Business Law Paper

Clackamas Gastroenterology Associates, P.C. v. Wells

We hear from our friends and family members that being a good citizen means practicing your right to vote and participating in elections. In addition to this involvement, being a good citizen means analyzing court decisions by asking questions and challenging ideas. When examining legal cases and the progression of common law, being critical citizens of outcomes and the reasoning behind certain rulings allows society to grow as a whole and keep up with changing values. In this examination of the Clackamas Gastroenterology Associates, P.C. v. Wells (2003) case, we will explore some of the discrepancies in logic used to arrive at the decision.

I. History of the Case

Deborah Wells was an employee with the Clackamas Medical Clinic who had a disorder that affected her health in many ways.[footnoteRef:1] In order to complete her work duties to the best of her abilities, Wells asked for accommodations from the clinic; however, instead of meeting Wells’ sensible request, the clinic served her with a demotion from bookkeeper to receptionist. Feeling a sense of discrimination against her disability, Wells protested only to find herself being asked to quit by her superior. This incident caused Wells’ health to further deteriorate so, citing notice from her physician, she took a medical leave from work. Despite having a valid reason for missing work, the clinic refused to accept the situation and fired Wells. Wells argued that if she was given the proper health accommodations she would have been able to stay employed and continue her service to the clinic. This negative retaliation by the clinic prompted Wells to sue the associates of Clackamas Gastroenterology for violating the Americans with Disabilities Act (ADA) of 1990. From the point of the view of the clinic associates, they were not in the wrong because the clinic, which operated as a professional corporation, was comprised of 14 employees and 4 other physicians who identified in their larger roles as shareholders. The ADA demands compliance from those employers “…who has 15 or more employees for each working day in each of 20 or more calendar weeks…”[footnoteRef:2] With only 14 employees, the clinic was supposedly exempt. [1: Crispin, Craig A. "CLACKAMAS GASTROENTEROLOGY V. WELLS U.S. Supreme Court № 01-1435 ." N.p., n.d. Web. <http://apps.americanbar.org/labor/lel-aba-annual/papers/2003/crispin.pdf>.] [2: "Americans with Disabilities Act of 1990,AS AMENDED with ADA Amendments Act of 2008." Americans with Disabilities Act of 1990,AS AMENDED with ADA Amendments Act of 2008. N.p., n.d. Web. <https://www.ada.gov/pubs/adastatute08.htm>.]

II. Rulings and Interpretations

The main problem in this case is whether or not the four Clackamas Medical Clinic shareholder-physicians are to be classified as employers or employees. This issue is similar to how certain entities choose to label service providers as independent contractors rather than employees for the sole purpose of gaining limited liability and “thereby escaping coverage of the relevant stature for a claim.”[footnoteRef:3] Under the ADA, an employee is characterized as “an individual employed by an employer.”[footnoteRef:4] Since the definition of one worker relationship relies on the other, it is difficult to isolate and create a trend in the distinctions. In a sense, the vagueness of the legal definition of an employee reinforces the idea that the law is adaptable and relevant; however, at the same time, common law can be depended on too much as a source of guidance. [3: Crispin, Craig A. "CLACKAMAS GASTROENTEROLOGY V. WELLS U.S. Supreme Court № 01-1435 ." N.p., n.d. Web. <http://apps.americanbar.org/labor/lel-aba-annual/papers/2003/crispin.pdf>.] [4: United States. CLACKAMAS GASTROENTEROLOGY ASSOCIATES v. Wells. N.p.: n.p., n.d. Supreme Court of the US. Web. <https://scholar.google.com/scholar_case?about=16283734325000644107&q=clackamas+gastroenterology+associates+v.+wells&hl=en&as_sdt=40006&as_vis=1>. ]

During the first stage of the ruling, the district court of Oregon decided that the physicians were employers, not employees. Precedent utilizing the economic realities test from the EEOC v. Dowd & Dowd, Ltd. (1984) case helped the court compare the doctors more as “partners in a partnership than to shareholders in a general corporation.”[footnoteRef:5] While this fact may be true, it does not directly answer the question at hand. The shareholder-physicians may be partners but, with the changing nature of partnerships, sometimes certain partners command more managerial responsibility and control than others.[footnoteRef:6] This discrepancy in power can lead to the classification of a partner as being an employee too, thus a partner cannot automatically be assumed to be an owner/employer. As stated in the Hyland v. New Haven Radiology Associates case of 1986, which focused on an age discrimination claim by a shareholder identifying as an employee, “the way in which a business functions, rather than the business form, should determine how it will be treated under the various discrimination acts.”[footnoteRef:7] Overall, context matters which is why predictability and continuity between cases with similar topics is hard to come by. [5: Stevens. "CLACKAMAS GASTROENTEROLOGY ASSOCIATES,P.&NBSP;C. V. WELLS." CLACKAMAS GASTROENTEROLOGY ASSOCIATES,P.&NBSP;C. V. WELLS. N.p., 22 Apr. 2003. Web. <https://www.law.cornell.edu/supct/html/01-1435.ZO.html>.] [6: United States. CLACKAMAS GASTROENTEROLOGY ASSOCIATES v. Wells. N.p.: n.p., n.d. Supreme Court of the US. Web. <https://scholar.google.com/scholar_case?about=16283734325000644107&q=clackamas+gastroenterology+associates+v.+wells&hl=en&as_sdt=40006&as_vis=1>.] [7: P. Anthony Salveter, Effect of Professional Incorporation on an Organization's Liability to Shareholder's under the Age Discrimination in Employment Act of 1967, The , 52 Mo. L. Rev. (1987)]

At the next level, the Court of Appeals reversed the decision and concluded that the shareholder-physicians could not claim benefits from being considered a corporation in one sense and a partnership in another. The court believed that there was “no reason to permit a professional corporation to secure the ‘best of both possible worlds’ by allowing it both to assert its corporate status in order to reap the tax and civil liability advantages and to argue that it is like a partnership in order to avoid liability for unlawful employment discrimination.”[footnoteRef:8] To a certain extent, I agree with this statement. I believe that individuals and businesses should be able to represent different labels based on the different roles they fulfill. For example, an individual who works for a franchise is considered an employee but since he also has sole autonomy to determine the sales plan for his branch and exert power over his receptionist this individual can be identified as an employer. Similarly, because the four shareholder-physicians practice medicine under the same rights and conditions as the other employees, the shareholders should be labeled as employees in this manner. When the shareholder-physicians are conducting management duties, they should be considered shareholders for those range of activities. While some may argue that the dual identification causes uncertainty, there is no conflict of interest that arises as both roles come with different responsibilities and distinct characteristics that can be easily identified. Under the Employee Retirement Income Security Act of 1974 (ERISA), which defines “employee” the same as the ADA, “a working owner may have dual status.”[footnoteRef:9] This ideology is even indirectly supported in the fact that while claiming shareholder identity, “the same physicians had defined themselves as ‘employees’ under ERISA…..[and were]…covered by Oregon’s workers’ compensation law.”[footnoteRef:10] On the other hand, the application of the dual classification by the shareholder-physicians is unfair because of its underlying intention. Clackamas was able to choose its classification solely to take advantage of the rewards created for the entity’s higher officials. Rather than being self-seeking, the shareholder-physicians should utilize the dual classification to better the entity as a whole and protect the majority of those impacted by the happenings of the entity. Apart from the dispute on the number of employees, the Clackamas Medical Clinic has no reason not to comply with the ADA doctrine. [8: Stevens. "CLACKAMAS GASTROENTEROLOGY ASSOCIATES,P.&NBSP;C. V. WELLS." CLACKAMAS GASTROENTEROLOGY ASSOCIATES,P.&NBSP;C. V. WELLS. N.p., 22 Apr. 2003. Web.] [9: "Yates v. Hendon, 541 US 1 (2004) -." MiB Law. N.p., 24 Aug. 2012. Web. <http://www.miblaw.com/lawschool/yates-v-hendon/>.] [10: "Clackamas Gastroenterology Associates v. Wells, 538 US 440 (2003) -." MiB Law. N.p., 24 Aug. 2012. Web. <http://www.miblaw.com/lawschool/clackamas-gastroenterology-associates-v-wells/>.]

Even further, the Supreme Court rejected this rationalization by the Court of Appeals. Specifically, since “learned professions” were previously unable to incorporate[footnoteRef:11], the new business practice of a professional corporation could not rely on common law precedent with similar facts for direction. As a result, Congress interpreted that, for federal discrimination laws, the term “employee” calls on the traditional master-servant relationship and that the extent of control exerted by a shareholder should determine whether or not he/she is also an employee.[footnoteRef:12] Congress utilized the Equal Employment Opportunity Commission’s (EEOC) six factor economic realities test as criteria for assessing control. In this view, “if the shareholder-directors operate independently and manage the business, they are proprietors and not employees; if they are subject to the firm’s control, they are employees.”[footnoteRef:13] Based off the distinction, the Supreme Court ruled that the shareholder-physicians were employers and thus, being under the 15 minimum employee quota of the ADA, did not commit a discriminatory act by firing Wells. This ruling follows a simple logic; however, the complexity of the facts is too strong to have all the associated issues resolved with this one declaration. As argued above, the shareholder-physicians should be seen as employees; however, the Supreme Court truly believes that there is lack of evidence supporting this classification. If we take to be true that the shareholder-physicians are employers, then there is a greater reason why Wells should have been protected from discrimination. Employers have certain responsibilities to their inferiors that are not always necessarily defined by law. This is where ethics comes into play. For example, the managerial approach states that giving employees rights and fostering “…trust in and loyalty to the employer…[can] establish good working conditions, improved employee morale, and higher productivity.”[footnoteRef:14] Not only this, ethics also shares with the law the value of promoting justice. As the Roman orator and philosopher, Cicero, once said, “Justice consists in doing no injury to men; decency in giving them no offence.”[footnoteRef:15] So even if the ADA says that there was no wrongdoing, does not the wellbeing of the employee overrule other legal standings? Should the Clackamas Associates not actively support Wells and her safety? Legal ethics says that the shareholder-physicians have a duty to Wells. III. Other Considerations [11: United States. CLACKAMAS GASTROENTEROLOGY ASSOCIATES v. Wells. N.p.: n.p., n.d. Supreme Court of the US. Web. <https://scholar.google.com/scholar_case?about=16283734325000644107&q=clackamas+gastroenterology+associates+v.+wells&hl=en&as_sdt=40006&as_vis=1>.] [12: "Clackamas Gastroenterology Associates v. Wells, 538 US 440 (2003) -." MiB Law. N.p., 24 Aug. 2012. Web. <http://www.miblaw.com/lawschool/clackamas-gastroenterology-associates-v-wells/>.] [13: "Legal Updates." Schwartz Hannum PC. N.p., n.d. Web. <http://shpclaw.com/Schwartz-Resources/united-states-supreme-court-update-decision-in-mixed-motive-case-is-bad-news-for-employers/>.] [14: Emerson, Robert W. Law, Society, and Business. Gainesville: Target Copy, 2014. Print. p 86] [15: Emerson, Robert W. Law, Society, and Business. Gainesville: Target Copy, 2014. Print. p 6]

Discrimination is defined as “…unfair or unequal treatment of an individual or group based on certain characteristics, including age, disability, ethnicity, gender, national origin, race, religion and sexual orientation.”[footnoteRef:16] The definition lends itself to interpretation that discrimination can occur between anyone. In the context of the case, alleged discrimination occurred between an employee and a superior. But what if discrimination occurred between partners or shareholders who are equals? How would the shareholders who are rejecting Wells’ discrimination claim feel if they were in her shoes? Would the facts of the case change i.e. would their superior position provide them additional safeguarding? [16: "What is Discrimination?" Findlaw. N.p., n.d. Web. <http://civilrights.findlaw.com/civil-rights-overview/what-is-discrimination.html>.]

In our modern society, the traditional master-servant relationship is not as relevant as it was in the past. Businesses and other organizations are being run with more shared responsibilities and power. Servants can be “told what to do, how to do it, what hours to work”[footnoteRef:17] but only to a certain extent. Servants have become more aware of their rights and personal freedoms which allows them to openly voice desires and act out against perceived injustices. [17: Emerson, Robert W. Law, Society, and Business. Gainesville: Target Copy, 2014. Print. p 75]

Once again, contrary to belief, the law and ethics are not mutually exclusive. Previously we discussed the ethical obligations of the shareholder-physicians to its employees. Another lens that can be helpful in understanding the case is how ethical the law is in terms of the requirements of the Americans with Disabilities Act. While the ADA was created with the positive intention to reduce discriminatory acts, its implementation has a few drawbacks. For one, the reasoning behind limiting the coverage of the ADA was “to spare very small firms from the potentially crushing expense of mastering the intricacies of the antidiscrimination laws, establishing procedures to assure compliance, and defending against suits when efforts at compliance fail.”[footnoteRef:18] Here, the ADA is illustrating how economic principles are seen as being more important than the well-being and safety of the individual. However, to what extent is it ethical to use a lack of funding as an excuse not to protect smaller businesses? Why should those individuals who are fortunate to work in employment settings larger than 15 employees be sheltered by the government while those who work in smaller settings are not? Is it acceptable for businesses of different magnitudes to be held to different standards with civil rights concerns? [18: Stevens. "CLACKAMAS GASTROENTEROLOGY ASSOCIATES,P.&NBSP;C. V. WELLS." CLACKAMAS GASTROENTEROLOGY ASSOCIATES,P.&NBSP;C. V. WELLS. N.p., 22 Apr. 2003. Web. <https://www.law.cornell.edu/supct/html/01-1435.ZO.html>.]

More generally, shareholders today are facing a multitude of changes. The exponential growth of shareholder power has challenged typical ways of approaching business decisions and operations. This influence has lent itself to greater creativity and increased opportunity for development. Unfortunately, with this power comes some concerns. One of the major debates is “whether the current focus on shareholder value and investor protection is at the expense of other values that are central to the sustainability of healthy corporations.”[footnoteRef:19] The shareholder role has created tension with long-term and short-term goals, public trust in corporations, and the thin line between management and ownership. With the dynamic role of the shareholder in today’s industries, the law must create a healthy balance between precedent and modern values. [19: Posted by Holly J. Gregory, Sidley Austin LLP, on. "Corporate Governance Issues for 2015." The Harvard Law School Forum on Corporate Governance and Financial Regulation Corporate Governance Issues for 2015 Comments. N.p., n.d. Web. <https://corpgov.law.harvard.edu/2014/12/12/corporate-governance-issues-for-2015/>.]

IV. Conclusion

Considering the facts of the case, analyzing the intentions of the shareholder-physicians, and following basic ethical standards, the shareholder-physicians should be equivalent to employees who are employed under the professional corporation of the Clackamas Medical Clinic.

This case is interesting because it brings to light the topic of diversity and inclusion and what this looks like in terms of the law. While the core argument behind this case stemmed from a claim of discrimination, it is important to note that the case actually focused on legal definitions and did not do much to address the true discrimination that purportedly occurred. Here, we see the law adding uncertainty to the facts of the case rather than shedding clarity and understanding.

Overall, the outcome of this single case brought with it major implications. While the resolution had the possibility of overturning an injustice to the respondent, it also had “…the potential to determine the reach of a vast body of state law carrying similar employee-based statutory thresholds”[footnoteRef:20] including Title VII of the Civil Rights Act of 1964, the Equal Pay Act of 1963, and Age Discrimination in Employment Act of 1967. These protections are reserved for employees thus the definition of who constitutes an employee in various situations can be the decisive factor in determining one’s legal rights and in holding others accountable for their actions. The main lesson from this case study can be described as follows: The law is not perfect in prescribing people or ideas into categories, but the continual exploration of future cases provides hope that the uncertainty surrounding the legal definitions will be reduced and further uncovered. [20: Crispin, Craig A. "CLACKAMAS GASTROENTEROLOGY V. WELLS U.S. Supreme Court № 01-1435 ." N.p., n.d. Web. <http://apps.americanbar.org/labor/lel-aba-annual/papers/2003/crispin.pdf>.]

Works Cited

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Aug. 2012. Web. <http://www.miblaw.com/lawschool/clackamas-gastroenterology-associates-v-wells/>.

Emerson, Robert W. Law, Society, and Business. Gainesville: Target Copy, 2014. Print.

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2015." The Harvard Law School Forum on Corporate Governance and Financial Regulation Corporate Governance Issues for 2015 Comments. N.p., n.d. Web. <https://corpgov.law.harvard.edu/2014/12/12/corporate-governance-issues-for-2015/>.

"Legal Updates." Schwartz Hannum PC. N.p., n.d. Web. <http://shpclaw.com/Schwartz-

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“What is Discrimination?" Findlaw. N.p., n.d. Web. <http://civilrights.findlaw.com/civil-rights-

overview/what-is-discrimination.html>.

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