EEOC Discusses Factors for Determining Partner-Employee Status Under EEO Laws

Author: Beth P. Zoller, XpertHR Legal Editor

Date: August 28, 2013

The Equal Employment Opportunity Commission (EEOC) has released two informal discussion letters regarding partner-employee coverage under the Age Discrimination in Employment Act (ADEA). Employers should note that enforcement agencies and the courts do not rely blindly on internal labels, job titles or ownership interests when making a determination regarding coverage under equal employment opportunity (EEO) laws.

In letters dated July 25, 2013 and July 29, 2013 responding to the scope of ADEA coverage regarding partners of accounting firms, the EEOC stressed that whether a partner is considered an employee for purposes of EEO laws (including the ADEA) depends upon the "actual working relationship between the individual and the partnership." The EEOC maintained that:

  • A partner "acts independently and participates in managing the organization;" whereas
  • An employee "is subject to the organization's control."

Therefore, an individual holding the title of partner may be considered an employee under EEO laws. The EEOC generally makes its determination regarding a specific employment relationship applying the following six factors (and any other relevant information):

  • Whether the organization can hire or fire the individual or set the rules and regulations of the individual's work;
  • Whether and, if so, to what extent the organization supervises the individual's work;
  • Whether the individual reports to someone higher in the organization;
  • Whether and, if so, to what extent the individual is able to influence the organization;
  • Whether the parties intended that the individual be an employee, as expressed in written agreements or contracts; and
  • Whether the individual shares in the profits, losses, and liabilities of the organization.

The EEOC cited Clackamas Gastroenterology Associates, P.C. v. Wells, 538 U.S. 440 (2003), a Supreme Court case interpreting the Americans with Disabilities Act (ADA), as support for its reasoning. In Clackamas, the Court emphasized that the amount of control a shareholder-director exercises must be evaluated in considering whether that individual is an "employee" under the ADA. The Court stressed that an ownership interest in a corporation or partnership does not necessarily preclude an individual from being considered an employee, but all relevant factors must be carefully considered. Importantly, the Court highlighted the same six factors set forth by the EEOC.

Taken together, the informal discussion letters and the Clackamas case can guide employers (especially professional employers such as doctors, lawyers and accountants) in determining when a partner may be considered an employee for EEO enforcement purposes. Although the informal discussion letters explicitly referred to the ADEA and Clackamas referenced the ADA, the EEOC suggests that the same logic would apply under all EEO laws.