In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 02-1605

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION,

Applicant-Appellee,

v.

SIDLEY AUSTIN BROWN & WOOD,

Respondent-Appellant.

____________

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 01-C-9635—Joan Humphrey Lefkow, Judge.

____________

ARGUED SEPTEMBER 6, 2002—DECIDED OCTOBER 24, 2002

____________

Before POSNER,EASTERBROOK, andDIANE P.WOOD, Circuit

Judges.

POSNER, Circuit Judge. In 1999, Sidley & Austin (as it

then was) demoted 32 of its equity partners to “counsel”

or “senior counsel.” The significance of these terms is unclear, but Sidley does not deny that they signify demotion

and constitute adverse personnel action within the meaning of the antidiscrimination laws. The EEOC began an

investigation to determine whether the demotions might

have violated the Age Discrimination in Employment Act.

After failing to obtain all the information it wanted without
2 No. 02-1605

recourse to process, the Commission issued a subpoena

duces tecum to the firm, seeking a variety of documentation bearing on two distinct areas of inquiry: coverage and

discrimination. The reason for the inquiry about coverage

is that the ADEA protects employees but not employers.

E.g., Simpson v. Ernst & Young, 100 F.3d 436, 443 (6th Cir.

1996); see 29 U.S.C. §§ 623(a)(2), (a)(3), 630(f). To be able

to establish that the firm had violated the ADEA, therefore, the Commission would have to show that the 32

partners were employees before their demotion.

Sidley provided most of the information sought in the

subpoena that related to coverage (but no information

relating to discrimination, though Sidley claims that the

demotions were due to shortcomings in performance

rather than to age), but not all. It contended that it had

given the Commission enough information to show that

before their demotion the 32 had been “real” partners and

so there was no basis for the Commission to continue

its investigation. The Commission applied to the district

court for an order enforcing the subpoena. The court ordered the firm to comply in full, and the firm appeals. The

order to comply was a final order appealable under 28

U.S.C. § 1291 because it terminated the judicial proceeding. The only relief sought was enforcement of the subpoena, and so when enforcement was ordered the EEOC

had gotten everything it wanted. CFTC v. Collins, 997 F.2d

1230, 1232 (7th Cir. 1993); United States v. Construction

Products Research, Inc., 73 F.3d 464, 469 (2d Cir. 1996).

The Commission also appears to be seeking information on whether Sidley may be forcing other partners

whom the Commission suspects may also be employees

within the meaning of the age discrimination law to retire

on account of their age, contrary to the abolition of mandatory retirement by the age discrimination law. But the
No. 02-1605 3

parties appear to have assumed that if the 32 are (as Sidley

contends) employers, so are all of Sidley’s other partners.

So we need not consider the mandatory-retirement issue

separately.

The law firm’s argument proceeds in three steps: (1) the

question whether the 32 demoted partners are within the

ADEA’s coverage is a jurisdictional question, which once

answered against the Commission requires that the investigation cease; (2) the target of a subpoena need comply

only up to the point at which it has produced evidence

that establishes that there is no jurisdiction; (3) the Commission has no jurisdiction in this case because a partner

is an employer within the meaning of the federal antidiscrimination laws if (a) his income included a share of

the firm’s profits, (b) he made a contribution to the capital

of the firm, (c) he was liable for the firm’s debts, and (d) he

had some administrative or managerial responsibilities—

and all these things, the firm argues, have been proved.

The facts as developed so far reveal the following:

The firm is controlled by a self-perpetuating executive

committee. Partners who are not members of the committee have some powers delegated to them by it with respect to the hiring, firing, promotion, and compensation

of their subordinates, but so far as their own status is concerned they are at the committee’s mercy. It can fire them,

promote them, demote them (as it did to the 32), raise

their pay, lower their pay, and so forth. The only firmwide issue on which all partners have voted in the last

quarter century was the merger with Brown & Wood

and that vote took place after the EEOC began its investigation. Each of the 32 partners at the time of their demotion by the executive committee had a capital account

with the firm, averaging about $400,000. Under the firm’s

rules, each was liable for the firm’s liabilities in propor-
4 No. 02-1605

tion to his capital in the firm. Their income, however, was

determined by the number of percentage points of the

firm’s overall profits that the executive committee assigned to each of them. Each served on one or more of the

firm’s committees, but all these committees are subject to

control by the executive committee.

Sidley can obtain no mileage by characterizing the coverage issue as “jurisdictional.” It is the law that the EEOC

cannot protect employers; and it is also the law that like

any agency with subpoena powers the EEOC is entitled

to obtain the facts necessary to determine whether it can

proceed to the enforcement stage. EEOC v. United Air

Lines, Inc., 287 F.3d 643, 651 (7th Cir. 2002); Commodity

Trend Service, Inc. v. CFTC, 233 F.3d 981, 986-87 (7th Cir.

2000); SEC v. Brigadoon Scotch Distributing Co., 480 F.2d

1047, 1052-53 (2d Cir. 1973). Among these are facts bearing

on whether the 32 demoted partners were employees within the meaning of the age discrimination law. The Commission is entitled to the information that it thinks it

needs in order to be able to formulate its theory of coverage before the court is asked to choose between the

Commission’s theory and that of the subpoenaed firm.

Only if, as in Reich v. Great Lakes Indian Fish & Wildlife

Comm’n, 4 F.3d 490 (7th Cir. 1993), the information that the

subpoenaed firm resists furnishing is not even arguably

relevant, because it is evident at the outset that whether

the agency has any business conducting the investigation depends on a pure issue of statutory interpretation,

can the court resolve the issue then and there without

insisting on further compliance with the subpoena. See

also EEOC v. Shell Oil Co., 466 U.S. 54, 64-65 (1984); FTC

v. Miller, 549 F.2d 452, 460-61 (7th Cir. 1977); FTC v. Ken

Roberts Co., 276 F.3d 583, 586-87 (D.C. Cir. 2001); EEOC

v. Karuk Tribe Housing Authority, 260 F.3d 1071, 1076-77

(9th Cir. 2001); EEOC v. Ocean City Police Dept., 820 F.2d
No. 02-1605 5

1378, 1380 (4th Cir. 1987) (en banc), vacated on other

grounds, 486 U.S. 1019 (1988). The issue in Great Lakes was

whether the Fair Labor Standards Act applies to game

wardens on Indian reservations. If, as we held, it did not,

the continued investigation of the wardens’ employer was

all burden and no benefit, making insistence on compliance with the Labor Department’s subpoena unreasonable. See EEOC v. United Air Lines, Inc., supra, 287 F.3d

at 653.

Great Lakes does not hold, as Sidley argues, that characterizing a threshold issue as “jurisdictional” takes a case

out of the general rule (on which see Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186, 212-14 (1946); Endicott

Johnson Corp. v. Perkins, 317 U.S. 501, 508-09 (1943); EEOC

v. Peat, Marwick, Mitchell & Co., 775 F.2d 928, 930-31 (8th

Cir. 1985); FTC v. Ken Roberts Co., supra, 276 F.3d at 585-

87) that enforcement of a subpoena cannot be resisted on the

ground that the information the agency is seeking would

not justify an enforcement action. The cases are legion that

there is no general exception to the rule for issues going to

the agency’s jurisdiction. See, e.g., FTC v. Feldman, 532 F.2d

1092, 1095-96 (7th Cir. 1976); FTC v. Ken Roberts Co., supra,

276 F.3d at 585-87; United States v. Sturm, Ruger & Co., 84

F.3d 1, 5-6 (1st Cir. 1996). As explained in United States v.

Construction Products Research, Inc., supra, 73 F.3d at 470, “at

the subpoena enforcement stage, courts need not determine

whether the subpoenaed party is within the agency’s

jurisdiction or covered by the statute it administers; rather

the coverage determination should wait until an enforcement action is brought against the subpoenaed party.”

Sidley gains nothing, therefore, from characterizing the

coverage issue as jurisdictional, and so we need not decide

whether the characterization is correct.

But the cases leave intact the principle that a subpoena

may be challenged as unreasonable. And one basis on
6 No. 02-1605

which it may be found unreasonable is that, as in Great

Lakes, the agency clearly is ranging far beyond the boundaries of its statutory authority. As the Supreme Court

explained in United States v. Morton Salt Co., 338 U.S. 632,

652 (1950), “of course a governmental investigation into

corporate matters may be of such a sweeping nature and

so unrelated to the matter properly under inquiry as to

exceed the investigatory power. But it is sufficient if the

inquiry is within the authority of the agency, the demand

is not too indefinite and the information sought is reasonably relevant.” In Endicott Johnson Corp. v. Perkins,

supra, 317 U.S. at 509, the Court noted that “the evidence

sought by the subpoena was not plainly incompetent or

irrelevant to any lawful purpose of the Secretary in the

discharge of her duties under the Act, and it was the duty

of the District Court to order its production for the Secretary’s consideration”—implying therefore that had the

evidence sought by the subpoena been “plainly incompetent or irrelevant to any lawful purpose,” enforcement

would have been denied. See also United States v. Construction Products Research, Inc., supra, 73 F.3d at 471.

Great Lakes was such a case; this one is not (not yet

anyway, though it may become one, as we shall point out

later). But the difference is not, as implied in EEOC v. Karuk

Tribe Housing Authority, supra, 260 F.3d at 1077-78, that

Great Lakes involved an issue of jurisdiction and this case

a “mere” issue of coverage and that there should be a

special rule if not for jurisdictional defects then at least

for “patent” jurisdictional defects. “Patent” is important

to the issue of reasonableness, but not “jurisdictional.” The

Commission has the same right to obtain information

bearing on its jurisdiction as to obtain any other information that it needs in order to decide whether there has

been a violation of one of the laws that it enforces, while

the recipient of the subpoena has the same right to chal-
No. 02-1605 7

lenge the subpoena as unreasonable because of lack of

coverage as it does to complain that the subpoena is unreasonable because the recipient is outside the agency’s jurisdiction. Suppose Sidley were conceded to have only eight

employees, when an employer must have at least 20 employees in order to be subject to the ADEA. 29 U.S.C.

§ 630(b). It would not follow that Sidley could not complain about the subpoena unless the issue were characterized as jurisdictional. The distinction for which Karuk

contended would complicate litigation pointlessly by forcing judges to distinguish between jurisdictional and nonjurisdictional limitations on agencies’ powers and to decide on which side of the line coverage issues belong. So,

to repeat, whether the coverage issue in this case should

be characterized as jurisdictional is irrelevant.

The case law dealing with challenges to subpoenas

contains the statement that the EEOC’s “investigative

authority is tied to charges filed with the Commission;

unlike other federal agencies that possess plenary authority to demand to see records relevant to matters within

their jurisdiction, the EEOC is entitled to access only to

evidence ‘relevant to the charge under investigation.’ ”

EEOC v. Shell Oil Co., supra, 466 U.S. at 64; see also EEOC

v. United Air Lines, Inc., supra, 287 F.3d at 650. But this

was said with reference to Title VII; the ADEA’s grant

of investigative authority to the Commission is not

cabined by any reference to charges. 29 U.S.C. § 626(a); 29

C.F.R. § 1626. Anyway the Supreme Court has held that

the Commission can file its own charges of violation of

Title VII. EEOC v. Shell Oil Co., supra, 466 U.S. at 69-70. So

it is doubly irrelevant that none of the 32 demoted partners has filed a charge.

A remarkable feature of the way the case has been argued is that neither party has addressed the question why
8 No. 02-1605

some or all members of partnerships should for purposes

of the federal antidiscrimination laws be deemed employers and so placed outside the protection of these laws.

That question might be avoidable if the laws contained

an exemption for discrimination against partners; we

might then simply look to the definition of the term in

federal or state law. And if we looked there, we would find

that Sidley was indeed a partnership and the 32 demoted

partners were indeed partners before their demotion.

Sidley has complied with all the formalities required by

Illinois law to establish and maintain a partnership; the

32 were partners within the meaning of the applicable

partnership law.

Although the EEOC does not concede that the 32 are

bona fide partners even under state law, it is emphatic

that their classification under state law is not dispositive

of their status under federal antidiscrimination law. The

antidiscrimination laws do not exempt partnerships from

coverage (Sidley concedes that) or deny partners, as such,

the protection of the laws. Employers are not protected

by discrimination laws such as Title VII and the ADEA,

but are partners employers? Always? Always for purposes

of Title VII or the ADEA, or the other federal laws

that prohibit employment discrimination? Statutory purpose is relevant. When the Supreme Court in Robinson v.

Shell Oil Co., 519 U.S. 337, 346 (1997), was faced with the

question whether “employee” in Title VII includes a former employee, it looked to “consistency with a primary

purpose of antiretaliation provisions: Maintaining unfettered access to statutory remedial mechanisms. The

EEOC quite persuasively maintains that it would be destructive of this purpose of the antiretaliation provision

for an employer to be able to retaliate with impunity against

an entire class of acts under Title VII.” And when in Papa

v. Katy Industries, Inc., 166 F.3d 937 (7th Cir. 1999), we held
No. 02-1605 9

that, in deciding whether a firm has the minimum number of employees required for it to be covered by federal

antidiscrimination law we would not pierce the corporate veil, we did so on the basis of “the policy behind the

exemption for employers that have very few employees.”

Id. at 942.

An individual who was classified as a partner-employer

under state partnership law might be classified as an

employee for other purposes, including the purpose for

which federal antidiscrimination law extends protection

to employees but not employers. Against this conclusion

it can be argued that partners should be classified as employers rather than employees for purposes of the age

discrimination law because partnership law gives them

effective remedies against oppression by their fellow

partners, because partnership relations would be poisoned if partners could sue each other for unlawful discrimination, and because the relation among partners

is so intimate that they should be allowed to discriminate, just as individuals are allowed to discriminate in

their purely personal relations. This is not the occasion

on which to come down on one side or the other of the

issue, though we note that in Hishon v. King & Spalding,

467 U.S. 69, 78 (1984), the Supreme Court rejected the

argument that the intimate nature of the partnership

relation precludes a challenge under Title VII to a discriminatory refusal to promote an employee to partner.

But we do not understand how Sidley, without addressing the purpose of the employer exemption, can be so

certain that it has proved that the 32 are employers within the meaning of the ADEA. They are, or rather were,

partners, but it does not follow that they were employers.

A firm that under pursuit by the EEOC on suspicion of

discrimination redesignated its employees “partners” without changing the preexisting employment relation an iota
10 No. 02-1605

would not by doing this necessarily buy immunity, even

if the redesignation sufficed to make them partners under state law.

This case is not as extreme; it does not involve relabeling. Yet it involves a partnership of more than 500 partners in which all power resides in a small, unelected

committee (it has 36 members). The partnership does not

elect the members of the executive committee; the committee elects them, like the self-perpetuating board of

trustees of a private university or other charitable foundation. It is true that the partners can commit the firm, for

example by writing opinion letters; but employees of a

corporation, when acting within the scope of their employment, regularly commit the corporation to contractual

undertakings, not to mention to tort liability. Partners who

are not members of the executive committee share in the

profits of the firm; but many corporations base their employees’ compensation in part anyway, but sometimes in

very large part, on the corporation’s profits, without anyone supposing them employers. The participation of the

32 demoted partners in committees that have, so far as

appears, merely administrative functions does not distinguish them from executive employees in corporations.

Corporations have committees and the members of the

committees are employees; this does not make them employers. Nor are the members of the committees on

which the 32 served elected; they are appointed by the

executive committee. The 32 owned some of the firm’s

capital, but executive-level employees often own stock in

their corporations. We shall see that there is authority that

employee shareholders of a professional corporation are

still employees, not employers, for purposes of federal

antidiscrimination law.

Particularly unconvincing is Sidley’s contention that

since the executive committee exercises its absolute pow-
No. 02-1605 11

er by virtue of delegation by the entire partnership in

the partnership agreement, we should treat the entire

partnership as if it rather than the executive committee

were directing the firm. That would be like saying that if

the people elect a person to be dictator for life, the government is a democracy rather than a dictatorship. The

partners do not even elect the members of the committee. They have no control, direct or indirect, over its composition.

Perhaps the most partneresque feature of the 32 partners’ relation to the firm is their personal liability for the

firm’s debts: not because unlimited liability is a sine qua

non of partnership (there can be limited partnerships,

and there are other business entities besides partnership

that have unlimited liability—a sole proprietorship, for

example), but because it is the most salient practical difference between the standard partnership and a corporation. Sidley does not have limited liability, and this

means, by the way, that although under the firm’s rules

each partner is liable for the firm’s debts only in proportion to his capital, a creditor of the firm could sue any

partner for the entire debt owed it. Is this enough to pin

the partner tail on the donkey? Wheeler v. Hurdman, 825

F.2d 257, 274-75 (10th Cir. 1987), comes close to saying

it is; see also Fountain v. Metcalf, Zima & Co., P.A., 925

F.2d 1398, 1400-01 (11th Cir. 1991). Yet it does not quite

deny the necessity of considering other factors. And

tugging the other way are Strother v. Southern California Permanente Medical Group, 79 F.3d 859, 866-68 (9th

Cir. 1996) (interpreting a similar provision of state antidiscrimination law), and Simpson v. Ernst & Young, supra,

100 F.3d at 441-42. Simpson classified partners as employees in circumstances broadly similar to, though distinguishable from, those of the present case:
12 No. 02-1605

Simpson had no authority to direct or participate in

the admission or discharge of partners or other firm

personnel; participate in determining partners or other

personnel compensation predicated upon performance levels, responsibility, and years of service with

the firm, including his own; participate in the vote

for the chairman or the members of the Management

Committee; or participate in the firm’s profits and

losses or share in unbilled uncollected client accounts

(“UBT’s”). Simpson had no right to examine the

books and records of the firm except to the extent

permitted by the Management Committee. He was

required to execute a will which mandated that his

heirs accept as binding the accounts provided by Ernst

& Young with no right of inspection or verification.

He had no authority to sign promissory notes on behalf

of the firm, or pledge, transfer, or otherwise assign

his interest in the firm. He was refused access to

data concerning various client accounts. He was denied participation in annual performance reviews and

other indicia of partnership status.

In sum, the firm’s business, assets, and affairs were

directed exclusively by a 10 to 14 member Management

Committee and its chairman. The Management Committee exercised exclusive control over the admission

and discharge of all personnel, including Simpson.

It could terminate employees without cause and without a right to appeal such decisions. The Management

Committee unilaterally determined the compensation

of all personnel, which authority was exercised and

executed in total secrecy. Simpson and those similarly

situated had no vote for the chairman or the members

of the Management Committee. Instead, the Management Committee appointed its chairman and its chairman appointed the members of the Management Com-
No. 02-1605 13

mittee. “For all practical purposes [the court is quoting here from the district court’s opinion], he was an

employee with the additional detriment of having

promised to be liable for the firm’s losses. Ernst &

Young was free to draft its Partnership Agreement

and U.S. Agreement in such a way as to generate the

belief in its employees that they enjoyed partnership

status and to permit them to represent themselves as

partners. However, because these individuals actually had no bona fide ownership interest, no fiduciary

relationship, no share in the profits and losses, no

significant management control, no meaningful voting

rights, no meaningful vote in firm decisions, and no job

security, they were not bona fide partners. Therefore

Ernst & Young was obligated not to discriminate

against them because of their age, sex, race, religion,

national origin, or handicap.”

The matter of liability for partnership debts illustrates

the importance of referring the question whether a partner in a particular firm is an employer or an employee

to statutory purpose. If implicit in the ADEA’s exemption

for employers is recognition that partners ordinarily have

adequate remedies under partnership law to protect themselves against oppression (including age or other forms of

invidious discrimination) by the partnership, then exposure to liability can hardly be decisive. These 32 partners were not empowered by virtue of bearing large potential liabilities! The 32 were defenseless; they had no

power over their fate. If other partners shirked and as a

result imposed liability on the 32, the 32 could not, as partners in a conventional partnership could do, vote to

expel them. They had no voting power. What could be

argued but is not is that because the other partners are

potentially liable for the pratfalls of the 32, the partnership

should have greater power over their employment than
14 No. 02-1605

if the firm were a corporation and so had limited liability.

To repeat, the issue is not whether the 32 before their

demotion were partners, an issue to which their liability

for the firm’s debts is germane; the issue is whether

they were employers. The two classes, partners under state

law and employers under federal antidiscrimination law,

may not coincide.

The problem of line drawing presented by this case is

not unique to employment. It arises whenever legal consequences turn on classification as partner versus employee, whether in tax and tort cases or in discrimination cases. See, e.g., Armstrong v. Phinney, 394 F.2d 661, 663-

64 (5th Cir. 1968) (tax); Davis v. Loftus, 2002 WL 31031467 (Ill.

App. Sept. 9, 2002) (tort liability). The law does not allow

firms to obtain the benefits or avoid the costs associated

with particular forms of doing business by simple redesignation. Of course firms have broad freedom of

election among the different forms of doing business, such

as the corporate, partnership, LLC, and so forth. Their

freedom is not unlimited; there is, for example, the “substance over form” rule of tax law. See, e.g., Yosha v. Commissioner, 861 F.2d 494, 497-98 (7th Cir. 1988). But the question, as we have been at pains to emphasize throughout

this opinion, is not whether Sidley is a partnership; it is.

The question is whether, when a firm employs the latitude allowed to it by state law to reconfigure a partnership

in the direction of making it a de facto corporation, a federal agency enforcing federal antidiscrimination law is

compelled to treat all the “partners” as employers.

The same problem of the tyranny of labels arose when

the Supreme Court had to draw the line in ERISA between an “employee,” defined unhelpfully as in the

ADEA as “any individual employed by an employer,” 29

U.S.C. § 1002(6), and an independent contractor. The
No. 02-1605 15

Court could have said that an employee is anyone who

is called an employee. Instead it said:

In determining whether a hired party is an employee

under the general common law of agency, we consider the hiring party’s right to control the manner and

means by which the project is accomplished. Among

the other factors relevant to this inquiry are the

skill required; the source of the instrumentalities and

tools; the location of the work; the duration of the

relationship between the parties; whether the hiring

party has the right to assign additional projects to the

hired party; the extent of the hired party’s discretion over when and how long to work; the method of

payment; the hired party’s role in hiring and paying

assistants; whether the work is part of the regular

business of the hiring party; whether the hiring party is

in business; the provision of employee benefits; and

the tax treatment of the hired party. Since the commonlaw test contains no shorthand formula or magic

phrase that can be applied to find the answer, . . . all

of the incidents of the relationship must be assessed

and weighed with no one factor being decisive.

Nationwide Mutual Ins. Co. v. Darden, 503 U.S. 318, 323-25

(1992) (citations and internal quotation marks omitted). In

a subsequent case, we said the most important factor

in deciding whether a worker was an employee or an

independent contractor was the employer’s right to control the worker’s work. Ost v. West Suburban Travelers

Limousine, Inc., 88 F.3d 435, 438 (7th Cir. 1996). That is a

potentially important factor here as well. Both decisions

reject mechanical tests.

We can get a little help on the question in our case from

Justice Powell’s concurring opinion in Hishon v. King &
16 No. 02-1605

Spalding, supra, 467 U.S. at 79-81, one of the few discussions of the applicability of Title VII to partnerships. Here

is what he said (id. at 79-80; record reference omitted):

I write to make clear my understanding that the Court’s

opinion [holding discriminatory refusal to promote

an associate to partner actionable] should not be read

as extending Title VII to the management of a law

firm by its partners. The reasoning of the Court’s opinion does not require that the relationship among partners be characterized as an “employment” relationship to which Title VII would apply. The relationship

among law partners differs markedly from that between employer and employee—including that between the partnership and its associates.2

 The judgmental and sensitive decisions that must be made

among the partners embrace a wide range of subjects.3

The essence of the law partnership is the common conduct of a shared enterprise. The relationship among

law partners contemplates that decisions important

to the partnership normally will be made by common

agreement or consent among the partners.

_____________________

2. Of course, an employer may not evade the strictures of

Title VII simply by labeling its employees as “partners.” Law

partnerships usually have many of the characteristics that

I describe generally here.

3. These decisions concern such matters as participation

in profits and other types of compensation; work assignments; approval of commitments in bar association, civic,

or political activities; questions of billing; acceptance of

new clients; questions of conflicts of interest; retirement

programs; and expansion policies. Such decisions may affect

each partner of the firm. Divisions of partnership profits,

unlike shareholders’ rights to dividends, involve judgments
No. 02-1605 17

as to each partner’s contribution to the reputation and

success of the firm. This is true whether the partner’s participation in profits is measured in terms of points or percentages, combinations of salaries and points, salaries and

bonuses, and possibly in other ways.

Justice Powell was saying that a traditional law partnership, involving “the common conduct of a shared enterprise” and a relationship among the partners that “contemplates that decisions will be made by common agreement

or consent among the partners,” has a governance structure different from the one contemplated or assumed by

Title VII. At the same time he was making clear that labeling an enterprise that does not have the structure, the

character, of the traditional partnership will not immunize

it from the statute. In a case in which we held that partners were employers for purposes of Title VII, the partnership was, so far as appears, an equal partnership of four

partners. See Burke v. Friedman, 556 F.2d 867, 868 (7th

Cir. 1977).

A functional approach need not always lead to an expansion in coverage. When physicians who were both the

shareholders of a professional medical corporation and

employees of the corporation argued that they were “really”

employers for purposes of deciding whether the corporation had enough employees to come within the reach of

the Americans with Disabilities Act, a panel of the Ninth

Circuit, rejecting the “economic realities” test proposed

by the dissent, refused to look behind the formal status

of the medical personnel as employees and concluded

that the corporation was indeed covered by the Act. Wells

v. Clackamas Gastroenterology Associates, P.C., 271 F.3d 903,

905-06 (9th Cir. 2001), cert. granted, 70 U.S.L.W. 3625 (U.S.

Oct. 1, 2002); see also Hyland v. New Haven Radiology Associates, P.C., 794 F.2d 793, 796-98 (2d Cir. 1986). Like the dissent in Wells, we had employed an “economic realities” test
18 No. 02-1605

to hold that a professional corporation could be treated

as a partnership, EEOC v. Dowd & Dowd, Ltd., 736 F.2d

1177 (7th Cir. 1984), and it could be argued that consistency precludes our rejecting the Commission’s “economic

realities” test in this case, at least at this early stage in the

Commission’s investigation. And even the majority in

Wells stated that a firm could not, by affixing the label

of “partner” to someone who was functionally an employee, avoid federal antidiscrimination law. Wells v.

Clackamas Gastroenterology Associates, P.C., supra, 271 F.3d

at 905.

All that is clear amidst this welter of cases is that the

coverage issue in the present case remains murky despite

Sidley’s partial compliance with the subpoena. The Commission is therefore entitled to full compliance, at least

with regard to coverage, unless the additional documents

the Commission is seeking are obviously irrelevant. What

the Commission particularly wants to know is how unevenly the profits are spread across the entire firm. Are

profits so concentrated in members of the executive committee, or in some smaller or larger set of partners, in

relation to the profits that the executive committee allocated to the 32, that the latter occupied the same position

they would have if they had been working at a comparable rank for one of the investment banks that once were

partnerships but now are corporations? This might not

be decisive but it would bear on the unavoidably multifactored determination of whether this large law firm—

which in recognition that conventional partnership is

designed for much smaller and simpler firms has contractually altered the structure of the firm in the direction of

the corporate form—should for purposes of antidiscrimination law be deemed the employer of some at least of

the individuals whom it designates as partners.
No. 02-1605 19

But we think the district court was premature to order

the subpoena complied with in its entirety. It is not only

the law firm that has failed to argue the purpose of the

exclusion of employers from the protection of the statute;

it is also the EEOC. Without having proposed a standard

or criterion to guide the determination, the Commission

has not earned the right to force the law firm not merely

to finish complying with the coverage portion of the subpoena but to go on and produce the voluminous and

sensitive documentation sought relating to the question

whether, if these 32 partners were employees, they were

demoted on account of their age and therefore in violation of the age discrimination law. We are therefore vacating the district court’s order and remanding the case with

directions to order the law firm to comply fully with the

part of the subpoena that requests documents relating to

coverage, but upon completion of those submissions to

make a determination whether the 32 demoted partners

are arguably covered by the ADEA. If it is plain on the

basis of uncontested facts that before their demotion the

32 were not employees and therefore were not protected

by the Act, which would place the case under the principle of our Great Lakes decision, then, barring circumstances that we do not at present foresee, the court should

excuse the firm from compliance with the part of the

subpoena that requests documents relating to the merits.

We are not ruling that the 32 demoted partners were

in fact employees within the meaning of the age discrimination law. Such a ruling would be premature. Sidley has

respectable arguments on its side, not least that the functional test of employer status toward which the EEOC is

leaning is too uncertain to enable law firms and other

partnerships to determine in advance their exposure to

discrimination suits—that it would be better if the courts

and the Commission interpreted the employer exclusion
20 No. 02-1605

to require treating all partners as employers, with perhaps a narrow sham exception. These issues will become

ripe when Sidley finishes complying with the coverage

part of the subpoena. We hold only that there is enough

doubt about whether the 32 demoted partners are covered by the age discrimination law to entitle the EEOC to

full compliance with that part, at least, of its subpoena.

VACATED AND REMANDED WITH DIRECTIONS.

EASTERBROOK, Circuit Judge, concurring in part and

concurring in the judgment. I join my colleagues’ exemplary discussion of the law governing agency subpoenas

(slip op. 3-7) but otherwise concur only in the judgment.

I do not think that the scope of the ADEA’S coverage is

as unfathomable as the majority makes out, nor do I believe that if the law were so ambulatory we should punt

the legal question to the district court. Instead we should

do our best to reduce uncertainty. Sidley and other large

partnerships need to plan their affairs; their members

also need to know their legal status. Can large law firms

adopt mandatory-retirement rules? It is disappointing

that the EEOC should profess, some 30 years after the

ADEA’s enactment, that it hasn’t a clue about the answer.

My colleagues’ opinion does not help matters, and this

is a missed opportunity.

The ADEA’s definition of “employee” has a circular quality:

The term “employee” means an individual employed by any employer except that the term
No. 02-1605 21

“employee” shall not include any person elected

to public office in any State or political subdivision of any State by the qualified voters thereof,

or any person chosen by such officer to be on such

officer’s personal staff, or an appointee on the

policymaking level or an immediate adviser with

respect to the exercise of the constitutional or legal

powers of the office. The exemption set forth in the

preceding sentence shall not include employees

subject to the civil service laws of a State government, governmental agency, or political subdivision. The term “employee” includes any individual

who is a citizen of the United States employed by

an employer in a workplace in a foreign country.

29 U.S.C. §630(f). Yet this does not condemn us to wandering forever through the mist like the Flying Dutchman.

The ADEA was interpolated into the Fair Labor Standards

Act, and its definition of employee tracks the FLSA’s. 29

U.S.C. §203(e). It turns out to be a definition in wide

use. Language essentially identical to the first clause of

§630(f) appears in the National Labor Relations Act, 29

U.S.C. §158(b)(4)(i); the Labor-Management Reporting

and Disclosure Act, 29 U.S.C. §402(f); the Employee Retirement Income Security Act, 29 U.S.C. §1002(6); the Family

and Medical Leave Act, 29 U.S.C. §2611(3) (incorporating §203(e)); Title VII of the Civil Rights Act of 1964,

42 U.S.C. §2000e(f); and the Americans with Disabilities

Act, 42 U.S.C. §12111(4). This means on the one hand

that a search for legislative purpose is futile—Congress

took off the rack language devised, and often used,

for subjects other than employment discrimination—and

on the other hand that a definition may be secured from

opinions that have addressed these other statutes. For

example, in Hishon v. King & Spalding, 467 U.S. 69 (1984),

all of the Justices assumed—and Justice Powell in con-
22 No. 02-1605

currence was explicit—that a bona fide partner of a large

law firm is not an “employee” for purposes of Title VII.

More recently, when dealing with ERISA, the Court held

unanimously that the definition’s circularity should be

fixed by incorporating into federal law the traditional

state agency-law criteria for identifying master-servant

relations. Nationwide Mutual Insurance Co. v. Darden, 503

U.S. 318, 322-27 (1992).

Darden turned on the distinction between an employee

and an independent contractor. As they had done when

resolving a similar problem in copyright law, see Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989),

the Justices looked to the approach in the Restatement

(Second) of Agency §220(2) (1958). We have done the same

in cases arising under other federal statutes that have

circular definitions of “employee.” See, e.g., Ost v. West

Suburban Travelers Limousine, Inc., 88 F.3d 435, 437-39

(7th Cir. 1996). Likewise we have drawn from state-law

principles—such as the rule that corporate form must

be respected—to determine whether an “employer” has

enough “employees” to come under a federal statute.

See, e.g., Papa v. Katy Industries, Inc., 166 F.3d 937 (7th

Cir. 1999). As Darden recognized, these bodies of law

contain some flexible elements but give ready answers

for the great majority of situations.

So too with partnership law. No one believes that a

bona fide partner is in a master-servant relation with the

partnership, or that the partner “is employed by” the

partnership. The qualification “bona fide” is important; as

Justice Powell observed in Hishon, an employer may not

evade obligations under federal law by plastering the

name “partner” on someone whose legal and economic

characteristics are those of an employee. See also Restatement (Third) of Agency §1.02 (T.D. 2, 2001) (parties’ labels
No. 02-1605 23

do not control). But if a person has those attributes that

differentiate “partners” from “employees” in normal

legal usage, then Darden classifies that person as a nonemployee for purposes of a federal statute such as

§630(f). It is neither our duty, nor our privilege, to invent

a federal law of employment relations, as my colleagues

appear to believe. The law must be federal (because §630

is a federal statute), but Darden tells us that federal law

tracks ordinary principles of master-servant relations

that come from state law.

Were the 32 lawyers bona fide partners? The majority all

but concedes that they were. If this had been a suit under the diversity jurisdiction, and we needed to decide

whose citizenship counted for purposes of the rule that

a partnership has every partner’s citizenship, see Carden

v. Arkoma Associates, 494 U.S. 185 (1990), we would have

acknowledged that all 32 were partners by normal reckoning. We know that all 32 (i) received a percentage of

Sidley’s profits and had to pony up if Sidley incurred a

loss; (ii) had capital accounts that were at risk if the firm

foundered; and (iii) were personally liable for the firm’s

debts and thus put their entire wealth, not just their

capital accounts, on the line. We also know that (iv) no nonpartner has an equity interest in the firm. The most important of these is the first (which implies the third): under

the Uniform Partnership Act, it is profit-sharing (coupled

with the lack of organization as an entity under some

other law) that defines a partnership and identifies its

partners, all of whom are personally liable for the venture’s

debts. See Uniform Partnership Act §202 (1997 rev.); see

also Daniel S. Kleinberger, Agency, Partnerships, and LLCs

§7.2.1 (2d ed. 2002). Illinois, which has enacted the model

act into positive law, treats participation in profits as the

defining characteristic of a bona fide partner. The court

in Davis v. Loftus, 2002 WL 31031467 (Ill. App. 1st Dist.
24 No. 02-1605

Sept. 9, 2002), held that a partner who shares in the profits

or loss is personally liable for the law firm’s debts, while an

“income partner” who receives a salary plus a bonus is an

employee and not liable for the firm’s debts.

The 32 lawyers were real partners and consequently not

“employees.” My colleagues’ suggestion that one can be

a partner under normal agency principles and still be

an “employee” because of a federal-law override is incompatible with Darden. Anyway, it makes both linguistic and economic sense to say that someone who is liable

without limit for the debts of an organization is an entrepreneur (a principal) rather than an “employee” (an agent).

Unlimited liability and profit-sharing give each partner

an interest in monitoring (and if need be expelling) those

other partners who are shirking or otherwise not carrying their part of the load. Their actions in this respect

are those of owners. Cf. Eugene F. Fama & Michael

Jensen, Separation of Ownership and Control, 26 J.L. & Econ.

301, 315-17 (1983); Fama & Jensen, Agency Problems and

Residual Claims, id. at 327, 334-36.

Perhaps each practice group at a large firm is best viewed

as a distinct venture, and the umbrella organization (run

by the Executive and Management Committees at Sidley)

as a partnership of partnerships. The top committees can

make all decisions, but much power is bound to be delegated, just as departments at a university make their own

hiring and salary decisions even though a self-perpetuating board of trustees holds all the legal authority. Membership on an academic department’s appointments committee is a position of real influence and responsibility

even though the trustees formally make all appointments.

See NLRB v. Yeshiva University, 444 U.S. 672 (1980) (holding that all faculty members are managers for purposes of

federal labor law even though they lack any legal instru-
No. 02-1605 25

ments of control). So too within the judiciary: committees

of the Judicial Conference effectively make many of the

most important administrative decisions although committee members do not sit on the Conference. Doubtless

things work similarly at large law firms, so my colleagues

ought not sneeze at Sidley’s observation that all 32 demoted partners served on committees. But the relation

between practice groups and the whole firm, and the

allocation of managerial authority among the lawyers,

do not matter to classification: a member of a large partnership including smaller associations remains a partner

rather than an employee in both economic and legal senses.

My colleagues tellingly do not cite a single state case, or

any scholarly commentary, restatement, or model code,

for the proposition that concentration of decision-making

authority within an entity alters the legal status of those

who share profits and bear all residual risk of loss.

What leads me to concur in the judgment is not any

doubt about the right characterization of the 32 demoted

partners but uncertainty about that of other lawyers.

Sidley has a retirement age for everyone it dubs a partner.

Whether this is lawful can be determined only by classifying, as “employee” or not, every lawyer who carries a

“partner” label. The EEOC is entitled to investigate without

knowing in advance how the inquiry will come out. It

may well be that Sidley designates as “partners” lawyers

who are paid straight salaries plus bonuses rather than

a portion of the profit (or loss) set ex ante. Unlike my

colleagues, I do not read the EEOC’s brief as conceding

that all of Sidley’s members are just like the 32 about

whom Sidley has provided information. How could the

EEOC tell at this stage whether the 32 are a representative

sample? It wants to know whether some “partners” are

paid entirely on the basis of guarantees (that is, salaries)

or have compensation packages slanted so heavily toward
26 No. 02-1605

the guarantee that they would not be liable for the firm’s

debts. The EEOC also seeks to learn whether all partners

have capital accounts at risk as the demoted 32 did.

These are things that the EEOC is entitled to find out for

everyone covered by the mandatory-retirement policy.

What is more, EEOC v. Dowd & Dowd, Ltd., 736 F.2d 1177,

1178 (7th Cir. 1984), appears to commit this circuit to the

view that state law forms don’t matter, and that a federal court must assess for itself the question whether

the “economic realities” demonstrate the existence of

an employment relation. I say “appears to” not only because Dowd precedes Darden but also because any reference to “economic realities” poses the question which of

many realities will be selected as those that matter. Maybe

all that Dowd shows is that our court seeks to search

out those realities that matter under ordinary agency

law, and to look past veneers that lack legal or economic

significance. That would align Dowd with Justice Powell’s

concurring opinion in Hishon, on which the panel in

Dowd relied. But there would be little point in revisiting

the matter today, because the Supreme Court will decide

this Term whether Dowd is correct. The ninth circuit in

Wells v. Clackamas Gastroenterology Associates, P.C., 271

F.3d 903 (2001), cert. granted, No. 01-1435 (U.S. Oct. 1,

2002), rejected both the method and the outcome of Dowd,

and the grant of certiorari enables the Supreme Court

to resolve some or all of the problems that govern the

classification of Sidley’s members.

Dowd held that classification of a person as an “employee”

under state law must be disregarded, for purposes of federal law, when the corporation is closely held—a professional corporation that differs from a partnership (beyond

matters of form) only in the extent to which the members

are personally liable for the firm’s debts. Clackamas held,
No. 02-1605 27

to the contrary, that any person classified as an employee

for purposes of state law necessarily is an employee for

purposes of federal law. Dowd has at least the virtue of

symmetry; it always looks through state-law forms (though

I confess unease about what Dowd identifies as the legally

important “realities”; professionals who are not personally liable for debts lack one of the principal attributes of

partners). Clackamas, by contrast, states only a rule of

inclusion: one can become an “employee” by virtue of state

law even if one has all of the attributes that agency law

associates with being an independent contractor or a

partner, but a classification as a “partner” or “independent

contractor” under state law is never conclusive in the

employer’s favor. This is not Darden’s approach (nor did

the ninth circuit cite Darden or Reid). If we are to use ordinary agency-law principles to identify an “employee,” we

should be consistent. The ninth circuit, though, has a

thumb on the scale in favor of classification as an “employee.”

Darden is not alone in preferring symmetry. For example, Robinson v. Shell Oil Co., 519 U.S. 337 (1997),

holds that an ex-employee is an “employee” for some

purposes under Title VII without regard to classification

under state law, and Walters v. Metropolitan Educational

Enterprises, Inc., 519 U.S. 202 (1997), holds that for purposes of determining whether the employer exceeds the

statutory size threshold an “employee” is a person on the

firm’s payroll at a given time, whether or not that person

is paid for the date used in measurement. Both Robinson

and Walters adopt rules that attach consequences to particular attributes, without asking what names state law

(or particular employers) give to those attributes. Likewise

with the question whether a person who shares in a venture’s profits and losses and has unlimited personal liability for the enterprise’s debts is an employee. We should
28 No. 02-1605

ask not what the organization, or any given state, calls

this person; we should ask how this set of attributes is

classified under the prevailing law of agency. I think it

very likely that the 32 lawyers Sidley demoted would be

classified as partners rather than employees under this

body of rules, but I do not know how Sidley’s other lawyers should be classified, so a remand is in order. Enforcing those aspects of the subpoena that call for information relevant to the merits would be unduly burdensome

until this task has been completed, and unless the evidence then shows that Sidley has classified as “partners”

some persons who are employees under ordinary agency

principles.

A true Copy:

Teste:

 _____________________________

Clerk of the United States Court of 

Appeals for the Seventh Circuit 

USCA-02-C-0072—10-24-02