Opinion ID: 161335
Heading Depth: 3
Heading Rank: 2

Heading: Exceptions from Employee Status

Text: 20 The ERISA statute authorizes the Secretary of Labor to prescribe such regulations as he finds necessary or appropriate to carry out the provisions of the statute. 29 U.S.C. 1135. For purposes of determining whether an employee benefit plan exists, the regulations exclude from the definition of employee only: (1) the owner of a business, incorporated or unincorporated, which is wholly owned by the individual or by the individual and his or her spouse, and (2) partners in a partnership (and spouses). 29 C.F.R. 2510.3-3(c) (emphasis added). 21 Subsection (1) of the regulation speaks of an individual in the singular who wholly own[s] a business. Thus, the exception on its face is limited to individuals (including spouses) who are sole owners of a business. The exception does not extend to exclude multiple shareholders from the definition of employee. Contra Kennedy v. Allied Mut. Life Ins. Co., 952 F.2d 262 (9th Cir. 1991) (applying this exception to two brothers that owned a company). Additionally, the Department of Labor interprets this subsection as applying only where the stock of the corporation is wholly owned by one shareholder and his or her spouse and the shareholder or the shareholder and his or her spouse are the only participants in the plan. Op. Dep't of Labor 76-67 (May 21, 1976) (emphasis added). An agency's interpretation of its own regulations is entitled to deference. Emery Min. Corp. v. Sec. of Labor, 744 F.2d 1411, 1415 (10th Cir. 1984). 22 Since Mr. Sipma was not the sole shareholder of the corporation, he is not excluded from the definition of employee for purposes of determining whether an employee benefit plan exists. 23 We find that Mr. Sipma is an employee and does not qualify for the exception from employee status for sole shareholders of a corporation. We now consider the remaining Gaylor factors.