Opinion ID: 197466
Heading Depth: 1
Heading Rank: 5

Heading: the doctrinal parameters

Text: Putting this appeal into proper perspective requires us to articulate the doctrinal parameters which inform an inquiry into a partner's status vis-a-vis Title VII. We divide our discussion into two segments.
Partnerships are mutable structures, and partners come in varying shapes and sizes. Consequently, attempting to delineate the circumstances in which a particular partner should be regarded as an employee for Title VII purposes is tricky business. Although one court has hinted at the desirability of a per se rule, saying in effect that all members of professional services corporations were employees for purposes of the antidiscrimination laws (there, the ADEA), no matter how significant a role they played in managing the affairs of the corporation, see Hyland, 794 F.2d at 797-98,3 we reject the notion that labels can conclusively resolve status inquiries. We hold instead that the Title VII question cannot be 3We note that the Second Circuit appears to have retreated somewhat from this position. See EEOC v. Johnson & Higgins, Inc., 91 F.3d 1529, 1538-39 (2d Cir. 1996), petition for cert. filed, 65 U.S.L.W. 3755 (U.S. May 1, 1997) (No. 96-1743). 11 decided solely on the basis that a partnership calls or declines to call a person a partner. A court must peer beneath the label and probe the actual circumstances of the person's relationship with the partnership. See Devine, 100 F.3d at 80-81; Fountain , 925 F.2d at 1400-01; see also Hishon, 467 U.S. at 79 n.2 (Powell, J., concurring) (Of course, an employer may not evade the strictures of Title VII simply by labelling its employees as `partners.'); see generally Board of Trade v. Hammond Elevator Co. , 198 U.S. 424, 437-38 (1905) (holding that the manner in which the parties to an agreement designate their relationship is not controlling). In other words, partnerships cannot exclude individuals from the protection of Title VII simply by draping them in grandiose titles which convey little or no substance. In our judgment, the correct course is to undertake a case-by-case analysis aimed at determining whether an individual described as a partner actually bears a close enough resemblance to an employee to be afforded the protections of Title VII. See Strother v. S outhern Cal. Permanente Med. Group, 79 F.3d 859, 86768 (9th Cir. 1996) (reversing grant of summary judgment where the trial court based its status determination principally on the fact that the plaintiff was called a partner); see also Devine, 100 F.3d at 81 (holding, in a case involving a professional services corporation, that a court should not treat either the individual's title or the entity form as determinative). After all, form should not be permitted to triumph over substance when important civil rights are at stake. 12 We also reject a variation on the per se theme advanced by the appellant. She asseverates that, due to the peculiarities of Puerto Rico's civil law structure, all partners in all Puerto Rico partnerships must be considered employees for purposes of Title VII. In a civil law system, this theory goes, a partnership is not merely a banding together of individual partners but a separate entity which must itself be considered the employer of all the individual partners. We need not delve too deeply into the hotly disputed question of whether the appellant's construct is sound as a matter of Puerto Rico law. It is enough for our purposes that the construct is unsound as a matter of federal law. The appellant cites no apposite authority for the novel proposition that the status of an individual under Title VII should vary depending on the law of the state in which a partnership entity is chartered or in which a claim arises. We think that the reverse is true: whether an individual is an employee for purposes of Title VII is a matter of federal law, and the question must be answered with reference to principles of federal law. Accord Broussard, 789 F.2d at 1159-60; C obb v. Sun Papers, Inc., 673 F.2d 337, 339 (11th Cir. 1982); Lambertsen v. Utah Dep't of Corrections, 922 F. Supp. 533, 536 (D. Utah 1995), aff'd, 79 F.3d 1024 (10th Cir. 1996).4 This determination is grounded in both Supreme Court case law and strong federal policies of uniformity and fairness. 4 The Bro ussard decision is of particular interest because the claim which was considered there arose in Louisiana a jurisdiction which, like Puerto Rico, has a civil law tradition. 13 In Robinson v Shell Oil Co., 117 S. Ct. 843 (1997), the Court decided that the word employee, as used in the antiretaliation section of Title VII, 42 U.S.C. S 2000e-3(a), included former as well as current employees. See id. at 849. In this issue, the Court ignored state law, concentratin . resolving g instead on the statute itself and on federal jurisprudence. See id. at 846-48. The Court took a similar approach in Walters v. Metropolitan Educ. Enters., Inc., 117 S. Ct. 660, 663-66 (1997), resolving the scope of the words employee and employer under Title VII by reference solely to federal statutes and judicial opinions. So, too, in Darden, 503 U.S. at 322-23 & n.3, the Court determined the meaning of employee under ERISA through the application of established common law principles (rejecting the idea that the term incorporated the law of any particular state). These cases are merely specific applications of the widely accepted principle that, in the absence of plain indication of a contrary intent, courts ought to presume that the interpretation of a federal statute is not dependent upon state law. 5 See , e.g. , Mississ ippi Band of Choctaw Indians v. Holyfield, 490 U.S. 30, 43 (1989); Dickerson v. New Banner Inst., Inc., 460 U.S. 103, 119 (1983); Uni ted States v. De Luca, 17 F.3d 6, 8-9 (1st Cir. 1994). 5 We are unimpressed by the appellant's attempted analogy to a line of cases involving the federal tax laws. See, e.g., Morgan v. Commission er, 309 U.S. 78 (1940). The appellant has not called to our attention any court which has accepted those cases as persuasive in the Title VII context, and we decline to be the first. 14 Our refusal to give state law controlling weight on this question not only comports with the case law but also makes common sense. Linking status determinations to local law would make an important federal statute mean different things in different states. This sort of checkerboarding would undermine Congress' easily discerned intent that Title VII stand as a national code of conduct in the struggle to ensure equality of treatment in the workplace. See 110 Cong. Rec. 13,088-13,091 (1964). Moreover, since the United States is home to in excess of 1,000,000 operating partnerships, numbering over 13,000,000 individual partners, see U.S. Bureau of the Census, Statistical Abstract of the United States 535 (116th ed. 1996), relegating status determinations to local law would create enormous confusion and widespread uncertainty. In regard to Title VII, there is no basis for departing from the precept that federal statutes are generally intended to have uniform nationwide application, Mississippi Band of Choctaw Indians , 490 U.S. at 43, and there is every reason for adhering to it. Here, moreover, the possibility that defining the term employee by reference to local law would open the door for state legislatures to adopt restrictive definitions and thereby defeat Title VII's broad remedial purposes militates strongly in favor of a uniform national standard. Cf. United States v. Kimbell Foods, Inc. , 440 U.S. 715, 728 (1979) (suggesting that, in cases in which the application of state law would frustrate the specific objectives of a federal program, establishing uniform federal rules 15 is appropriate). Thus, we hold that the meaning of the term employee, as that term is used in Title VII, must be derived through an analysis of federal statutes, legislative history, judicial decisions, and common law understandings, not through the law of Puerto Rico.
Having determined that federal law controls the question of the appellant's status, we turn next to an analysis of those attributes of a partner's relationship to the partnership which may influence the decisional calculus. In this endeavor, we do not write on a pristine page. Two other courts of appeals have tried their hands at plotting the line which divides partners who may be treated as employees under federal antidiscrimination statutes from those who may not. In Simpson, the Sixth Circuit considered the status for ADEA purposes of an individual denominated a partner by an international accounting firm. In attempting to ascertain whether the plaintiff, notwithstanding his title, qualified as a person protected by the ADEA, the court weighed factors such as: the right and duty to participate in management; the right and duty to act as an agent of other partners; exposure to liability; the fiduciary relationship among partners . . . participation in profits and losses; investment in the firm; partial ownership of firm assets; voting rights; the aggrieved individual's ability to control and operate the business; the extent to which the aggrieved individual's compensation was calculated as a percentage of the firm's profits; the extent of that individual's employment security; and other similar indicia of ownership. 16 Simpson, 100 F.3d at 443-44. Concluding that the plaintiff more closely resembled an employee than a proprietor the court noted particularly that the plaintiff had no right either to participate in the partnership's management decisions or to vote for those who did, and that his compensation was not determined on the basis of the firm's profits the court allowed the plaintiff to sue under the ADEA. See id. at 441-43. The Tenth Circuit grappled with the same sort of conundrum in Wheeler, a case which also involved a partner in an accounting firm. In determining that the plaintiff was not an employee for purposes of either Title VII or the ADEA, the Wheeler court focused on her participation in firm profits and losses, her exposure to liability, her investment in the firm, and her voting rights under the partnership agreement. See Wheeler, 825 F.2d at 276. Other cases, though not involving partnerships, are useful in our analysis. In Devine, for example, the Eighth Circuit, in deciding whether attorneys who were shareholders and directors in a professional services corporation were employees for Title VII purposes, stated that courts should look to the extent to which [the attorneys] manage and own the business. Devine, 100 F.3d at 81. The court proceeded to consider factors such as the attorneys' ability to participate in setting firm policy, the extent of their contributions to firm capital, their liability for firm debts, and the correlation (or lack of correlation) between their compensation and the firm's profits. See id. 17 In a comparable situation, the Eleventh Circuit evaluated the ADEA claim of a member-shareholder of an accounting firm by weighing elements such as the plaintiff's ability to share in firm profits and whether his compensation was a function of those profits; the plaintiff's liability for the firm's losses, debts, and obligations; and the extent of the plaintiff's right to vote on major firm decisions. See Fountain, 925 F.2d at 1401. The court dismissed an assertion that the autocratic actions of the firm's president constituted a reasonable basis for concluding that the plaintiff was an employee. Domination by an `autocratic' partner over others is not uncommon and does not support a finding that the others are `employees.' Id. We think that these cases provide valuable guidance concerning the factors which courts must consider in making status determination s under Title VII. In large, the critical attributes of proprietary status involve three broad, overlapping categories: ownership, remuneration, and management. Within these categories, emphasis will vary depending on the circumstances of particular cases. Nonetheless, although myriad factors may influence a court's ultimate decision in a given case, we recount a nonexclusive list of factors that frequently will bear upon such determinations. Under the first category, relevant factors include investment in the firm, ownership of firm assets, and liability for firm debts and obligations. To the extent that these factors exist, they indicate a proprietary role; to the extent that they do 18 not exist, they indicate a status more akin to that of an employee. Under the second category, the most relevant factor is whether (and if so, to what extent) the individual's compensation is based on the firm's profits. To the extent that a partner's remuneration is subject to the vagaries of the firm's economic fortunes, her status more closely resembles that of a proprietor; conversely, to the extent that a partner is paid on a straight salary basis, the argument for treating her as an ordinary employee will gain strength. A second potentially relevant factor in this regard relates to fringe benefits. An individual who receives benefits of a kind or in an amount markedly more generous than similarly situated employees who possess no ownership interest is more likely to be a proprietor. Under the third category, relevant factors include the right to engage in policymaking; participation in, and voting power with regard to, firm governance; the ability to assign work and to direct the activities of employees within the firm; and the ability to act for the firm and its principals. Once again, to the extent that these factors exist, they indicate a proprietary role. We add a note of caution. Status determinations are necessarily made along a continuum. The cases that lie at the polar extremes will prove easy to resolve. The close cases, however, will require a concerned court to make a case-specific assessment of whether a particular situation is nearer to one end of the continuum or the other. In performing this assessment, no single factor should be accorded talismanic significance. Rather, 19 a status determination under Title VII must be founded on the Given these verities, any effort to formulate a hard-and-fast rule would likely result in a statement that was overly simplistic, or too general to be of any real help, or both.