The opinion of the court was delivered by: Arthur J. Schwab United States District Judge
MEMORANDUM OPINION RE: DEFENDANT'S PHASE ONE MOTION FOR SUMMARY JUDGMENT ON THRESHOLD EMPLOYMENT STATUS ISSUE (DOC. NO. 130)
I. INTRODUCTION AND BACK GROUND
Plaintiff Alyson J. Kirleis is an equity Class A Shareholder/Director at defendant law firm, Dickie, McCamey & Chilcote, PC ("DMC" or "the Firm"), a Pennsylvania professional corporation. The relationship between Shareholders of DMC and the corporation are defined by its By-Laws, pursuant to which plaintiff receives annual compensation and a comprehensive package of benefits.
Section 3.08(g) of the By-Laws provide Ms. Kirleis with, inter alia, a car allowance of $600 per month, a parking lease at DMC's PPG Place office complex, an annual trip to a legal seminar or convention with airfare included plus a $2,000 spending allowance, reimbursement of 70% of her annual dues at St. Clair Country Club, and a life insurance policy with a death benefit of $800,000. Ms. Kirleis accepted these benefits, and in addition, she accepted: (1) annual compensation pursuant to Section 4.03(h) of the By-Laws; (2) a position on the Board of Directors pursuant to Section 2.02; and (3) a right to vote on all DMC matters reserved to the Board, pursuant to Section 1.03(b) of the By-Laws.*fn1 Plaintiff served as a member of various subcommittees of DMC, including as Chair or Co-Chair, and held various management positions, including: Chair of the Associate Review Committee, member of an ad hoc committee charged with administering an Executive Committee election, and member of the Shareholder Evaluation Committee.
After careful review of defendant's motion for summary judgment, the briefs in support and in opposition, the statements of 920 material facts and counter statements of 920 material facts, and the voluminous supporting materials, the Court finds, as a matter of law based upon undisputed material facts, that plaintiff is not an "employee" within the meaning of the anti-discrimination laws. Instead, the Court finds plaintiff to be a statutory "employer" who cannot claim the protection afforded by those laws. Because a reasonable jury could not find otherwise on the record before the Court,*fn2 the Court will grant summary judgment for defendant on the threshold issue presented in this case, for the reasons to follow.
Plaintiff has filed suit under federal and state anti-discrimination employment laws alleging that DMC, a Pennsylvania professional corporation engaged in the practice of law, discriminated and then retaliated against her because of her sex, and subjected her to a hostile work environment, in violation of Title VII of the Civil Rights Act of 1964 ("Title VII"), 42 U.S.C. § 2000e, et seq., and the Pennsylvania Human Relations Act ("PHRA"), 43 P.S. § 951, et seq. Additionally, plaintiff claims that DMC paid her less than similarly situated male Class A Shareholder/Directors, in violation of the Fair Labor Standards Act of 1938 ("FLSA"), 29 U.S.C. § 201, et seq. Plaintiff seeks compensatory damages, punitive damages and injunctive relief.
At a prior stage of the proceedings, a colleague on this Court summarized plaintiff's claims as follows:
Plaintiff filed charges of sex discrimination, hostile work environment and retaliation with the Equal Employment Opportunity Commission ("EEOC") and the Pennsylvania Human Relations Commission ("PHRC") on October 19, 2006. Plaintiff then filed suit on December 18, 2006 alleging that the method of establishing her annual compensation was not applied to similarly situated male attorneys who were performing the same, or less work, than plaintiff. Plaintiff further alleges that defendant has a separate and lower employment track for female attorneys who have taken maternity leave and/or have children. Plaintiff also contends that defendant has a pattern and practice of discriminating against women because of their sex in the terms and conditions of their employment, including paying lower wages to women, assigning women to lower quality cases, and/or assigning women to roles secondary to male attorneys on cases. Plaintiff also alleges that defendant maintains a hostile work environment towards women. Memorandum Order of July 24, 2007 (Doc. No. 54), Kirleis v. Dickie, McCamey & Chilcote, PC, 2007 WL 2142397 at *1 (W.D. Pa. 2007) (Lancaster, J.). In a separate complaint in a related (and now consolidated and closed action), plaintiff alleges that DMC retaliated against her in various ways since filing her claims with the EEOC and the PHRC.*fn3
Before litigating these serious allegations, the Court must resolve the threshold issue of whether plaintiff is properly considered an "employee" of DMC for purposes of the employment anti-discrimination laws, Title VII, the PHRA and the FLSA,*fn4 or whether she must be deemed an "employer" who is not protected by those laws. Both parties agree that the threshold determination is controlled by the decision of the United States Supreme Court in Clackamas Gastroenterology Assocs. v. Wells, 538 U.S. 440 (2003).
The Clackamas Court agreed with the EEOC that the employer-employee determination should be made with reference to the common-law definition of the master-servant relationship, focusing on the element of control and six non-exhaustive factors bearing on that relationship. Id. at 442. Summarizing the EEOC approach adopted in Clackamas, the Court stated as follows:
As the EEOC's standard reflects, an employer is the person, or group of persons, who owns and manages the enterprise. The employer can hire and fire employees, can assign tasks to employees and supervise their performance, and can decide how the profits and losses of the business are to be distributed. The mere fact that a person has a particular title -- such as partner, director, or vice president -- should not necessarily be used to determine whether he or she is an employee or a proprietor. See [EEOC Compliance Manual § 605:0009] ("An individual's title... does not determine whether the individual is a partner, officer, member of a board of directors, or major shareholder, as opposed to an employee"). Nor should the mere existence of a document styled "employment agreement" lead inexorably to the conclusion that either party is an employee. See [[EEOC Compliance Manual § 605:0009] (looking to whether "the parties intended that the individual be an employee, as expressed in written agreements or contracts"). Rather, as was true in applying common-law rules to the independent -- contractor - versus - employee issue..., the answer to whether a shareholder-director is an employee depends on "'all of the incidents of the relationship... with no one factor being decisive.' " [Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 324 (1992)]....
Id. at 450-51 (additional citation omitted).
The United States Court of Appeals for the Ninth Circuit found four physician- shareholders who owned the professional corporation and constituted its board of directors should be deemed to be employees, finding no reason to permit a professional corporation to reap the tax and civil liability advantages of its corporate status and then argue that it is like a partnership so as to avoid employment discrimination liability. Rejecting this categorical approach, which deemed any person working in or for a professional corporation to be an employee, the Clackamas case held that shareholder-directors of a professional corporation could, under appropriate circumstances, be counted as "employees" towards the fifteen-employee threshold for covered employers under the Americans with Disabilities Act of 1990 ("ADA").
Clackamas also noted that the "meaning of the term 'employee' comes into play when determining whether an individual is an 'employee' who may invoke" the protections of the ADA. Id. at 447 n.6. DMC argues that under Clackamas, Ms. Kirleis is not its "employee" but is, in fact, an "employer" in the professional corporation and that, therefore, she is not protected by the anti-discrimination laws. Plaintiff asserts, on the other hand, that the evidence of record, viewed as a whole, precludes summary judgment in favor of DMC on the issue of her employment status "because there are genuine issues of material fact with respect to each of the six Clackamas factors. The evidence submitted by Kirleis demonstrates that she does not act independently and is subject to the supervision and control of DMC's Executive Committee, which is a small group of 13 to 15 attorneys who unilaterally make all management decisions for DMC, including determination of annual compensation for all attorneys and support staff, distribution of work assignments, and hiring and firing of attorneys." Plaintiff's Brief in Opposition to Defendants' Motion for Summary Judgment (Doc. No. 142) at 3.
On July 24, 2007, another member of this Court*fn5 entered a Memorandum Order (Doc. No. 54) denying DMC's motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), on the ground that plaintiff is not an employee under the applicable statutes, without prejudice to DMC's ability to raise the employer-employee issue following discovery.*fn6 This Memorandum Order also denied DMC's alternative motion to compel arbitration of the claims pursuant to the DMC By-Laws providing for such arbitration because, under Pennsylvania law, which the parties agreed controlled the issue, plaintiff had not expressly agreed to waive her legal claims to arbitration.
DMC filed a timely appeal of the Memorandum Order denying its motion to compel arbitration to the United States Court of Appeals for the Third Circuit, which on March 24, 2009, affirmed the District Court's denial of the motion to compel arbitration. Kirleis v. Dickie, McCamey & Chilcote, P.C., 560 F.3d 156 (3d Cir. 2009).*fn7 The Court of Appeals for the Third Circuit affirmed the District Court's finding that Ms. Kirleis had not expressly agreed to arbitrate her claims because there was no evidence that she had actually received a copy of the DMC ByLaws, and she was unaware of the existence of the arbitration provision contained therein. Accordingly, because Pennsylvania law did not recognize an implicit agreement to arbitrate her claims, the arbitration provision of the By-Laws was unenforceable.
After the Court of Appeals entered its Mandate (Doc. No. 94) on May 11, 2009, this Court convened an initial case management conference. DMC filed a Motion for Bifurcation of Discovery and Dispositive Motion Proceedings, (Doc. No. 96), and plaintiff filed her response in opposition. After hearing argument on this motion at the case management conference, this Court entered an Order (Doc. No. 110) on June 11, 2009, granting the motion to bifurcate discovery,*fn8 and setting a schedule for Phase I discovery on the threshold issue of plaintiff's status as employer or employee.
Following extensive discovery, DMC filed its motion for summary judgment, concise statement of 194 material facts, and brief in support of summary judgment, Ms. Kirleis filed her response, counter statement of 194 material facts with 726 additional facts and brief in opposition, and defendant filed a reply brief and counter statement to plaintiff's 726 additional facts. The threshold issue is now ripe for determination.
A. Summary Judgment Standards
Fed.R.Civ.P. 56(c) currently provides that on a motion for summary judgment, the "judgment sought should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." "Rule 56 of the Federal Rules of Civil Procedure 'mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.'" Marten v. Godwin, 499 F.3d 290, 295 (3d Cir. 2007), citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). Summary judgment is appropriate "'if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Woodside v. Sch. Dist. of Philadelphia Bd. of Educ., 248 F.3d 129, 130 (3d Cir. 2001), quoting Foehl v. United States, 238 F.3d 474, 477 (3d Cir. 2001) (citations omitted).
An issue of material fact is genuine if the evidence is such that a reasonable jury could return a verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); see also Doe v. Abington Friends Sch., 480 F.3d 252, 256 (3d Cir. 2007) ("A genuine issue is present when a reasonable trier of fact, viewing all of the record evidence, could rationally find in favor of the non-moving party in light of his burden of proof."), citing Anderson and Celotex Corp. Recently, the United States Supreme Court "emphasized, [w]hen the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts.... Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial." Scott v. Harris, 550 U.S. 372 (2007) (internal quotations omitted), quoting Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586-587 (1986).
In deciding a summary judgment motion, a court must view the facts in the light most favorable to, draw all reasonable inferences, and resolve all doubts, in favor of the nonmoving party. Doe v. County of Centre, PA, 242 F.3d 437, 446 (3d Cir. 2001); Woodside, 248 F.3d at 130; Heller v. Shaw Indus., Inc., 167 F.3d 146, 151 (3d Cir. 1999). Further, a court must not engage in credibility determinations at the summary judgment stage. Simpson v. Kay Jewelers, Div. of Sterling, Inc., 142 F.3d 639, 643 n. 3 (3d Cir. 1998), quoting Fuentes v. Perskie, 32 F.3d 759, 762 n.1 (3d Cir. 1994).
B. Substantive Principles - the Clackamas Test
In order to make a claim under Title VII, the FLSA or the PHRA, Ms. Kirleis must first establish that she was an employee of DMC, at all times relevant to her claims. Title VII, the FLSA*fn9 and the PHRA*fn10 were meant to protect only "employees and potential employees," therefore, it is critical to make the distinction between employees and employers. Serapion v. Martinez, 119 F.3d 982, 985 (1st Cir. 1997).
There is no dispute between the parties that the question of whether Ms. Kirleis is an employee is a "preliminary threshold issue" and that plaintiff bears the burden of proving that she was an employee, not an employer.*fn11 See Steelman v. Hirsch, 473 F.3d 124, 128 (4th Cir. 2007) (citing Benshoff v. City of Virginia Beach, 180 F.3d 136, 140 (4th Cir. 1999)) ("A plaintiff bears the burden of establishing that she is an employee."); Simpson v. Ernst & Young, 100 F.3d 436, 439 (6th Cir. 1996) ("the distinction between a partner and an employee... is a preliminary jurisdictional issue."). Moreover, "a single individual in a single occupational setting cannot be both an employer and an employee."Ziegler v. Anesthesia Assocs. Of Lancaster, Ltd., 74 Fed.Appx. 197 (3d Cir. 2003) (finding four shareholder-physicians to be employers) (quoting Serapion, 119 F.3d at 985); Devine v. Stone, Leyton & Gershman, P.C., 100 F.3d 78, 80-81 (8th Cir. 1996), cert. denied, 520 U.S. 1211 (1997).
While the anti-discrimination statutes define the term "employee," the definition is "completely circular and explains nothing." Clackamas, 538 U.S. at 444 (quoting Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 322 (1992)). Title VII and the PHRA define the term "employee" as "an individual employed by an employer." 42 U.S.C. §2000e(f), 29 U.S.C. §203 (e) and 43 P.S. §954(b). Thus, the EEOC and the Supreme Court had to look outside the statutes for guidance.
In Clackamas, the Supreme Court agreed with the EEOC that "Congress intended to describe the conventional master-servant relationship as understood by common-law agency doctrine." Clackamas, 538 U.S. at 445 (quoting Darden, 503 U.S. at 322-23). The master-servant relationship is generally described as a relation where "the employer has the right to select the employee, the power to remove and discharge him and the right to direct both what work shall be done and the manner in which it shall be done." Blacks Law Dictionary, 879 (5th ed. 1979).
Prior to Clackamas, there had been a split among the Courts of Appeals as to how to define the term "employee" in the context of a professional organization, in a meaningful and workable manner. The Court of Appeals for the Seventh Circuit applied an "economic realities" test. The economic realities test considered myriad facts and circumstances regarding the professional organization and its professional members, generally concluding that a shareholder in a professional corporation is more analogous to a general equity partner in a partnership, who is an "employer," than it is to a shareholder of a general corporation. Clackamas, 538 U.S. at 442 (citing EEOC v. Dowd & Dowd, Ltd., P.C., 736 F.2d 1177, 1178 (7th Cir. 1984)).*fn12 The Supreme Court declined to follow the economic realities test to the extent that the analysis of "employer-employee" status ceased once a court determined the individual was akin to a partner in a partnership, who is always deemed to be an employer. Clackamas, 538 U.S. at 446 ("The question whether a shareholder-director is an employee, however, cannot be answered by asking whether the shareholder-director appears to be the functional equivalent of a partner. Today there are partnerships that include hundreds of members, some of whom may well qualify as "employees" because control is concentrated in a small number of managing partners. Cf. Hishon v. King & Spalding, 467 U.S. 69, 79, n. 2 (1984) (Powell, J., concurring) ("[A]n employer may not evade the strictures of Title VII simply by labeling its employees as 'partners'")").
The Supreme Court also rejected the approach taken by the Court of Appeals for the Second Circuit, an even more categorical, "employee friendly" approach, wherein professional corporations are viewed in the corporate format, and individuals who work for a professional corporation must be considered to be employees of the corporation. In Hyland v. New Haven Radiology Assocs., the Court of Appeals stated that the "incorporators of a professional corporation make a deliberate decision to adopt the corporate form for their business in order to avail themselves of important tax, employee benefit, and civil liability advantages. Having freely made the choice to adopt this form of business organization they should not now be heard to say that their firm is essentially a... partnership and not a corporation." Hyland, 794 F.2d 793, 798 (2d Cir. 1986) (after electing to do business in a corporate form, defendant can not later assert that in economic reality the business was a partnership and that the plaintiff was a partner.).
The Court in Clackamasrejected both of these categorical approaches, and adopted the functional test developed by the EEOC, the agency charged with enforcing the anti-discrimination statutes,*fn13 to resolve the question of who qualifies as an employee. Clackamas, 538 U.S. at 448. The EEOC had adopted a "master-servant control" test that focuses on the common-law touchstone of control to determine whether a person is an employee or an employer. Clackamas, 538 U.S. at 440 (citing 2 EEOC Compliance Manual §605.0009 (2000)). This test sets forth six factors to be considered when determining "whether an individual acts independently and participates in managing the organization, or whether the individual is subject to the organization's control." Clackamas, 538 U.S. at 449-50 (quoting 2 EEOC Compliance Manual §605.0009 (2000)). These six factors are as follows:
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.
Whether the individual shares in the profits, losses, and liabilities of the organization.
Clackamas, 538 U.S. at 449 (quoting 2 EEOC Compliance Manual §605.0009 (2000)).
The six Clackamas factors are not exhaustive and "the answer to whether a shareholder-director is an employee depends on all the incidents of the relationship... with no one factor being decisive." Clackamas, 538 U.S. at 450-51, n.10 (internal quotations omitted). Moreover, a person's title and labels on documents are not determinative of whether the person is an employee for whom protections should be afforded under anti-discrimination laws, so titles such as "partner" and "shareholder" are not dispositive. Id., at 450. There is no "shorthand formula or magic phrase" that is determinative of the issue whether a person is an employee, which must be determined on a case by case basis with reference to the totality of the facts. Clackamas, 538 U.S. at 449, n.10.
While Clackamas analyzed the term employee with regard to whether an employer met the fifteen employee threshold under the ADA, the Supreme Court also stated that the same analysis is appropriate in determining whether a plaintiff qualifies as an employee, and therefore is protected by the ADA. Clackamas, 538 U.S. at 444 n.3 and 446 n.6.
In summary, the Supreme Court stated:
As the EEOC's standard reflects, an employer is the person, or group of persons, who owns and manages the enterprise. The employer can hire and fire employees, can assign tasks to employees and supervise their performance, and can decide how the profits and losses of the business are to be distributed. The mere fact that a person has a particular title - such as partner, director, or vice president - should not necessarily be used to determine whether he or she is an employee or a proprietor. See ibid. ("An individual's title... does not determine whether the individual is a partner, officer, member of a board of directors, or major shareholder, as opposed to an employee"). Nor should the mere existence of a document styled "employment agreement" lead inexorably to the conclusion that either party is an employee. See ibid. (looking to whether "the parties intended that the individual be an employee, as expressed in written agreements or contracts"). Rather, as was true in applying common-law rules to the independent-contractor- versus- employee issue confronted in Darden, the answer to whether a shareholder-director is an employee depends on " 'all of the incidents of the relationship... with no one factor being decisive.' "
Clackamas, 538 U.S. 449-50 (footnotes and citations omitted).
Unless otherwise indicated, the following facts of record, adduced from the summary judgment supporting materials, either are not in dispute or are historical facts the substance of which has not been challenged, even though the parties may "deny" some statements based on divergent inferences drawn therefrom or for some other non-content related reason.
DMC is a Pittsburgh based professional corporation at which Ms. Kirleis has practiced law for over twenty years: ten years as an associate attorney, three years as a Class B Shareholder, and for almost nine years, as a Class A Shareholder/Director. Plaintiff's election as a Class A Shareholder/Director of the Firm, effective January 1, 2001, was made in accordance with an election held pursuant to Section 3.08 of DMC's By-Laws. Although plaintiff maintains that in practice, the DMC By-Laws are not routinely followed or distributed to Shareholders, and that she never received a copy or saw the By-Laws until after she commenced this litigation, the relationship between DMC's Shareholders, associate attorneys and staff officers and employees and the professional corporation is ostensibly governed by detailed By-Laws of the corporation.
Pursuant to the By-Laws, all Class A Shareholders are members of DMC's Board of Directors. The only differences between a Class B Shareholder and a Class A Shareholder/ Director are that Class B Shareholders cannot vote (nor can associate attorneys or other staff employees), are not Directors of the Firm, and are not eligible for certain benefits for which Class A Shareholder/Directors are eligible.
As noted, section 3.08(g) of the By-Laws provided Kirleis with a car allowance, parking lease, annual trip to a legal seminar or convention with airfare included plus spending allowance, reimbursement of 70% of annual country club dues, and a life insurance policy. In addition to these benefits, Ms. Kirleis also accepted (1) compensation pursuant to Section 4.03(h) of the ByLaws; (2) a position on the Board of Directors pursuant to Section 2.02; and (3) a right to vote on all DMC matters reserved to the Board, pursuant to Section 1.03(b). Class B Shareholders are not eligible for the car lease allowance of $600 per month, insurance on the car or the annual legal seminar or convention trip.
Plaintiff does not deny the substance of these historical facts, but she vigorously denies that the conferral and acceptance of these benefits were "pursuant to the By-Laws." Plaintiff's persistent refrain regarding the effect of the DMC By-Laws is that up until this litigation, she had not been given a copy of the By-Laws, had never actually seen the By-Laws, and never asked to see the By-Laws because she "understood" they were in the process of being revised, and were in a "state of flux." (As discussed more fully, infra, plaintiff does not offer any facts to contradict defendant's averment that the By-Laws were always available to any Shareholder/Director.)
The DMC By-Laws*fn14 specifically reserve certain decisions to the Board of Directors and provide, among other things:
(a) Section 3.08 of the By-Laws specifically reserves to the Board of Directors as a whole, of which Plaintiff ...