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  "We have often been asked to construe the meaning of 'employee' where the statute containing the term does not helpfully define it." Nationwide Mut. Ins. Co. v. Darden, 503 U. S. 318, 322 (1992). The definition of the term in the ADA simply states that an "employee" is "an individual employed by an employer." 42 U. S. C. §12111(4). That surely qualifies as a mere "nominal definition" that is "completely circular and explains nothing." Darden, 503 U. S., at 323. As we explained in Darden, our cases construing similar language give us guidance on how best to fill the gap in the statutory text.

     In Darden we were faced with the question whether an insurance salesman was an independent contractor or an "employee" covered by the Employee Retirement Income Security Act of 1974 (ERISA). Because ERISA's definition of "employee" was "completely circular," 503 U. S., at 323, we followed the same general approach that we had previously used in deciding whether a sculptor was an "employee" within the meaning of the Copyright Act of 1976, see Community for Creative Non-Violence v. Reid, 490 U. S. 730 (1989),⁴ and we adopted a common-law test for determining who qualifies as an "employee" under ERISA.⁵ Quoting Reid, 490 U. S., at 739-740, we explained that " 'when Congress has used the term 'employee' without defining it, we have concluded that Congress intended to describe the conventional master-servant relationship as understood by common-law agency doctrine.' " Darden, 503 U. S., at 322-323.

     Rather than looking to the common law, petitioner argues that courts should determine whether a shareholder-director of a professional corporation is an "employee" by asking whether the shareholder-director is, in reality, a "partner." Brief for Petitioner 9, 15-16, 21 (arguing that the four shareholders in the clinic are more analogous to partners in a partnership than shareholders in a corporation and that "those who are properly classified as partners are not 'employees' for purposes of the anti-discrimination statutes"). 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, 80, n. 2 (1984) (Powell, J., concurring) ("[A]n employer may not evade the strictures of Title VII simply by labeling its employees as 'partners' "); EEOC v. Sidley Austin Brown & Wood, 315 F. 3d 696, 709 (CA7 2002) (Easterbrook, J., concurring in part and concurring in judgment); Strother v. Southern California Permanente Medical Group, 79 F. 3d 859 (CA9 1996). Thus, asking whether shareholder-directors are partners--rather than asking whether they are employees--simply begs the question.

     Nor does the approach adopted by the Court of Appeals in this case fare any better. The majority's approach, which paid particular attention to "the broad purpose of the ADA," 271 F. 3d, at 905, is consistent with the statutory purpose of ridding the Nation of the evil of discrimination. See 42 U. S. C. §12101(b).⁶ Nevertheless, two countervailing considerations must be weighed in the balance. First, as the dissenting judge noted below, the congressional decision to limit the coverage of the legislation to firms with 15 or more employees has its own justification that must be respected--namely, easing entry into the market and preserving the competitive position of smaller firms. See 271 F. 3d, at 908 (opinion of Graber, J.) ("Congress decided 'to spare very small firms from the potentially crushing expense of mastering the intricacies of the antidiscrimination laws, establishing procedures to assure compliance, and defending against suits when efforts at compliance fail' " (quoting Papa v. Katy Industries, Inc., 166 F. 3d 937, 940 (CA7), cert. denied, 528 U. S. 1019 (1999))). Second, as Darden reminds us, congressional silence often reflects an expectation that courts will look to the common law to fill gaps in statutory text, particularly when an undefined term has a settled meaning at common law. Congress has overridden judicial decisions that went beyond the common law in an effort to correct "the mischief " at which a statute was aimed. See Darden, 503 U. S., at 324-325.

     Perhaps the Court of Appeals' and the parties' failure to look to the common law for guidance in this case stems from the fact that we are dealing with a new type of business entity that has no exact precedent in the common law. State statutes now permit incorporation for the purpose of practicing a profession, but in the past "the so-called learned professions were not permitted to organize as corporate entities." 1A W. Fletcher, Cyclopedia of the Law of Private Corporations §112.10 (rev. ed. 1997-2002). Thus, professional corporations are relatively young participants in the market, and their features vary from State to State. See generally 1 B. Bittker & J. Eustice, Federal Income Taxation of Corporations and Shareholders ¶ ;2.06 (7th ed. 2002) (explaining that States began to authorize the creation of professional corporations in the late 1950's and that the momentum to form professional corporations grew in the 1970's).

     Nonetheless, the common law's definition of the master-servant relationship does provide helpful guidance. At common law the relevant factors defining the master-servant relationship focus on the master's control over the servant. The general definition of the term "servant" in the Restatement (Second) of Agency §2(2) (1958), for example, refers to a person whose work is "controlled or is subject to the right to control by the master." See also id., §220(1) ("A servant is a person employed to perform services in the affairs of another and who with respect to the physical conduct in the performance of the services is subject to the other's control or right to control"). In addition, the Restatement's more specific definition of the term "servant" lists factors to be considered when distinguishing between servants and independent contractors, the first of which is "the extent of control" that one may exercise over the details of the work of the other. Id., §220(2)(a). We think that the common-law element of control is the principal guidepost that should be followed in this case.

The court Held:

     1. The common-law element of control is the principal guidepost to be followed in deciding whether the four director-shareholder physicians in this case should be counted as "employees." Where, as here, a statute does not helpfully define the term "employee," this Court's cases construing similar language give guidance in how best to fill the statutory text's gap. Nationwide Mut. Ins. Co. v. Darden, 503 U. S. 318, 322, 323. The professional corporation is a new type of business entity with no exact common-law precedent, but the common law's definition of the master-servant relationship provides helpful guidance: the focus on the master's control over the servant. Accordingly, the Equal Employment Opportunity Commission (EEOC) argues that a court should examine whether shareholder-directors operate independently and manage the business or instead are subject to the firm's control. Specific EEOC guidelines discuss the broad question of who is an "employee" and the narrower one of when partners, officers, board of directors' members, and major shareholders qualify as employees. The Court is persuaded by the EEOC's focus on the common-law touchstone of control and specifically by its submission that each of six factors are relevant to the inquiry whether a shareholder-director is an employee. Pp. 4-11.

 This is the position that is advocated by the Equal Employment Opportunity Commission (EEOC), the agency that has special enforcement responsibilities under the ADA and other federal statutes containing similar threshold issues for determining coverage. It argues that a court should examine "whether shareholder-directors operate independently and manage the business or instead are subject to the firm's control." Brief for United States et al. as Amici Curiae 8. According to the EEOC's view, "[i]f the shareholder-directors operate independently and manage the business, they are proprietors and not employees; if they are subject to the firm's control, they are employees." Ibid.

     Specific EEOC guidelines discuss both the broad question of who is an "employee" and the narrower question of when partners, officers, members of boards of directors, and major shareholders qualify as employees. See 2 Equal Employment Opportunity Commission, Compliance Manual §§605:0008-605:00010 (2000) (hereinafter EEOC Compliance Manual).⁷ With respect to the broad question, the guidelines list 16 factors--taken from Darden, 503 U. S., at 323-324--that may be relevant to "whether the employer controls the means and manner of the worker's work performance." EEOC Compliance Manual §605:0008, and n. 71.⁸ The guidelines list six factors to be considered in answering the narrower question, which they frame as "whether the individual acts independently and participates in managing the organization, or whether the individual is subject to the organization's control." Id., §605:0009.

     We are persuaded by the EEOC's focus on the common-law touchstone of control, see Skidmore v. Swift & Co., 323 U. S. 134, 140 (1944),⁹ and specifically by its submission that each of the following six factors is relevant to the inquiry whether a shareholder-director is an employee:

"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." EEOC Compliance Manual §605:0009.¹⁰

     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.' " 503 U. S., at 324 (quoting NLRB v. United Ins. Co. of America, 390 U. S. 254, 258 (1968)).

     2. Because the District Court's findings appear to weigh in favor of concluding that the four physicians are not clinic employees, but evidence in the record may contradict those findings or support a contrary conclusion under the EEOC's standard, the case is remanded for further proceedings. P. 11.

271 F. 3d 903, reversed and remanded.

     Stevens, J., delivered the opinion of the Court, in which Rehnquist, C. J., and O'Connor, Scalia, Kennedy, Souter, and Thomas, JJ., joined. Ginsburg, J., filed a dissenting opinion, in which Breyer, J., joined.

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CIVIL RIGHTS, CORP. GOVERNANCE, CORPORATION & ENTERPRISE LAW, LABOR &
EMPLOYMENT LAW

CLACKAMAS GASTROENTEROLOGY ASSOCS., P.C. v. WELLS, No. 01-1435
(U.S.S.C. April 22, 2003)
In determining whether shareholder-directors of a corporation should
be counted as "employees" under the ADA, courts should assess
whether the shareholder-directors operate independently and manage
the business, or instead are subject to the firm's control.

To read the full text of this opinion, go to:
http://laws.lp.findlaw.com/us/000/011435.html
CLACKAMAS GASTROENTEROLOGY ASSOCS., P.C. v. WELLS, No. 01-1435
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