When an employee is not an employee

This semantic stroke was remarkable — so remarkable, indeed, that in writing the Americans With Disabilities Act (ADA) of 1990, Congress adopted the same definition. An employee is "an individual employed by an employer." Now, in a case just accepted for argument before the Supreme Court, the justices will have one more opportunity to explain when an employee is not an employee. Or vice versa.

The case at hand, scheduled for argument next winter, is Arbaugh v. Y&H Corporation , on appeal from the U.S. 5th Circuit in New Orleans. The "Arbaugh" is Jenifer Arbaugh, who served as a bartender and waitress at the Moonlight Cafe in the city's lower Garden District from May 2000 to February 2001.


Ms. Arbaugh was not a happy camper. She alleged that Yalcin Hatipoglu, one of the two co-owners of the cafe, continually subjected her to a sexually hostile environment. The Civil Rights Act of 1964 prohibits that sort of thing. Evidently a jury believed her charges, for in October 2002 she won a two-day trial and $40,000 in back pay and damages.

The co-owners naturally appealed. This time they won. A panel of the U.S. Court of Appeals for the 5th Circuit, speaking through Judge Harold R. DeMoss, nullified the award. His opinion had nothing to do with the substance of Ms. Arbaugh's grievance. It had everything to do with the meaning of "employee."

It is a jurisdictional matter. The applicable law affects only those employers with 15 or more employees. The young bartender's lawyers argued persuasively that the cafe qualified. In their view, the two owners, their wives and two delivery drivers were employees in fact. Counsel for the owners argued convincingly to the contrary.

The owners said they could not possibly be regarded as "employees" under the act. They were partners in ownership of the corporation. They divided the profits equally, did the hiring and firing, and exercised complete control over the restaurant. As for their wives, they performed no real "work." They were at most passive partners. Arbaugh's lawyers, for their part, offered evidence that the wives (1) received a salary for their handling of advertising and publicity; (2) were included on the payroll register, and (3) had the proper taxes deducted from their paychecks.

What about the two drivers? The owners argued that the drivers were not on a "payroll." They worked for $4 an hour plus tips; nothing was deducted from their wages. They drove and maintained their own cars. Arbaugh's counsel responded that the two drivers, when they weren't driving, were required to help in the kitchen. They prepared salads and desserts, filled the salt and pepper shakers, and worked according to hourly schedules set by the owners.

Alas for Jenifer Arbaugh! The 5th Circuit's panel found the owners' evidence convincing. As employers, they themselves were not employees. Neither could their wives and the drivers be counted as employees. Economic realities supported the owners' view. Also on their side — barely — was the Supreme Court's 7-2 opinion just two years ago in a case from Oregon. Justice John Paul Stevens wrote for the majority in that case. Justices Ruth Bader Ginsburg and Stephen Breyer dissented.

The 2003 case involved a gastroenterology clinic in Clackamas, a suburb south of Portland. In 1996 the clinic hired Deborah Anne Wells as a bookkeeper. After the four physician-owners dismissed her in 1997, she sued under the Americans With Disabilities Act. Like the Civil Rights Act, the ADA affects only employers with 15 or more employees. Counting the doctors, the clinic had 18. Without them, it was not subject to suit.

The high court ruled that the doctors should not be counted. Their clinic is a professional corporation. Like partners in a big law firm, the four doctors are not exactly "employees." Several factors, said Stevens, support that view. On the other hand, Ginsburg argued in dissent, they're owners. They should not be sheltered from the strictures of the disability act.

For my own part, I would turn to Judge Dumpty of Wonderland fame. "The question," said that eminent jurist, "is who is to be master, that's all." I would count the wives and the drivers as employees and save the day for Jenifer.

(Letters to Mr. Kilpatrick should be sent by e-mail to kilpatjj@aol.com.)

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