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Media Alerts - Robert A. Mariotti, Sr. v. Mariotti Building Products, Inc. - Third Circuit
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April 30, 2013
  Robert A. Mariotti, Sr. v. Mariotti Building Products, Inc. - Third Circuit
Headline: Test for Whether a Shareholder-Director of a Professional Corporation is an Employee for Purposes of Title VII Extends to Business Entities that are not Professional Corporations.

Area of Law: Title VII; Federal Rule of Civil Procedure 12(b)(6)

Issue(s) Presented: Whether the Supreme Court's holding in Clackamas Gastroenterology Associates, P.C. v. Wells, which set out a test for determining whether a shareholder-director of a professional corporation is an "employee" under the ADA, applies to business entities that are not professional corporations in a Title VII employment action.

Brief Summary: This case arose after the District Court granted the defendant's motion to dismiss plaintiff's Title VII claims pursuant to Federal Rule of Civil Procedure 12(b)(6). The defendant, Mariotti Building Products, Inc., terminated the plaintiff, one of the founders of the corporation and a shareholder. The plaintiff filed a Title VII religious discrimination and hostile working environment claim against MBP, and the defendant moved to dismiss under Rule 12(b)(6). The District Court held that the plaintiff was not an "employee" under Title VII. The Third Circuit affirmed, holding that the rule in Clackamas Gastroenterology Associates, P.C. v. Wells is not limited to professional corporations. However under Clackamas, the plaintiff is not considered an "employee" and is therefore not entitled to relief.

Extended Summary: The U.S. Court of Appeals for the Third Circuit affirmed the District Court's dismissal of the plaintiff's Title VII claims pursuant to Federal Rule of Civil Procedure (12)(b)(6). The plaintiff, one of the founders of a family building materials business, filed a Title VII religious discrimination and hostile working environment claim after the corporation's shareholders terminated his employment. The plaintiff alleged that after a spiritual awakening, MBP's officers, directors, and employees engaged in making negative, hostile and/or humiliating statements about him and his religious affiliation. As one of the founders of the corporation, the plaintiff was an officer of the corporation and served as both vice-president and secretary. He was also a member of the board of directors and was a shareholder pursuant to a written agreement.

After the plaintiff filed suit against MBP, the defendant moved to dismiss the complaint under Rule 12(b)(6), arguing that the plaintiff was not an "employee" under Title VII and therefore was not protected by the statute. The District Court granted the motion and the plaintiff appealed. The Third Circuit reviewed whether the District Court applied the correct legal standard in deciding that the plaintiff was not an employee under Title VII. The Third Circuit affirmed, holding that the rule in Clackamas Gastroenterology Associates, P.C. v. Wells is not limited to professional corporations and that the plaintiff is not an "employee" under the Clackamas test.

In Clackamas, the Supreme Court considered whether the shareholder-directors of a professional corporation should be counted as employees in determining whether the entity met the threshold number of employees, and therefore qualified as an employer, under the ADA. The Supreme Court focused on the master-servant relationship as understood by common-law agency doctrine, and concluded that the common-law element of control is the principal guidepost in deciding whether an individual is an employee. Following the Equal Employment Opportunity Commission (EEOC) guidelines on whether shareholders qualify as employees, the Court identified six factors that are relevant in determining whether a shareholder is an employee: (1) Whether the organization can hire or fire the individual or set the rules and regulations of the individual's work; (2) Whether and, if so, to what extent the organization supervises the individual's work (3) Whether the individual reports to someone higher in the organization; (4) Whether and, if so, to what extent the individual is able to influence the organization; (5) Whether the parties intended that the individual be an employee, as expressed in written agreements or contracts; (6) Whether the individual shares in the profits, losses, and liabilities of the organization.

The Third Circuit concluded that because the EEOC guidelines, on which the Clackamas decision was based, did not restrict itself to professional corporations, and explicitly covers major shareholders, the Clackamas test applies to the plaintiff's activities as a shareholder in the corporation. As a shareholder, director, and corporate officer, the plaintiff had substantial authority at MBP and the right to control the enterprise. Because the plaintiff participated in the management, development, and governance of MBP, and had the ability to participate in the fundamental decisions of the business, the court concluded that the plaintiff's complaint failed to allege that he is an employee under Title VII and he is not entitled to invoke its protections.

The full opinion is available at http://www.ca3.uscourts.gov/opinarch/113148p.pdf

Panel: Circuit Judges Smith, Greenway, Jr., and Van Antwerpen

Argument Date: 3/18/2013

Argument Location:

Date of Issued Opinion: 4/29/2013

Docket Number: No. 11-3148

Decided: Affirmed

Case Alert Author: Larissa Staszkiw

Counsel: Clifford B. Cohn, Cohn & Associates, Jeffrey J. Malak, Chariton, Schwager & Malak, Thomas H. Roberts, Thomas H. Roberts & Associates, Counsel for Appellant; Daniel T. Brier & Donna A. Walsh, Myers, Brier & Kelly, Counsel for Appellee.

Author of Opinion: Judge Smith

Circuit: 3rd Circuit

Case Alert Circuit Supervisor: Susan L. DeJarnatt

    Posted By: Susan DeJarnatt @ 04/30/2013 02:19 PM     3rd Circuit  

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