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Legal Services

by Daniel J. Schulte, J.D.
MDA Legal Counsel
Published in the April 2004 issue of the Journal

Dear Dan Schulte: I’ve been told that the number of employees I have will determine whether several federal employment laws apply to my practice. Do I include myself when counting the number of employees in my practice? What about my partners and our dentist employees who do not have any ownership interest in the practice

Answer: There are several federal employment laws that can affect your practice. The best known of these laws include the Americans with Disabilities Act (ADA), the Family and Medical Leave Act (FMLA) and the Age Discrimination in Employment Act (ADEA). These laws contain many requirements and prohibitions that, if applicable to your practice, will regulate several aspects of your employee administration (i.e., hiring, firing, leave time, holding jobs open, setting, working conditions, etc.).

Whether your dental practice is required to follow the requirements and prohibitions contained in these federal laws depends on the number of your practice’s employees. For instance, your practice is subject to the ADA if it has at least 15 employees. The FMLA applies if your practice has 50 employees, and the ADEA applies if you have 20 employees.

You (even though you own all of or a portion of the practice) are considered an employee of the practice for most purposes (for example, tax withholding, FICA, benefits, worker’s compensation insurance, unemployment compensation, etc.). The same is true for your partners. Until last year, owners of the practice like yourself were also considered to be employees for purposes of determining the applicability of these federal employment laws.

This changed in April 2003 when the U.S. Supreme Court rendered its decision in Clackamas Gastroenterology Associates, P.C. vs. Wells. In that case, an employee who had been fired sued her employer (a gastroenterology practice) claiming that her termination was in violation of the ADA and that the employer had failed to provide her with those “reasonable accommodations” required by the ADA that were necessary for her to do her job. If the gastroenterologists were not counted, the practice did not employ the 15 workers required for the ADA to be applicable. Importantly, each of these gastroenterologists was an owner of the practice and sat on its board of directors.

In a decision that means fewer dental practices will have to comply with the federal employment laws, the U.S. Supreme Court held that these owner/director physicians should not be counted as employees. The Court reached this decision after determining that, pursuant to the practice’s Articles of Incorporation and Bylaws and state law, the gastroenterologists: (i) had authority in the management decision-making of the practice; (ii) had a share of the profits; and (iii) were personally liable for malpractice claims. Due to the presence of these factors, the Court held it cannot be said that the activities of the gastroenterologists were controlled by anyone. This element of “control” is one of the most important factors used by the courts in determining whether an employer-employee relationship exists.

Most articles of incorporation and bylaws give dentists who own their practices management decision-making authority and a share of the practice’s profits. Pursuant to Michigan law, dentist/owners of a professional corporation or professional limited liability company are personally liable for their own acts of malpractice and the acts of malpractice of those they supervise. Following the reasoning of the Clackamas case, therefore, when now counting employees to determine whether a federal employment law applies to your practice you may exclude yourself and any other owner/director of the practice.


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