An employee of a bank was fired and sued, alleging sex and disability discrimination
under the Americans with Disabilities Act (ADA) and Title VII of the Civil Rights
Act of 1964, which apply to employers with 15 or more employees. The employer
argued that its credit committee members did not qualify as employees so it
was not large enough to be subject to the ADA and Title VII.
What happened. Karen Stone worked for Indiana Postal & Federal Employees
Credit Union, known as Pinnacle Credit Union (Pinnacle), from 1996 to 2004,
when she was terminated. She filed a complaint claiming retaliation and discrimination
based on sex and alleged disability. Pinnacle moved to have the case dismissed.
What the court said. This case turned on one issue: whether Pinnacle
was an "employer" under the definition given by the ADA and Title
VII. In order to be considered an "employer," the employing entity
must be "engaged in an industry affecting commerce who has 15 or more employees
for each working day in each of 20 or more calendar weeks in the current or
preceding calendar year.?" If the employing entity does not meet this
threshold, it is not governed by either the ADA or Title VII.
Pinnacle argued that it was not an employer for the purposes of the ADA and
Title VII. During 2003 and 2004, the years in which the alleged discrimination
occurred, there were only two pay periods in which it employed 15 or more employees.
For the rest of the time it employed between 12 and 14 employees. Stone insisted
that it did have 15 employees because it should have counted the three members
of Pinnacle's 'Credit Committee.' The court therefore addressed
the question of whether these committee members were employees.
A person is an employee under the ADA and Title VII if he or she is "employed
by an employer." The Supreme Court has said that the primary consideration
is whether an "employment relationship" exists. The best way to spot
an employment relationship is through the "payroll method": If an
individual appears on an employer's payroll, he or she is probably an employee.
There are, however, some cases in which a person appears on the payroll but
is not in fact an employee.
A better test is to see if the person would fall under the common law agency
definition of an employee. This test examines the amount of control the hiring
party has over the manner and means of working, the skill required, the source
of tools, the location of the work, the duration of the relationship, the extent
of the hired party's control over when and how long to work, the method
of payment, the hired party's role in hiring and paying assistants, whether
the work is part of the hiring party's regular business, the provision
of employee benefits, and the tax treatment of the hired party. No single factor
The Credit Committee failed the payroll test because they did not appear on
Pinnacle's payroll. The court then examined their work situation to see
if they could still qualify as employees under the common law definition. It
concluded that they did not. Members of the committee were not hired or fired
in the normal manner but instead were elected by the credit union membership.
Pinnacle's management did not control them. They were all engaged in full-time
pursuits outside Pinnacle. They did not perform the duties of Pinnacle's
regular employees. They were generally paid $4 for each meetingand in
2004, were paid nothing at all. The court held that they were more like an arm
of the board of directors than employees. Therefore, the court concluded that
Pinnacle did not have enough employees to be considered an employer under the
ADA or Title VII.
Because Pinnacle was not considered an employer, Stone's claims of discrimination
were irrelevant and there was no basis for a trial. Stone v. Indiana Postal
& Federal Employees Credit Union, U.S. District Court for the Northern
District of Indiana, No. 1:05-CV-114 (09/26/05).
Point to remember: Every plaintiff who files a lawsuit under the ADA
or Title VII must pass the first hurdleemployer size. That doesn't
mean small employers should feel free to discriminate; even a dismissed lawsuit