Hospital administrators take note: A recent 2nd U.S. Circuit Court of Appeals decision that a physician with staff privileges at a hospital may be deemed to be an employee for purposes of Title VII liability has potentially huge ramifications for hospitals. Although the decision is fact-specific, understanding the court’s analysis is important for hospitals and other employers that are, or need to be, aware of the distinctions between independent contractors and employees.

Salamon v. Our Lady of Victory Hospital, et al., No. 06-1707-cv, arose out of a Title VII and New York Human Rights Law (NYHRL) sex discrimination lawsuit, in which a gastroenterologist with staff privileges at Our Lady of Victory Hospital alleged that the Chief of the Gastroenterology Division sexually harassed and retaliated against her, and that the Hospital and the members of its administration were complicit in this retaliatory conduct. The U.S. District Court for the Western District of New York granted summary judgment to all defendants, finding that the plaintiff was an independent contractor, not an employee, and, therefore, was not protected by Title VII or the NYHRL.

On appeal, the 2nd Circuit analyzed the employment question under the common law of agency and a fact-specific analysis of 13 factors, known as the "Reid factors." The first factor, one on which courts are instructed to place special weight in anti-discrimination cases, is the extent to which the hiring party controls the “manner and means by which the product is accomplished," meaning how an individual completes his or her tasks. This factor ultimately formed the basis for the court’s decision in this case, because it found that the record on the "manner and means" issue contained "significant contested facts" that made summary judgment inappropriate.1 In particular, the Hospital had a "quality assurance program" overseen by its Quality Review Committee. Under this program, hospital practitioners reviewed, on a rotating basis, procedures conducted during a quarter. According to the plaintiff, the quality assurance program included "detailed requirements as to when and how her work was to be performed, requirements intended in some cases to maximize profits, not patient care." On this point, the 2nd Circuit emphasized four specific allegations by the plaintiff, taking these facts as true for purposes of ruling on the summary judgment motion.  They dealt with:

  • The role of hospital administrators acting as supervisors and maintaining surveillance over the plaintiff's performance;

  • The requirement for the plaintiff to follow quality assurance standards that affected her choices of medications to prescribe, "not in the interest of medical judgment, but to maximize hospital profit;"

  • Performance reviews required the plaintiff to change her treatment choices, "at times requiring practices that may not have related to improving treatment outcomes;" and

  • The Hospital's increasing its review of her practice after she complained of sexual harassment, a review that resulted in a "detailed 're-education' program designed to change the methods by which she arrived at diagnosis and treatment," including appropriate treatment, length of procedures and level of sedation.

Ultimately, the 2nd Circuit determined that the record contained a genuine factual conflict, enough so that a reasonable fact-finder could conclude that the Hospital exercised control over the "manner and means" by which the plaintiff treated patients. The court remanded the case to the District Court for further proceedings on the issue of the physician's employment status.

This decision is significant in its potential to increase Title VII liability for hospitals and hospital administrators. It is also consistent with a clear trend across the nation of courts expanding the rights of erstwhile independent contractors to avail themselves of the workplace protections of statutory employees. Ballard Spahr's Labor, Employment and Immigration Group can provide advice and assessment of employment practices for health care institutions.
1The remaining Reid factors are: the skill required; the source of the instrumentalities and tools; the location of the work; the duration of the relationship between the parties; whether the hiring party has the right to assign additional projects to the hired party; the extent of the hired party's discretion 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 regular business of the hiring party; whether the hiring party is in business; the provision of employee benefits; and the tax treatment of the hired party.

Copyright © 2008 by Ballard Spahr LLP.
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