Verdecchia v. Douglas A. Prozan, Inc.: Court Rules Broker's Salespeople Are Not Employees under ADA

A Pennsylvania federal court has considered whether a brokerage's salespeople counted as "employees" in determining whether a brokerage qualified as an "employer" within the meaning of the Americans with Disabilities Act ("ADA").

Linda K. Verdecchia ("Employee") was employed by the real estate brokerage firm Douglas A. Prozan, Inc. ("Brokerage") as a bookkeeper, starting 1988. In March 1995, she developed a kidney disease. At that time, she informed Douglas Prozan ("Broker") about her condition and also told him that her condition would not effect her ability to work. The Employee continued working regular hours while she underwent treatment.

In September 1995, the Broker informed the Employee that it would be cutting back her hours because the Broker was restructuring the firm. In late 1995, the Employee began developing complications due to medications she was taking for her kidney disease. The Employee took a leave of absence beginning in early 1996. The Broker originally told the Employee that the Brokerage would continue to compensate her during her leave of absence, but later informed her that the Brokerage would be unable to compensate her during her timeoff.

In March 1996, she had surgery, following which her doctor directed her to stay home from work until July 8th, at which time he determined that she was sufficiently recovered to resume employment on a limited basis. She showed up at the Brokerage on July 8th, apparently without having notified anyone that she planned to come to work on that day. The Broker testified that he was surprised by the Employee's appearance, and he sent her home because the office was not prepared for her return to work.

Following the July 8th incident, the Employee filed for unemployment compensation as well as filing age and disability discrimination charges. Eventually, the Employee filed a lawsuit alleging violations of the ADA as well as violations of the Age Discrimination in Employment Act ("ADEA"). The ADA makes it illegal to discriminate against an individual in any employment-related decision because of an individual's disability. The ADEA makes it unlawful to discriminate against an individual in any employment-related decision because of their age.

The ADA applies to employers with 15 or more employees, while the ADEA applies to employers with 20 or more employees. The Brokerage filed a motion seeking judgment in its favor, primarily arguing that neither federal statute applied to it because it did not have the requisite number of employees for either statute to apply.

The United States District Court, Western District of Pennsylvania, entered judgment in favor of the Brokerage. The Brokerage argued that it had 11 or fewer employees at all times relevant to the Employee's lawsuit. The Employee argued that the Brokerage had 22 employees. The difference between the two numbers was the Brokerage's salespeople, who the Brokerage argued did not count as employees because they were independent contractors.

The court determined that the Brokerage's independent contractor salespeople did not count as employees under either of the federal statutes in question. Neither statute contains a statutory definition of an "employee," and so the court used the common-law (or judge-created) tests for determining whether the Brokerage's salespeople were employees or independent contractors. The court first stated that the label used was not determinative in whether an individual was an employee or an independent contractor. Rather, courts look at a number of factors to make this determination, such as: the amount of control exercised over the individual by the hiring party related to the individual's accomplishing its tasks; the source of instrumentalities used in accomplishing the task; the location of the work; the length of the relationship; authority of hiring party to assign additional tasks; control over when work is accomplished; and the tax treatment of the individual by the hiring party, among others.

Looking at the relationship between the Brokerage and its salespeople, the court found that the agreement between the Brokerage and the salespeople explicitly stated that the salespeople functioned without being subject to control by the Brokerage. The salespeople were responsible for providing their own insurance; their own automobile; set their own work schedule; paid for their own advertising (although the Brokerage had to actually promulgate the advertising, pursuant to state law); and paid for their own medical coverage. Based on its evaluation, the court found that the salespeople were independent contractors. Since the salespeople did not qualify as employees under both the ADA and ADEA, the court ruled that neither statute applied to the Brokerage as the Brokerage did not have the minimum number of employees. Thus, judgment was entered in favor of the Brokerage.

Verdecchia v. Douglas A. Prozan, Inc., 274 F.Supp.2d 712 (W.D. Pa. 2003).

Notice: The information on this page may not be current. The archive is a collection of content previously published on one or more NAR web properties. Archive pages are not updated and may no longer be accurate. Users must independently verify the accuracy and currency of the information found here. The National Association of REALTORS® disclaims all liability for any loss or injury resulting from the use of the information or data found on this page.