                             In the
 United States Court of Appeals
               For the Seventh Circuit
                          ____________

No. 01-3274
RICHARD A. SCHMIDT, M.D.,
                                               Plaintiff-Appellant,
                                 v.

OTTAWA MEDICAL CENTER, P.C.,
                                              Defendant-Appellee.
                          ____________
            Appeal from the United States District Court
       for the Northern District of Illinois, Eastern Division.
             No. 00-C-7973—Elaine E. Bucklo, Judge.
                          ____________
  ARGUED OCTOBER 28, 2002—DECIDED MARCH 5, 2003
                  ____________


 Before KANNE, DIANE P. WOOD, and EVANS, Circuit
Judges.
  KANNE, Circuit Judge. Does Dr. Richard A. Schmidt’s
status as a shareholder-director in a closely held profes-
sional corporation preclude him from being considered an
“employee” entitled to bring suit under the Age Discrimina-
tion in Employment Act? Applying a functional “economic
realities” test, which this Court adopted in EEOC v. Dowd
& Dowd, Ltd., 736 F.2d 1177, 1178 (7th Cir. 1984), and
recently discussed in EEOC v. Sidley Austin Brown &
Wood, 315 F.3d 696 (7th Cir. 2002), the district court
interpreted the relationship between Dr. Schmidt and
Ottawa Medical Center as more like that of a partner to
a partnership, rather than that of an employee to an
2                                                 No. 01-3274

employer. As such, the district court held that Dr. Schmidt
could not entertain suit under the ADEA and granted
summary judgment in favor of Ottawa Medical Center.
Dr. Schmidt appeals, arguing that the economic realities
dictate that he be treated as an employee under the Act.
We affirm.


                          HISTORY
  Ottawa Medical Center (“OMC”) was originally incorpo-
rated under the Illinois Medical Practice Act, before it
reorganized itself in 1969 as a professional corporation
under the Illinois Professional Service Corporation Act. 805
ILCS 10/1 et seq. (2002). Dr. Schmidt, a family practice
physician, began his practice with OMC in 1966 and, upon
OMC’s reorganization, became a founding shareholder.
He has remained a shareholder at all relevant times since.
  Including Dr. Schmidt, there are eight shareholder-
physicians of OMC. Each has the right to an equal vote
on shareholder-physician compensation plans, on proposed
amendments to employment agreements, on the hiring
of nonshareholder-physicians,1 and any other matter put
to shareholder vote. While being a shareholder-physician
of OMC, Dr. Schmidt has also frequently served as one of
its corporate officers, holding at different times vice-presi-
dential and secretarial positions. Most recently in 1997, Dr.
Schmidt was the corporation’s secretary. During those
periods that he was a corporate officer, Dr. Schmidt
also had a seat on OMC’s board of directors. And in
March 2000, the shareholders voted to amend OMC’s



1
   Besides the eight shareholder-physicians, there were at the
time of the complaint three nonshareholder-physicians and sixty-
five nonphysician employees working at OMC. Their status
under the Act is not at issue here.
No. 01-3274                                              3

bylaws to provide that all shareholders, by virtue of their
shareholder status, would be directors of the corporation.
Accordingly, Dr. Schmidt is once again a director of OMC.
  OMC compensates its shareholder-physicians in two
ways. First, every shareholder-physician has executed
employment agreements with OMC. Under his 1976
employment agreement, Dr. Schmidt draws a base salary
of $3700 a month. Second, each shareholder-physician
is also eligible to share in OMC’s profits via shareholder
compensation in addition to whatever base salary his or
her employment contract provides.
  The formula for determining the amount of that addi-
tional compensation has been amended multiple times
by the shareholder-physicians, and Dr. Schmidt has had
the opportunity to vote on each of those proposals. Most
recently in December 1999, the shareholder-physicians
considered a plan whereby a shareholder-physician’s com-
pensation would equal his or her net medical receipts
after deducting his or her pro rata share of overhead
expenses, pension allocation, and profit-sharing contrib-
utions. Because Dr. Schmidt’s net medical receipts would
not have entitled him to any additional compensation
under the proposed plan, he voted against it. He lost.
Moreover, a majority of shareholder-physicians voted in
2000 to adopt new “Shareholder Employment Agree-
ments” to supercede their outstanding employment agree-
ments with OMC. Every shareholder-physician besides
Dr. Schmidt has since entered into this new agree-
ment. As a result of the new compensation structure, Dr.
Schmidt has since drawn only the $3700-per-month base
salary.


                       ANALYSIS
  An appellate court reviews summary-judgment motions
de novo, viewing the record and all inferences from it in
4                                              No. 01-3274

the light most favorable to the nonmoving party. McCoy
v. WGN Cont’l Broad. Co., 957 F.2d 368, 370 (7th Cir.
1992). Summary judgment is appropriate only when there
is no genuine issue as to any material fact and where the
moving party is entitled to judgment as a matter of law.
Id. Here, no material facts are in dispute; the parties con-
test only whether the facts require Dr. Schmidt to
be treated as an “employee” of OMC for purposes of the
ADEA.
  The ADEA unhelpfully defines “employee” as “an individ-
ual employed by an employer,” and an “employer” as “a
person . . . who has twenty or more employees.” 29 U.S.C.
§ 630(f), (b) (2002). To determine whether an organiza-
tion has enough “employees” to qualify as an “employer”
under the ADEA, we have already decided that the eco-
nomic realities of the workplace, rather than mechanical
adherence to state-law corporate forms, shall define the
relationship between the parties. EEOC v. Dowd & Dowd,
Ltd., 736 F.2d 1177, 1178 (7th Cir. 1984). In Dowd, we
found that the “role of a shareholder in a professional
corporation is far more analogous to a partner in a part-
nership than it is to the shareholder of a general corpora-
tion.” Id. We noted that “the economic reality of the pro-
fessional corporation in Illinois is that the management,
control, and ownership of the corporation is much like
the management, control, and ownership of a partnership.”
Id. Since we did not consider bona fide partners as em-
ployees for purposes of Title VII actions, see Burke v.
Friedman, 556 F.2d 867, 869 (7th Cir. 1977) (“[W]e do not
see how partners can be regarded as employees rather
than as employers who own and manage the operation
of the business.”), we saw no reason to treat professional-
corporation shareholders differently, and thus deter-
mined that those shareholders should be excluded from
the ADEA employee count. Dowd, 736 F.2d at 1177.
No. 01-3274                                               5

   We must now decide whether Dowd applies when we
are asked to classify an individual shareholder-claimant
as an “employee” entitled to bring suit under the Act. If
it does, and if “economic realities” control here as well,
we must then ask, does Dowd require us always to treat
Illinois professional-corporation shareholders as employ-
ers? If not, what factors will determine the actual role of
the claimant-shareholder in the operations of the in-
volved entity? See Fountain v. Metcalf, Zima & Co., 925
F.2d 1398, 1400-01 (11th Cir. 1991).
  We recently asked similar questions in EEOC v. Sidley
Austin Brown & Wood, 315 F.3d 696 (7th Cir. 2002),
where we held that the EEOC was entitled to continued
enforcement of ADEA-coverage-related requests in a
subpoena, when those requests could not be deemed
unreasonable given continuing doubt over whether 32
demoted partners should be deemed bona fide partners
(and thus employers) or de facto employees of a law firm
in which ultimate decisionmaking authority rested solely
with a few überpartners. In so ruling, we expressly re-
fused to decide the question of the 32’s status, noting that
while they possessed many qualities indicative of bona
fide partners in a partnership under Illinois law (that is,
their income included a share of firm profits, they made
capital contributions to the firm, they were liable for firm
debts, and they had some administrative or managerial
responsibilities), their individual fates at the firm were
controlled entirely by a self-perpetuating executive manage-
ment committee, which on a whim could fire, promote, de-
mote, or raise and lower the pay of the 32. Id. at 699, 703.
  Although we reserved the question of the 32’s status, had
we been prepared to accept a mechanical test—that the
use of the partnership form as recognized under Illinois
state law precluded finding the 32 as anything but part-
ners and, thus, employers under the Act—there would
6                                                   No. 01-3274

have been no need to continue the EEOC’s investigation
into the circumstances of the 32’s actual role in the firm.
Id. at 707 (listing additional information sought by the
EEOC that “would bear on the unavoidably multifactored
determination” of whether the 32 should be treated
as employers or employees). Our holding in Sidley, there-
fore, must be read to apply Dowd’s functional test
of employee status to determinations of whether an indi-
vidual claimant qualifies as an employee under the ADEA.2
  What remains is deciding which factors, in what we
anticipated would be a multifactored analysis, see id. at
18, shall be important to determine whether Dr. Schmidt
should be treated as an employer or an employee. Dowd
provides little guidance—there, we matter-of-factly ob-
served that “the economic reality of the professional
corporation in Illinois is that the management, control, and
ownership of the corporation is much like the management,
control, and ownership of a partnership.” Dowd, 736 F.2d
at 1178. While that may be true, as we observed in Sidley,
all partnerships are not created equal, and, because of
this, all partners may not always be employers for pur-
poses of the federal-discrimination statutes. Sidley, 313
F.3d at 702; see also Burke, 556 F.2d at 869 (finding
only bona fide partners exempt from the federal-discrim-
ination statutes). We will not, therefore, interpret Dowd
to require us always to treat shareholders in Illinois
professional corporations as employers; such a result
would stand Dowd on its head, favoring, in the end, labels
over realities.


2
  We are not the first circuit to follow Dowd to this conclusion.
See Fountain v. Metcalf, Zima & Co., 925 F.2d 1398, 1400-01 (11th
Cir. 1991) (holding that a plaintiff shareholder in a professional
corporation of accountants was akin to a partner, precluding his
status as an “employee”); cf. Devine v. Stone Leyton & Gershman,
P.C., 100 F.3d 78, 80-81 (8th Cir. 1996) (following Dowd to
determine employee count).
No. 01-3274                                               7

   If not to Dowd, then where are we to look? An exhaus-
tive discussion of the relevant case law in Sidley revealed
alternate lines of precedent suggesting this multi-
factored analysis could be conducted either with an eye
towards statutory purpose, see Sidley, 313 F.3d at 702 (cit-
ing Robinson v. Shell Oil Co., 519 U.S. 337, 346 (1997)
(looking to “consistency with a primary purpose of anti-
retaliation provisions” in deciding whether former em-
ployees were “employees” under Title VI)), or under the
general common law of agency, see id. at 705 (citing Na-
tionwide Mutual Ins. Co. v. Darden, 503 U.S. 318, 323-25
(1992) (resolving the circularity of ERISA’s definition of
“employee” by incorporating into federal law common-
law agency criteria for identifying master-servant rela-
tions)). But we could not fairly decide which approach
should govern on the facts of the case then before us: our
task was only to decide whether continued enforcement
of the coverage-related requests in the EEOC’s subpoena
was justified. The observation that the law regarding
coverage was unsettled led us to conclude that the
EEOC was entitled to investigate the issue further. Id.
at 707.
    The Supreme Court may ultimately resolve this ten-
sion between statutory purpose and agency principles
since it has granted certiorari in Wells v. Clackamas
Gastroenterology Assoc., in which the Ninth Circuit re-
jected Dowd’s economic-realities test in holding that
the conscious adoption of the corporate form dictated
that shareholder-physicians in closely held professional
corporations be treated as employees. 271 F.3d 903,
905 (9th Cir. 2001), cert. granted 123 S. Ct. 31 (2002).
Citing the “broad purpose” of the federal employment-
discrimination statutes, the Ninth Circuit refused to
allow the shareholders to reap the tax, employment bene-
fits, and civil-liability advantages of the corporate form,
while avoiding federal employment-discrimination lia-
bility by asserting that they were really partners in a
8                                                    No. 01-3274

partnership. Id. (citing Hyland v. New Haven Radiology
Assocs., 794 F.3d 793, 796 (2d Cir. 1986) (rejecting Dowd)).
But the Ninth Circuit admitted it would not in all in-
stances adhere mechanically to state-law forms: echoing
Justice Powell’s concurrence in Hishon v. King & Spald-
ing, 467 U.S. 69 (1984), it would not allow a firm to
avoid liability for discrimination by labeling the bulk of
its employees “partners”. Clackmas, 271 F.3d at 905; see
also Hishon, 467 U.S. at 79 n.2 (Powell, J., concurring)
(“[A]n employer may not evade the strictures of Title
VII simply by labeling its employees as ‘partners.’ ”). The
Ninth Circuit did not discuss what approach it would
take to separate true partners from fake ones, nor did
it discuss the presumption announced in Darden that
traditional agency principles define who is an employee
unless Congress speaks otherwise. Sidley, 313 F.3d at
711 (Easterbrook, J., concurring).3


3
   The question in Darden was whether the claimant should
be classified as an employee or an independent contractor for
ERISA purposes. And like they had done elsewhere when
“Congress has used the term ‘employee’ without defining it,” see,
e.g., Cmty. for Creative Non-violence v. Reid, 490 U.S. 730, 739
(1989) (Copyright Act of 1976, 17 U.S.C. § 101); Kelly v. S. Pac.
Co., 419 U.S. 318, 322-23 (1974) (Federal Employers Liability Act,
45 U.S.C. §§ 51-60); Baker v. Tx. & Pac. R.R. Co., 359 U.S. 227,
228 (1959) (same), the Justices “concluded that Congress intended
to describe the conventional master-servant relationship as
understood by common-law agency doctrine.” Darden, 503 U.S. at
322-23. The Court rejected the lower court’s argument that the
term should be defined in light of the purposes of the Act. Id. at
324. Although the Court had previously taken this approach
in defining “employee” for purposes of the National Labor
Relations Act, see NLRB v. Hearst Publications, Inc., 322 U.S.
111, 120-29 (1944), and the Social Security Act, United States
v. Silk, 331 U.S. 704, 713 (1947) (construing the term “in the light
of the mischief to be corrected and the end to be attained”), the
                                                     (continued...)
No. 01-3274                                                  9

  In any event, we need not attempt to resolve this tension
here. It makes little difference in this case whether we
are guided in our analysis of the economic realities by
adherence to common-law agency principles or by atten-
tion to statutory purpose. Under either approach, we
must conclude that Dr. Schmidt’s shareholder-physician
role was akin to that of a bona fide partner-employer
rather than that of an employee.
  It is beyond reproach that both agency-law principles
and statutory purpose would consider control over em-
ployment opportunities to be a relevant factor. Certainly,
in describing the master-servant relationship, agency
law focuses on control: The defining characteristic of
the master-servant relationship is the possession in the
one of the right to control the work of the other. That is,
“the relation presupposes the right of the master to
have the work executed in such manner as he directs and
a correlative duty on the part of the servant to perform
as expressly or impliedly directed by the master.”
HAROLD GILL REUSCHLEIN ET AL., THE LAW OF AGENCY
AND PARTNERSHIP at 102 (2d ed. 1990). Conversely, “[t]he
essence of [a] partnership is the common conduct of a
shared enterprise,” and as a result the recognition that
decisions important to that enterprise are made by com-
mon agreement. Hishon, 467 U.S. at 79-80 (Powell, J.,



3
   (...continued)
Court noted that after each decision was announced, Congress
had amended the statute at issue to clarify that it had meant
for traditional common-law agency principles to govern the
term’s definition. Darden, 503 U.S. at 324. That circumstance
brought about the conclusion in Darden that the agency-law
presumption announced in Reid in the wake of Congress’s ac-
tion in response to Hearst and Silk had “signaled [the Court’s]
abandonment” of the purposes-focused analysis of the earlier
cases. Id. at 325.
10                                               No. 01-3274

concurring). Which is to say, the sharing of the control of
the enterprise, and by extension each other’s fate in it, is
the sine qua non of partnership. REV. UNIF. PARTNERSHIP
ACT § 202(a), cmt. (1997) (“[T]he attribute of co-ownership
distinguishes a partnership from a mere agency relation-
ship . . . . Ownership involves the power of ultimate control.
To state that partners are co-owners of a business is
to state that they each have the power of ultimate control.”
(citing UNIF. PARTNERSHIP ACT § 6(1) cmt.)).
  As for statutory purpose, the Supreme Court has opined
that the congressional intent behind the federal
antidiscrimination laws was to prohibit those entities
where “control over access to the job market may reside”
from “exerting any power [they] may have to foreclose, on
invidious grounds, access by an individual to employ-
ment opportunities otherwise available to him.” Ex rel.
Doe v. St. Joseph’s Hosp., 788 F.2d 411, 422-23 (7th
Cir. 1986) (discussing Sibley Mem. Hosp. v. Wilson, 488
F.2d 1338, 1340-1341 (D.C. Cir. 1973)). Perhaps it was
this recognition of statutory purpose that led Justice
Powell to conclude in Hishon that bona fide partners
cannot be considered “employees” for purposes of Title
VII because a relationship among the partners that “ ‘con-
templates that decisions will be made by common agree-
ment or consent . . . ,’ has a governance structure differ-
ent from one contemplated or assumed by Title VII.”
Sidley, slip op. at 17 (emphasis added) (quoting Hishon, 467
U.S. at 79-80 (Powell, J., concurring)).
  Here, Dr. Schmidt throughout his career has shared
in the management and control of OMC. He was a found-
ing shareholder-physician of the corporation and has
remained one at all relevant times since. During most of
the last decade he was also a corporate officer and held
a seat on OMC’s board, and he once again holds a direc-
tor’s seat now by virtue of his enduring status as a share-
holder. As a shareholder, he possesses an equal vote in
No. 01-3274                                             11

all matters put to shareholder vote, including the hiring
of nonshareholder-physicians and shareholder compensa-
tion. Presumably as a director, he has in the past and
now also enjoys a voice in all matters put before the
board. Throughout his relationship with OMC and con-
tinuing to the present day, Dr. Schmidt thus has had
ample opportunity to share in the management and con-
trol of OMC.
  And the mere fact that lately his preferences on
shareholder-compensation proposals have not secured
the majority opinion of his fellow shareholders does not
alter the fact that with each vote he has exercised this
right to control. Even though Dr. Schmidt rejected the
current plan because he would be affected adversely by
its passage, he nevertheless had the opportunity to par-
ticipate in revising and voting on it. It is hornbook law
that majority rules dictate the governance of partner-
ships (in the absence of an act in contravention of the
partnership agreement or extraordinary matters), and
thus partnership law anticipates that individual part-
ners may be bound by adverse majority decisions of the
partnership as a whole. REUSCHLEIN ET AL., supra, at 276.
It is common for partners to vote on compensation that
reflects each partner’s economic contributions to the firm.
See Hishon, 467 U.S. at 79 n.3 (Powell, J., concurring)
(“Divisions of partnership profits, unlike [common] share-
holders’ rights to dividends, involve judgments as to each
partner’s contribution to the reputation and success of
the firm.”). That appears to be what has happened in
this case.
  Against this conclusion, Dr. Schmidt argues that his
employment agreement, which repeatedly refers to him
as an employee, signifies a relinquishment of control
over his employment since, among other things, it vests
sole authority of patient assignment in OMC’s board.
But Dr. Schmidt is also a member of the board, which
12                                             No. 01-3274

confers upon him decisionmaking authority with respect
to these matters, including patient assignments. More-
over, his employment agreement vests in him absolute
authority for the treatment of his patients once assigned
to him. Therefore, while Dr. Schmidt may not possess
sole authority over the conditions of his employment
(that is, he only shares that complete authority in equal
parts with other members of the board), he does exer-
cise significant control. And since each of the seven
other shareholder-physicians are governed by similar
employment agreements, Dr. Schmidt exercises as much
control over his employment as any other member of
OMC. By contrast, the nonshareholder-physicians have
no ability to exercise any control over patient assign-
ments or any other matter put to the directors or share-
holders.


                     CONCLUSION
  We need not determine here whether the absence of
control in and of itself will distinguish bona fide partner-
employers from disguised employees when the presence
of other factors may favor partnership. Compare Sidley,
313 F.3d at 702-03 (discussing the absence of control as
a factor weighing in favor of classifying the 32 demoted
partners as employees), with id. at 709-10 (Easterbrook, J.,
concurring) (relying on the presence of profit-sharing
and the spectre of unlimited liability as characteristics
in favor of treating the 32 as bona fide partner-employers),
and REUSCHLEIN ET AL., supra, at 250 (“Many decisions
permit management to be centralized in one partner, or
a small committee of partners. Where this is done, co-
ownership is still found to exist frequently but only if
the other factors are consistent with partnership.”). We
only hold that when an individual claimant-share-
holder enjoys the opportunity for shared control of the
No. 01-3274                                             13

closely held professional corporation, including the op-
portunity to share in its profits, we will treat him or her
as a bona fide employer for purposes of the ADEA. The
decision of district court is therefore AFFIRMED.

A true Copy:
      Teste:

                       ________________________________
                       Clerk of the United States Court of
                         Appeals for the Seventh Circuit




                   USCA-02-C-0072—3-5-03
