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Feldman v. Hunterdon Radiological Associates

187 N.J. 228, 901 A.2d 322 (2006)

CORPORATIONS; EMPLOYEES; CEPA—A physician who served as one of six employee-directors of a professional corporation and who shared in the management and control of the firm was found not to be an employee as defined in the Conscientious Employee Protection Act.

A physician and a shareholder-director of a professional association filed a complaint against the professional association alleging, among other things, a violation of the Conscientious Employee Protection Act (CEPA). The professional association moved for summary judgment on the ground that the physician was, for CEPA purposes, not an employee. The Law Division granted the motion and the Appellate Division reversed. The New Jersey Supreme Court granted certification to determine whether the physician, a shareholder-director of a professional association, was an employee within the meaning of CEPA.

CEPA defines an “employee” as any individual who performs services for and under the control and direction of an employer for wages or other remuneration. The Supreme Court concluded that the physician satisfied part of that definition to the extent that she performed work as a radiologist for the professional association in return for an annual salary, thus rendering services for remuneration. However, the Supreme Court reasoned that the remaining question was whether, in light of her status as a shareholder-director, the physician was sufficiently subject to the professional association’s control and direction that she could reasonably be considered an employee rather than an employer.

The Supreme Court explained that courts must look to the goals underlying CEPA and focus not on labels, but on the reality of the plaintiff’s relationship with the party against whom the CEPA claim is advanced. After considering the applicability of several tests, the Supreme Court concluded that a six-factor test was the appropriate point of departure in analyzing a shareholder-director’s employee status under CEPA. The Court emphasized that the fourth factor – the extent to which the individual is able to influence the organization—was critical. That factor that incorporates an in-depth inquiry into the dynamics of an organization and reveals which shareholder-directors are in a position to influence the operation and which are marginalized and have power in name only.

Applying the test to the facts of the case, the Supreme Court held that the physician was not an employee within the meaning of CEPA. The Court noted that, for over a decade, the physician was one of six shareholder-directors in the professional association that shared in the management and control of the firm; that the physician possessed an equal vote and voice in all matters, including hiring and compensation; and that her duties included overseeing re-credentialing of the professional association’s members. Accordingly, the Supreme Court held that no reasonable fact-finder could conclude that the physician was an employee or a member of the vulnerable class of persons the CEPA statute was designed to protect.

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