Labor & Employment Law Daily As independent contractor, surgeon couldn’t maintain Title VII race discrimination claim against hospital
Tuesday, August 18, 2020

As independent contractor, surgeon couldn’t maintain Title VII race discrimination claim against hospital

By Georgia D. Koutouzos, J.D.

Based on his employment contracts, work obligations, and compensation, the surgeon was an independent contractor and not a hospital employee.

Title VII did not protect a surgeon who provided on-call service in a hospital emergency department, the Ninth Circuit held, affirming the Hawaii federal court’s grant of summary judgment favoring the hospital on the surgeon’s racial discrimination claims. The surgeon was paid, taxed, and received benefits like an independent contractor, the agreements he had signed with the hospital characterized him as an independent contractor, and his duties evidenced his professional independence from the hospital in treating his patients, the panel reasoned (Henry v. Adventist Health Castle Medical Center, August 14, 2020, Owens, J.).

Employment contracts. A board-certified general and bariatric surgeon licensed to practice medicine in Hawaii joined the staff at a hospital in Kailua, Hawaii, and with clinical privileges, performed surgeries at the hospital. The surgeon signed two agreements with the hospital: (1) a Physician Recruitment Agreement providing that he would operate a full-time practice of medicine; and (2) an Emergency Department Call Coverage and Uninsured Patient Agreement obligating him to five days per month of on-call service in the hospital’s emergency department. Both agreements specified that the surgeon “shall at all times be an independent contractor.”

Adverse action. The surgeon, a Caucasian, complained of discrimination at the hospital, which led to a review of his past surgeries. That assessment resulted in his precautionary suspension and, later, a recommendation by the hospital’s medical executive committee that his clinical privileges be suspended until he completed additional training and demonstrated competency in various areas of concern. An internal appellate process upheld the suspension, after which the surgeon filed suit against the hospital alleging Title VII violations, racial discrimination, and retaliation.

Lower court ruling. The hospital moved for summary judgment on the basis that, as an independent contractor, the surgeon did not enjoy Title VII’s protections. The trial court granted the motion, citing the manner in which the surgeon had been paid ($100 per 24-hour on-call shift if there was no emergency intervention or $500 for each emergency he handled), his lack of typical employee benefits such as medical insurance or retirement savings plan, his tax treatment (an IRS 1099 tax form for independent contractor income rather than a W-2 form for employee income), the fact that both contracts characterized his status as an independent contractor, and his ability to work at competing hospitals. The surgeon appealed the trial court’s decision.

“Employee” status. To determine whether an individual is an “employee” under Title VII, the appeals court evaluated the hiring party’s right to control the manner and means by which the employment was accomplished, including such factors as the skill required, the location of the work, the duration of the relationship between the parties, whether the employer had the right to assign additional projects to the individual, the extent of the individual’s discretion over when and how long to work, the method of compensation, the individual’s role in hiring/paying assistants, whether the work is part of the employer’s regular business, the provision of employee benefits, and the individual’s tax treatment. Those factors confirmed what the trial court concluded—i.e., that the surgeon was an independent contractor and not an employee—the appellate panel held.

Compensation. Following the money, the appeals court noted that the hospital paid the surgeon for his on-call time, which only accounted for 10 percent of his earnings. That arrangement was emblematic of an independent contractor relationship, the panel said, adding that the surgeon also did not receive any typical employee benefits from the hospital and that he reported his earnings to the IRS on the form used by independent contractors and not the form used by employees. The employee was paid, taxed, and received benefits like an independent contractor, and those factors weighed in favor of treating him as one, the panel advised.

Work obligations. In addition, the surgeon’s obligations to the hospital were limited and provided him with the freedom to run his own private medical practice, the appeals court observed, finding that the parties’ arrangement was inconsistent with “employee” status. Under the parties’ On-Call Agreement, the hospital was required to prioritize the surgeon’s obligations when scheduling him, he was free to be elsewhere during his on-call shifts unless an emergency arose, and he could perform elective surgeries during his shifts if he coordinated backup coverage—all of which were consistent with independent contractor status.

The hospital also leased the surgeon space for elective surgeries on his own patients, he performed general surgeries at a competing hospital, and he could refer his patients to any hospital of his choosing. Employees normally do not have that level of work freedom, the appeals court explained, concluding that, in sum, the surgeon’s duties did not exhibit the level of control present in employment relationships. Rather, they evidenced his professional independence from the hospital in treating his patients.

Employment contracts/regulations. Moreover, the contracts between the surgeon and the hospital described him as an independent contractor, the appeals court said, differentiating the surgeon’s work obligations from those in case precedent he had cited in support of his “employee” status. The court found it unremarkable that the hospital subjected the surgeon to regulations and requirements, given the fact that hospitals are responsible for maintaining a certain standard of care and safety for their patients. Thus, rather than evidencing a right to control the manner and means of the surgeon’s practice, the regulations reflected a shared professional responsibility to cooperate with the hospitals to maintain standards of patient care, to keep appropriate records, and to follow established procedures.

On balance, the undisputed facts clearly showed that the surgeon was the hospital’s independent contractor and, as such, he was not entitled to Title VII protections, the appeals court concluded, affirming the trial court’s decision.

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