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Law Firm Shareholder Not Employee Rules Fourth Circuit Court of Appeals

A law firm shareholder is not an “employee” within the meaning of Title VII of the Civil Rights, according to a unanimous opinion by the Fourth Circuit Court of Appeals.

Shawna Cannon Lemon practiced patent law at Myers Biegel, first as an associate and then as an equity partner. She filed a lawsuit against the firm after it denied her request for leave. She claimed the firm denied her leave based on her race and her gender. At the time of the denial, Lemon was a “shareholding partner and equal owner of the firm.” Lemon filed suit, alleging violation of Title VII.

In considering her claims, the Fourth Circuit Court of Appeals reviewed Title VII’s language. The court found the text clear: “the protections of Title VII’s anti-discrimination and anti-retaliation provisions extend only to employees.” With that finding, the court next considered whether Lemon fell within the definition of a law firm employee. Relying heavily on a U.S. Supreme Court case, Clackamas Gastroenterology Associations, P.C. v. Wells, the court determined Lemon was not an employee. She could not be unilaterally terminated; she received a high degree of independence; she was a full equity partner and did not report to any individual; she received the same voting power as all other partners; the firm determined her compensation by a formula tied to the firm’s profits and losses. For those reasons, Lemon was not an “employee.” According to the circuit court, “to treat Lemon, an equity partner in a conventionally-structured law firm, as an employee would be to assign ourselves the task of single-handedly refashioning the foundation of a prevailing form of legal practice.”