The New York City Human Rights Law (NYCHRL) makes it illegal for “an employer” to fire, refuse to hire, or take other adverse employment action because of a person’s gender. The statute operates straightforwardly where the “employer” is a person, but what about if the employer is a corporate entity? Those kinds of cases raise some tricky questions, including the one in this case, Doe v. Bloomberg. As the parties have framed it, the question here is whether an individual owner of a corporate employer may be held liable as an “employer” under the statute.
As we explained in our case summary, plaintiff in the case alleged that she experienced illegal discrimination while working at Bloomberg. Plaintiff sued her supervisor, who allegedly engaged in the discrimination; she sued the corporate entity that employed her, Bloomberg LP; and she sued an individual owner of the company, former New York City Mayor Michael Bloomberg. There was no real question about liability for the supervisor and the corporate entity, but what about the individual owner?
The First Department dismissed the claims against Bloomberg and held that a plaintiff must allege two things to hold an individual owner of a corporate employer liable under the NYCHRL. First, the plaintiff must allege that the individual owner had an ownership interest in the corporate employer or had the power to do more than carry out personnel decisions made by others. Second, the plaintiff must allege that the individual owner encouraged, condoned or approved the alleged illegal discrimination. In the majority’s view, this approach conformed with federal and state court decisions, cabined what would otherwise be “broad” liability for corporate executives, and was consistent with general corporate-law principles limiting the liability of corporate owners.
Two First Department judges dissented and would have allowed plaintiff’s claims against the individual owner without allegations that he participated in the alleged illegal discrimination. In the dissenters’ view, it would be enough to allege that the individual held an ownership interest or had authority to do more than carry out the personnel decisions of others. The dissenters drew that conclusion from the Court of Appeals’ decision in Patrowich v. Chemical Bank, 63 N.Y.2d 541 (1984), which applied that test to decide whether an individual owner of a corporate employer could be held liable as an “employer” under the New York State Human Rights Law.
In the Court of Appeals, the parties’ arguments in Bloomberg largely tracked the Appellate Division opinions below. Citing Patrowich, plaintiff urged the Court to adopt the rule from the dissent, i.e., that a person is an employer if he owns the corporate employer or has hiring / firing authority. Plaintiff argued that nothing in the NYCHRL’s text or history suggests that an individual owner must also participate in illegal discrimination to qualify as an employer under the statute. On the contrary, plaintiff suggested that Patrowich’s definition of “employer” was well-known when the relevant provisions of the NYCHRL were enacted, and that city lawmakers effectively endorsed that definition by not including a different one in the NYCHRL. Moreover, as to the concerns about breadth of liability, plaintiff pointed out that an individual owner is not automatically liable for illegal discrimination by a corporate employee merely because the owner qualifies as an “employer” under the statute.
If not the standard from Patrowich, plaintiff urged the Court to adopt an alternate approach applied by the Second Circuit in Fair Labor Standards Act cases, called the “economic realities test.” Under that slightly more restrictive approach, an individual owner of a corporate employer qualifies as an employer if the individual has control over the company’s operations in a way that relates to the plaintiff’s employment. As plaintiff pointed out, some lower federal courts have applied the “economic realities test” to determine who is an employer under the NYCHRL.
For his part, defendant urged the Court to require an allegation that the individual owner participated in the alleged discrimination before he may qualify as an employer under the NYCHRL. According to defendant, this approach was consistent with the provisions of the statute, which in defendant’s view all required some showing of participation before imposing liability. And defendant thought the rule was sound policy, since he claimed that making an individual owner liable who did not participate in illegal discrimination would create a “staggering” new liability. Amici supporting defendant raised additional policy arguments. They claimed that imposing liability on individual owners without any showing of participation would not incentivize employers to take steps to eliminate discrimination. And echoing the majority below, amici argued that imposing liability on corporate owners without any showing of individual culpability would contravene basic principles of corporate law and impose significant costs on New York City businesses.
The case is set to be argued on January 6. Look for a decision as early as the beginning of the Court’s February argument session on February 9.