By Miriam F. Clark.
Disclaimer: Ms. Clark submitted a brief amicus curiae on behalf of the National Employment Lawyers Association/New York in support of appellate in Doe v. Bloomberg LP.
The Court of Appeals in Doe v. Bloomberg LLP, ___N.Y.3d___, 2021 N.Y. Slip. Op. 00898, N.Y. LEXIS 50, at *9 (2021), in the context of interpreting the New York City Human Rights Law, has gone out of its way to decide that a 37-year-old decision interpreting the New York State Human Rights Law, Patrowich v. Chemical Bank, 63 N.Y.2d 541 (1984), means the opposite of what it says. As a result, small and fly-by-night business owners may find it easier to avoid complying with the New York State Human Rights Law, ironically just at a time when the Legislature has chosen to strengthen that law and broaden its protections. At the same time, the Court also chose a narrow, employee-hostile interpretation of the New York City Human Rights Law. A vigorous dissent by Judge Rivera challenged both of these interpretations.
The New York State law question decided in Doe was raised and answered in Patrowich: whether an individual shareholder or manager could be sued as an “employer” under the New York State Human Rights Law. The Patrowich court stated:
A corporate employee, though he has a title as an officer and is the manager or supervisor of a corporate division, is not individually subject to suit with respect to discrimination based on age or sex under New York’s Human Rights Law (Executive Law, art 15) or its Labor Law (§ 194) or under the Federal Age Discrimination in Employment Act ( 29 U.S.C. § 623) or Equal Pay Act ( 29 U.S.C. § 206, subd [d]) if he is not shown to have any ownership interest or any power to do more than carry out personnel decisions made by others. Patrowich at 542.
As the Doe dissent points out, for the next 37 years, most courts, as well as the New York State Division of Human Rights, assumed that this language meant what it said: that individual employees could be subject to suit under the New York State Human Rights Law as employers if they did have ownership interest or the power to do more than carry out personnel decisions made by others. Doe at *20 (Rivera, J., dissenting). Some courts added additional layers to Patrowich, such as requiring that the accused individual bear some minimal culpability for the conduct (Marchuk v. Faruqi & Faruqi, LLP, 100 F. Supp. 3d 302, 309 (S.D.N.Y. 2015)) or required “some allegation of participation by the individual” (Zach v. E. Coast Restoration & Constr. Consulting Corp., No. 15 Civ. 0007 (NRB), 2015 U.S. Dist. LEXIS 138334, at *2 (S.D.N.Y. Oct. 7, 2015)). As a practical matter, Patrowich and its progeny ensured that when small employers broke the law by allowing hostile work environments to flourish in their workplaces, their owners were not completely shielded by whatever corporate structure they had created. Individual owners of small businesses owners knew they could not evade responsibility simply by dissolving the corporate structure.
In 2019, the Legislature significantly expanded the New York State Human Rights Law, by, among others, eliminating the “severe or pervasive” requirement for proving a hostile work environment claim; adding punitive damages and attorney fees, and expanding the law to include employers of all sizes. The law was also specifically amended to state that it was to be interpreted liberally in light of its remedial purpose. Laws 2019, ch. 160, § 6.
However, in Doe, the Court of Appeals has created a significant loophole through which employers can evade the new law. It has reinterpreted the Patrowich language to hold the opposite of what it apparently says: “the State HRL does not render shareholders or managers liable as individual employers.” Doe at *9.
Thus, if a small business is faced with, for example, a sexual harassment suit based on a hostile work environment of which the business owner was aware (but did not demonstrably aid and abet), the business owner himself can readily escape liability by simply dissolving the corporation and wash his hands of the matter, leaving no remedy for the employee.
The Court of Appeals interpretation of the New York City Human Rights Law in Doe is equally restrictive and employee-hostile. It holds, relying on principles of corporate liability, that under no circumstances can an individual be held liable as an employer under that law. Doe at *11. As the Doe dissent noted, such an interpretation is contrary to the intent of the New York City Council in passing the New York City Human Rights Law, which was to displace general principles of corporate liability in order to achieve a society in which there is “no tolerance for discrimination in public life,” (Report of the Committee on Civil Rights on Local Law 35 of 2016 at 8), quoted in Doe at *22 (Rivera, J., dissenting). As the Doe dissent points out, in the past, when faced with Court of Appeals decisions that conflicted with its broad view of the purposes of the New York City Human Rights Law, the City Council has reacted by amending the law to specifically disavow case law that in its view frustrated the law’s broad purpose. Id. In this case, legislative action on both the state and city level may once again be required to protect employees and to carry out the broad legislative vision embodied in both the state and city statutes.
ABOUT THE AUTHOR: Miriam F. Clark is a partner with the firm of Ritz Clark & Ben Asher LLP.
Posted on 2021-02-19.