Thursday, January 12, 2006

Arbaugh v. Y&H Corp.: Supreme Court To Decide Import of Title VII's 15-Employee Minimum

On Wednesday, January 11, the U.S. Supreme Court heard arguments in a mundane little employment law case, which has some fairly important practical consequences.

The case involves a claim under Title VII of the 1964 Civil Rights Act. Only employers who employ 15 or more employees for 20 or more calendar weeks during the current or preceding year are covered by Title VII. As Professor Joanna Grossman aptly puts it in her interesting and clearly-written preview of the case on FindLaw's Writ, Title VII "exempt[s] small 'Mom and Pop' establishments." The question that the Supreme Court will answer in Arbaugh v. Y&H Corp. is what that employee-minimum means in legal terms. Is it a factual allegation that a plaintiff must prove to prevail in a case? Or is it a jurisdictional requirement that a court must be convinced is true or, if not, refuse to hear the case, because it lacks the authority to render a judgment without the minimum number of employees (regardless of how long the case has been going)?

The issue has real life consequences. A review of the facts giving rise to the case will show why.

Jennifer Arbaugh was employed at Y&H Corporation (d/b/a the Moonlight Café) as a bartender and waitress for ten months. She claims that during that time she was sexually harassed by Yalcin Hatipoglu, one of Y&H’s owners.

Arbaugh sued Y&H claiming sex discrimination under Title VII. Following a jury verdict in favor of Arbaugh after a two-day trial and nearly a year after Arbaugh filed the complaint, Y&H filed a motion to dismiss the case arguing that the court lacked subject matter jurisdiction over the case. Y&H contented that it did not fit the legislative definition of “employer” in Title VII, because it did not employ 15 or more employees for 20 or more calendar weeks during the time period relevant to the case.

The court treated the motion to dismiss as a motion for summary judgment and entered an order vacating and reversing the jury verdict and judgment. The court determined, as a matter of law, that Y&H did not have the requisite number of employees and that, as a result, the court lacked subject matter jurisdiction over the case. In particular, the magistrate judge (using a combination of the economic realities test and the common law control test) determined that the owners, their wives, and the delivery drivers were not employees for purposes of Title VII. If they had been counted, Y&H would have been a covered entity. The appellate court, the U.S. Court of Appeals for the Fifth Circuit, agreed with the trial court.

So, despite the fact Y&H basically conceded that it had at least 15 employees (by failing to raise the issue before the trial when it would have been expected to do so) and despite the fact that Arbaugh had carried her burden at trial to prove that she'd been discrminated against by Y&H, the court turned Arbaugh's victory into an utter defeat. When the court determined that Y&H did not have the required 15 employees, it determined that it had no jurisdiction. Therefore, it had no authority to have heard the case or rendered a judgment. Arbaugh loses.

As the excellent SCOTUSblog discusses in its entry on this case, this issue has split the courts. Six federal appeals courts agree with the Fifth Circuit's decision in Arbaugh and treat the 15-employee minimum as jurisdiction. Five others disagree and treat the employee minimum as an issue of the factual merit of the Title VII claim.

Grossman predicts that Arbaugh will win the appeal, because the text of Title VII and the policy arguments weigh in her favor. What do you think? Grossman does not find much merit in Y&H's arguments. But isn't there a fairly strong policy (and intuitional) argument in Y&H's favor?

(For the record, I tend to agree with Grossman, but think she may too easily brush aside the appeal of Y&H's argument.)


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