Does Size Matter When It Comes to Title VII Sexual Harassment Suits?

The issue of civil rights has always been hotly contested in this country. Heated debates resulted in the passage of the landmark Civil Rights Act of 1964. Originally intended to secure the rights of African Americans, it was later amended to safeguard women’s rights.

Title VII of this law prohibits discrimination in employment on the basis of race, national origin, gender, or religion. In the late 1970s courts began ruling that it applied to sexual harassment as well. Though Title VII only applies to employers with fifteen or more employees, it is how the definition of employee bears on the case that is the center of the most significant controvery regarding discrimination suits.

Consider the case of Jenifer Arbaugh vs. Y&H Corp. The suit involves an employee of the Moonlight CafГ(c) in New Orleans who alleged she was victimized by a sexually hostile work environment while employed as a bartender and waitress. Y&H Corp., a corporation with two individual owners, owned the Moonlight CafГ(c). The case was tried in the U.S. District Court for the Eastern District of Louisiana, and in 2002, a jury awarded Arbaugh $40,000 in damages.

Y&H Corp filed a motion, arguing the action should be dismissed because the federal court had no jurisdiction as the company had less than 15 employees, which meant Title VII didn’t apply. The methodology they used in determining the number of employees involved excluding the two owners, their wives, who also worked for the business, and their delivery truck drivers.

In 2003, the district court agreed with Y&H Corp and dismissed the case on the grounds of subject matter jurisdiction. That is they agreed that given the number of employees was less than 15, the court had no authority to decide on the case. A year later, a three-judge panel of the U.S. 5th Circuit Court of Appeals upheld the district court’s 2003 decision.

However, Arbaugh made an appeal to the Supreme Court and it began hearing arguments on January 11, 2006. The basis of the appeal is that Section 701(b) of Title VII does, in fact, state that the prohibition against employment discrimination applies to employers with fifteen or more employees. The question is whether this provision also limits the subject matter jurisdiction of the federal courts as was previously decided, or does it only raise an issue about the merits of a Title VII claim? Arbaugh’s attorney argued that the number of employees went to the merits of the case, rather than to the question of whether or not the court had the right to rule.

What stands at the heart of this case is whether the definition of an employee is decided as one of the facts of the case or as determination of the court’s authority. This decision has profound implications for employers. If the definition of an employee is a deciding factor in the court’s right to rule, an employee can postpone raising the question of who are the legitimate employees of the company being sued until after he/she knows the outcome of a trial on the case’s merits. This means a suit of this type can drag on costing the company being sued millions of dollars in legal fees. If the definition of an employee is determined to be part of the merits of the case, than a jury would decide on that factor along with the rest of the case’s merits, which would expedite litigation.

The Supreme Court is expected to decide on this issue as part of their ruling in the Arbaugh case.

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