A Kiss in the Caribbean Results in a Lawsuit in New York
For those of you who managed to get away and have not kept up on your advance sheets this summer, August brought an interesting (and colorful) Title VII decision from the Southern District concerning a seemingly simple issue many of us face, but as to which there may be no clear answer: Who is the employer?
The defendant in St. Jean v. Orient-Express Hotels1 is a U.S. hotel and resort company that was sued in New York for sexual harassment—the result of a kiss on a beach in St. Maarten. By itself, this is perhaps not such an unusual outcome. These days, U.S. employers may be sued for alleged sexual harassment that occurs anywhere in the world, if the employee is a U.S. citizen, because Title VII and most of the other federal anti-bias laws have explicit extraterritorial effect.
The twist here is that the plaintiff employee was employed not by the defendant, but by a local Netherlands Antilles company. That company was, in turn, a subsidiary of a Bermuda company, of which the defendant was also an affiliate. So, the two employers were sister companies, subsidiaries of the same parent. To the U.S. employer, there was something viscerally counterintuitive about the situation.
The issue of who is the employer arises in many contexts. For example, a "whistleblower" employee of a U.S. company's foreign subsidiary, who is based overseas, may claim that she was fired in retaliation for alleging wrongdoing and seek to sue the U.S. parent under the Sarbanes-Oxley Act, claiming that the U.S. parent made the decision to fire.
Or, an employee of a small U.S. subsidiary of a large foreign company may claim that the foreign parent directed and oversaw a U.S. work force reduction that targeted older workers. The company may keep its personnel records "in the cloud," and personnel records may be accessible to the overseas parent. She may sue the foreign parent, claiming it is a joint employer, and seek discovery of its overseas employment practices to prove that it discriminates overseas, and, it follows, it may discriminate in the United States.
In St. Jean, the plaintiff was an American citizen. While she had a residence in Connecticut, she resided and worked on the island of St. Maarten in the Dutch Antilles for Cupecoy Village Development N.V. Cupecoy is located in St. Maarten, is incorporated under Dutch law, and manages Porto Cupecoy, a luxury residential marina in St. Maarten.
Cupecoy, in turn, is a subsidiary of Bermuda-based Orient-Express Hotels Ltd. (OEH Ltd.), which is engaged in owning and managing luxury properties in the leisure and tourism sector.
The plaintiff alleged that Richard Seay, Cupecoy's director of sales at Porto Cupecoy, began sending her sexually offensive emails with disparaging comments in 2011, and that in January 2012 at the Winter Concert Series at Porto Cupecoy, he grabbed and kissed her on the mouth. When she pulled away immediately, she claimed, he said, "I'm so sorry. I'm so sorry."
The day of the incident, plaintiff emailed two employees of yet another OEH Ltd. subsidiary—this one the defendant, Orient-Express Hotels Inc. (OEHI), an American company—about the incident. A week later, she met with OEHI's director of human resources, Carol Etheridge, and an attorney for OEHI. According to the plaintiff, Etheridge accused her of inventing her claims, and asked her why she wanted to work for the defendant when no one there liked her. No corrective action against Seay was taken; instead, the next day, the plaintiff was dismissed. Her termination letter was signed by an OEHI employee.
New York Case
Plaintiff filed her complaint in New York, and OEHI moved to dismiss, claiming that it was not her employer. OEHI also appears to have argued that even if it were her employer, it was not subject to Title VII because it has fewer than 15 employees, and the requirement that an employer have at least 15 employees is a substantive element of a plaintiff's Title VII claim.2
For her part, plaintiff alleged—and the court found—that, at least for the purposes of assessing the adequacy of her pleading in the context of a motion to dismiss, first, that OEHI was her joint employer, along with Cupecoy, which therefore provided for Title VII liability; and second, that OEHI controlled the manner and means by which Cupecoy employees' work was accomplished, and thus OEHI and Cupecoy constituted a "single employer."
As Judge Robert Sweet pointed out in his decision, there are two exceptions to the rule that employment discrimination may be maintained only against a plaintiff's direct employer: first, the "single employer doctrine" permits liability "when two nominally separate entities are part of a single integrated enterprise," and the "joint employer doctrine" permits liability when "separate legal entities have chosen to handle certain aspects of their employer-employee relationships jointly."3
While the U.S. Court of Appeals for the Second Circuit has "not yet fully analyzed or described a test for what constitutes joint employment in the context of Title VII," courts have looked to an "economic realities" test, or if there is evidence that the defendant had "immediate control over the former employer's employees."4