Jottings By An Employer's Lawyer

Tuesday, July 18, 2006

Fighting Over 15 - 7th Circuit Adds Another Wrinkle

Any time a bright line exists between coverage or not, there will be fights as to how to determine the line. Wading into one such fight, the 7th Circuit today holds that two individuals -- even though given unfettered reign by the sole proprietor to run her restaurant-- were employees for purpose of determining the 15 needed for coverage under Title VII. Smith v. Castaways Family Diner (7th Cir. 7/18/06) [pdf].

Although the Supreme Court had focused on that issue in Clackamas Gastroenterology Assocs.
v. Wells
, 538 U.S. 440, 123 S. Ct. 1673 (2003), Judge Rovner focused on an issue not mentioned in Clackamas, the source of the two individuals' power. Unlike Clackamas, where the physicians whose status in question were also shareholders and members of the Board of Directors, at Castaways, the power derived strictly because the sole owner delegated it. As Judge Rovner explains that is a distinction that makes a difference:
[A] distinction must be drawn between the power that a supervisor or manager exercises as of right and the power that he exercises by delegation. It is not at all unusual for the owner of a business enterprise to bring someone else in to run the business on her behalf, just as Gonzalez has done. In practice, that person may be given virtually unbounded day-to-day discretion and authority in operating the business. Nonetheless, he exercises that discretion and authority at the pleasure of the business owner; he has no inherent right, as the owner does, to control the business. In that respect, his position is no different from that of any other worker: he could be overruled (and, depending on the terms of his employment contract, fired) just as summarily as the lowest ranked employee. By contrast, the owner of a business, even if he chooses not to exercise it, always has the right to control the direction and operation of the business.
And the fact that there was a family relationship, the two in question were the husband and mother of the owner, by itself was not legally significant.

Although obviously important to the small group at the Knox, Indiana diner, my guess is this opinion will be even more intently read at a much larger institution located at One South Dearborn, Chicago. There it will be an effort to discern which way the 7th Circuit might be leaning on the issue headed their way of whether ex-partners of Sidley, Austin are themselves employers and thus not proper plaintiffs, either directly or through the proxy of the EEOC in a discrimination suit.

Prior decisions from that fight, which has already been to the circuit twice on procedural issues, were cited. My guess is that today's focus on the source of power, not how effective one was in wielding it -- is a slightly different and certainly welcome slant that will not be overlooked by the defendant as the Sidley litigation continues.

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