U.S. Supreme Court Unanimously Determines That Employment Status of a Title VII Defendant Is Not a Jurisdictional Issue
 
May 3, 2006
 

In a unanimous decision, the Supreme Court has ruled that the determination as to whether a Title VII defendant has 15 employees, and therefore is an “employer” subject to Title VII, is not jurisdictional but rather an element of a plaintiff’s claim. Arbaugh v. Y & H Corp., d/b/a/ Moonlight Cafe, U.S., No. 04-944, (2/22/06). Accordingly, in order to avoid liability under Title VII because it has fewer than 15 employees, a small business entity must raise an objection to its classification as an “employer” under Title VII before trial. Failure to do so may result in a finding of liability even though the employer has fewer than 15 employees.

Background

Title VII of the Civil Rights Act of 1964 prohibits employers from discriminating against employees on the basis of race, color, religion, sex or national origin. 42 U.S.C. §2000e-2(a)(1). An “employer” is defined as a person who has 15 or more employees. 42 U.S.C. §2000e(b). The federal courts are given jurisdiction to adjudicate civil actions brought under Title VII by §2000-5(f)(3).

Prerequisites to statutory coverage, such as Title VII’s 15-employee minimum, come in two varities. Some are “jurisdictional,” which means that they go to the power of the court to hear the case at all. Others are part of the plaintiff’s case – the plaintiff must prove that the requirements for statutory coverage are met in order to recover. The difference is that if a defense to statutory coverage is jurisdictional, it can be raised at any time, even on appeal, and cannot be waived. In contrast, a prerequisite to statutory coverage that is part of the plaintiff’s case must be contested by the defendant, at the latest, at the trial of the case. The federal appellate courts had reached conflicting decisions about whether Title VII’s 15-employee coverage requirement was jurisdictional or a part of the plaintiff’s case. The Supreme Court resolved that question in Arbaugh.

Facts

The petitioner, Jennifer Arbaugh, worked at the Moonlight Café in New Orleans from May 2000 to February 2001 as a waitress and bartender. Her employer was Y & H Corporation. In November 2001, Arbaugh sued Y & H Corporation, alleging sexual harassment in violation of Title VII and asserting related state law claims.

After a two-day trial, a jury ruled in Arbaugh’s favor on all claims and awarded her $5,000 back pay, $5,000 compensatory damages and $30,000 in punitive damages. Following the trial court’s entry of judgment, Y & H filed a motion seeking to dismiss the case for lack of jurisdiction. The company argued, for the first time, that the claim must be dismissed on the grounds that it did not meet the definition of “employer” under Title VII because it fell below the employee threshold requirement. Arbaugh argued both that the company did employ at least 15 and that any evidence submitted to the contrary was not before the jury.

The parties conducted discovery on the issue and the trial court ultimately determined that the employee count should exclude eight delivery drivers found to be contractors and the company’s four owners. As a result, Y & H did not have 15 employees. Recognizing the waste of judicial economy involved in granting the motion, the trial court nonetheless felt compelled to do so because it understood the threshold employee requirement to be jurisdictional. Accordingly, the trial court vacated its prior judgment due to lack of subject matter jurisdiction, dismissing the Title VII claims with prejudice and the state law claims without prejudice. The Fifth Circuit affirmed, based on its precedent that meeting the Title VII definition of “employer” is a jurisdictional matter.

The question before the Supreme Court was whether the definition of an “employer” is a jurisdictional fact or merely evidence to be argued on the merits of a particular claim.

The Court found that the determination is not jurisdictional. Justice Ginsburg, writing for the Court, explains that tying the employee threshold requirement to subject matter jurisdiction would result in unfairness and a waste of judicial resources. The federal court would have to dismiss the complaint in its entirety, including claims fully tried and determined on the merits, if it finds that it lacks subject matter jurisdiction. Alternatively, when a claim is dismissed for failure to prove the claim, the court is generally free to exercise supplemental jurisdiction over state-law claims. Unless and until directed to do so by Congress, courts need not, on their own motion, ensure the numerical threshold is met.

Significance

As a result of the Court’s finding, it is imperative that all Title VII defendants assess their employee count and raise any issues as early in the process as possible. Once the merits of the case have been tried and determined, it is likely too late.

For more information, e-mail Ann Marie Hensler at ann.hensler@hklaw.com or call toll free, 1-888-688-8500.

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