Title VII Damages Cap Is Based On the Number Of Employees at the Time of the Alleged Violation

In Hernandez-Miranda v. Empresas Diaz Masso, Inc., No. 10-1639, 2011 U.S. App. LEXIS 13259 (1st Cir. June 29, 2011), the First Circuit held that, for the purposes of counting the employer’s number of employees to establish the damages bracket under Title VII, 42 U.S.C. § 1981a(b)(3), Congress intended the relevant time period to be the time during which the alleged discrimination occurred. The Fourth, Fifth, and Seventh Circuits concur.  See DePaoli v. Vacation Sales Assocs., L.L.C., 489 F.3d 615 (4th Cir. 2007); Vance v. Planters Corp., 209 F.3d 438 (5th Cir. 2000); Hennessy v. Penril Datacomm Networks, Inc., 69 F.3d 1344 (7th Cir. 1995).

The relevant portion of § 1981a(b)(3) provides: 

The sum of the amount of compensatory damages awarded under this section for future pecuniary losses, emotional pain, suffering, inconvenience, mental anguish, loss of enjoyment of life, and other nonpecuniary losses, and the amount of punitive damages awarded under this section, shall not exceed, for each complaining party --

(A) in the case of a respondent who has more than 14 and fewer than 101 employees in each of 20 or more calendar weeks in the current or preceding calendar year, $ 50,000;

(B) in the case of a respondent who has more than 100 and fewer than 201 employees in each of 20 or more calendar weeks in the current or preceding calendar year, $ 100,000; and

(C) in the case of a respondent who has more than 200 and fewer than 501 employees in each of 20 or more calendar weeks in the current or preceding calendar year, $ 200,000 . . . .

42 U.S.C. § 1981a(b)(3) (emphasis added).

In Depaoli v. Vacation Sales Associates, LLC, supra, Judge Niemeyer, writing for a panel of the Fourth Circuit, held that current year is not the year in which the damages are awarded, but rather to the year in which the Title VII violation occurred. The Fourth Circuit, like other courts that have addressed this question, focused on the fact that the word “current” also appears in § 2000e(b) of Title VII which defines an “employer” as “a person… who has 15 or more employees for each working day in each of 20 or more calendar weeks in the current or preceding calendar year…” (emphasis supplied). As § 2000e(b) has been interpreted to refer to the year of the discrimination (Walters v. Metro. Educ. Enter. Inc., 519 U.S. 202, 205 & n.*(1997)), the Court applied the rule of statutory construction that “identical words used in different parts of the same act are intended to have the same meaning.” Dept. of Revenue of Or. v. ACF Indus., 510 U.S. 332, 342 (1994). 

Several circuit courts have interpreted § 2000e(b) to define “current year” as being the year of the discrimination. See e.g. Komorowski v. Townline Mini-Mart and Rest., 162 F.3d 962 (7th Cir. 1998); Vera-Lozano v. Int’l Broad., 50 F.3d 67, 69 (1st Cir. 1995); Rogers v. Sugar Tree Prods., Inc., 7 F.3d 577, 579 (7th Cir. 1993); McGraw v. Warren Cnty. Oil Co., 707 F.2d 990, 991 (8^th Cir. 1983) (per curiam); Dumas v. Town of Mt. Vernon, Ala., 612 F.2d 974, 979 n.4 (5^th Cir. 1980); Slack v. Havens, 522 F.2d 1091, 1093 (9th Cir. 1975). 

While a bright-line rule defining the year in which one counts employees for the purpose of determining the cap on certain damages would certainly be preferable, I am struck by the fact that, apparently, none of the circuit courts that have addressed this question have spoken to the fact that the statutory language is not simply “the current year”, but rather the current year or the preceding year. Assume, hypothetically, that in the year of the discrimination the defendant has more than 100 but less than 201 employees, and in the preceding year had more than 200 and less than 501 employees. Is the cap $100,000.00 or is it $200,000.00? I am confident that there is some simple response to my contrariness, but at first neither the statute nor the case law address this conundrum. 

Another wrinkle that occurs to me is harassment cases which, under the Supreme Court’s holding in Nat’l R.R. Passenger Corp. v. Morgan, 536 U.S. 101 (2002), that a hostile work environment claim is a cumulative claim and that the continuing violation doctrine applies to such a claim. In harassment cases, after Morgan, so long as the plaintiff alleges that a single act of harassment occurred within 300 days of the EEOC charge-filing, the plaintiff can go back in time beyond the 300^th day as far as the cumulative chain of events leads, so long as the defense cannot establish a “break” in the chain, typically a discrete act. So, in such a case, is the plaintiff permitted to “cherry pick” the best year in that chain for purposes of maximizing damages. Again, a hypothetical—assume a chain of events over 3 years that cumulates into an actionable hostile work environment, and assume that in year 1 of that chain, the employer has more than 200 employees and less than 200 in the ensuing 2 years. Can plaintiff go to the maximum damages permissible under the statute or is plaintiff limited to a lower capped amount? 

Another oddity that I note is § 1981a(b)(3)(c), which refers to employers of more than 200 and fewer than 501 employees. Does that mean that, for employers of 501 or more employees, there is no cap? A textual analysis would seem to suggest that there is no cap. 

The “takeaways” on these issues would seem to be the following:

1. Plaintiff should take discovery to establish the number of employees during the year or years of the alleged discrimination. 
2. In light of Judge Evans’ unwillingness in Hennessy v. Penril Datacomm Networks, Inc., supra, to take judicial notice of the SEC 10-K form under Rule 201 of the Federal Rules of Evidence, plaintiff should be scrupulous to have admissible evidence regarding the number of employees.
3. If plaintiff is within touching distance of a higher damage cap, plaintiff should be scrupulous in discovery regarding how the defense has classified certain individuals. See e.g. Thurber v. Jack Reilly’s Inc., 717 F.2d 633, 634 (1st Cir. 1983) (court concluded that defendant was an employer under § 2000e(b), finding that the relevant employees were not only those who were physically present at work each day, but all those who had an ongoing employment relationship with the employer during the requisite 20 weeks during the relevant calendar year). A unanimous Supreme Court, Justice Scalia writing, in Walters v. Metropolitan Educational Enterprises, Inc., supra, adopted the payroll method of counting employees, citing Thurber with approval.
4. Counsel should be familiar with the case law on independent contractors (Zimmerman v. N. Am. Signal Co., 704 F.2d 347, 352 n.4 (7th Cir. 1983) (disapproved of in Walters v. Metro. Educ. Enters., 519 U.S. 202 (1977) on other grounds) (“We caution that employers cannot avoid having employees counted toward the jurisdictional threshold by denominating them as directors, independent contractors, or other designations besides ‘employee.’ The issue is whether an employer-employee relationship exists, not what title a worker holds.”)), part time employees (Hornick v. Borough of Duryea, 507 F. Supp. 1091, 1098 (M.D. Pa. 1980) (a number of courts have held that “part-time workers are to be counted in ascertaining whether a ‘person’ is an ‘employer’ and therefore subject to… Title VII”)), volunteers (Hall v. Del. Council on Crime & Justice, 780 F. Supp. 241, 244 (D. Del. 1992) (reimbursement for work-related expenses is not sufficient to cause volunteers to be counted as employees), aff’d mem., 975 F.2d 1549 (3d Cir. 1992); City of Ft. Calhoun v. Collins, 500 N.W.2d 822, 826 (Neb. 1993) (a volunteer fire department is not an employer within the meaning of the state fair employment practices act); but see Haavistola v. Cmty. Fire Co., 6 F.3d 211, 222 (4th Cir. 1993) (volunteer firefighters may sue under Title VII)), shareholders (EEOC v. Dowd & Dowd, Ltd., 736 F.2d 1177, 1178 (7th Cir. 1984) (abrogated on other grounds in Clackamas Gastroenterology Assoc., P.C. v. Wells, 538 U.S. 440 (2003) as noted in Ruiz v. Trustees of Purdue Univ., 2008 U.S. Dist. LEXIS 118835 (N.D. Ind. Feb. 20, 2008)) (law firm “shareholders” are not counted)), directors and officers (EEOC v. First Catholic Slovak Ladies Ass’n, 694 F.2d 1068, 1070 (6th Cir. 1982) (corporate directors who drew salaries as employees and who had duties as employees in addition to those of directors are counted as employees); but see Zimmerman, supra at 352 (“We do not believe Congress intended the term ‘employee’ to include persons who are no more than directors of a corporation or unpaid, inactive officers.”); McGraw v. Warren County Oil Co., 707 F.2d 990, 991 (8th Cir. 1983) (per curiam) (affirming dismissal on the ground that corporate directors should not be counted as employees); Schoenbaum v. Orang County Ctr. For the Performing Arts, 677 F. Supp. 1036, 1038 (C.D. Cal. 1987) (“Congress did not intend the term ‘employee’ in the ADEA to include the defendant trustees and directors by virtue of the functions they performed for the Orange County Center.”) (quoting Zimmerman, supra)).
5. Counsel may want to explore whether the employees of one entity can be aggregated with another under the “single employer”/single enterprise (e.g. EEOC v. McLemore Food Stores, Inc., 25 FEP 1356, 1358, 1977 U.S. Dist. LEXIS 13741 (W.D. Tenn. Sept. 29, 1977) (since three defendants might be held to constitute a single enterprise, a charge against one might meet the jurisdictional prerequisite of a timely charge with respect to all three); Eskridge v. Coates, 57 FEP 589, 591, 1991 U.S. Dist. LEXIS 19914 (N.D. Ind. 1991) (the defendant corporations had interrelated operations, common ownership, and common management, with one specific individual in charge of hiring and firing for all of the corporate defendants); compare McKenzie v. Davenport-Harris Funeral Home, 834 F.2d 930, 933-34 (11th Cir. 1987) (demonstration of common ownership, management, personnel, and administrative functions raised a genuine issue of material fact) and EEOC v. Christie Lodge Assocs., 51 FEP 916, 920, 1989 U.S. Dist. LEXIS 14469 (N.D. Ill. 1989) (no summary judgment for parent company where disputed issues existed regarding centralized control of labor relations and other issues) with Morgan v. Safeway Stores, 884 F.2d 1211, 1213-14 (9th Cir. 1989) (no genuine issue of material fact raised where common management, control of labor relations, and ownership were not shown between employer and credit union))  or “joint employer” theories (e.g. EEOC v. Sage Realty Corp., 87 F.R.D. 365, 368-69, 1980 U.S. Dist. LEXIS 12404 (S.D.N.Y. 1980) (denying the defendant’s summary judgment motion; the contractor, who paid the plaintiff, and the building management company, which hired the contractor, may be joint employers; evidence showed that the latter hired, trained, and supervised the plaintiff, then ordered her fired when she refused to wear a revealing costume); Compare Evans v. McDonald’s Corp., EEOC Dec. 71-708, 3 FEP 141, 141 (1970) (franchisor and franchisee were joint employers where franchisor controlled the hours of work, work assignments, and products used, and was a named insured on policies covering store property) and Guerra v. Tishman E. Realty, 52 FEP 286, 288, 1989 U.S. Dis. LEXIS 6744 (S.D.N.Y. 1989) (summary judgment is inappropriate where the business relationship between the building owner and those who managed its buildings might be considered to be that of joint employers)).

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