Third Circuit says VIPs cannot sue for Title VII discrimination

Robert Mariotti was the vice-president and secretary of the company his father founded. Not only was he a corporate officer, but Mariotti also served as a member of the board of directors, and was a shareholder who could only be fired for cause.

In 1995, Mariotti had a spiritual awakening, which he claims resulted in a resulted in “a systematic pattern of antagonism” toward him in the form of “negative, hostile and/or humiliating statements” about him and his religious affiliation. Mariotti claimed that this behavior ramped up for over a decade and, ultimately, resulted in his termination. Thereafter, he sued his former employer for religious discrimination. The company moved to dismiss the claim on the basis that a shareholder-director-officer is not an “employee” under Title VII of the Civil Rights Act of 1964 and, thus, has no standing to assert a claim for religious discrimination.

What happened you say? Well, even if you read the lede, click through for full analysis…

In Clackamas Gastroenterology Associates, P.C. v. Wells, the Supreme Court determined that shareholder-directors of a professional corporation should not be counted as employees in determining whether the business entity met the threshold number of employees, and thereby qualified as an employer under the Americans with Disabilities Act.

The Third Circuit In Mariotti v. Mariotti Building Products, Inc., determined that the rationale in Clackamas, specifically, the six EEOC factors highlighted in Clackamas to determine whether a shareholder-director is an employee, applied with equal force in the Title VII context.

Further, the Clackamas test was not limited to cases involving professional corporations. Rather, the “nature of the business entity is simply an attribute of the employment relationship that must be considered in applying the Clackamas test to determine whether an individual is an employee or an employer.”

Applying the Clackamas test to the Mariotti facts, the Third Circuit easily determined that Mr. Mariotti was not an employee:

The allegations in the amended complaint make plain that Plaintiff was entitled to participate in the development and governance of the business. His averment that he continued to serve after his termination on January 9, 2009 as a member of the board of directors confirms that he remained entitled by virtue of his position “to a say in the fundamental decisions” of the closely held family corporation for months after his termination.

While employers should be pleased with this decision, they should remember that cases like these are fact intensive and, as the Third Circuit warned, rarely get resolved on a motion to dismiss. Rather, “standing” cases like these generally must await summary judgment. And that means discovery and attorney’s fees.

Gosh, I wish I were an employment lawyer. Wait a minute…

Woo hoo!