• Small Employers Should Raise Size Defense Early in Discrimination Litigation
  • May 3, 2006
  • Law Firm: Ford & Harrison LLP - Atlanta Office
  • The U.S. Supreme Court has held that an employer who waited until two weeks after the conclusion of a sexual harassment trial to raise the defense that it is too small to be covered by Title VII waived this defense. See Arbaugh v. Y & H Corp. (Feb. 22, 2006). In Arbaugh the Court had to determine whether Title VII's size limitation (it applies only to employers with 15 or more employees) is a jurisdictional issue (which means the issue cannot be waived, can be determined by a judge and can be raised at any time, even after the conclusion of trial) or an element of a Title VII claim (meaning it may be waived if not raised in a timely manner and that factual questions regarding the issue must be decided by a jury). The Court held that the size limitation is an element of a Title VII claim and that the employer in Arbaugh waited too long to raise the defense.

    In this case, Arbaugh worked for a restaurant owned and operated by Y & H. Arbaugh claimed the restaurant manager sexually harassed her and that she was forced to resign because of the harassment. After she resigned, Arbaugh sued Y & H for, among other things, sexual harassment in violation of Title VII. Two weeks after the jury returned a verdict in Arbaugh's favor, the employer asked the trial court to dismiss Arbaugh's claims, arguing that it is not covered by Title VII because it employs fewer than 15 employees. After determining that Y & H employs fewer than 15 employees, the trial court threw out the judgment in favor of Arbaugh and dismissed her complaint. The Fifth Circuit affirmed this decision; however, the Supreme Court reversed it.

    In analyzing whether the size limitation is a jurisdictional issue or an element of a Title VII claim, the Supreme Court was "mindful" of the consequences of labeling it a jurisdictional issue. Among other things, the Court noted that courts have an independent obligation to determine whether subject matter jurisdiction exists, even if the parties do not raise the issue. The Court held that nothing in the language of Title VII indicates that Congress intended a court to raise the size limitation itself if the parties do not do so. The Court also noted that the size limitation in Title VII does not speak in jurisdictional terms and does not refer to the jurisdiction of federal courts.

    The Court held that when Congress does not rank a statutory limitation on coverage as jurisdictional, courts should treat the restriction as nonjurisdictional in character. Applying that bright line test to this case, the Court held that Title VII's size limitation is an element of a Title VII complaint. Accordingly, the Court reversed the lower courts' decisions throwing out the plaintiff's claims.

    Employers' Bottom Line:

    Although this case addresses a technical issue that may be of interest primarily to attorneys, it is important for small employers to realize that they may not be covered by Title VII or other federal or state employment related laws because of their size. Since the Supreme Court's decision means that a size limitation defense may be waived if not raised in a timely manner, employers should address this issue as early as possible with employment counsel when faced with a discrimination charge or complaint.