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Serrins & Associates LLC Employment Law Blog

Tuesday, May 30, 2017

So, Who Gets Sued? Examining Liability for Employment Law Violations Up the Corporate Ladder

This month, the Court of Appeals, New York’s highest court, answered several questions “certified” to it by the Second Circuit Court of Appeals that are important for certain employees considering bringing a lawsuit against an employer to understand.

That’s a mouthful, so let’s unpack it before we go further, because this post is going to include a lot of legal speak: the Second Circuit Court of Appeals is a federal appellate court. It decides appeals from cases tried in federal district courts. The New York Court of Appeals, meanwhile, is the highest state court in New York, and it reviews decisions from state trial courts. So there is a two-tiered system of justice in which cases brought in federal court proceed federally, while cases brought in state court proceed in the state court system.

When certain situations occur, federal courts may be asked to interpret state laws, rather than federal laws. (Here at Serrins Law, we are used to bringing cases in both federal and state courts, depending on the underlying facts.)  Sometimes, rather than deciding questions of state law itself, a federal appellate court will “certify” questions of state law to a state court directly. In other words: “Hey, New York, we have to decide a question of New York law. Tell us how you would handle it.”

That’s what happened in Griffin v. Sirva – you can read a bit more about the underlying facts of the case here. Essentially, a company based outside of New York contracted with a New York company to provide moving services. The parent company, Allied, required employees to pass criminal background checks. When certain employees failed these checks, the New York contractor, Astro, fired them.

Of course, it is illegal in New York State to discriminate against employees or potential employees based on a record of  criminal convictions, without consideration of various factors.  Doing so is employment discrimination. So Allied’s company policy violated New York law. But Allied is not a New York company – Astro is. So the question is: can a job applicant or employee who was victimized by Allied’s policy sue not only Astro, but Allied as well?

The Court of Appeals held that both companies can be sued by the worker. Astro can be sued for violating New York law. Allied, on the other hand, can be sued for “aiding and abetting” a violation of New York law by forcing a New York company to violate it. Both the parent company and the contractor can be taken to court under New York law.

Why is this important? One word: money.  A small local company may not have much in the way of assets or insurance to pay a wronged worker – while the plaintiff might win their suit, it could prove difficult to collect the money the business has been ordered to pay. When there is also a large, national corporation on the hook for a violation of New York law, money can be much easier to actually collect, simply because a national company usually has assets a local company would not.

Another area in which this issue crops up concerns franchise liability. McDonald’s, for example, is run as a series of franchises that are essentially small businesses.  So if a McDonald’s franchise discriminates against an employee on an illegal basis, whether it be due to criminal history, race, sex, gender, or any other status recognized by the law, can that employee sue the national corporation, or just the small business franchise?

As it turns out, the federal courts have held in the past that McDonald’s corporate headquarters is not a so-called “joint employer” of franchise employees, and thus is not responsible for violations of employment law by franchises. But this position has been under fire, and last year, McDonald’s settled with wronged employees for almost 4 million dollars rather than allow a court to hear the dispute and potentially rule in favor of workers. And New York’s attorney general has sued corporate parents (in this case, Domino’s) for violations of employment law by local franchise owners. In another encouraging sign for employers, the National Labor Relations Board has found McDonald’s corporate body to be a “joint employer” with its franchisees, and so federal labor laws (including unionization rights) apply to both McDonald’s corporate and its small business franchisees. So right now, the law is in a state of flux regarding larger corporate liability for franchise violations of employment law.

Is it a complicated area of law? Absolutely. And that’s why you need a reliable and experienced employment lawyer who has fought these same battles in the past, understands the ins and outs of these issues, and stays current with rapidly changing law. If you believe your employer has discriminated against you, contact our office and set up a consultation – learn your rights, and learn who you can sue and how.





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