The US's principal federal anti-discrimination law – Title VII of the Civil Rights Act of 1964 – has a long extraterritorial reach. Not only does it apply to employees of US and foreign employers working within the US, but it also covers US employees working abroad if the company for whom they work is controlled by a US entity. However, Title VII does not apply to foreign nationals working outside the US.
Notwithstanding this, a recent decision of a federal court in New York, Greenbaum v Svenska Handelsbanken NY, should give international businesses with small US branches a degree of comfort, at least with respect to liability for punitive damages.
Greenbaum was an assistant vice president with Svenska Handelsbanken in New York, a branch of the Stockholm bank. She claimed that she was denied promotions and other benefits because of her age and gender and that her employer retaliated against her for filing a discrimination complaint. A jury awarded Greenbaum US$320,000 in back pay and US$1.25 million in punitive damages.
The amount of punitive damages usually depends on the number of people employed by the defendant. Svenska's New York branch argued that the punitive damages award under Title VII should be limited to US$50,000 because the branch employed only 80 people in the US. Greenbaum argued that the court should count not only the employees employed by the branch in the US but also the thousands of employees who worked in Sweden. The court rejected Greenbaum's argument.
First, the court ruled that the Swedish entity was not a party to the action, nor could it be under Title VII. A foreign corporation may be a party to a Title VII action only if it is controlled by an American employer. In the case of Svenska, any control would have been by the Swedish entity over the New York branch, not the reverse. Because Greenbaum could not establish that the New York branch controlled the Swedish entity, the Stockholm company was not subject to Title VII.
Second, non-US citizens employed outside the US are not considered 'employees' subject to Title VII. In fact they are are explicitly excluded from it. Thus, even if the Swedish entity could have been considered an employer under Title VII, its non-US citizens could not be counted as employees under Title VII. Therefore, they could not be counted toward the aggregate number of employees for the purposes of determining the appropriate monetary limits on punitive damages.
Finally, the plaintiff argued that, as a matter of public policy, the court should include the Stockholm location's employees to "preserve the punitive nature of the damages and to calibrate the damages to the defendant's financial resources". Rejecting this final argument, the court noted: "This Court does not generate policy – Congress does. And on this question, Congress has spoken with a clear voice. It must be left to Congress to change its policy determination if it believes that such a result is contrary to the complicated purposes of this Act." Accordingly, the court held that, for the purposes of determining punitive damages under Title VII, the employees in Sweden would not be counted. Greenbaum v Svenska Handelsbanken, NY, 979 F Supp 973 (SDNY 1997)
This article first appeared on the lawmoney.com website
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