Michigan Court Gives Shareholders Standing to Sue For Discrimination Under Civil Rights Act

Posted by Jason Shinn on October 07, 2011

Shareholder Agreement.jpgA recent Michigan Court of Appeals Opinion has significant impact on small businesses, employment discrimination claims, and arbitration agreements. This decision is likely to especially impact professional businesses such as law firms and doctors groups.

Specifically, in Hall v Stark Reagan, P.C., two former law partners were forced out of their professional corporation after contesting the involuntary redemption of their shares. The plaintiffs claimed this decision was based on unlawful age discrimination and sued under Michigan's Elliot-Larsen Civil Rights Act (ELCRA), MCL 37.2101 et seq.

Employment Discrimination Claims - Who is an Employee

The defendants argued that the plaintiff shareholders lacked standing to sue under the Michigan Civil Rights Act because only "employees" may sue under the Michigan Civil Rights Act and as shareholders of the firm, the plaintiffs instead qualified as employers. 

The Court rejected this argument and reasoned that to merit protection under the CRA, a plaintiff must show some form of nexus or connection between the employer and the status of the nonemployee. The key to liability under the ELCRA is not simply the status of an individual as an "employee." Rather, liability is contingent upon the employer's affecting or controlling that individual's work status.

Accordingly, an employer can be held liable under Michigan Civil Rights Act for discriminatory acts against a nonemployee if the nonemployee can demonstrate that the employer affected or controlled a term, condition, or privilege of the nonemployee's employment.

Limiting Application of Arbitration Provision  

The defendants also argued that the claims were should be submitted to arbitration pursuant to the partnership agreement. The Court disagreed noting that even in contracts containing broad arbitration provisions, the determination of whether a particular claim must be submitted to arbitration necessarily depends on the existence of some nexus between the dispute and the contract containing the arbitration clause.

The test for determining arbitrability of a particular claim under a broad arbitration provision is whether a significant relationship exists between the claim and the agreement containing the arbitration clause, regardless of the legal label attached to the dispute.  

The Take Away

A person's status as a partner will not preclude that partner from asserting a discrimination claim under ELCRA. 

The Court's conclusion regarding the arbitration provision also signals that courts will more carefully scrutinize arbitration provisions to determine if issues are properly subject to arbitration. For this reason, it is important to assess existing arbitration agreements to ensure they stand up to this increased scrutiny.  

Religion in the Workplace: Avoiding Religious Discrimination Claims

Posted by Jason Shinn on August 04, 2011

Muslim Prayers.jpgThis week marked the beginning of Ramadan, which is the Islamic month of fasting. Participating Muslims generally refrain from eating and drinking during daylight hours. Ramadan is intended to teach Muslims about patience, spirituality, humility and submissiveness to God.

It is also a good reminder for the need to understand restrictions against religious discrimination in the workplace - not only Islamic religion but all religions. 

This is because Michigan employers are generally prohibited from discriminating in employment decisions and conditions on the basis of religion under Michigan’s Elliott-Larsen Civil Rights Act (ELCRA) and Title VII under federal law. 42 U.S.C. §§ 2000e et seq.; MCL 37.2202; See also 29 CFR 1605.1 et seq. for additional EEOC guidelines concerning religious discrimination.

Three Forms of Religious Discrimination 

Claims of religious discrimination under Title VII are often framed under three general theories:

  • Disparate treatment: An employee may may assert a disparate treatment theory where an employer treats an employee less favorably than other similarly situated employees because of the employee's religious beliefs or practices. For example, in Campbell v. Avis Rent a Car Sys. (pdf) (E.D. Mich. 2006) a Muslim plaintiff contended that she was terminated because of her Muslim religion and not for legitimate, non-discriminatory reasons because no non-Muslim employee had been terminated under similar circumstances; 
  • Hostile Work Environment: Under this theory, an employee may claim that the employer subjected the employee to a hostile work environment that may take the form of pervasive religious slurs or insults. An example of this type of discrimination occurred in EEOC v. Sunbelt Rentals, Inc., (4th Cir. 2008) where the plaintiff suffered severe and pervasive religious discrimination when several co-workers, including one supervisor, repeatedly called him "Taliban" and "towel head," questioned his allegiance to the United States, mocked his kufi and beard and observance of prayers, and made several anti-Muslim comments in the plaintiff's presence; and  
  • Failure to Accommodate: An employee may claim that an employment requirement, although evenhandedly implemented by the employer, conflicts with the person's religious practices. Enforcement of such a requirement against the employee constitutes a violation of Title VII unless the employer demonstrates that it is unable to accommodate the employee's religious practices without undue hardship. This type of claim was seen in EEOC v. Abercrombie & Fitch Stores, Inc. (2011) where the employer was found to have discriminated against a job applicant for its retail store because she wore a Muslim head scarf. The employer unsuccessfully argued that the scarf violated its employee "look policy" and, therefore, was an undue hardship. 

The Take Away

While the preceding examples of religious discrimination involve Muslim religious practices and beliefs, it is important to realize that religious discrimination may involve any belief that constitute a “religion." For example, see the Ohio Employer's Law Blog's discussion on a claim involving a Taco Bell employee and practicing Nazarite's refusal to cut his hair in accordance with his Biblical views. Further, Title VII broadly defines the term "religion" as “all aspects of religious observance and practice, as well as belief." But defining what is a "religion" or what religious accommodation may or may not be appropriate is best addressed in collaboration with a competent employment attorney.

For further information on Muslim religious practices, the Council on American-Islamic Relations provides employers with this overview of Muslim Religious practices (PDF).   

Changing Gears in Reverse Discrimination Claims: Differences under Michigan and Federal Law

Posted by Jason Shinn on July 19, 2011

Changing Gears.jpgA Flint jury recently awarded $535,000 to a white former employee wrongfully fired after making a racial comment. This verdict also highlights important differences when it comes to reverse discrimination claims under Michigan and federal law.

For background, Mr. Craig Hecht, a former charter school teacher, was fired from Linden Charter for undisputedly telling another employee that “white tables are better than brown tables and brown tables should be burned.” 

At trial, however, Mr. Hecht was able to show that black staff members at Linden Charter Academy also made racial jokes but were never punished like him. 

Reverse Discrimination under Michigan and Federal Law

Reverse discrimination generally refers to discrimination experienced by a member of a class that has not historically been disadvantaged.

Under both Michigan and federal employment discrimination law, an employment plaintiff - minority and non-minority - must generally satisfy a burden-shifting framework (commonly called the McDonnell Douglas test) to establish a prima facie case of discrimination by showing the plaintiff:

  1. Was a member of a protected class; 
  2. Suffered an adverse employment action; 
  3. Was qualified for the position; and 
  4. Was replaced by someone outside the protected class or was treated differently than similarly-situated, non-protected employees.

Duch v. Mich. Dep't of Corr. (E.D. Mich. Feb. 15, 2011).

Reverse Discrimination Differences under Michigan and Federal Law

In addition to the preceding test, under federal law, a reverse discrimination plaintiff must also demonstrate "background circumstances" to support the suspicion that the defendant is that unusual employer who "discriminates against the majority." 

In contrast, Michigan law diverged from federal law in 2004 on this point. Specifically, in Lind v. City of Battle Creek, 470 Mich. 230, 232-233 (2004), the Michigan Supreme Court abolished the different standards for minority and non-minority plaintiffs. In this regard, the Court reasoned that the Michigan Civil Rights Act simply protected all persons from racial discrimination equally, with uniform burdens of proof, regardless of the race or races involved. 

Closing Thoughts

Mr. Hecht's verdict is a good reminder of three important points:

  • Employers must have a clear policy prohibiting discrimination in employment. That policy should also define prohibited discrimination and provide multiple avenues for making complaints of perceived discrimination; 
  • A policy is only as good as its enforcement. And even the best policy that is not followed or (worse) applied inconsistently can result in an expensive head-on collision with a jury; and
  • There are a number of similarities between federal and state employment law. But there are also significant differences. It is, therefore, critical to understand these similarities and leverage the strategic value or work to minimize the disadvantages offered to one side or the other, i.e., the employer or individual employee.