Missouri Appeals Court Addresses Third Party Harassment Claim Against Parent Company
Author: Marta Moakley, XpertHR Legal Editor
November 23, 2015
A Missouri appeals court has declined to find a parent company liable for the acts of its subsidiary under the state civil rights law. In Diaz v. AutoZoners, LLC, a case alleging third-party sexual harassment (i.e., an employee alleged being harassed by two customers), the Missouri Court of Appeals for the Western District reversed a jury verdict and judgments against the parent company.
The corporate structure of the corporations at issue is relevant when determining liability. The parent company (AutoZone, Inc.) was a holding company organized under Missouri law, holding the stock of its domestic and foreign subsidiaries. The subsidiary (Autozoners, LLC) was a limited liability company authorized to do business in Missouri, and was the employee's direct employer.
In reaching its decision, the court focused on the definition of employer under the Missouri Human Rights Act (MHRA), which covers "any person employing six or more persons within the state, and any person directly acting in the interest of an employer." The parties agreed that the parent corporation did not have the requisite number of employees in the state for the MHRA to apply. However, the employee argued that the parent company directly acted in the interests of the subsidiary, making them "joint employers" for purposes of liability under the MHRA.
In order to determine whether the parent company could be held liable, the court applied the "economic realities" test, which is frequently applied in wage-and-hour cases. The test considers:
- Who has the power to hire and fire the worker;
- Who supervises and controls the worker's work schedule and conditions of work;
- Who determines the rate and method of payment of the worker;
- Who maintains work records; and
- Whether the alleged employers' premises and equipment were used for the worker's work.
Because this is a third-party sexual harassment case, the court also considered:
- Who was responsible for establishing policies and training employees concerning harassment;
- Who was responsible for receiving, investigating and responding to harassment complaints; and
- Who had the power to discipline employees who may have failed to comply with anti-harassment policies.
The subsidiary received, investigated and responded to the employee's workplace complaints, in addition to training and disciplining its employees. Although the parent company provided the employee handbook and code of conduct, as well as responded to the employee's charge of discrimination, the court reasoned that the employee's proof and arguments did not support a finding of joint employment and declined to hold the parent company liable.