On October 21, 2020, the 7th Circuit affirmed an order of summary judgment in favor of the defendants in a Title VII employment discrimination and retaliation lawsuit, on the ground that the company for which the plaintiff worked had fewer than fifteen employees and, therefore, was not an “employer” subject to Title VII. Prince v. Appleton Auto, LLC, et al., No. 20-1106 (7th Cir. Oct. 21, 2020). The defendant company is a member of a network of affiliated but corporately distinct used-car dealerships in Wisconsin. The plaintiff claimed that his employment termination resulted from unlawful discrimination and retaliation in violation of Title VII of the Civil Rights Act of 1964 (“Title VII”). The plaintiff argued that the court should aggregate the number of employees from the other dealerships to meet the jurisdictional requirement of 15 employees. The 7th Circuit concluded that there was insufficient evidence to support the plaintiff’s theory that the court should pierce the corporate veil of the dealership network to aggregate the number of employees so that Title VII would apply.

Congress exempted small businesses from Title VII. Title VII only applies to an “employer,” defined as “a person engaged in an industry affecting commerce who has fifteen or more employees for each working day in each of twenty or more calendar weeks in the current or preceding calendar year.” If all the related dealerships were aggregated, there would be more than fifteen employees altogether. The issue was whether the court should pierce the dealerships’ corporate veil and aggregate the dealerships’ employees to meet the jurisdictional requirement of fifteen employees. The 7th Circuit has recognized three circumstances when the existence of an affiliated company could result in jurisdiction under Title VII. Employee aggregation is appropriate when: (1) the enterprise has purposely divided itself into smaller corporations to dodge the requirements imposed by anti-discrimination laws; (2) a creditor of one corporation could, by piercing the corporate veil, sue its affiliate; or (3) the affiliate directed the discriminatory act or practice at issue. This case only involved piercing the corporate veil. The 7th Circuit found that there was no evidence that the defendants neglected corporate forms or risked confusing creditors. Although they were substantially integrated, the dealerships properly maintained separate accounts, identities, and corporate records. Therefore, there was no basis to pierce the corporate veil.

It should be noted that the Illinois Human Rights Act, the Illinois anti-discrimination statute, applies to all Illinois employers who have one or more employee.