PERSONAL LIABILITY OF MANAGEMENT UNDER NYC HUMAN RIGHTS LAW

Doe v Bloomberg, L.P., 2019 NY Slip Op 06728, Decided on September 24, 2019, Appellate Division, First Department Kern, J.:

"The City HRL imposes strict liability on an "employer" for the discriminatory acts of the employer's managers and supervisors (see Administrative Code of the City of New York § 8-107[13][b][1]; Zakrzewska v New School, 14 NY3d 469, 480-481 [2010])[FN2]. Specifically, Administrative Code § 8-107(13)(b) provides:

"An employer shall be liable for an unlawful discriminatory practice based upon the conduct of an employee or agent which is in violation of subdivision 1 or 2 of this section only where:

(1) The employee or agent exercised managerial or supervisory
responsibility . . . ."

However, the statute does not provide a definition of "employer" and the legislature has not provided guidance as to how "employer" should be defined under the statute. The legislature has also not provided guidance as to when an individual, in addition to the corporate employer, may be held strictly liable under the statute.

The Court of Appeals has held that section 8-107(13)(b)(1) of the Administrative Code holds corporate employers strictly liable for the discriminatory acts of their managers and supervisors (see Zakrzewska, 14 NY3d at 469). Additionally, pursuant to the plain language of the statute, where the only employer is an individual and there is no corporate employer, the individual may be held strictly liable for the discriminatory acts of his or her managers and supervisors as such individual is the only possible employer under the statute. However, the Court of Appeals has never addressed the issue of when an individual, in addition to the corporate employer, may be held strictly liable under section 8-107(13)(b)(1) of the Administrative Code. Based on a review of the cases that have addressed the issue, we find that in order to hold an individual owner or officer of a corporate employer, in addition to the separately charged corporate employer, strictly liable under section 8-107(13)(b)(1) of the Administrative Code, a plaintiff must allege that the individual has an ownership interest or has the power to do more than carry out personnel decisions made by others and must allege that the individual encouraged, condoned or approved the specific conduct which gave rise to the claim.[FN3]
This Court has twice explicitly addressed the issue of when an individual may be held strictly liable, in addition to the corporate employer, under section 8-107(13)(b)(1) of the Administrative Code, and held that an individual will be held strictly liable under the statute if he or she encouraged, condoned or approved the specific discriminatory behavior alleged in the complaint. In Boyce v Gumley-Haft, Inc. (82 AD3d 491, 492 [1st Dept 2011]), this Court denied summary judgment to the individual owner of the corporate employer under section 8-107(13)(b)(1) of the Administrative Code because there were issues of fact as to whether he "encouraged, condoned or approved" the specific discriminatory conduct alleged by the plaintiff (82 AD3d at 492). This Court reiterated this standard in McRedmond v Sutton Place Rest. & Bar, Inc. (95 AD3d 671, 673 [1st Dept 2012]), a case in which we denied summary judgment to the individual officers of the corporate employer under section 8-107(13)(b)(1) of the Administrative Code because there were issues of fact as to whether they condoned or participated in the discriminatory conduct complained of by the plaintiff.

All of the federal cases cited by the parties which have addressed the specific issue before us now have also held that an individual will only be held strictly liable under section 8-107(13)(b)(1) of the Administrative Code if he or she participated, in some way, in the specific discriminatory conduct alleged in the complaint (see Marchuk v Faruqi & Faruqi, LLP, 100 F Supp 3d 302, 309 [SD NY 2015] [a plaintiff must establish "at least some minimal culpability on the part of (the company's individual shareholders)" in order to hold them liable as employers under the City HRL]; Zach v East Coast Restoration & Constr. Consulting Corp., 2015 WL 5916687, *1, 2015 US Dist LEXIS 138334, *1 [SD NY 2015] [denying plaintiff's motion to add the president of the corporate employer as an individual defendant under the City HRL because the proposed amended complaint failed to "allege any knowledge, participation, or involvement whatsoever" in the discriminatory conduct detailed in the complaint]; Burhans v Lopez, 24 F Supp 3d 375, 385 [SD NY 2014] [allowing plaintiffs' claims to proceed against the individual defendant as an employer under the City HRL on the ground that plaintiffs "sufficiently allege that (the individual defendant) was personally involved in the conduct in question"]).[FN4]

We note that the legislative history of section 8-107(13)(b)(1) does not address whether an individual owner or officer of a corporate employer may be held strictly liable, in addition to the corporate employer, absent a finding of culpability on the part of the individual. However, holding an individual owner or officer of a corporate employer liable under the City HRL as an [*3]employer, without even an allegation that the individual participated, in some way, in the specific conduct that gave rise to the claim, would have the effect of imposing strict liability on every individual owner or high-ranking executive of any business in New York City. The City HRL is not so broad that it imposes strict liability on an individual for simply holding an ownership stake or a leadership position in a liable corporate employer.

Moreover, interpreting section 8-107(13)(b)(1) of the Administrative Code to impose liability on an owner or officer of a corporate employer in his or her individual capacity without any inquiry into his or her personal participation in the conduct giving rise to the claim would be inconsistent with the principles underlying this State's corporate law (see Marchuk, 100 F Supp 3d at 309). "The law permits the incorporation of a business for the very purpose of enabling its proprietors to escape personal liability" (Walkovszky v Carlton, 18 NY2d 414, 417 [1966]). Indeed, a corporate owner or officer may be held individually liable for a tort committed by the corporation but only if the corporate officer or owner "participates in the commission of [the] tort" (American Express Travel Related Servs. Co. v North Atl. Resources, Inc., 261 AD2d 310, 311 [1st Dept 1999]). Moreover, a plaintiff who attempts to pierce the corporate veil and hold a corporate officer or owner liable for an obligation of, or a wrong committed by, the corporation must show complete domination of the corporation and that "the [individual], through [his] domination, abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against [the plaintiff]" (Matter of Morris v New York State Dept. of Taxation and Fin., 82 NY2d 135, 142 [1993]). Thus, some participation in the specific conduct committed against the plaintiff is required in order to hold an individual owner or officer of a corporate employer personally liable in his or her capacity as an employer.

Based on the foregoing, we find that plaintiff's City HRL claims must be dismissed as against Mr. Bloomberg because plaintiff has failed to sufficiently allege that Mr. Bloomberg is her employer for purposes of the City HRL. She has failed to allege that Mr. Bloomberg encouraged, condoned or approved the specific discriminatory conduct allegedly committed by Mr. Ferris."