Wis.LIRC ER Decision: Sinclair - October 15, 1993 - Procedure - parties - who should be respondent - if respondent is a corporation, its stockholders should not be separately named as repsondents - agent of an employer should not be separate respondent based on conduct absent allegations that the conduct was outside of the scope of their agency

STATE OF WISCONSIN
LABOR AND INDUSTRY REVIEW COMMISSION

RADEENA SINCLAIR, Complainant

MIKE'S TOWNE & COUNTRY, Respondent A

TIM ARFSTROM, Respondent B

MYRON & GAY TASSOUL, Respondent C

FAIR EMPLOYMENT DECISION
ERD Case No. 9201449, EEOC Case No. 26G921067

An administrative law judge for the Equal Rights Division of the Department of Industry, Labor and Human Relations issued an "Amended Order of Dismissal of Amended Complaint" in this matter on August 6, 1993. Complainant RaDeena Sinclair filed a timely petition for commission review of that order.

Based on its review, the commission now issues the following:

ORDER

The "Order of Dismissal -- Amendment Not Timely Filed" dated July 30, 1993, and the "Amended Order of Dismissal of Amended Complaint" dated August 6, 1993 are set aside, and this matter is remanded to the Equal Rights Division for further proceedings.

Dated and mailed October 15, 1993

/s/ Pamela I. Anderson, Chairman

/s/ Richard T. Kreul, Commissioner

James R. Meier, Commissioner

MEMORANDUM OPINION

The complaint here, filed by an employe of grocery store, concerned allegations of sexual harassment by the store manager and changes in and reductions in her hours, in retaliation for opposition to the alleged harassment. The initial complaint identified the respondent as: "Mike's Towne and Country/Tim Arfstrom."

Tim Arfstrom was described in the text of the complaint as the manager who engaged in the alleged sexual harassment. The text of the complaint also made a reference to Mike and Gay Tassaul (the spelling is actually Tassoul) as the owners.

The complaint asserted that the discriminatory actions last happened on February 29, 1992. The complaint itself was filed on April 15, 1992.

The problem here concerns an amended complaint, filed on January 22, 1993. Like the original complaint, the amended complaint also identifies February 29, 1992 as the last date on which alleged discrimination occurred. The amended complaint would thus appear to be untimely on its face.

(Complainant argues that it is not untimely, because, she claims, retaliatory actions had taken place as late as April 30, 1992. This argument is based on a finding to that effect in the initial determination. However, this argument overlooks the assertion on the face of both complaints that the date on which discrimination last occurred was February 29, 1992.)

The amended complaint was limited in its purpose. All it purported to do was to add Myron (Mike) and Gay Tassoul as respondents, explaining this with the indication that the amendment was being filed because of the sale of Mike's Towne & Country Stores to another company. The amended complaint continued by asserting that Myron and Gay Tassoul were the "owners" at the time of the (alleged) retaliation and that Gay was responsible for handing down the challenged suspension and schedule changes.

The investigator found probable cause to believe that "Mike's Towne and Country" had discriminated as alleged. She also found that the other respondent named in the original complaint, Tim Arfstrom, had discriminated in respect to sexual harassment and sex discrimination but that there was no probable cause to believe that he had engaged in the retaliation which was alleged. Finally, the investigator found that there was no probable cause to believe that Myron and Gay Tassoul had discriminated as alleged in the amended complaint. She made this last finding based not on consideration of the merits, however, but solely based on her conclusion that the allegation was time-barred because identification of the two as respondents was made by a complaint filed more than 300 days after the date alleged as the last date on which discrimination occurred.

Within 30 days of the date of this initial determination, the complainant filed an appeal from so much of the initial determination as dismissed allegations against Myron and Gay Tassoul. The ERD handled this as it would a typical "split" ID with appeal (i.e., probable cause and no probable cause found, no probable cause finding appealed). It set a hearing on the issue of probable cause. Then the attorneys for the Tassouls moved to dismiss the complaint against the Tassouls based on the statute of limitations. The ALJ granted this motion. His decision also ordered that the parts of the complaint as to which probable cause were found proceed to conciliation.

The commission is unable to affirm the ALJ's order because there are too many factual questions which are unresolved and which have a bearing on how the amended complaint should be handled.

The original complaint in this matter named "Mike's Towne and Country" as a respondent. The amended complaint purported to add Myron and Gay Tassoul as separately designated respondents in their own right. There is a question of whether such an amendment would have had any legal significance in any event, or would have been appropriate. That question turns on the legal status of "Mike' s Towne and Country."

If it is an unincorporated business, operated as a proprietorship of Myron and Gay Tassoul "doing business as" Mike's Towne and Country, then Myron and Gay Tassoul already are respondents in legal contemplation: an unincorporated proprietorship has no legal identity distinct from that of its owners. An amended complaint purporting to "add" them as respondents would be entirely unnecessary. As it would make no real legal change in the parties, or the allegations, it would in effect be a nullity. As such it would properly be ignored without even the formality of a dismissal order.

If Mike's Towne and Country is a corporation, the situation would be potentially more complex, but not ultimately any more significant. The commission takes the view that where an incorporated employer is named as a respondent in a complaint alleging a violation of the Wisconsin Fair Employment Act, there is no basis for separately naming "owners" (i.e., owners of the corporation's stock) as respondents in their individual capacities based simply on their stock ownership. The corporation is a separate legal entity. Liability for actions taken by the corporation (acting through its agents) is liability of the corporation. It is a fundamental principle of corporation law, that the liability of stockholders for actions taken by the corporation is limited to the extent of their investment in the corporation, i.e., their stock holdings. While there may be cases in which the law will "pierce the corporate veil" to impose a liability of a corporation directly on its owners on a personal basis, whether this is appropriate or necessary must be determined on a case-by-case basis, and it cannot be automatically achieved merely by initially naming owners as parties.

If Mike's Towne and Country is a corporation, and the effort to make Myron or Gay Tassoul (or both) respondents in their individual capacities is based not only on their alleged "ownership" but also on their having been in some capacity agents of the corporation, a question is presented of whether individuals who acted as agents of an employer can or should be made additional respondents in a proceeding against the employer. The WFEA is unclear on this question. While it seems to anticipate (in secs. 111.321 and 111.325, Stats.) that not only "employers" but also "persons," as distinct from "employers," may be made respondents, it also provides expressly in sec. 111.39(4)(c), Stats. for employer liability for remedies ordered as a result of a violation of the WFEA by an employe (i.e., an agent) of the employer. The commission has never directly addressed this question, although its decision in Nelson v. Waybridge Manor. Inc. and Theodore Sternbach (LIRC, April 6, 1990), suggests that where a person has acted under color of their authority as an agent of an employer, it is that employer rather than the individual person that is properly viewed as the respondent.

Assuming without deciding that sec. 111.39(4)(c) Stats. would even allow imposition of liability directly on an employer's agent rather than on the employer where the employer's agent has acted outside the scope of their agency, it would seem that where the alleged violation by the agent was within the scope of their agency, they should not be separately named as a respondent, since by statute the liability will rest on the employer. In this case, there is no allegation in either the original or the amended complaints that any alleged violations of the WFEA by Myron or Gay Tassoul arose out of actions beyond the scope of their authority as agents of the employer. Therefore, the commission sees no basis for adding a separate designation of Myron and Gay Tassoul personally as respondents.

The amended complaint in this matter was, as noted, apparently a response to a sale of the business. However, the problems presented by the sale of a business which may be liable for an act of employment discrimination cannot be addressed merely by tinkering with the caption. Whether liability rests with the predecessor or the successor in the case of a transfer of ownership depends on a number of factors including (1) whether the successor had prior notice of the claim against the predecessor; (2) whether the predecessor is able, or was able prior to the purchase, to provide the relief requested; and (3) whether there has been a sufficient continuity in the business operations of the predecessor and successor. Wheeler v. Snyder Buick, Inc., 794 F.2d 1228 (7th Cir. 1986). Obviously, whether the predecessor or the putative successor is even pleaded into the proceedings is also a practical consideration. The tests presented by successorship cases are fact specific and must be evaluated in light of the facts of each case and the particular legal obligations at issue. In re National Airlines, 700 F.2d 695 (11th Cir. 1983).

Particularly because no hearing has yet been held, the record in this case does not allow resolution of many questions: Is "Mike's Towne and Country" an unincorporated proprietorship or a corporation? If it is incorporated, what positions do the Tassouls hold in the corporation, is its stock privately held or publicly traded, and was there a sale by the Tassouls of their stock or a sale by the corporation of the business? Was it a sale of assets only, or of the good will as well? Did the purchasers have notice or knowledge of the pendency of this claim?

On remand, these questions should be addressed, by hearing if necessary, but preferably by stipulation of the parties, as it appears that these are points on which the facts should not be in dispute. The ALJ will then be in a position to resolve the questions which may be presented by the apparent sale of the employer in this case.

In summary, the amended complaint in this matter appears to be either (1) unnecessary and of no effect if "Mike's Towne and Country" is simply an unincorporated proprietorship of Myron and Gay Tassoul, since in that case they are already parties in legal contemplation, or (2) inappropriate if "Mike's Towne and Country" is incorporated, because Myron and Gay Tassoul's liability as owners is limited to the extent of their stock ownership and their liability as agents, not having been alleged to have arisen outside of the scope of their agency, is subsumed in the liability of the employer. On remand, the amended complaint should either be ignored if the facts are as in the former case, or rejected if the facts are as in the latter case. To the extent that there is an issue of successorship presented by a sale of the business, it should be resolved consistent with the law and standards alluded to above.

NOTE: The petition for commission review was filed in this matter on August 19, 1993. On October 11, 1993, after the commission had reviewed, discussed, and arrived at a decision in the case, and while the decision was being reduced to written form, the commission received an inquiry from the office of counsel for respondent as to whether briefs could be submitted. Based on the fact that no request for a briefing schedule was made when the petition was filed, and on the fact that the commission had already reviewed, discussed, and decided the case when the request for a briefing schedule was received, the commission decided that it would issue its decision without entertaining briefs.

110

cc: John C. Peterson
Bruce N. Evers

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