Joanne Cote v. Derby Insurance Agency, Inc., an Iowa Corporation, and Kevin Dorn, Individually
Joanne Cote v. Derby Insurance Agency, Inc., an Iowa Corporation, and Kevin Dorn, Individually
Opinion
In this appeal, we must decide whether a small business that incorporates thereby loses the family-member exception to the employee-numerosity requirement in the Iowa Civil Rights Act (ICRA). The ICRA does not apply to "[a]ny employer who regularly employs less than four individuals. ... [I]ndividuals who are members of the employer's family shall not be counted as employees."
We hold that a corporation does not have family members and therefore cannot qualify for the family-member exception in section 216.6(6)( a ). Accordingly, for the reasons explained more fully below, we affirm the decision of the court of appeals.
I. Background Facts and Proceedings.
Patricia Georgesen started a small insurance business named Derby Insurance Agency (Derby), a subchapter S corporation, in 1991. She is the sole shareholder and president of Derby, which is located in Sioux City. Patricia married Kevin Dorn in 2000 and changed her last name to Dorn. Both of them worked at Derby selling insurance. Kevin served as a manager and supervisor.
Joanne Cote began working for Derby as a customer service representative on May 6, 1998. She also performed administrative tasks, such as reconciling Derby's bank statements, ordering supplies, and training new employees. Cote considered both Patricia and Kevin to be her bosses. In 2003, Cote was promoted to office manager.
From November 2010 to October 2012, Derby employed the Dorns, Cote, and Patricia Strawn, who is Patricia Dorn's niece. Derby also employed Scott Delperdang until February 2012. After he left, Derby hired Candice Hunter, who worked for Derby until October 2012. Additionally, Jasmine Derby, Patricia Dorn's grandniece, worked part-time at Derby during the summer of 2012 to help with filing. During the eight weeks she worked there, Jasmine averaged twelve hours weekly. She was paid $10 per hour.
On October 10, 2012, Derby sold its assets, goodwill, and book of business to Derby Insurance Services, Inc. (Services). Derby ceased operating as an insurance agency. Cote began working for Services and continued to do so until March 19, 2014. Patricia Strawn also began working for Services and became the office manager.
Cote filed a complaint of discrimination with the Iowa Civil Rights Commission (ICRC) on April 10, 2013. Cote alleged that Kevin sexually harassed her and other female colleagues over a seven-year period. The ICRC issued Cote an administrative release on January 10, 2014. Cote filed a petition in district court on April 7, 2014, naming Derby and Kevin as defendants. Cote alleged claims for sex discrimination based on a hostile work environment under the ICRA, Iowa Code chapter 216. 1 Cote later filed a motion to amend, which the court granted, and she filed an amended petition adding common law claims for assault and intentional infliction of emotional distress.
In December 2015, Derby and Kevin filed a motion for summary judgment against Cote, on grounds that the ICRA did not apply because Derby regularly employed fewer than four individuals, not counting Patricia Dorn's family members. Defendants also argued that Cote's claims were time-barred and that Cote's common law claims were preempted by the ICRA or unsupported by sufficient evidence to generate a jury question. Cote resisted the motion and supported her resistance with affidavit testimony that Kevin's misconduct continued within the limitations period.
*864 The district court denied Derby's motion for summary judgment on the ICRA claims. The court ruled that the family-member exception contained in Iowa Code section 216.6(6)( a ) does not apply to corporate employers and that Derby employed at least four employees during the relevant time. The district court found genuine issues of material fact as to whether there was misconduct actionable under the ICRA within the limitations period. The court granted a partial summary judgment on the common law tort claims as to conduct preceding April 7, 2012, as barred by the two-year statute of limitations in section 614.1(2). But the court declined to dismiss the assault and intentional infliction claims entirely, finding questions of fact precluded summary judgment. The district court did not decide whether the ICRA preempted the common law claims.
Derby and Kevin filed an application for interlocutory appeal, which we granted. We transferred the case to the court of appeals. On appeal, Derby and Kevin argued that (1) the district court erred in ruling the family-member exception in section 216.6(6)( a ) is not available to corporate employers, (2) the district court should have dismissed Cote's claims as untimely, (3) Cote's common law claims were preempted by the ICRA, and (4) Cote lacked sufficient evidence to generate a jury question on her common law claims.
The court of appeals concluded that "employer," as used in the phrase "members of the employer's family" in section 216.6(6)( a ), is limited to "individuals" and, therefore, affirmed the district court's denial of summary judgment on that ground. The court of appeals also affirmed the district court ruling that fact questions precluded summary judgment on the limitations periods. The court of appeals concluded that the district court should have granted summary judgment on Cote's assault claim and therefore reversed on that issue. The court of appeals declined to reach the ICRA preemption claim. One judge dissented in part, concluding that Cote failed to raise a genuine issue of fact regarding harassment and intentional infliction of emotional distress within the statute of limitations. The dissent would have granted the defendants' motion for summary judgment, dismissing the ICRA and intentional infliction of emotional distress claims as time-barred.
Derby and Kevin applied for further review, which we granted.
II. Standard of Review.
We review a district court's ruling on a motion for summary judgment for correction of errors at law.
McQuistion v. City of Clinton
,
"On further review, we can review any or all of the issues raised on appeal ...."
Papillon v. Jones
,
III. Analysis.
We must decide whether a corporate employer may claim the family-member exception to the numerosity requirement in section 216.6(6)(
a
). This is a question of first impression that turns on
*865
statutory interpretation. Derby argues that when the employer is a corporation, the family members of the sole owner should be considered the employer's family members. Cote, on the other hand, argues that because corporations are fictitious entities,
see
Kerrigan v. Errett
,
We begin with the statutory text. Section 216.6 prohibits various discriminatory employment practices.
See
The ICRA defines "employer" as "the state of Iowa or any political subdivision, board, commission, department, institution, or school district thereof, and every other
person
employing employees within the state."
We are to "construe[ the ICRA] broadly to effectuate its purposes."
We are mindful that the legislature chose to exempt small employers from the ICRA to protect their freedom of association.
Baker v. City of Iowa City
,
Almost all fair employment practices acts exempt small employers, which are defined as employers with less than a specified number of employees. The general consensus seems to be that notions of freedom of association should preponderate over concepts of equal opportunity in these situations because the smallness of the employer's staff is usually likely to mean for him a rather close, intimate, personal, and constant association with his employees.
Many family businesses in Iowa-including family farms-operate as corporations or limited liability companies. Clearly, the family members of a sole proprietor are not counted in determining whether the employer falls under the ICRA. So why count family members of the owner who chooses to incorporate his or her small business? The close-knit, small-group interpersonal dynamics at the office or farm do not change merely because a sole proprietor incorporates. The legislature may well have intended to exclude from the ICRA all businesses with fewer than four nonfamily-member employees whether incorporated or not, but we are bound by the text of the statute. See Iowa R. App. P. 6.904(3)( m ) ("In construing statutes, the court searches for the legislative intent as shown by what the legislature said, rather than what it should or might have said."). We are not free to rewrite section 216.6(6)( a ). We must defer to the legislature to amend that provision if it chooses to allow small incorporated employers to omit the owner's family members from the employees counted to determine whether the ICRA applies.
"In the absence of a legislative definition, we strive to give words their ordinary meaning."
Simon Seeding
,
*867
We rely on the ordinary meaning of the phrase "individuals who are members of the employer's family" in Iowa Code section 216.6(6)(
a
) and hold that a
corporate
employer has no family members as employees. Our conclusion is reinforced by our precedent holding corporations do not have "family members" within the meaning of business insurance policies.
See
Huebner v. MSI Ins.
,
Derby relies on
Burwell v. Hobby Lobby Stores, Inc.
, 573 U.S. ----, ----,
Most states lack a family-member exception in the numerosity provision of their antidiscrimination statutes. We found no case holding a corporation can have family-member employees excluded from state statutory numerosity thresholds. A case on point supports Cote's position. The Washington Court of Appeals declined to apply that state's family-member exception to a corporation that employed its owner's family members.
Patten v. Ackerman
,
*868 IV. Disposition.
For these reasons, we affirm the decision of the court of appeals and affirm the district court's rulings denying summary judgment on the ICRA claims and common law claim for intentional infliction of emotional distress. We reverse the district court ruling denying summary judgment on the assault claim for the reasons set forth by the court of appeals. We remand the case for further proceedings consistent with this opinion, including entry of summary judgment dismissing the assault claim.
DECISION OF COURT OF APPEALS AFFIRMED; DISTRICT COURT JUDGMENT AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
Cote's petition initially included a retaliation claim against Services, but this claim was dismissed in November 2015.
Title VII has a numerosity requirement without a family-member exception. See 42 U.S.C. § 2000e(b) (2012) (defining "employer" 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, and any agent of such a person").
Because we hold Derby, a corporation, is ineligible for the family-member exception, we need not decide how broadly to define family members to determine, for example, whether a niece or grandniece is included under Iowa Code section 216.6(6)( a ). A contrary holding would also raise questions as to whose family members are not counted as employees when the corporate employer has multiple owners, officers, and directors. Derby argues these issues are suited for case-by-case adjudication. We resolve this case through a textual analysis of chapter 216, while noting Derby's proposed interpretation would raise myriad questions better resolved through legislative policy choices and resulting statutory amendments.
This treatise recognizes that "[w]hen the named insured is a partnership, interpretation problems are less problematic since partners are individuals who can suffer injury and have families; however, differences in outcomes still exist since a partnership can be a separate legal entity." 8A Plitt § 118:24, at 118-47. This case does not present the question of whether a partnership may claim the family-member exception under Iowa Code section 216.6(6)( a ).
Reference
- Full Case Name
- Joanne COTE, Appellee, v. DERBY INSURANCE AGENCY, INC., an Iowa Corporation, and Kevin Dorn, Individually, Appellants.
- Cited By
- 6 cases
- Status
- Published