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Thursday, August 27, 2009

Legal Analysis of ENDA, Section 3 (a)(3) and 3(a)(4): Private Employers

This is part two of a series of posts analyzing ENDA, the Employment Non-Discrimination Act, known as H.R.3017 in the U.S. House of Representatives, and S.1584 in the Senate.

In this post, I analyze Section 3(a)(3) and 3(a)(4), which contains the definitions of "employee" and "employer" as applied to private employers. While this section might seem quite boring and irrelevant to the untrained eye, in reality it is, in fact, a exciting display of the political forces swirling around the bill. In this section, we find out who and what the bill is going cover -- or, more importantly, not cover.

Is your employer covered by ENDA? Are you? These and more thrilling questions ahead.


I have set out the texts of Section 3(a)(3) and (4) at the bottom of this post, which sets out the portion of the definitions of "employee" and "employer" relevant to the private sector. The definition of employee in this context is not very important. Rather it is the term "employer" that provides the major limitation. The main prohibition on employment discrimination, found in Section 4 of the bill, says that it shall be "an unlawful employment practice for an employer" to discriminate based on sexual orientation or gender identity. What is an "employer"?

If you're not within the definition of "employer," then it is not against federal law to discriminate in this way. Of course, many states and localities have laws that prohibit such discrimination, so an employer may still be prohibited by law from discriminating.

When Title VII of the Civil Rights Act was passed in 1964, it applied to all employers with 25 or more employees. It was subsequently amended over the years to apply to employers with 15 or more employees. ENDA, as you can see from the text at the bottom of this post, uses the 15-employee threshhold.

The counting includes all employees, whether part-time or full-time employees. The counting does not include unpaid volunteers. ENDA's definition of "employee" explicitly excludes unpaid volunteers.

But what if your employment rolls fluctuate, as most do, so that sometimes you're under 15 and sometimes over? That is why the definition says the number should be counted "for each working day in each of 20 or more calendar weeks in the current or preceding calendar year."

How many such employers are there? As of 2006, for private non-government employers, there were about 92 million employees in firms over the threshhold, and about 17 million employees in firms below it. That means about 84% of all private employees would be covered.

This portion of the definition does not cover government workers, of which there are about 17 million. I will discuss those next time.

Employers "Affecting Commerce"

The statute explicitly only covers employers "affecting commerce." This refers to the constitutional authority under which Congress has the right to pass the statute, i.e., the power to regulate interstate commerce under Article I, section 8 of the U.S. Constitution.

Over time, the Supreme Court has found more and more types of activities to be within the ambit of interstate commerce, so that even an employer whose goods or services are only used or provided within a single state would likely be found to "affect" interstate commerce. As noted right in ENDA's definition of "employer," the term "affecting commerce" is further defined in the statute 42 U.S.C. 2000e(h). Here is what section (h) says:

The term “industry affecting commerce” means any activity, business, or industry in commerce or in which a labor dispute would hinder or obstruct commerce or the free flow of commerce and includes any activity or industry “affecting commerce” within the meaning of the Labor-Management Reporting and Disclosure Act of 1959 [29 U.S.C. 401 et seq.], and further includes any governmental industry, business, or activity.

Interestingly to legal and historical scholars, that last bit about including governmental industry was not in the original Title VII, but was added later. That is because state and government workers were not originally covered by Title VII, but were added in later. I'm not sure that the government's activities constitute "interstate commerce" in the same way that private industrities do. Is government commerce? I don't know, and I don't have to know -- the law defines it as commerce, and commerce it is. Perhaps someone will someday challenge this notion in court, and then we will see. I don't think it's of key importance in ENDA because the main authority on which ENDA rests as to government workers is the 14th Amendment, and not the Commerce Clause. More on this in the upcoming post on ENDA's coverage of government workers.

"Private Membership Clubs"

This definition also excludes private membership clubs, other than labor unions, that are chartered under section 501(c) of the Internal Revenue Code. What constitutes a private membership club? An example may be found in the 1997 case of
Richard v. Friar's Club, 124 F.3d 212 (9th Cir. 1997).

In that case, the court noted that a club must show three elements: that it (1) is a club in the ordinary sense of the word, (2) is private, and (3) requires meaningful conditions of limited membership. EEOC Guidelines § 605 at 2316.

The court found that the Friars Club effectively limited its use of its facilities and services to club members and their guests, through the use of consistently-enforced club rules and security devices. Although the record contained some evidence that the club may have held two or three events open to the public, the club's general practice appeared to adhere to its members-only policy. Under the club's by-laws, members controlled the club and its assets through the board of directors. The declaration of the club's general manager and controller indicated that the club had not engaged in any significant amount of paid or general advertising.

In a number of cases, organizations such as hospitals and credit unions have tried to take advantage of this exception, usually (but not always) unsuccessfully.

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TEXT OF SECTION 3 OF H.R.3017 AND S.1584

SEC. 3. DEFINITIONS.

(a) In General- In this Act:

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(3)EMPLOYEE --(A)IN GENERAL- the term `employee' means--(i) an employee as defined in section 701(f) of the Civil Rights Act of 1964 (42 U.S.C. 2000e(f))

(4) EMPLOYER- The term `employer' means--(A) a person engaged in an industry affecting commerce (as defined in section (701)(h) of the Civil Rights Act of 1964 (42 U.S.C. 2000e(h)) who has 15 or more employees (as defined in subparagraphs (A)(i) and (B) of paragraph (3)) for each working day in each of 20 or more calendar weeks in the current or preceding calendar year, and any agent of such a person, but does not include a bona fide private membership club (other than a labor organization) that is exempt from taxation under section 501(c) of the Internal Revenue Code of 1986;

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