In Walters v. Metropolitan Educational Enterprises, Inc., -- U.S. -- (January 14, 1997), the United States Supreme Court decided a case involving the application of Title VII of the Civil Rights Act of 1964 to small employers. The Court's decision in the Walters case is significant because it applies fully to many federal employment discrimination laws, not just the Civil Rights Act. In particular, the Court's decision is authoritative precedent for the determination of the application to small employers of the following laws: the Civil Rights Act of 1964 (employers with 15 or more employees), the Age Discrimination in Employment Act of 1967 (20 or more employees), the Americans with Disabilities Act of 1990 (15 or more employees), the Civil Rights Act of 1991 (15 or more employees), and the Family and Medical Leave Act of 1993 (50 or more employees).

     1. The Walters Case

     The issue in the Walters case concerned the definition of the term "employer" in Title VII of the Civil Rights Act. The statute defines an employer as "a person . . . 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." Does this definition apply only to an employer who has fifteen or more employees actually working each working day in each of the twenty weeks? Or does this definition apply to an employer who has an ongoing employment relationship with fifteen or more employees in the relevant time period, even if some of the employees are out of work on paid or unpaid leaves or only work three days per week? The Court answered the first question No and the second question Yes. The Court held that what is important under the statute, and what triggers the statute's coverage, is that the employer has an ongoing employment relationship with fifteen or more employees for each working day in each of twenty or more calendar weeks in the current or preceding calendar year. It is not necessary under the statute for the employer to actually have at least fifteen employees actively working on each working day of each of twenty weeks.

     2. The Payroll Test

     Although the test applied by the Court is commonly known as the "payroll test" because a brief examination of an employer's payroll usually will be all that is necessary to determine if the employer meets the statutory coverage requirements, the Court made clear that not every person listed on an employer's payroll is automatically counted as an employee. Only persons with whom the employer has a genuine employment relationship are counted as employees. Independent contractors are not counted as employees. Persons listed on a payroll in error are not counted as employees. And a person hired or terminated in the middle of a calendar week is not counted as an employee for that calendar week (because the person does not meet the "for each working day" requirement for that week).

     3. The Relevant Calendar Year

     The Court in Walters also made clear that the relevant "current or preceding calendar year" is determined by reference to the time of the alleged discriminatory act, not the time of a lawsuit or any other event. For example, if an employee was terminated on January 28, 1997, then for any federal employment discrimination claim arising out of the termination the employee asserts, the "current year" would be 1997 (even though 20 calendar weeks had not yet passed in 1997) and the "preceding year" would be 1996. This would be true even if the employee commenced a lawsuit, or obtained a jurisdictional ruling, only in 1998 or 1999. The employer's employment levels in 1998 or 1999 are not relevant.

     4. Significance For Maine Employers

     The Maine Human Rights Act ("MHRA") applies to all employers in Maine. The Act defines an employer as "any person in this State employing any number of employees." 5 M.R.S.A. §4553(4). The Act comprehensively prohibits age, disability, race, sex, and other forms of discrimination. Effective in September, 1997, the Maine Human Rights Act was amended to authorize the recovery of compensatory and punitive damages and the use of jury trials in cases alleging intentional employment discrimination against employers having 15 or more employees. Prior to September, 1997, compensatory and punitive damages and jury trials were not available in any cases under the Maine Human Rights Act. Given this State law, the Walters decision now means much less to small employers in Maine than it did when it was decided. Maine employers with less than 15 employees are now exempt from most employment discrimination claims under federal and state law for compensatory and punitive damages and jury trials, but all other Maine employers are subject to those claims and remedies. Employers with less than 15 employees remain covered by the Maine Human Rights Act, but the damages and jury trial remedies under the Act are not available against them. The only other factor for Maine employers to note is that claims arising under federal employment discrimination laws may be brought in either Maine or Federal courts, but claims arising only under the MHRA usually may be brought only in Maine courts.

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Dated: February, 2000