The Small Firm Exemption and the Single Employer Doctrine in Employment Discrimination Law

Abstract

The small firm exemption is a provision of Title VII and the other major federal employment discrimination laws that exempts very small firms from coverage as employers. Under the Title VII version of the exemption, for example, an employer is exempt as long as it employs no more than fourteen employees. However, a small firm might be affiliated or integrated with other firms, which collectively employ more than the number of employees required for coverage. The single employer doctrine is a rule for treating affiliated but separately organized firms as if they were one employer, for purposes of meeting the statutory threshold for coverage. Lately, a number of critics lead by Judge Posner have questioned the doctrine's place in discrimination law. The critics charge that the collective bargaining cases in which the doctrine first evolved are not valid precedents for the doctrine's use as a rule of coverage in discrimination cases, and that the doctrine defeats the purposes of the small firm exemption. Judge Posner and other critics would treat affiliated but separately organized firms as a single employer only if it would be appropriate to pierce the corporate veil or hold the firms jointly liable under traditional rules of corporate law. In this article I explore the origins of the single employer doctrine and its vivid presence in the background of the Congressional debates leading to the small firm exemption. I also find support for the doctrine in the text of Title VII, and I show that the doctrine is not only consistent with the purpose of the small firm exemption but is necessary to fully achieve the exemption's purpose.