The Minnesota Court of Appeals recently published two important decisions addressing an individual’s liability for “aiding and abetting” acts of discrimination under the Minnesota Human Rights Act (“MHRA”) in the context of closely held corporations. In Matthews v. Eichorn Motors, Inc., 800 N.W.2d 823, 830 (Minn. Ct. App. 2011), the Minnesota Court of Appeals held that a person is liable for aiding and abetting a violation of the MHRA when that person knows that another person’s conduct constitutes a violation of the MHRA and “gives substantial assistance or encouragement to the other so to conduct himself.” More recently, on July 23, 2012, in Rasmussen v. Two Harbors Fish Co., 817 N.W.2d 189, 202-203 (Minn. Ct. App. 2012), the Minnesota Court of Appeals held that where a person is both the sole harasser and the owner and sole shareholder of a corporation, such person cannot aid and abet his or her own discriminatory conduct. These two recent decisions are welcome developments for small business owners and reduce the possibility of individual (as opposed to corporate) liability under the MHRA.
Aiding and Abetting Liability Under the MHRA
The MHRA prohibits employers from engaging in various forms of discrimination in the workplace, including discrimination against job applicants and employees based upon race, color, creed, religion, national origin, sex, marital status, status with regard to public assistance, membership or activity in a local commission, disability, sexual orientation, and age. Minn. Stat. § 363A.08, subd. 2.
Under the MHRA, individuals can also be held personally liable for aiding and abetting an employer’s discriminatory practice forbidden by the MHRA:
It is an unfair discriminatory practice for any person: (1) intentionally to aid, abet, incite, compel or coerce a person to engage in any of the practices forbidden by this chapter; (2) intentionally to attempt to aid, abet, incite, compel or coerce a person to engage in any of the practices forbidden by this chapter; (3) to intentionally obstruct or prevent any person from complying with the provisions of this chapter, or any order issued thereunder, or to resist, prevent, impede, or interfere with the commissioner or any of the commissioner’s employees or representatives in the performance of duty under this chapter.
Minn. Stat. § 363A.14. Many employers are structured as corporations, limited liability companies, or other legal entities that provide liability protection to their owners, officers, and directors. Due to the limited liability of such business entities, victims of discrimination who successfully pursue claims under the MHRA may later find that the employer is out of business, insolvent, or otherwise unable to pay a judgment.
For this reason, victims of discrimination under the MHRA often utilize the “aiding and abetting” provision of the MHRA in an attempt to impose personal liability on key decision-makers or the individual who engaged in the discriminatory conduct. In the context of closely held corporations, often the person who engaged in the discriminatory conduct is also an owner, officer, or director of the company. In two recent decisions, the Minnesota Court of Appeals clarified when such an owner, officer, or director can be held personally liable for “aiding and abetting” discrimination under the MHRA.
Matthews v. Eichorn Motors, Inc. (2011)
In Matthews v. Eichorn Motors, Inc., 800 N.W.2d 823 (Minn. Ct. App. 2011), Justin Eichorn held an 85% interest in Eichorn Motors. Michael Coombe held the remaining 15% interest and also acted as the general manager. Justin Eichorn’s father, Mitch Eichorn, financed the business, but was not a shareholder or employee. He did, however, do many odd jobs for Eichorn Motors.
Coombe hired the plaintiff, Sheila Matthews, as a business manager in 2006 and she worked for the company for approximately three months. After hiring Matthews, Coombe pursued her romantically. When Matthews expressed she was not interested in a romantic relationship, Coombe began sexually harassing her, creating a hostile work environment for Matthews. Matthews reported Coombe’s harassing behavior to Mitch Eichorn. The following morning, Mitch Eichorn, Justin Eichorn, and Coombe entered an office and closed the door. Witnesses testified they heard yelling coming from the office. Ten days later, Coombe and Justin Eichorn met with Matthews and fired her.
Matthews sued Eichorn Motors for violating the MHRA. Matthews also sued Mitch Eichorn and Justin Eichorn for “aiding and abetting” discrimination under the MHRA. (Matthews did not sue Coombes, the perpetrator.) The district court granted the individual defendants’ motion for summary judgment, holding that Mitch Eichorn and Justin Eichorn did not violate the MHRA’s aiding and abetting provision.
On appeal, the Minnesota Court of Appeals noted that the Minnesota Legislature did not define the operative terms under the MHRA’s “aiding and abetting” provision and turned to dictionaries for guidance. According to Black’s Law Dictionary, to aid and abet, is to “assist” or “facilitate” an act or to “promote its accomplishment.” The American Heritage Dictionary defines the terms “aid” and “abet” to mean to “furnish with help, support and relieve” and to “approve, encourage, and support,” respectively. The Minnesota Court of Appeals noted that these interpretations of aiding and abetting are consistent with the criminal aiding and abetting statute, Minn. Stat. § 609.05, subd. 1, and also with the definition of aiding and abetting under the Restatement (Second) of Torts § 876(b) for aiding and abetting in the context of civil tort liability. Other jurisdictions have adopted the Restatement of Torts version when addressing aiding and abetting claims under their state anti-discrimination laws.
Ultimately, the Minnesota Court of Appeals held that an individual is liable for aiding and abetting a violation of the MHRA “when that person knows or should have known that another person’s conduct constitutes a violation of the MHRA and ‘gives substantial assistance or encouragement to the other so to conduct himself.'” The Court of Appeals stated that in order for Matthews’ aiding and abetting claim to survive summary judgment, she had to show “(1) Coombe’s conduct violated the MHRA, and (2) either Mitch Eichorn or Justin Eichorn knew that Coombe’s conduct violated the MHRA and substantially assisted or encouraged the violation.” The Court of Appeals affirmed the district court’s decision, holding that failure to act in and of itself generally does not constitute “substantial assistance” under the MHRA.
Rasmussen v. Two Harbors Fish Co. (2012)
In Rasmussen v. Two Harbors Fish Co., 817 N.W.2d 189 (Minn. Ct. App. 2012), three former female employees sued their employer and its owner and sole shareholder, Brian Zapolski, for sexual harassment and aiding and abetting under the MHRA. The district court dismissed the claims and the plaintiffs appealed.
On appeal, the Minnesota Court of Appeals held that the district court erred in concluding that the women failed to prove their sexual harassment claims. The court next addressed whether Zapolski could be held individually liable for “aiding and abetting” under the MHRA. The court affirmed the district court’s ruling that Zapolski was not individually liable. In holding that Zapolski was not liable for aiding and abetting under the MHRA, the court reasoned that while Zapolski was responsible for the sexual harassment that occurred, he could not aid and abet his own discriminatory conduct as the only wrongdoer. The court left open the possibility, however, that Zapolski could be found individually liable as the alter ego of the corporation or under the corporate veil piercing doctrine.
Lessons for Employers and Employees
The Minnesota Court of Appeals’ decisions in Matthews v. Eichorn Motors and Rasmussen v. Two Harbors Fish Co. will make it more difficult for an employee to prevail on an aiding and abetting claim under the MHRA. Under Matthews, a plaintiff will need to show more than inaction by a person with knowledge of discriminatory conduct. Under Rasmussen, a sole owner and shareholder of a company cannot be held liable for aiding and abetting their own discriminatory conduct under the MHRA. Nonetheless, as noted in Rasmussen, shareholders of a closely held corporation still could be held personally liable under a different theory of law (e.g., the alter ego doctrine or piercing the corporate veil). And, of course, the employer can always be held liable for violations of the MHRA.
For these reasons, while the recent Court of Appeals decisions limit the scope of liability under the MHRA’s aiding and abetting clause, the owners, officers, and directors of closely held Minnesota corporations are well advised to update their sexual harassment and anti-discrimination policies, provide diversity and sexual harassment training to executives and managers, and respond promptly to complaints of unlawful discrimination or harassment.
Trepanier MacGillis Battina P.A. represents both employers and employees in all aspects of employment law in the State of Minnesota. If you are pursuing or defending claims of aiding and abetting under the Minnesota Human Rights Act, please contact any of our employment law attorneys.
About the Author:
Minneapolis employment attorney Craig W. Trepanier represents clients in a broad range of employment law matters including administrative charges and lawsuits alleging discrimination, harassment, and aiding and abetting under the MHRA and/or Title VII. Craig may be reached at 612.455.0502 or firstname.lastname@example.org. Trepanier MacGillis Battina P.A. is a Minneapolis employment law firm located in Minneapolis, Minnesota.