Recently, a federal district court in New York ruled that a worker retained to perform public relations and other promotional services for a clothing manufacturer could proceed to trial on claims under the New York City Human Rights Law (NYCHRL) and the New York State Human Rights Law (NYSHRL) that he was fired because he was perceived to be homosexual. Interestingly, the worker contends that (1) he isn’t homosexual, (2) he lived and worked in California for most of the time he was engaged by the company, including when his services were terminated, and (3) he operates his own public relations corporation. The manufacturer claims that he was an independent contractor rather than an employee.
This case underscores the importance of being cognizant that the NYCHRL and NYSHRL prohibit discrimination based on both real and perceived sexual orientation and that the New York laws may permit even “out-of-state” employees to file lawsuits. Finally, if you intend to create independent contractor business relationships rather than employment relationships, you must consider the factors the courts use to determine which type of relationship exists.
Background
LC Play Inc. d/b/a LaQue Clothing is a New York-based clothing manufacturer with a single shareholder, Erastus Pratt. LaQue entered into a written contract to retain the services of Ron Padmore and his corporation, Rohn Padmore Inc., to perform a variety of services, including planning and coordinating events, selecting and managing models and photographers to be used for advertising campaigns, and performing other public relations-related duties. In return, LaQue would pay Padmore $2,750 per month, “with regular increases in payment after three months.” The contract also permitted Padmore to charge LaQue for “[a]ny additional services” he was asked to perform for the company.
The contract provided that Padmore would be retained from June 1, 2005, through June 30, 2006. His tenure ended on September 26, 2005, however. During the approximately four months he worked for LaQue, he worked out of its offices in New York City only for the first month. After that, he worked primarily from his home in Los Angeles, returning to LaQue’s New York City office just three times.
Padmore’s tenure ended when LaQue sent him an e-mail stating that the agreement was being terminated “due to marketing directions.” Within a few weeks, on October 12, he received a second e-mail from Pratt’s e-mail account that said LaQue terminated the contract because models and other people had questions about his sexuality and the company couldn’t afford to have a gay spokesperson.
Padmore asserted that the October 12 e-mail proved that LaQue terminated his employment based on a demonstrable antigay bias. However, his claim was no ordinary claim of sexual orientation discrimination. He contended that he is not homosexual, but for whatever reason, Pratt perceived him to be and discriminated against him based on that perception. LaQue sought early dismissal of the case to avoid a jury trial, arguing that the NYSHRL and NYCHRL don’t prohibit bias based on sexual orientation in these circumstances and that Padmore wasn’t entitled to the protection of either city or state employment discrimination laws since he isn’t a resident of New York, doesn’t work in New York, and is an independent contractor.
Perception Protected as Much as Reality
To get his claim to a jury trial, Padmore had to establish that (1) he is a member of a protected class, (2) he was competent to perform the job or was performing his duties satisfactorily, (3) he suffered an adverse employment decision or action, and (4) the decision or action occurred under circumstances leading to an inference of discrimination based on his membership in the protected class. The court found that Padmore is a member of a protected class because he was perceived to be homosexual. Citing no case law but relying on the language of the NYCHRL and its interpretation of the NYSHRL, the court confirmed that perceived sexual orientation is a protected classification.
In particular, the court noted that the text of the NYCHRL expressly prohibits discrimination because of “actual or perceived” sexual orientation. The court then acknowledged that the NYSHRL doesn’t expressly prohibit discrimination based on “perceived” sexual orientation, but pointed out that the law defines “sexual orientation” to mean “heterosexuality, homosexuality, bisexuality or asexuality, whether actual or perceived. ” Thus, the prohibitions against sexual orientation discrimination clearly incorporate prohibitions against both real and perceived sexual orientation.
The court found that Padmore had shown that he had experience and expertise in marketing and styling before his employment with LaQue and offered sworn statements from a former coworker to show that he was performing his duties satisfactorily. The court further found that his termination was clearly an adverse employment action and that the circumstances surrounding his termination — namely, the October 12 e-mail — led to an inference of discrimination based on a perception that he is homosexual.
Because Padmore had met his initial burden, LaQue needed to respond with a legitimate nondiscriminatory reason for firing him to avoid having the case resolved by a jury. Rather than respond to Padmore’s arguments, LaQue chose not to address them. It simply argued that an unauthorized person might have gained access to Pratt’s e-mail account and sent the October 12 e-mail. The company also relied on its contention that the NYCHRL and NYSHRL couldn’t apply to Padmore.
Out-of-State Workers May Be Protected by NY law
To maintain a claim under either the NYCHRL or NYSHRL, an employee must allege that he is a city or state resident or that a discriminatory act was committed in the jurisdiction in question. Some federal and state courts in New York have interpreted the NYCHRL and NYSHRL as requiring nonresidents to allege not only that a discriminatory act occurred within the jurisdiction but also that the impact of the discrimination was felt within that jurisdiction. Based on those decisions, LaQue asserted that the court couldn’t consider Padmore’s claims under either the NYCHRL or NYSHRL because he wasn’t a resident of either New York City or New York state and because he felt the impact of the termination only in California, where he lived and worked.
The court acknowledged that there’s disagreement among federal and state courts about whether they may consider claims under the NYCHRL and NYSHRL filed by nonresidents who feel the impact of alleged discrimination outside the boundaries of New York City and New York state. Some courts have required that the impact of the discrimination against a nonresident be felt locally, as LaQue argued, while other courts have rejected that so-called “impact rule.”
The court relied on a recent New York appellate court’s decision not to apply the “impact rule” and found that Padmore could maintain a claim under the NYCHRL and NYSHRL because the decision to terminate his contract occurred in New York City and the e-mail suggesting discrimination originated there, even though he resided and felt the effects of the alleged discrimination in California.
Jury Will Decide Employee-Independent Contractor Question
Only employees — not independent contractors — are covered by the employment discrimination laws. To determine whether Padmore qualified as an employee rather than an independent contractor, the court applied a 13-factor test established by the U.S. Supreme Court that requires examining (1) the hiring party’s right to control the manner and means by which the project is accomplished, (2) the skill required, (3) the source of the instrumentalities and tools, (4) the location of the work, (5) the duration of the relationship between the parties, (6) whether the hiring party has the right to assign additional projects to the worker, (7) the extent of the worker’s discretion over when and how long to work, (8) the method of payment, (9) the worker’s role in hiring and paying assistants, (10) whether the work is part of the regular business of the hiring party, (11) whether the hiring party is in business, (12) whether employee benefits are provided, and (13) the tax treatment of the worker.
The court pointed out that no single factor is the deciding factor, but in the context of discrimination cases, federal courts in New York give the greatest weight to the first factor — the extent to which the hiring party controls the manner and means by which the worker completes his assigned tasks. Conversely, the 11th factor is given little weight because most companies that either engage independent contractors or hire employees are “in business.”
The parties provided conclusions rather than factual evidence about whether LaQue controlled the manner and means by which Padmore completed his work. Given the dearth of evidence, the court couldn’t determine whether Padmore had a high or low degree of discretion in how to complete his tasks, who made the final decisions on his advertising and promotions proposals, and how much and how often LaQue supervised him.
The court found the evidence on the remaining factors equally inconclusive. It noted that the second, seventh, 12th, and 13th factors supported a finding that Padmore was an independent contractor. In particular, he admitted that his work for LaQue required a high degree of skill (factor two), that he was given broad discretion over when and how long to perform his job duties (factor seven), that he didn’t receive employee benefits (factor 12), and that he was treated as an independent contractor for tax purposes (factor 13).
On the other hand, the third, 10th, and 11th factors supported a finding that Padmore was an employee. In particular, LaQue admitted that it provided the instrumentalities and tools for him to complete his work (factor three), that it was in business (factor 11), and that its business involved designing and selling clothing and Padmore’s marketing and promotional responsibilities related directly to selling clothing (factor 10).
The remaining factors didn’t clarify Padmore’s employment status. The fourth factor, the location of the work, was inconclusive because Padmore worked in LaQue’s New York City offices as well as in a variety of locations outside New York. The fifth factor, the duration of the relationship between the parties, also was unhelpful since his contract was terminated after a relatively short period of time but was intended to be for a fixed period of 13 months, which wasn’t such a short duration that would indicate he wasn’t an employee. The sixth factor, the right of the hiring party to assign additional projects, wasn’t helpful because the contract wasn’t limited to particular projects but covered a broad array of services that Padmore was to perform and had an ambiguous provision for additional charges for new projects assigned to him.
The court didn’t analyze the eighth factor because neither party addressed how Padmore’s compensation suggested either an employment or independent contractor relationship. It observed that the ninth factor was inconclusive because Padmore might have selected and hired his assistants, but LaQue paid them.
The court couldn’t conclude whether Padmore was an employee or an independent contractor but held that his allegations raised issues of fact about his legal employment status that would have to be resolved by a jury. In sum, LaQue didn’t offer sufficient evidence that it created and maintained an independent contractor relationship with him. As a result, a jury will determine both whether Padmore was an employee covered by employment discrimination laws and whether LaQue violated those laws. Rohn Padmore Inc. v. LC Play Inc. d/b/a LaQue Clothing, S.D.N.Y., No. 06-cv-00498, 1/11/10.
Bottom Line
New York employers must be diligent in preventing discrimination based not only on employees’ actual sexual orientation but also on their perceived sexual orientation. In addition, you must be aware that out-of-state employees might be allowed to avail themselves of the broad prohibitions and remedies of New York’s antidiscrimination statutes if the action or decision triggering any alleged discrimination occurs here, even if the effects of the alleged discrimination are felt elsewhere. Finally, if you intend to engage independent contractors for a project rather than hire employees, you may wish to consult legal counsel to draft your contracts and advise you how to administer contractual relationships so there’s no ambiguity for courts or juries to consider when determining if a putative independent contractor is entitled to rights or protections under laws typically reserved for employees.