The ADEA applies even if some of the minimum 20 employees are overseas and working for a US Corporation. In a foreign company with foreign operation, if there is an American employer behind the scenes, the ADEA applies to US Citizens outside the US. Foreign companies and their subsidiaries operating in the US are subject to the ADEA.MORELLI v. CEDEL, 141 F.3d 39 (2nd Cir. 1998)
IDA MORELLI, PLAINTIFF-APPELLANT v. CEDEL, DEFENDANT-APPELLEE.
No. 546, 97-7277.
United States Court of Appeals, Second Circuit.
Argued October 21, 1997.
Decided March 26, 1998.
Page 40
Steven G. Eckhaus, Eckhaus & Olson, New York City, for
Plaintiff-Appellant.
Gary D. Friedman, Mayer, Brown & Platt, New York City, for
Defendant-Appellee.
Appeal from United States District Court for the Southern
District of New York, Mukasey, J.
Page 41
Before NEWMAN, CALABRESI an CUDAHY,[fn*] Circuit Judges.
[fn*] The Honorable Richard D. Cudahy of the United States Court
of Appeals for the Seventh Circuit, sitting by designation.
CUDAHY, Circuit Judge:
[1] This appeal requires us to decide whether the domestic
employees of certain foreign corporations are protected under the
Age Discrimination and Employment Act of 1967 (the ADEA), and, if
so, whether a foreign corporation's foreign employees are counted
for the purpose of determining whether the corporation has enough
employees to be subject to the ADEA. We answer both questions in
the affirmative.
Background
[2] After the defendant fired the plaintiff, the plaintiff sued the
defendant. The plaintiffs amended complaint asserted that the
defendant violated the ADEA, 29 U.S.C. §§ 621-634, the
Employment Retirement Security Act (ERISA), 29 U.S.C. §§
1001-1461, and New York State's Human Rights Law, N.Y. Exec. Law
§§ 290-301. The district court dismissed the complaint on the
grounds that the defendant was not subject to the ADEA, see Fed.
R. Civ. P. 12(b)(1) (lack of jurisdiction over the subject
matter), and that the ERISA count did not state a claim upon
which relief could be granted, see Fed. R. Civ. P. 12(b)(6). The
court also dismissed the state law claim. The plaintiff appeals
the dismissal of her federal claims.
[3] As alleged in the complaint, the facts relevant to this appeal
are as follows. The plaintiff, Ida Morelli, was born on April 11,
1939. The defendant is a Luxembourg bank. On or about June 29,
1984, the defendant hired the plaintiff to work in its New York
office. On or about February 26, 1993, the plaintiff became an
assistant to Dennis Sabourin, a manager in the defendant's New
York office. Mr. Sabourin summoned the then 54-year-old plaintiff
to his office on January 18, 1994, handed her a separation
agreement, and insisted that she sign it.
[4] Under the terms of the separation agreement, a copy of which
was attached to the complaint, the plaintiff would resign,
effective April 30, 1994. She would continue to receive her
salary and benefits until the effective date of her resignation,
but she would be relieved of her duties as an employee, effective
immediately. Both the defendant and the employee would renounce
all claims arising out of "their past working relationship." Mr.
Sabourin told the plaintiff that she would receive the three
months' severance pay, medical coverage for three months, and her
pension only on the condition that she sign the agreement on the
spot. The plaintiff had never seen the separation agreement
before and had no warning that she was going to be asked to
resign. But in the face of Mr. Sabourin's ultimatum, she did sign
the agreement immediately and returned it to him. The defendant,
however, never provided her with a pension distribution.
Discussion
1. Age Discrimination
(a) Does the ADEA cover a U.S.-based branch of a foreign
employer?
[5] The ADEA was enacted in 1967 to prevent discrimination by
employers on the basis of age. See Pub.L. No. 90-202, § 2, 81
Stat. 602 (codified at 29 U.S.C. § 621(b)); Lorillard v.
Pons, 434 U.S. 575, 577, 98 S.Ct. 866, 868, 55 L.Ed.2d 40 (1978).
In order to determine whether the defendant is subject to the
ADEA, we must first determine whether the ADEA generally protects
the employees of a branch of a foreign employer located in the
United States.
[6] It is undisputed that Cedel is a foreign employer with fewer
than 20 employees in its sole U.S. branch. There being no
contested facts on the motion to dismiss under Rule 12(b)(1), we
review the district court's dismissal de novo. See Rent
Stabilization Ass'n v. Dinkins, 5 F.3d 591, 594 (2d Cir. 1993).
[7] Section 4(h)(2) of the ADEA provides that "[t]he prohibitions
of [the ADEA] shall not apply where the employer is a foreign
person not controlled by an American employer."
Page 42
29 U.S.C. § 623(h)(2). At a minimum, this provision means
that the ADEA does not apply to the foreign operations of foreign
employers - unless there is an American employer behind the
scenes. See Denty v. SmithKline Beecham, Corp., 109 F.3d 147,
150-51 (3d Cir. 1997). An absolutely literal reading of §
4(h)(2) might suggest that the ADEA also does not apply to the
domestic operations of foreign employers. But the plain language
of § 4(h)(2) is not necessarily decisive if it is
inconsistent with Congress' clearly expressed legislative
purpose. See Tomka v. Seiler Corp., 66 F.3d 1295, 1313-14 (2d
Cir. 1995); see also Matimak Trading Co. v. Khalily, 118 F.3d 76,
87 (2d Cir. 1997); Haberman v. Finch, 418 F.2d 664, 666 (2d Cir.
1969).
[8] Section 4(h)(2) was not part of the original ADEA. It was added
in 1984. See Pub.L. No. 98-459, § 802(b)(2), 98 Stat. 1792
(1984); Pub.L. No. 99-272, § 9201(b)(3), 100 Stat. 171 (1986)
(clerical correction). The context in which it was added reveals
that Congress' purpose was not to exempt the domestic workplaces
of foreign employers from the ADEA's prohibition of age
discrimination. Instead, the purpose of adding this exclusion was
to limit the reach of an extraterritorial amendment adopted as
part of the same legislation.
[9] In 1984, before § 4(h)(2) was added, several courts of
appeals had concluded that the ADEA did not apply to "Americans
employed outside the United States by American employers." Cleary
v. United States Lines, Inc., 728 F.2d 607, 610 (3d Cir. 1984);
see also, eg., Thomas v. Brown & Root, Inc., 745 F.2d 279, 281
(4th Cir. 1984) (per curiam); Zahourek v. Arthur Young & Co.,
750 F.2d 827, 828-29 (10th Cir. 1984). These decisions were based in
part on language in § 7 of the ADEA, 29 U.S.C. § 626,
which prescribes enforcement procedures by reference to certain
provisions of the Fair Labor Standards Act (FLSA), 29 U.S.C.
§§ 201-219, the national wage and hour law. Those FLSA
provisions specify that the FLSA does not apply "with respect to
any employee whose services during the workweek are performed in
a workplace within a foreign country." 29 U.S.C. § 213(f);
see 29 U.S.C. § 216(d)(1); Cleary, 728 F.2d at 608-09. The
courts of appeals held that the ADEA incorporated the FLSA's
prohibition on extraterritorial application. See, e.g., Cleary,
728 F.2d at 609. Within a few months of the 1984 court decisions,
Congress amended the ADEA in away that superseded the holding of
these cases by "provid[ing] for limited extraterritorial
application" of the ADEA. Denty, 109 F.3d at 149-50.
[10] The 1984 amendments amplified the definition of "employee" in
§ 11(f) of the ADEA, which had previously embraced any
"individual employed by employer," except for certain elected
public officials and political appointees. See Pub.L. No. 90-202,
§ 11(f) (1967); Pub.L. No. 93-259, § 28(a)(4) (1974). One
of the 1984 amendments specified that "[t]he term `employee'
includes any individual who is a citizen of the United States
employed by an employer in a workplace in a foreign country."
Pub.L. No. 98-459, § 802(a) (1984).
[11] Companion amendments dealt with the cases of foreign persons
not controlled by an American employer - now § 4(h)(2) of the
ADEA - and foreign corporations controlled by American
employers - now § 4(h)(1):
If an employer controls a corporation whose place of
incorporation is in a foreign country, any practice
by such corporation prohibited under this section
shall be presumed to be such practice by such
employer.
[12] Id. § 803(b)(2); Pub.L, No. 99-272, § 9201(b)(3) (1986),
codified at 29 U.S.C. § 623(h)(1). The amendments also
included a "foreign law exception" - now ADEA §
4(f)(1) - insulating employers from liability for "practices
involv[ing] an employee in a workplace in a foreign country"
where compliance with the ADEA "would cause [the] employer, or a
corporation controlled by such employer, to violate the laws of
the country in which such workplace is located." Pub.L. No.
98-459, § 803(b)(1) (1984), codified at
29 U.S.C. § 623(f)(1).
[13] The 1984 revision to the definition of "employee" in §
11(f) was intended "to assure that the provisions of the ADEA
would be applicable to any citizen of the United States who is
employed by an American employer in
a workplace outside the United States." S.Rep. 98-467, at 27
(1984), reprinted in 1984 U.S.C.C.A.N. 2974, 3000 (S.Rep.); see
EEOC v. Arabian American Oil Co., 499 U.S. 244, 258-59, 111 S.Ct.
1227, 1235-36, 113 L.Ed.2d 274 (1991). The other 1984 amendments,
to § 4 of ADEA, conform the ADEA's reach to "the
well-established principle of sovereignty, that no nation has the
right to impose its labor standards on another country." S.Rep.
at 27. Thus § 4(h)(2) of the ADEA merely limits the scope of
the amended definition of employee, so that an employee at a
workplace in a foreign country is not protected under the ADEA if
the employer is a foreign person not controlled by an American
employer. See id. at 27-28 ("[T]he amendment. . . . does not
apply to foreign companies which are not controlled by U.S.
firms.") (emphasis added). There is no evidence in the
legislative history that these amendments were intended to
restrict the application of the ADEA with respect to the domestic
operations of foreign employers.
[14] Further, the plain language of the corresponding
foreign-employer exclusions in Title VII of the Civil Rights Act
of 1964, 42 U.S.C. §§ 2000e-2000e-17, and the Americans with
Disabilities Act of 1990 (ADA), 42 U.S.C. §§ 12101-12213,
indicates that a foreign employer's domestic operations are not
excluded from the reach of those statutes. The Title VII and ADA
exclusions are expressly limited to the "foreign operations of an
employer that is a foreign person not controlled by an American
employer," 42 U.S.C. §§ 2000e-1(c)(2), 12112(c)(2)(B)
(emphasis added), so these employment discrimination statutes
would apply to a foreign company's domestic operations. It is not
apparent why the domestic operations of foreign companies should
be subject to Title VII and the ADA, but not to the ADEA. The
legislative history of the comparable foreign-employer exemptions
of those laws - both added as part of the Civil Rights Act of
1991, see Pub.L. No. 102-166, § 109(b)(1), (2), 105 Stat.
1077 - contains no indication that Congress intended any such
difference in scope between the ADEA and Title VII or the ADA.
See, e.g., 137 Cong.Rec. 28,638 (1991) (statement of Sen.
Kennedy).
[15] If § 4(h)(2) does not exempt the domestic operations of
foreign companies from the ADEA, there is no other basis for such
an exemption. Because "[t]he Age Discrimination Act is remedial
and humanitarian legislation," it should be "construed liberally
to achieve its purpose of protecting older employees from
discrimination." Moses v. Falstaff Brewing Corp., 525 F.2d 92, 93
(8th Cir. 1975). The exemption of the domestic operations of
foreign employers from the ADEA would only undermine the purpose
of the ADEA to "promote employment of older persons based on
their ability rather than age." 29 U.S.C. § 621(b).
International comity does not require such an exemption; the 1984
amendments anticipate that American corporations operating abroad
will be subject to foreign labor laws, and Congress presumably
contemplated that the operations of foreign corporations here
will be subject to U.S. labor laws.
[16] We have previously concluded that even when a foreign employer
operating in the United States can invoke a Friendship, Commerce
and Navigation treaty to justify employing its own nationals,
this "does not give [the employer] license to violate American
laws prohibiting discrimination in employment." Avigliano v.
Sumitomo Shoji America, Inc., 638 F.2d 552, 558 (2d Cir. 1981),
vacated on other grounds, 457 U.S. 176, 102 S.Ct. 2374, 72
L.Ed.2d 765 (1982); see also MacNamara v. Korean Air Lines,
863 F.2d 1135, 1141 (3d Cir. 1988) ("[A] foreign business may not
deliberately undertake to reduce the age of its workforce by
replacing older Americans with younger foreign nationals.").
Although the Supreme Court vacated our judgment in that case on
the grounds that the defendant could not invoke the treaty, see
Sumitomo, 457 U.S. at 189-90 & n. 19, 102 S.Ct. at 2382 & n. 19,
the Court observed that "the highest level of protection afforded
by commercial treaties" to foreign corporations operating in the
United States is generally no more than "equal treatment with
domestic corporations." Id. at 188 n. 18, 102 S.Ct. at 2381
n. 18. Here equal treatment would require that antidiscrimination
rules apply to foreign enterprises' U.S. branches, since
"defending personnel
decisions is a fact of business life in contemporary America and
is a burden that the domestic competitors of foreign enterprise
have been required to shoulder," MacNamara, 863 F.2d at 1147.
Also, U.S. subsidiaries of foreign corporations are generally
subject to U.S. antidiscrimination laws, see, e.g., Fortino v.
Quasar Co., 950 F.2d 389, 393-94 (7th Cir. 1991), and, absent
treaty protection - not an issue in this case - a U.S. branch of a
foreign corporation is not entitled to an immunity not enjoyed by
such subsidiaries. See Sumitomo, 457 U.S. at 189, 102 S.Ct. at
2381-82.
[17] We therefore agree with the EEOC, the agency charged with
the enforcement of the ADEA, see 29 U.S.C. §§ 626, 628; cf.
Ohio Pub. Employees Retirement Sys. v. Betts, 492 U.S. 158,
170-75, 109 S.Ct. 2854, 2862-66, 106 L.Ed.2d 134 (1989), that the
law generally applies "to foreign firms operating on U.S. soil."
EEOC Policy Guidance, N-915.039, Empl.Prae.Guide (CCH) 5183,
6531 (March 3, 1989), For the reasons we have discussed, we are
confident that Congress has never clearly expressed a contrary
intent. See Regions Hosp. v. Shalala, ___ U.S. ___, ___, 118
S.Ct. 909, 915, 139 L.Ed.2d 895 (1998).
(b) Are employees based abroad counted in determining whether a
U.S. - based branch of a foreign employer is subject to the
ADEA?
[18] Cedel will still not be subject to the ADEA by virtue of its U.S.
operations unless Cedel is an "employer" under the ADEA. A
business must have at least twenty "employees" to be an
"employer." 29 U.S.C. § 630(b). Cedel maintains that, in the
case of foreign employers, only domestic employees should be
counted. The district court agreed, and, since Cedel had fewer
than 20 employees in its U.S. branch, the court granted Cedel's
motion to dismiss for lack of subject matter jurisdiction without
considering the number of Cedel's overseas employees.
[19] The initial version of the ADEA, adopted in 1967, did not apply
to employers with fewer than 25 employees. See Pub.L. No. 90-202,
§ 11(b), 81 Stat. 605 (codified as amended at 29 U.S.C. § 630(b)).
(For a brief transitional period, employers with fewer
than 50 employees were not subject to the ADEA. Id.) In 1974, the
threshold was lowered to its present level. See Pub.L. No.
93-259, § 28(a)(1). We first consider whether the ADEA's
definition of "employee" might somehow support Cedel's position.
Prior to the 1984 amendments, the definition of an employee was
simply "an individual employed by any employer," with exceptions,
noted above, not relevant in the present case. See Pub.L. No.
90-202, § 11(f) (1967); Pub.L. No. 93-259, § 28(a)(4)
(1974). This language provides no basis for counting only
domestic employees. (Neither does the reasoning of the cases
limiting the reach of the pre-1984 ADEA to domestic workplaces,
since the portions of the FLSA incorporated into the ADEA - in
particular § 13(f) of the FLSA - do not purport to modify the
definition of employee under § 3(e) of the FLSA. See 29
U.S.C. §§ 213(f), 203(e); see also, e.g., Cleary, 728 F.2d at
610.)
[20] The 1984 amendments supplemented the definition of employee in
§ 11(f) of the ADEA to include U.S. citizens employed in a
foreign workplace. This revision to § 11(f) does not
establish that the employees, wherever located, of a foreign
corporation with a U.S. branch are not "employees" under the
ADEA, for it makes no distinction between foreign and domestic
employers. As discussed above, the function of adding §
4(h)(2) in 1984 was only to limit a foreign-based employer's ADEA
liability with respect to employees in a foreign workplace, and
so provides no grounds for counting only Cedel's domestic
employees. The word "employee" does not even appear in §
4(h); if Congress had wished to restrict the definition of
"employee" to exclude a foreign employer's foreign workers, it
certainly could have done so directly when it amended § 11(f)
in 1984. The 1984 foreign law exception also does not aid Cedel.
[21] The district court reasoned that the overseas employees of
foreign employers should not be counted because they are not
protected by the ADEA. But there is no requirement that an
employee be protected by the ADEA to be counted; an enumeration,
for the purpose of ADEA coverage of an employer,
includes employees under age 40, who are also unprotected, see
29 U.S.C. § 631(a). The nose count of employees relates to the
scale of the employer rather than to the extent of protection.
[22] The legislative history of the ADEA does not address the
minimum employee requirement. The ADEA was modeled in large part,
on Title VII, however, see McKennon v. Nashville Banner Publ'g
Co., 513 U.S. 352, 357, 115 S.Ct. 879, 884, 130 L.Ed.2d 852
(1995), and we have previously identified several reasons for
Title VII's minimum-employee requirement, see 42 U.S.C. § 2000e(b)
(15 or more employees). These include the burdens of
compliance and potential litigation costs, "the protection of
intimate and personal relations existing in small businesses,
potential effects on competition and the economy, and the
constitutionality of Title VII under the Commerce Clause." Tomka,
66 F.3d at 1314; see also id. at 1322-23 (Parker, J.,
dissenting).
[23] None of these reasons suggests that whether a foreign employer
is subject to the ADEA should turn on the size of its U.S.
operations alone. Cedel contends that because it has fewer than
20 employees in the United States, it is the equivalent of a
small U.S. employer. This is implausible with respect to
compliance and litigation costs; their impact on Cedel is better
gauged by its worldwide employment. Cedel would not appear to be
any more a boutique operation in the United States than would a
business with ten employees each in offices in, say, Alaska and
Florida, which would be subject to the ADEA. Further, a U.S.
corporation with many foreign employees but fewer than 20
domestic ones would certainly be subject to the ADEA.
[24] Accordingly, in determining whether Cedel satisfies the ADEA's
20-employee threshold, employees cannot be ignored merely because
they work overseas.[fn1] We therefore vacate the judgment on the
plaintiffs ADEA count.
2. ERISA
[25] The plaintiff contends that Cedel violated ERISA by failing to
"pay . . . her pension." Clause 3.2(f) of the separation
agreement, attached to her complaint, reads:
Pension Plan: Ida [Morelli] shall be paid an unique
and tax protected lump sum of USD on April 30, 1994.
[26] The district court dismissed the plaintiffs ERISA complaint on
three grounds: First, the plaintiff failed to allege the
existence of an employee pension benefit plan or that she was a
participant in, or beneficiary of, such a plan - the only
capacities in which Morelli would have standing to sue, see 29
U.S.C. §§ 1002(7), 1002(8), 1132(a)(1). Second, even if
Morelli had alleged the existence of an ERISA qualified pension
benefit plan, she failed to allege facts demonstrating that she
was a plan participant or was entitled to benefits under the
plan. Third, the sole pension plan Cedel had for its New York
employees was implemented during 1994, the year the plaintiff was
terminated, and the terms of the plan required that an employee
be employed on the last day of the plan year in order to receive
an employer contribution. Since the plaintiff did not work for
Cedel on the last day of the plan year, she was not entitled to
any benefits under the terms of the plan.
[27] As a basis for the second and third grounds for dismissing the
complaint, the district court relied on an affidavit from the
office manager of Cedel's New York office, which stated that
"Cedel did not have any pension or retirement benefit plan for
its New York employees" until July 1, 1994. Consideration of
matters outside the pleadings converts the defendant's motion to
dismiss into a summary judgment motion. See Fed. R. Civ. P.
12(b); James Wm. Moore et al., Moore's Federal Practice §
56.30[4] (3d ed. 1997). Although a review of the record below
indicates that the plaintiff had enough notice of a potential
conversion to permit the trial court to treat the motion as one
for summary judgment sua sponte, see Groden v. Random House,
Inc., 61 F.3d 1045, 1052-53
Page 46
(2d Cir. 1995); Kopec v. Coughlin, 922 F.2d 152, 154-56 (2d Cir.
1991), in relying on matters outside the pleadings, the court
should have explicitly disposed of the motion under Rule 56. See
Carter v. Stanton, 405 U.S. 669, 671, 92 S.Ct. 1232, 1234, 31
L.Ed.2d 569 (1972) (per curiam). We could still address the
motion now if that best served judicial economy. See George v.
Kay, 632 F.2d 1103, 1106 (4th Cir. 1980). But since we are
already remanding the plaintiffs ADEA claim, and since the
viability of the ERISA claim might be affected by the resolution
of the ADEA claim, we vacate the judgment on the ERISA count as
well. Thus all aspects of the ERISA claim remain open on remand.
[28] Should Morelli succeed on her age discrimination claim, the
district court will have an opportunity to determine in the first
instance whether, judgment in hand, Morelli might meet the
definition of a "participant" entitled to bring a civil action
under § 502(a)(1) of ERISA, 29 U.S.C. § 1132(a)(1). In
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 117, 109
S.Ct. 948, 957-58, 103 L.Ed.2d 80 (1989), the Supreme Court held
that pension-plan "participants" include "former employees who
have . . . a reasonable expectation of returning to covered
employment." 489 U.S. at 117, 109 S.Ct. at 958 (internal
quotation marks omitted). If Morelli prevails on her ADEA claim,
her status as a participant might depend, for example, on whether
"returning to covered employment" means returning to previously
covered employment or returning to currently covered
employment.[fn2]
Conclusion
[29] The judgment is vacated with respect to the ADEA and ERISA
claims and the case is remanded for further proceedings not
inconsistent with this opinion.
[fn1] We do not follow the district courts that have
concluded - without apparent exception - that only the domestic
employees of a foreign employer are counted in determining
whether the ADEA's 20-employee threshold is met. See, e.g.,
Robins v. Max Mara, U.S.A., Inc., 914 F. Supp. 1006, 1009
(S.D.N.Y. 1996); cf. Goyette v. DCA Adver., 830 F. Supp. 737, 745
(S.D.N.Y. 1993) (Title VII.
[fn2] Because we decline to address the merits of the ERISA
motion at this time, we need not now consider whether the filing
of an antidiscrimination suit, in itself, would provide a
plaintiff with "a reasonable expectation of returning to covered
employment." Compare Mullins v. Pfizer, Inc., 23 F.3d 663, 667
(2d Cir. 1994) (finding standing established by filing of ERISA
claim), with Winchester v. Pension Comm., 942 F.2d 1190, 1193
(7th Cir. 1991) (finding standing not conferred by filing of
antidiscrimination claim where plaintiff had sufficient
opportunity to vindicate ERISA goals while a plan
participant).