New York Court of Appeals Update (February 2021)

This was originally published on the SGR Blog.

Was “Mike” Bloomberg  Personally Liable For Alleged Transgressions of Supervisor at His Eponymous Firm?

Court of Appeals Addresses Question of  Owner/Leaders Vicarious Liability Under NYC Human Rights Law


An employee of Bloomberg L.P., using the pseudonym “Margaret Doe,” sued Bloomberg L.P., her supervisor Nicholas Ferris, and Michael Bloomberg, asserting several causes of action arising from alleged discrimination, sexual harassment, and sexual abuse. The question before the Court of Appeals was whether Bloomberg, in addition to Bloomberg L.P., could be held vicariously liable as an employer under the New York City Human Rights Law based on his status as “owner” and officer of the company. Was Bloomberg an “employer” within the meaning of the City HRL, and could Bloomberg be held vicariously liable for Ferris’s offending conduct.

Doe’s complaint asserted various causes of action, including sex discrimination and hostile work environment claims under the City HRL Doe alleged that Ferris, her direct supervisor at Bloomberg L.P., engaged in a continuous pattern of sexual harassment, including rape. She alleged that Bloomberg, in addition to Bloomberg L.P., was her “employer” and, as a result, was subject to vicarious liability under the City HRL. Doe asserted that “[a]t all relevant times” Bloomberg was the “Co-Founder, Chief Executive Officer, and President of Bloomberg[ L.P.],” and that he had fostered an environment that accepted and encouraged “sexist and sexually-charged behavior.” Doe did not claim that Bloomberg had any “personal participation” in the specific offending conduct.

Bloomberg moved to dismiss the claims against him. Supreme Court, after first granting the motion to dismiss, granted a reargument and denied the motion. The Appellate Division, with two Justices dissenting, reversed and dismissed the causes of action against Bloomberg. Doe appealed to the Court of Appeals.

The City HRL makes it unlawful for “an employer or an employee or agent thereof” to discriminate on the basis of gender. The statute also prohibits “any person” from aiding and abetting discrimination or from retaliating against another person for engaging in certain protected activities.

In addition, the City HRL imposes vicarious liability on employers in the following circumstances:

“An employer shall be liable for an unlawful discriminatory practice based upon the conduct of an employee or agent which is in violation of subdivision one or two of this section only where:

(1) the employee or agent exercised managerial or supervisory responsibility; or

(2) the employer knew of the employee’s or agent’s discriminatory conduct and acquiesced in such conduct or failed to take immediate and appropriate corrective action; an employer shall be deemed to have knowledge of an employee’s or agent’s discriminatory conduct where that conduct was known by another employee or agent who exercised managerial or supervisory responsibility; or

(3) the employer should have known of the employee’s or agent’s discriminatory conduct and failed to exercise reasonable diligence to prevent such discriminatory conduct”.

The statute is clear as to when an employer is liable: for the employer’s own offending conduct and vicariously for some actions of others. But the term “employer” is undefined, generating the question as to who is an employer in the context of the extensive—and at times strict—liability imposed.

The Appellate Division majority held that “some participation in the specific conduct committed against the plaintiff is required to hold an individual owner or officer of a corporate employer personally liable in his or her capacity as an employer”. Because Doe failed to allege that Bloomberg “encouraged, condoned or approved of the specific discriminatory conduct allegedly committed by Ferris,” the Court dismissed the complaint against Bloomberg. Doe appealed to the Court of Appeals.

The language in the City HRL is itself circumscribed and requires no external limiting principle exempting employees from individual suit as employers. Instead, where a plaintiff’s employer is a business entity, the shareholders, agents, limited partners, and employees of that entity are not employers within the meaning of the City HRL. Rather, those individuals may incur liability only for their own discriminatory conduct, for aiding and abetting such conduct by others, or for retaliation against protected conduct.

Employees and agents of a company are not ordinarily understood to be “employers” and are not normally subject to vicarious liability for the wrongs of corporate employees. Rather, an employee is someone who works in the service of another person (the employer).

Shareholders are also not commonly understood to be employers, and to designate them as such for the purpose of imposing vicarious liability would go against the principles underlying the legal distinction. The law permits the incorporation of a business for the very purpose of enabling its proprietors to escape personal liability.

As a general rule, the law treats corporations as having an existence separate and distinct from that of their shareholders and, consequently, will not impose liability upon shareholders for the acts of the corporation. Indeed, the avoidance of personal liability for obligations incurred by a business enterprise is one of the fundamental purposes of doing business in the corporate form.
Accordingly, at common law, shareholders are not subject to vicarious liability for the torts of a corporation’s agents or employees. The text of the City HRL demonstrated no intent to displace those settled legal principles.

The Court of Appeals concluded that Doe had failed to allege that Bloomberg was her employer for purposes of liability under the City HRL. Her allegations concerning his position at the company demonstrated only that he was an owner or officer of Bloomberg L.P. And Doe’s allegations that Bloomberg fostered a culture of discrimination and sexual harassment at Bloomberg L.P., based primarily on news articles and reports of a deposition in an unrelated case, did not transform him into an employer for purposes of vicarious liability for Ferris’s discriminatory conduct.

RIVERA, J. (dissenting):

The City HRL provides that, to cement its status as a powerful deterrent to discrimination, the law “shall be construed liberally for the accomplishment of the uniquely broad and remedial purposes thereof”. The New York City Council was clear that the Court was prohibited from ascribing a narrow intention or construction to the purpose and statutory text of the City HRL. Accordingly, the Court was required to construe the City HRL broadly in favor of discrimination plaintiffs, to the extent that such a construction was reasonably possible.

That rule of construction was dispositive in this appeal, in which the Court considered whether defendant Michael Bloomberg was an employer of those who work for Bloomberg L.P., the company that he built and that bears his name. The City HRL does not expressly limit “employer” to a business entity or exclude business owners from employer status. On the contrary, the statutory text and remedial scheme suggest the legislature’s intent for a broad and flexible definition of “employer,” in line with the public policy undergirding the City HRL. In that vein, the law generally applies to businesses with as few as four employees and subjects employers to liability for their own discriminatory conduct and that of their supervisors. Maximizing the accountability of those at the top encourages preemptive action by captains of industry with the means to effectuate broad workplace change.

The question, then, was whether the statute, in its broadest possible reading, applied to Bloomberg as an “employer” based on his relationship to the business. Viewed in this light, Doe alleged that he was an employer for purposes of the City HRL because he was co-founder, chief operating officer, president, and majority owner of the business.

According to the dissent, the majority repeated the errors of the past, retreated from the law’s mandate, and narrowly construed the City HRL to adopt a per se rule that favored corporate defendants. Applying its new rule, the majority concluded that Bloomberg was not an employer, notwithstanding his commanding role in the company. That interpretation of the statute was untenable.

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