In Davenport v. HansaWorld USA, Inc., Civil Action No 2:12–CV–233–KS–MTP, 2014 WL 2095190 (S.D. Miss. 2014), the Southern District of Mississippi held that foreign employees employed abroad are not considered in the fifteen-employee headcount when analyzing whether an entity may be subjected to Title VII. TheDavenport case is the first court to tackle the issue in Mississippi, and there are no decisions addressing this point of law from the Fifth Circuit Court of Appeals.

The plaintiff in Davenport sued her former employer in federal court under Title VII after her employment was terminated.  The employer, a U.S. subsidiary with a foreign parent company, undisputedly employed less than fifteen employees in the U.S.  The plaintiff, however, alleged that the subsidiary, along with the parent corporation and several sister companies, employed several hundred foreign employees in foreign countries, and that these employees should be considered in determining whether an entity constitutes an “employer” under Title VII.

Under Title VII, it is clear that an entity must have fifteen or more employees before it may be subjected to the mandates of the statute.  There is disagreement among the federal courts, however, as to whether foreign employees employed abroad may be considered in this fifteen-employee headcount. 

  Two Circuit Courts of Appeal, the Second Circuit and the Ninth Circuit, have reached a contrary result than that reached by the Southern District of Mississippi.  The Second Circuit, when addressing the issue under the ADEA, which has a twenty-employee minimum, concluded that foreign employees employed abroad may be considered in analyzing whether an entity in the U.S. may be forced to comply with federal employment discrimination laws.  The Ninth Circuit followed suit soon after in addressing the issue under Title VII.  Taking the Second and Ninth Circuits’ holdings to their logical conclusion, a foreign company with just one U.S. employee and a sufficient number of world-wide employees could be subjected to federal discrimination laws in the U.S.

In Davenport, Phelps Dunbar represented the employer, HansaWorld USA, Inc., and urged the Southern District of Mississippi to reject the holdings of the Second and Ninth Circuits based on the plain language of Title VII.  The Davenport court did just this, and, after analyzing the statute, concluded that Title VII’s coverage and definition of “employee” are co-extensive.  Specifically, the definition of “employee” under Title VII includes only U.S. citizens when addressing employees who are employed abroad. In addition, the statute renders Title VII inapplicable to the employment of aliens outside any State. The Davenport court’s holding also soundly rested on the established principle that when a statute gives no clear indication of an extraterritorial application, it has none.

Clients that employ foreign citizens, or that have parent/subsidiary/sister companies that employ foreign citizens, need to be aware of the Davenport decision, as well as the contrary holdings of the Ninth and Second Circuits.