A Measure of Control: Appellate Division Rules “Member-Owned Cooperative” Not Liable for Age Discrimination Claim of One Member’s Employee

A supermarket cooperative is not considered the employer of individuals who work for its member stores and cannot be found liable for the age discrimination claims of an employee of one of its members, the Appellate Division ruled last month in Dorrity v. Wakefern Food Corporation.

Facts

In 1991, Gina Dorrity, was hired as a part-time cashier at ShopRite, a supermarket located in West Caldwell, New Jersey. Over the next ten years, Dorrity was promoted twice – from Cashier to Courtesy Counter Clerk and then to Head Bookkeeper and Head Courtesy Clerk. In 2011, Dorrity was transferred from the West Caldwell store location to the Parsippany store while also taking on additional Human Resources duties.

Both the West Caldwell and Parsippany Shoprite locations are owned by Sunrise Supermarkets, Inc. Sunrise is part of a “member-owned cooperative” that independently owns and operates approximately 325 grocery stores doing business under the ShopRite trade name. The name of this member cooperative is Wakefern Food Cooperation.

In 2014, a few years after Dorrity’s transfer to ShopRite of Parsippany, Andrew Leaman was hired for the newly created Customer Service Manager position, which had supervisory authority over Dorrity. Leaman did not have any relevant experience prior to starting the job, and Dorrity was not offered or considered for the position despite her 25 years of experience. When Leaman transitioned to a new position as IT Supervisor, he was replaced by another new hire who was 26 years old.

In April 2015, Wakefern retained a consulting group to evaluate the hiring and retention practices of its member stores, and the VP of Human Resources at Sunrise admitted that the consulting firm’s report concluded with the recommendation that members “hire younger workers.” That same year when Leaman was promoted to IT Supervisor, Dorrity complained to him and stated that she did not get the position because she was older. Leaman reported this comment to the Human Resources Department at Sunrise but it was never investigated.

One month later, Dorrity was stripped of certain job duties and demoted from Head Bookkeeper to regular Bookkeeper. She was assigned to shifts that began at 3:00 a.m. and worked 35 straight days during January and February of 2016. In February 2016, Dorrity began talking to a customer during her break. She clocked back in but continued to chat with the same customer which resulted in Dorrity not being able to complete her work before the end of her shift and her supervisor had to override the time clock for her to punch out. Dorrity was suspended and ultimately terminated for “stealing time.” She was replaced by an employee at least twenty years younger. At the time of her suspension, Dorrity stated that other employees regularly committed worse violations and she felt she was being unfairly treated.

Dorrity later filed a lawsuit against both Sunrise and Wakefern alleging age discrimination. Wakefern was dismissed from the case at the summary judgment stage, and several months later Sunrise reached a settlement with Dorrity.

Appellate Division Decision

On appeal, Dorrity claimed that Wakefern should not have been dismissed from the case, because the cooperative was liable for failing to investigate her claims of age discrimination and did not take adequate remedial measures to prevent or stop the discriminatory acts. The Court rejected her claim, finding that there was no indication that anyone at Wakefern was directly involved in the discriminatory or retaliatory conduct alleged, nor was anyone at Wakefern aware of Dorrity’s allegations until after she filed her Complaint. The fact that Dorrity complained of discrimination to Sunrise employees “did not impute knowledge to Wakefern.”

Nor could Wakefern be considered a joint employer, the Appeals Court ruled, because Wakefern did not exert enough control over the terms and conditions of Dorrity’s employment. While Wakefern provided accounting software, managed intellectual property, marketing and advertising and loss prevention services to its members, it did not have any direct control or decision-making power over the individual employees of its member stores. The members alone managed vacation and sick time, issued employee paychecks, conducted performance evaluations, and were responsible for the hiring, discipline and termination of their employees.

The Court found that it was Sunrise, owner of the West Caldwell and Parsippany ShopRite stores, that set Dorrity’s work schedule, assigned her job duties, paid her salary, and provided her with benefits. While Wakefern maintained a website for employee training and provided a template for employee handbooks, member stores were free to forego the training or modify the training programs and policies at their discretion. Wakefern also had no involvement in Sunrise’s decision to demote, suspend, or terminate Dorrity. The Court found that “the overwhelming evidence demonstrating a customary relationship” between Sunrise and Dorrity precluded Dorrity from claiming that Wakefern was a joint employer, and affirmed the dismissal of Wakefern from Dorrity’s suit.

Bottom Line

This decision supports the theory that an entity cannot be liable for prevention or remediation of discriminatory acts that it did not directly participate in, or of which it did not receive actual notice. If there is no involvement or notice, and there already exists a “customary employment relationship” between the individual and another entity, courts will be hesitant to extend joint liability to another entity that is mostly removed from any employment decisions affecting that individual.

However, it is likely that this decision would have gone the other way if there had been evidence in the record that Sunrise escalated Dorrity’s complaint up to Wakefern. If you or your client is aware of an employee’s complaint of discrimination, retaliation, or harassment, you are under an obligation to investigate and to ensure that appropriate remedial measures have been implemented, if they are found to be warranted.

For more information regarding this decision and best practices, please contact John C. Petrella, Esq., Chair of the Firm’s Employment Litigation Practice Group at jpetrella@genovaburns.com or Erica M. Clifford, Esq., Counsel, at eclifford@genovaburns.com. or 973-533-0777.