The employment practices risk profile for companies that employ members of the same family may have just increased as a result of Dillon v. NED Management, Inc., a decision out of the Eastern District of New York.

In Dillon, the plaintiff, Michal Dillon, sued her employer, NED Management, Inc., and several of its employees under a trio of applicable human rights laws – Title VII and the New York State and City Human Rights Laws – alleging that a company manager, Jacob Friedman, subjected her to a hostile work environment and that NED fired her after she complained. Mr. Friedman was married to NED’s owner’s mother, who also worked at NED. NED moved for a judgment on the pleadings, which is sort of like a motion to dismiss, claiming that it couldn’t be held liable for Mr. Friedman’s actions.

Before getting to the Court’s decision, a little background – to prove a hostile work environment claim under Title VII, a plaintiff must show that (1) the harassment was sufficiently severe or pervasive to alter the working conditions of the plaintiff’s employment and create an abusive working environment; and (2) a specific basis exists for imputing the conduct that created the hostile envelopment to the employer. In other words, the plaintiff was subjected to some really bad behavior and the company should be responsible for the actions of its employees.

The status of the harasser is a critical issue in determining whether to hold the employer responsible. If the harasser is a “supervisor” and took a “tangible employment action” against the victim, then the employer is automatically liable (which is also commonly known as vicarious or strict liability). If the supervisor did not take a tangible employment action, then the employer will not be liable where it can show that (1) it exercised reasonable care to prevent and promptly correct any harassing behavior; and (2) the plaintiff unreasonably failed to take advantage of any preventive or corrective opportunities that were provided (also known as the Faragher-Ellerth defense). If the harasser is merely a co-worker instead of a supervisor, then the employer is responsible only if it was negligent in controlling the working conditions – that is, it failed to provide a reasonable avenue for the victim to complain about the harassment, or it knew of the harassment and failed to take the appropriate action.

Last year, the United States Supreme Court addressed the definition of “supervisor” under federal law in the Vance case. The Supreme Court held that an employee is a supervisor under Title VII if the employer empowered the employee to take tangible employment actions against the victim; that is, the employer empowered the employee to effect a significant change in employment status, such as hiring, firing, failing to promote, reassignment with significantly different responsibilities, or a decision causing a significant change in benefits.

And now we finally come back to the Dillon case. The Court denied NED’s motion for multiple reasons, but one in particular caught my eye. The Court found that the complaint sufficiently alleged that Mr. Friedman was a “supervisor,” not because Ms. Dillon alleged that he had authority over her hiring, firing, promotions, compensation or benefits, but rather because a “jury could reasonably infer that [Mr. Friedman’s] marital relationship included a strong influence . . . over his wife and [step]-son,” which was the “equivalent of supervisory power.” The Court continued: “Based upon the subtleties of the relationship and the nature of the business, the natural concern for the success of a family member can support that conclusion.”

The Court’s conclusion here is most interesting. Is the Court saying that the Company effectively delegated supervisory authority to Mr. Friedman by virtue of his family relationship? What if Mr. Freidman was merely a second cousin to the owner? Would that have been enough? What if he was not related, but rather the owner’s best friend? What if he was merely an employee who otherwise had strong influence over the owner or the owner’s mother? Is there a logical stopping point here? And what is the “standard” the Court was creating? Is it a “family relationship” standard? Or is it a “strong influence” standard? Or something else?

We will be tracking whether any other court addresses this. Meanwhile, in its decision, the Court set forth other valid bases under which Ms. Dillon could hold NED liable under Title VII (and there is still the matter of those pesky New York State and City Human Rights Law claims). Thus, another important takeaway from this case is that you must enforce your anti-discrimination and harassment policies and procedures in an even-handed manner. No matter who your employees are related to or who they know, they should clearly understand that you do not tolerate discrimination and harassment in the workplace and that you will properly investigate a complaint and remedy any wrongdoing.