Challenging Gender Discrimination in Closely Held Firms: The Hope and Hazards of Corporate Oppression Doctrine

Abstract

The #MeToo Movement has ushered sexual harassment out of the shadows and thrown a spotlight on the gender pay gap in the workplace. Harassment and unfair treatment have, however, been difficult to extinguish. This has been true for all workers, including partners – those women who are owners in their firms and claim that they have suffered harassment or unfair treatment based on gender. That is because a partner’s lawsuit for discrimination often will suffer an insurmountable hurdle: plaintiff’s status as a partner in the firm means that they may not be considered an “employee” under the relevant employment discrimination statutes. This article discusses an underexplored and underutilized potential alternative in seeking a remedy for discrimination: oppression (or “freeze out”) doctrine in the closely held business.

The article begins with a discussion of the current jurisprudence addressing when an owner is an employee for purposes of employment discrimination statutes. It also explores the doctrine of minority shareholder oppression, both as an instrument of enforcing fiduciary obligations and as a statutory mechanism to petition for dissolution or seek other equitable relief. The article then brings these subjects together by discussing how a female owner’s claim of discrimination or harassment fits into existing minority oppression doctrine, and by comparing the substantive requirements of discrimination claims and corporate oppression claims.

Ultimately, this article concludes that one of the advantages of oppression doctrine is that it need not be framed in gender-based terms to succeed. Indeed, in discrimination cases it is often very difficult to prove that the employment decisions were "based upon sex," and oppression doctrine bypasses this requirement. However, this advantage in any individual case may also prove to be a greater overall disadvantage because, without framing the claim in gender-based terms, the broader goals of workplace equality are not advanced.

Keywords: business law, corporate law, closely held corporations, closely held businesses, partnerships, minority oppression, discrimination, gender discrimination