Small Business Bulletin 12/9/04

Small Businesses Now Liable for Employment
Discrimination Due to Court Ruling

The SC Small Business Chamber of Commerce is issuing a warning today to small businesses with 14 or fewer employees to be extremely careful in all employment decisions. Employment decisions of these small businesses have traditionally been protected from discrimination lawsuits regarding “protected status” (ex. race, religion, gender, age) because state and most federal laws dealing with such activity only applied to businesses with 15 or more employees. Only federal law addresses racial discrimination in employment decisions regardless of number of employees.

However, on October 18 of this year, a South Carolina Supreme Court decision created a new cause of action saying that it is against the public policy of the State of South Carolina for any employer to discriminate on the basis of “protected status.” As a result, businesses with 14 or fewer employees are now subject to discrimination lawsuits in all employment events such as interviews, hiring, terminations, promotions, training, demotions and layoffs without the legal protection provided to businesses with 15 or more employees.

Existing federal and state laws offer some protection to the larger businesses by requiring the complaining party to go through administrative procedures before a discrimination suit can be filed. This process enables most complaints to be handled out of court. Plus, most of these anti-discrimination laws place a cap on the amount of damages that can be recovered. Smaller businesses have none of these legal protections because for the most part they were exempted from such lawsuits.

Small businesses with 14 or fewer employees, which possibly make up 70% to 80% of businesses in the state, are now in extreme jeopardy. Not only are they not aware that they are now at risk for employment discrimination lawsuits, they don’t even have the legal protection provided by law to larger businesses and thus face greater liability.

The Small Business Chamber has legislation drafted that would return the employment discrimination liability issue for small businesses back to the status prior to the October 18 Supreme Court ruling. While no one is defending any form of discrimination, small businesses should not have their legal protection against this form of liability stripped away without legislative debate and certainly should not have more liability on this issue than larger businesses.

The South Carolina General Assembly will not reconvene until January 11, 2005, and therefore any legislative remedy for this issue is months away. Until then, the Small Business Chamber is encouraging businesses with 14 or fewer employees to either delay all employment decisions until their protected liability status is returned or keep detailed documentation justifying the reason for all employment decisions. The latter will not protect the business from a discrimination lawsuit but will increase the likelihood of a successful defense.

Health Care At Lower Cost To Be Tested

The SC Small Business Chamber of Commerce is helping to coordinate a first in the nation, employee health care program for small businesses without traditional group health insurance. This innovative program will be tested in six of the state’s counties: Beaufort, Darlington, Greenville, Greenwood, Horry and Sumter.

Small businesses in these counties that do not have a health insurance plan and which are interested in providing health care services for their employees at lower costs should contact the Small Business Chamber at 803-252-5733.

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