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Overseas Affiliate Not Subject to Title VII Jurisdiction

    Client Alerts
  • December 14, 2017

Employment laws and standards of conduct greatly vary from country to country. U.S. employees working overseas for their U.S. employer generally enjoy the same legal protections as if they were working at home. However, when the employer is not a U.S. entity, U.S. jurisdiction may not extend even if the company has affiliated entities in the U.S. Last month, the Sixth Circuit Court of Appeals explained the limits of jurisdiction under Title VII.

In Anwar v. Dow Chemical Co., the plaintiff was a U.S. citizen working for a Dow affiliate in Dubai. She claimed that the company’s CEO discriminated against and harassed her based on her gender, religion, and national origin. The plaintiff filed suit in the U.S. on the basis that the Dubai company has a U.S. affiliate, and therefore the two companies act as a single entity for Title VII jurisdiction purposes. The district court dismissed the complaint for lack of jurisdiction over the defendant, and the plaintiff appealed.

The Sixth Circuit disagreed with her arguments, affirming dismissal of the complaint. The court analyzed the jurisdiction issue under the “alter ego” test. In order to make the U.S. company liable for acts of its foreign affiliate, the plaintiff must demonstrate a unity of interest and ownership between the two companies. In this case, the plaintiff’s only evidence was the common ownership of both entities by Dow. The companies did not share management, resources, or work from a unified business plan. The ownership relationship alone is not enough to satisfy the alter ego test.

Under some state laws, a U.S. subsidiary of a foreign parent corporation can be held liable for acts of the parent that adversely impact a U.S. employee. In other situations, the parent can be found to directly engage in business in the U.S., therefore subjecting it to U.S. legal jurisdiction. However in most situations, foreign employers will not be found liable for employment practices that take place entirely outside of the U.S.