Enforcement Guidance on Application of Title VII and the Americans with Disabilities Act to Conduct Overseas and to Foreign Employers Discriminating in the United States

	NOTICE	number 915.002
EEOC
		10/20/93

1. SUBJECT. Enforcement Guidance on Application of Title VII and the Americans with Disabilities Act to Conduct Overseas and to Foreign Employers Discriminating in the United States.
2. PURPOSE. This document is intended to provide guidance on two issues: the extraterritorial application of Title VII and the Americans with Disabilities Act to American and American-controlled employers abroad; and the coverage under both statutes of foreign employers discriminating within the United States.
3. EFFECTIVE DATE. On issuance.
4. EXPIRATION DATE. As an exception to EEOC Order 205.001, Appendix B, Attachment 4, § a(5), this Notice will remain in effect until rescinded or superseded.
5. ORIGINATOR. Title VII/EPA Division, Office of Legal Counsel.
6. INSTRUCTIONS. File after Section 605 of Volume II of the Compliance Manual. This document replaces the guidance on "American Companies Overseas, Their Subsidiaries and Foreign Companies," currently appended to Section 605 as Appendix M.
7. SUBJECT MATTER.

This enforcement guidance addresses two distinct issues: first, the circumstances in which American and American-controlled employers can be held liable for discrimination that occurs abroad; and second, the circumstances in which foreign employers can be held liable for discrimination that occurs within the United States. With regard to discrimination abroad, this guidance discusses Section 109 of the Civil Rights Act of 1991, which now governs the extraterritorial application of both Title VII and the Americans with Disabilities Act ("ADA").

Section I of the guidance sets forth standards for determining extraterritorial application, including how to assess the nationality of employers (Section I(B)(1)); how to determine whether a foreign entity is controlled by an American employer (Section I(B)(2)); and how to apply the Section 109 foreign laws defense (Section I(C)). Section II addresses coverage of foreign employers that discriminate in the United States. It focuses largely on the impact of any applicable international treaties on the application of Title VII and the ADA. Finally, Section III contains charge processing instructions to guide investigation of both categories of Title VII and ADA charges: those involving overseas discrimination and those brought against foreign employers acting within the United States.

This enforcement guidance replaces the Policy Guidance on "American Companies Overseas, Their Subsidiaries, and Foreign Companies," currently included in Volume II of the EEOC Compliance Manual as Appendix M to Section 605. In case of conflict, this guidance also supersedes Commission decisions addressing issues discussed herein.⁽¹⁾

I. DISCRIMINATION BY EMPLOYERS ABROAD

A. Background

1. The Boureslan Decision

In 1991, the Supreme Court decided, in the companion cases of EEOC v. Arabian American Oil Co. and Boureslan v. Arabian American Oil Co., 499 U.S. 244, 111 S. Ct. 1227, 55 EPD ¶ 40,607 (1991) ("Boureslan"), that Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e et seq., did not apply extraterritorially to regulate the employment practices of United States employers that discriminate against United States citizens abroad. In Boureslan, a naturalized United States citizen alleged that he had been harassed and ultimately dismissed, on the bases of his race, religion, and national origin, in Saudi Arabia. Boureslan's Title VII suit was brought against his employers, two Delaware corporations with their principal places of business in, respectively, Texas and Saudi Arabia.

The Supreme Court rejected Boureslan's claims, holding that Title VII did not extend to United States citizens employed abroad by American employers. Relying on the "long-standing principle of American law 'that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States,'" 111 S. Ct. at 1230 (citations omitted), the Court found the language of Title VII insufficient to overcome the presumption that the statute was not intended to apply extraterritorially. In so holding, the Court rejected arguments made by the Commission to support the exercise of extraterritorial jurisdiction; it noted, however, that Congress was free to amend Title VII to explicitly provide for overseas coverage if it chose to do so. Id. at 1236.

2. Section 109 of the Civil Rights Act of 1991

In response to the Boureslan decision, Congress included Section 109 in the Civil Rights Act of 1991, Pub. L. No. 102-166, 105 Stat. 1071 (1991). Section 109 amends both Title VII and the Americans with Disabilities Act, 42 U. S. C. §§ 12101 et seq. ("ADA"), to:

• add that the definition of "employee" includes, "[w]ith respect to employment in a foreign country . . . an individual who is a citizen of the United States," see Section 109(a), amending Section 701(f) of Title VII and Section 101(4) of the ADA;⁽²⁾
• provide that discrimination against U.S. citizens abroad will be covered if engaged in by an American employer or by a foreign corporation controlled by an American employer, see Title VII, new Section 702 (c) (1); ADA, new section 102 (c) (2) (A);
• make clear that neither Title VII nor the ADA will apply "to the foreign operations of an employer that is a foreign person not controlled by an American employer," see Title VII, new Section 702 (c) (2); ADA new Section 102(c)(2)(B);
• identify factors to be considered in determining whether an American employer controls a foreign corporation, including the interrelation of operations, common management, centralized control of labor relations, and common ownership or financial control of the two entities, see Title VII, new Section 702(c)(3); ADA new Section 102(c)(2)(C); and
• provide a defense for violations of Title VII or the ADA if compliance with those statutes, "with respect to an employee in a workplace in a foreign country," would "cause" a covered entity to "violate the law of the foreign country in which such workplace is located," see Title VII, new Section 702(b); ADA, new Section 102(c)(1).⁽³⁾

The legislative history of the Civil Rights Act makes clear that the purpose of Section 109 was to respond to the Boureslan decision. Section 109 was intended to "extend the protections of [T]itle [VII] and the [ADA] to American citizens working overseas for American employers," 136 Cong. Rec. S15,235 (daily ed. Oct. 25, 1991) (statement of Sen. Kennedy), while at the same time ensuring that employers would not be "required to take actions otherwise prohibited by law in a foreign place of business." Id. at S15,477 (daily ed. Oct. 30, 1991) (statement of Sen. Dole). The language of Section 109 was modeled after the 1984 amendments to the Age Discrimination in Employment Act ("ADEA"), which were enacted to create extraterritorial jurisdiction under that statute. See 29 U.S.C. § 623(f),(h); 136 Cong. Rec. S15,235 (daily ed. Oct. 25, 1991) (statement of Sen. Kennedy); id. at S15,477 (daily ed. Oct. 30, 1991) (statement of Sen. Dole); 136 Cong. Rec. H9547 (daily ed. Nov. 7, 1991) (statement of Rep. Hyde). The amendments made by Section 109 are discussed in further detail below.

B. Employers Covered Under Section 109 of the Civil Rights Act of 1991

1. Assessing the Nationality of Employers

As noted previously, Section 109 covers discrimination abroad by American employers and by foreign corporations controlled by American employers. See Title VII, new Section 702 (c) (1) and ADA, new Section 102 (c) (2)(A).⁽⁴⁾ An initial question to be addressed in investigating charges of overseas discrimination, therefore, is whether the entity that allegedly discriminated -- or that controls the entity that allegedly discriminated -- is an American employer.

Neither Section 109 nor its legislative history sets forth an explicit test for determining the nationality of employers. As an initial matter, however, investigators should look to a company's place of incorporation in ascertaining an employer's nationality. See, e.g., Restatement (Third) of the Foreign Relations Law of the United States § 213 (1987) ("for purposes of international law, a corporation has the nationality of the state under the laws of which the corporation is organized"); id., Reporters' Note # 5 (general assumption under United States legislation is that place of incorporation determines corporate nationality). Where a respondent is incorporated in the United States, it will typically be deemed to be an American employer because an entity that chooses to enjoy the legal and other benefits of being incorporated here must also take on the concomitant obligations. In many cases, therefore, the nationality of an entity will be relatively easy to discern.

Nonetheless, it may sometimes be necessary to examine factors beyond (or in lieu of) the employer's place of incorporation. For example, other factors will have to be weighed to assess the nationality of those entities (such as law firms or accounting partnerships) that are "employers" or other covered entities within the meaning of Title VII or the ADA, but that are not incorporated companies. Moreover, where the discriminating entity is incorporated outside the United States but has numerous contacts here, investigators may need to review the totality of that company's contacts with the United States to make a nationality termination.

Potentially relevant factors for assessing an entity's nationality include, but are not limited to: (a) the company's principal place of business, i.e., the place where primary factories, offices, or other facilities are located; (b) the nationality of dominant shareholders and/or those holding voting control; and (c) the nationality and location of management, i.e., of the officers and directors of the company. In situations such as those described in the above paragraph, a company may be found to be American if these factors suggest a significant connection to the United States. The factors must be considered on a case-by-case basis, and no one factor is determinative; generally, the greater the number of factors that demonstrate an entity's connection to the United States, the more reasonable a conclusion that it is an American employer.⁽⁵⁾

2. Assessing "Control" by an American Employer

Even if an entity is not itself American, its discriminatory conduct overseas will be covered if it is "controlled" by an American employer. As summarized in Section I(A)(2) above, Section 109 sets forth four factors to be considered in assessing whether such control exists. Those factors are: (a) the interrelation of operations; (b) the common management; (c) the centralized control of labor relations; and (d) the common ownership or financial control of the employer and the foreign corporation. See Title VII, new Section 702(c)(3); ADA, new Section 102(c)(2)(C).

The factors identified in Section 109 are the same as those relied upon by the Commission for determining when two or more entities (whether foreign or domestic) may be treated as an integrated enterprise or a single employer. See "Policy Statement on the concepts of integrated enterprise and joint employer," No. N-915 (June 6, 1987), incorporated into Volume II of the EEOC Compliance Manual as Appendix G to Section 605 ("Policy Statement on Integrated Enterprise"). The policy statement may thus be consulted for guidance in assessing whether, in the context of a particular charge alleging extraterritorial discrimination, a foreign entity is controlled by an American employer.⁽⁶⁾ See also "Policy Guidance: Application of the Age Discrimination in Employment Act of 1967 (ADEA) and the Equal Pay Act of 1963 (EPA) to American firms overseas, their overseas subsidiaries, and foreign firms," No. N-915.039 (Mar. 3, 1989) at pp. 9-10 ("Policy Guidance on Overseas Application of the ADEA").

One case that discusses the integrated enterprise concept specifically in the context of a Title VII claim against a foreign subsidiary of an American parent is Lavrov v. NCR Corp., 600 F. Supp. 923, 37 EPD ¶ 35,401 (S.D. Ohio 1984). Relying on the four factors now incorporated into Section 109, the Lavrov court found that there was sufficient evidence of the possible interrelationship of the American parent and its foreign subsidiary to justify a trial on the question. The court first determined that the foreign entity, which was a wholly owned subsidiary of the American company, shared common ownership with it. Id., 600 F. Supp. at 928. The court treated as relevant evidence of the centralization of labor relations the facts that the American company instituted corporation-wide personnel policies; that certain personnel decisions with regard to individual employees required approval by the American company; and that the foreign subsidiary was not authorized to change any remuneration plans, benefits, or operating conditions without prior approval of its American parent. Id. The court also pointed to the American company's appointment of management members of the foreign subsidiary's board, and to the foreign company's function to market products assigned by the American company, as factors relevant to assessing, respectively, the commonality of management and the interrelationship of operations of the two companies. Id.; see also Commission's Policy Statement on Integrated Enterprise at pp. 3-5 (identifying relevant evidence).⁽⁷⁾

In discussing the evidence it found relevant, the Lavrov court also indicated that "'all four criteria [for assessing integrated status] need not be present in all cases'" and that "'the presence of any single factor in the Title VII context is not conclusive.'" 600 F. Supp. at 927 (citations omitted). See also Policy Statement on Integrated Enterprise at pp. 4-5; Policy Guidance on Overseas Application of the ADEA at p. 9. The determination of whether nominally separate entities are an integrated enterprise will depend on the facts of each case.

Thus, if the alleged discrimination is perpetrated by an entity that is found to be American or to be controlled by an American employer, the Commission may assert jurisdiction over the charge and investigate the merits of the allegation. It is important to remember that this jurisdictional determination is to be made independently of any resolution of the merits of the underlying charge.

C. The "Foreign Laws Defense" of Section 109 of the Civil Rights Act of 1991

Section 109 makes clear that "it shall not be unlawful," under either Title VII or the ADA, for an employer to take otherwise prohibited action if compliance with either statute, with respect to an employee in a workplace in a foreign country, would cause an employer to violate the law of the foreign country in which the workplace is located.⁽⁹⁾ See Title VII, new Section 702(b); ADA, new Section 102(c)(1).

Under this provision, a respondent must prove three elements to establish a foreign laws defense: that (1) the action is taken with respect to an employee in a workplace in a foreign country, where (2) compliance with Title VII or the ADA would cause the respondent to violate the law of the foreign country, (3) in which the workplace is located. See generally, "Policy Guidance: Analysis of the sec. 4(f)(1) 'foreign laws' defense of the Age Discrimination in Employment Act of 1967," No. N-915.046 (Dec. 5, 1989) ("Policy Guidance on ADEA Foreign Laws Defense") (discussing identical defense available under ADEA). Each of the elements of the defense is discussed briefly below.⁽¹⁰⁾

1. Employee in a Foreign Workplace

To make out a foreign laws defense, an employer must first demonstrate that the challenged practice relates to an employee in a "workplace in a foreign country." Thus, the defense is unavailable under Title VII for employment practices that involve employees in any of the 50 States, the District of Columbia, Puerto Rico, the Virgin Islands, American Samoa, Guam, Wake Island, the Canal Zone, or the Outer Continental Shelf Lands as defined in the Outer Continental Shelf Lands Act. See Title VII, Section 701(i) (defining "State"); see also 29 C.F.R. § 1630.2 (d) (1992) (defining "State" for purposes of ADA jurisdiction).

2. Violate the Law of the Foreign Country

a. Existence of a Law

An employer must next prove that compliance with Title VII or the ADA would "cause" it to "violate the law of the foreign country." Under this prong of the defense, a respondent must initially demonstrate that the source of authority on which it relies constitutes a foreign "law." As noted in the Policy Guidance on the ADEA Foreign Laws Defense, the parameters of this element of the defense are uncertain. As a result, investigators should contact the Attorney of the Day whenever a question concerning a "law" arises. As further indicated in the Policy Guidance on the ADEA Foreign Laws Defense, however, there are circumstances in which the defense clearly would not be available. See Examples 2 and 3 at pp. 3-4 of ADEA Policy Guidance.⁽¹¹⁾

The court in Mahoney v. RFE/RL, Inc., 818 F. Supp. 1, 60 EPD ¶ 41,959 (D.D.C. 1992), identified some such circumstances in a case involving the ADEA foreign laws defense. In Mahoney, the defendant, an American employer, terminated plaintiffs, U.S. citizens working in Germany, based on a union contract that expressly required mandatory retirement at age 65. Defendant first claimed that the union contract, and the German labor practices it incorporated, were German "laws" that would be violated were defendant forced to comply with the ADEA. The court rejected this argument, holding that the defendant's union contract, although "legally binding," was not "law" for purposes of the ADEA foreign laws defense; the mandatory retirement provision had not been mandated by the German government and did not have general applicability beyond the parties to the contract. Id. at 3-4. Noting that "[t]he ADEA is a remedial statute and exceptions to it are to be construed narrowly," id. at 3, the court further held that foreign "[p]ractices and policies, even when embodied in contracts, are not 'laws'" for purposes of the defense. Id.

The court also refused to treat as foreign "law" German court decisions enforcing the union contract. As noted by the court, the German court decisions

did not hold that anything in German law compelled the decisions reached . . . . If overseas employers could avoid application of the ADEA simply by embedding an age-discriminatory provision in a contract, having a foreign court enforce the contract, and calling the court's decision "law," then the Act's extraterritorial provisions would be largely nullified, for employers could easily contract around the law.

Id. at 5 (emphasis in original). Although decided under the ADEA and applicable therefore to charges arising under that statute, the reasoning of Mahoney is equally applicable to analysis of the foreign laws defense under Title VII and the ADA. See, e.g., Commission Decision No. 90-1, CCH Employment Practices Guide ¶ 6875 (customs and preferences of host country do not justify gender discrimination against United States citizens).⁽¹²⁾

b. "Cause" a Violation

Under the second prong of the foreign laws defense, an employer must also demonstrate that compliance with Title VII or the ADA would "cause" it to violate foreign law, i.e., that it is impossible to comply with both sets of requirements. Investigators should attempt to obtain copies of all documentary material that might be relevant in assessing the requirements of the foreign law, including the text of the law itself, and any available legislative history or case law interpreting it. In addition, investigators should consider the steps a respondent has taken or could take to avoid the conflict and to comply with Title VII or the ADA. Compare Mahoney, 818 F. Supp. at 5 (rejecting defendant's claim that it had done all it could to comply with the ADEA where it had not fully pursued possibility of changing union contract or of mediating mandatory retirement issue), with Commission Decision No. 85-10, CCH Employment Practices Guide ¶ 6851 (respondent not liable for refusing to hire woman for work overseas where it provided "authoritative" evidence that foreign law restricted employment of women and demonstrated that it had taken all possible steps to process her application despite foreign restrictions). The defense will be established only where compliance with Title VII or the ADA will inevitably lead to a violation of foreign law. Cf. Kern v. Dynalectron Corp., 577 F. Supp. 1196, 33 EPD ¶ 34,194 (N.D. Tex. 1983) (employer had BFOQ defense for requiring helicopter pilots it employed in Saudi Arabia to convert to Moslem religion where Saudi Arabian law provided for beheading of non-Moslems who entered holy area), aff'd, 746 F.2d 810, 40 EPD ¶ 36,317 (5th Cir. 1984). Once again, investigators should contact the Attorney of the Day when questions arise about this element of the defense.

3. Where the Workplace is Located

The final element of a successful foreign laws defense is proof that the foreign laws involved are those of the country in which the charging party's workplace is (or, absent the discrimination, would be) located.⁽¹³⁾ The laws of the country in which an employer is headquartered or incorporated would not control for purposes of this element of the defense unless the charging party's workplace is also located in that country.

II. DISCRIMINATION BY FOREIGN EMPLOYERS WITHIN THE UNITED STATES

It is well settled that, absent constraints imposed by treaty or by binding international agreement, Title VII applies to a foreign employer when it discriminates within the United States. See, e.g., Ward v. W & R Voortman, 685 F. Supp. 231, 233 (M.D. Ala. 1988) ("any company, foreign or domestic, that elects to do business in this country falls within Title VII's reach"); Commission Decision No. 84-2, CCH Employment Practices Guide ¶ 6840 (foreign company recruiting in United States was "employer" subject to Title VII for charge relating to recruitment). By employing individuals within the United States, a foreign employer invokes the benefits and protections of U.S. law. As a result, the employer should reasonably anticipate being subjected to the Title VII enforcement process should any charge of discrimination arise directly from the business the employer does in the United States. Commission Decision No. 84-2, supra.⁽¹⁴⁾

For the same reasons, the Commission takes the position that the ADA generally applies to foreign employers when the discrimination occurs within the United States. Nothing in the Supreme Court's Bourselan decision, or in the subsequent enactment of Section 109 of the Civil Rights Act of 1991, affects the Commission's resolution of this issue with regard to either Title VII or the ADA.

A. Types of Agreements and Treaties that May Affect the Coverage of Title VII or the ADA

Although Title VII and the ADA may be generally applicable when a charge challenges discrimination by a foreign or foreign owned employer within the United States, such a respondent may allege that it is protected by the terms of a treaty or international agreement that limits the full applicability of U.S. anti-discrimination laws.⁽¹⁵⁾ An agreement, e.g., a protocol

agreement, multinational convention, or treaty negotiated between the United States and another sovereign nation, confers special privileges or immunities on foreign firms or their operations in the United States and reciprocal rights on American corporations operating in the other nation. One type of agreement that may commonly be raised as the basis for a foreign employer's challenge to the Commission's authority is a commercial agreement between two countries called a friendship, commerce and navigation ("FCN") treaty. An FCN treaty grants jurisdiction to one country over another country's corporations. Under the terms of a typical FCN treaty, each signatory grants legal status to the other party's corporations so that those corporations can conduct business in the foreign country on a comparable basis with that country's domestic companies.

When an FCN treaty or other international agreement is raised as a defense to the Commission's application of Title VII or the ADA to a foreign employer operating within the United States,⁽¹⁶⁾ the investigator should first confirm that the identified treaty in fact exists and should ask the respondent to produce a copy of the treaty. Copies of treaties can also usually be found at public libraries, courthouses, or university libraries. Investigators should then, in conjunction with the Attorney of the Day as set forth below, determine: (1) whether the respondent is protected by the treaty; (2) if so, whether the employment practices at issue are covered by the treaty; and (3) if so, the impact of the treaty on the application of Title VII or the ADA. In general, the answer to each of these questions will depend on the language of the treaty and the intent of its signatories. As a general rule, when treaty interpretation issues arise, investigators should contact the Attorney of the Day so that (s)he can coordinate with the Department of State.

B. Assessing Whether a Respondent is Protected by a Treaty

When a respondent invokes the protections of a treaty or agreement the first question is whether the respondent is covered by the specific treaty at issue. This inquiry depends in the first instance on the language of the treaty. "The clear import of treaty language controls unless 'application of the words of the treaty according to their obvious meaning effects a result inconsistent with the intent or expectations of its signatories.'" Sumitomo Shoji America, Inc., v. Avigliano, 457 U.S. 176, 180, 29 EPD ¶ 32,782 (1982) (citations omitted).

In Sumitomo, the Supreme Court held that the FCN treaty between the United States and Japan did not exempt wholly owned American subsidiaries of Japanese companies from Title VII. 457 U.S. at 183. According to the Supreme Court, the language of the treaty, confirmed by its negotiating history, compelled the conclusion that a company's place of incorporation would control the applicability of the treaty; thus, under Sumitomo only companies incorporated in Japan are entitled to the protection of the U.S./Japanese FCN treaty when they are charged with discriminating here. See also Commission Decision No. 86-2, CCH Employment Practices Guide ¶ 6860 (adopting Sumitomo). Except to the extent noted below, therefore, this treaty does not affect the applicability of Title VII or the ADA to Japanese-owned companies incorporated in the United States. Investigators may thus in most cases determine whether an entity is covered by the U.S./Japanese FCN treaty without contacting the Attorney of the Day.

It should be noted, however, that Sumitomo does not resolve all issues of treaty interpretation. First, the Supreme Court in Sumitomo was construing the language of a particular FCN treaty. The Court expressly reserved judgment on whether a similar interpretation would apply to FCN treaties between the United States and other countries, reasoning that other treaties, "although similarly worded, [might] have different negotiating histories." 457 U.S. at 185 n.12. The Sumitomo holding is thus expressly applicable only to those charges in which a Japanese- owned company relies on the U.S./Japanese FCN treaty. In other circumstances, investigators should contact the Attorney of the Day about the scope of coverage of any treaty at issue.

Second, the Seventh Circuit has stated that Sumitomo left open the question whether an American subsidiary might assert any of its parent's treaty rights where there was a contention that the parent had dictated the subsidiary's discriminatory conduct. Fortino v. Quasar Co., 950 F.2d 389, 393, 57 EPD ¶ 41,117 (7th Cir. 1991) (citing Sumitomo, 457 U.S. at 189-90 n.19). The Fortino court held that an American-incorporated subsidiary of a Japanese parent company may in such circumstances assert the FCN treaty rights of its parent, "at least to the extent necessary to prevent the treaty from being set at naught." 950 F.2d at 393. In Fortino, Quasar, a division of a U.S.-incorporated company owned by a Japanese corporation, discharged its American executives and gave preferential treatment to executives sent temporarily to the United States by the Japanese parent. According to the court, a judgment refusing to apply the U.S./Japanese FCN treaty and thereby "forbid[ding] Quasar to give preferential treatment to the expatriate executives that its parent sends would have the same effect on the parent as it would have if it ran directly against the parent; it would prevent [the parent] from sending its own executives to manage Quasar in preference to employing American citizens in these posts." Id.

The Commission disagrees with the result in Fortino and believes that permitting a U.S. subsidiary of a Japanese corporation to assert its parent's treaty rights enables that subsidiary "'to accomplish indirectly what it cannot accomplish directly [under the holding in Sumitomo].'" Spiess v. C. Itoh & Co. (America), Inc., 725 F.2d 970, 973, 33 EPD ¶ 34,213 (5th Cir.) (quoting unpublished order denying motion to dismiss), cert. denied, 469 U.S. 829, 35 EPD ¶ 34,663 (1984); cited in Brief of the Equal Employment Opportunity Commission as Amicus Curiae in Support of Plaintiffs-Appellees, submitted in Fortino v. Quasar Co., Nos. 91-1123, 91-1197, 91-1564, at p. 5. As a result, in charges filed outside the Seventh Circuit, the Commission will continue to treat place of incorporation as determinative of the FCN treaty protection to which Japanese-owned companies are entitled. Field offices in the Seventh Circuit⁽¹⁷⁾ are, however, bound by the Fortino decision. When charges alleging discrimination in the United States by Japanese-owned companies are filed in those offices, therefore, investigators should determine not only the respondent's place of incorporation, but whether, where an American subsidiary is involved, the discriminatory conduct was "dictated" by the Japanese parent.⁽¹⁸⁾

C. Assessing Whether Employment Practices Are Covered by a Treaty

If a respondent is covered by a treaty, the next question to be addressed is whether the treaty applies to the employment practices challenged in the charge. As with issues of coverage discussed in Section II(B) above, the answer depends on the facts of the charge and on the language and intent of the specific treaty at issue.

Compare MacNamara v. Korean Air Lines, 863 F.2d 1135, 1141-42, 49 EPD ¶ 38,756 (3d Cir. 1988) (discussing whether selected foreign national qualified as an "executive" under terms of FCN treaty), cert. denied, 493 U.S. 944, 51 EPD ¶ 39,439 (1989).

In assessing whether treaty protection is available, investigators should look first to the job as to which discrimination is alleged to have occurred. A job title or label may not be determinative; investigators should identify actual job functions and the charging party's relationship to others of the respondent's employees. In addition, investigators should consider the relationship between the treaty and the action an employer is alleged to have taken. A treaty permitting an employer to "engage" certain personnel of its choice is, for example, probably applicable not only to a charge of discriminatory hiring but also to one of unlawful discharge. MacNamara, 863 F.2d at 1141-42 (right to "engage" executives under Korean FCN treaty includes right to terminate current personnel and replace them with executives who share defendant's nationality). However, such a treaty may be inapplicable if the charge challenges wage discrimination. But see Spiess v. C. Itoh & Co. (America), Inc., 643 F.2d 353 (5th Cir. 1981) (applying treaty right to "engage" executives to case challenging company's policy of restricting promotions and benefits to Japanese citizens), vacated on other grounds, 457 U.S. 1128 (1982). On the issue of applying FCN treaties to particular employment practices generally, see, e.g., Street, "Korean Air Lines: The Future Interpretation of "Executive" and "Engage" in Friendship, Commerce and Navigation Treaties," 14 Hastings Int'l & Comp. L. Rev. 93 (1990). Once again, any resolution of the applicability of treaty protections will depend on the facts of the charge and the particular treaty at issue.

D. Assessing the Protection Granted by a Treaty

If a respondent can invoke treaty protections that cover the challenged employment practice, the final question to be addressed is the impact of the treaty on the application of Title VII or the ADA. Like other issues of coverage, this question ultimately depends on the language of the particular treaty at issue and on the intent of the treaty parties.

In general, FCN treaty provisions will control to the extent that they permit discriminatory conduct that would otherwise violate Title VII. See, e.g., Speiss, 643 F.2d at 356 ("unless federal civil rights laws reflect an affirmative disavowal of the rights provided by [a] Treaty, it is our duty to implement the treaty rights"); MacNamara, 863 F.2d at 1146 ("in the absence of evidence suggesting Congress intended subsequent legislation to affect existing treaty rights, and in the event the enactments conflict, the Treaty must prevail"). Even broadly worded treaties will not, however, "entitle a foreign company operating in the United States to select among American citizens on the basis of their age, race, sex, religion, or national origin." MacNamara, 863 F.2d at 1143; see also Wickes v. Olympic Airways, 745 F.2d 363, 365, 35 EPD ¶ 34,676 (6th Cir. 1984) (U.S./Greek FCN treaty "was intended to be a narrow privilege to employ Greek citizens for certain high level positions, not a wholesale immunity from compliance with labor laws prohibiting other forms of employment discrimination") (emphasis in original).

Most courts construing the scope of particular FCN treaties have further determined that the protection they extend is only the right of foreign companies covered by the treaty to prefer citizens of their own countries for executive, management, and other identified positions. See, e.g., Spiess, 643 F.2d at 359 (U.S./Japanese FCN treaty exempts covered companies "from domestic employment discrimination laws to the extent of permitting discrimination in favor of Japanese citizens in employment for executive and technical positions"); Wickes, supra, 745 F.2d at 365; MacNamara, 863 F.2d at 1140 (U.S./Korean FCN treaty intended to shelter foreign businesses from "any law . . . that would logically or pragmatically conflict with the right to select one's own nationals as managers because of their citizenship") (emphasis in original). Cf. Commission Decision No. 86-6, CCH Employment Practices Guide ¶ 6866 (international protocol did not immunize employer from any Title VII liability where it explicitly provided that foreign companies' rights would be exercised in accord with American employment laws).⁽¹⁹⁾

See Starrett v. Iberia Airlines, 756 F. Supp. 292, 295 (S.D. Tex. 1989).

Courts have also addressed the relationship between Title VII and a treaty that grants the right to prefer citizens. In MacNamara, for example, the Third Circuit determined that the U.S./Korean FCN treaty protected the right of a covered company to prefer its own citizens, but only because of their citizenship. As a result, the court held that the treaty barred disparate impact challenges against the Korean defendant that were based simply on the defendant's requirement that employees have Korean citizenship. In contrast, the court held that the treaty did not shield the foreign employer from disparate treatment claims alleging that the employer had intentionally preferred Korean citizens because of their race, sex, national origin, religion, or age. 863 F.2d at 1140-48; see also Brief of the United States as Amicus Curiae on Petition and Cross-Petition for a Writ of Certiorari in Korean Air Lines v. MacNamara, Nos. 88-1449, 88-1551 (Sept. 1989) (approving Third Circuit's reasoning). Compare, e.g., Fortino v. Quasar Co., 950 F.2d at 393 (refusing to decide whether FCN treaty "confers a blanket immunity from Title VII" for claims of intentional discrimination on the basis of national origin), with Avigliano v. Sumitomo Shoji America, 638 F.2d 552, 559, 24 EPD ¶ 31,460 (2d Cir. 1981)(treaty does not insulate Japanese employer from Title VII, because Title VII, through the BFOQ defense, permits company to employ "Japanese nationals in positions where such employment is reasonably necessary to the successful operation of its business"), vacated on other grounds, 457 U.S. 176, 29 EPD ¶ 32,782 (1982), and Linskey v. Heidelberg Eastern, Inc., 470 F. Supp. 1181, 1186, 20 EPD ¶ 30,058 (E.D.N.Y. 1979) (U.S./Danish FCN treaty "was not intended to immunize foreigners from claims under the host country's employment discrimination laws"). When questions about the scope of treaty protections arise, investigators should contact the Attorney of the Day.

III. CHARGE PROCESSING INSTRUCTIONS

Charges involving discrimination outside of the United States or discrimination by foreign companies inside the United States are very fact-specific. Defenses available to employers will vary with the particular facts of each case. The questions set forth below are offered as guidance for structuring an investigation. Investigators should bear in mind that these questions reflect the more detailed advice set forth above, and should consult the guidance as necessary for further information. Cross-references to the relevant sections of the guidance are included below.

The threshold question is whether the alleged discrimination occurred within or outside the United States.

A. Discrimination Outside the United States

B. Discrimination by Foreign Employers Within the United States

IV. CONCLUSION

Pursuant to Section 109 of the Civil Rights Act of 1991, Title VII and the ADA now cover discriminatory actions taken against U.S. citizens abroad by American or American-controlled employers. Jurisdiction over charges alleging extraterritorial discrimination thus depends on the status of both the charging party and the respondent. The charging party must be a U.S. citizen; the respondent must be an employer, or otherwise covered entity, and must be of American nationality or, if foreign, controlled by an employer of American nationality. Section 109 sets forth standards for determining control of a foreign corporation by an American employer and also identifies the requirements an employer must meet to establish a "foreign laws" defense.

Title VII and the ADA also cover discrimination by foreign companies within the United States, whether the charging party is a U.S. citizen or an alien. The extent of coverage in such situations is likely to depend on the existence of any treaties or international agreements between the United States and the home country of the foreign respondent.

Because of the potential sensitivity of issues involving relations between the United States and other countries, the Attorney of the Day should be consulted as questions arise about the scope of foreign laws or treaties or the appropriate handling of charges involving foreign policy concerns. The Attorney of the Day will then coordinate as necessary with the Department of State.

Oct. 20, 1993             ______/s/______
Date                      Tony E. Gallegos 
                          Chairman

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1. Extraterritorial discrimination and coverage of foreign employers under the Age Discrimination in Employment Act ("ADEA") are addressed in two prior Commission guidances that remain Commission precedent for ADEA charges. See "Policy Guidance: Application of the Age Discrimination in Employment Act (ADEA) and the Equal Pay Act of 1963 (EPA) to American firms overseas, their overseas subsidiaries, and foreign firms," No. N-915.039 (Mar. 3, 1989); and "Policy Guidance: Analysis of the sec. 4(f)(1) 'foreign laws' defense of the Age Discrimination in Employment Act of 1967," No. N-915.046 (Dec. 5, 1989). In addition, investigators may wish to consult a compilation of articles prepared by the Commission's library on "Multinational Businesses: How Do U.S. Equal Employment Laws Apply?" for further information on extraterritorial discrimination and coverage of foreign employers under each of the statutes enforced by the Commission.

2. Section 109 preserves the exemption in Section 702 of Title VII for "employer[s] with respect to the employment of aliens outside any State." As a result, foreign nationals working abroad are not protected under Title VII whether they work for American or foreign employers. Title VII does generally cover aliens working inside the United States. See, e.g., Espinoza v. Farah Manufacturing Co., 414 U.S. 86, 95, 6 EPD ¶ 8944 (1973).

Although the ADA does not contain an explicit exemption for aliens abroad, it is the Commission's position, based on the language of new Section 101(4) covering U.S. citizens overseas, that the standards governing coverage of aliens are the same under both the ADA and Title VII.

3. Section 109 (c) further states that the amendments made by the section do not apply to pre-Act conduct. As a result, the Commission lacks jurisdiction over charges challenging discrimination that occurred overseas prior to the effective date of the Act, November 21, 1991. Such charges, whenever filed, should be dismissed unless the charge alleges an ongoing violation, in which case investigators should consult with their Regional Attorney.

4. Questions related to the nationality or "control" of a foreign entity will generally arise only in those charges alleging that discriminatory conduct has occurred abroad. Where discrimination occurs within the United States, it is the Commission's position that Title VII and the ADA will, absent treaty constraints, generally apply even to foreign employers not controlled by U.S. entities. See discussion in Section II, infra; compare Helm v. South African Airways, 44 FEP Cases 261, 267, 43 EPD ¶ 37,303 (S.D.N.Y. 1987) (ADEA exemption for foreign companies not controlled by American employers not applicable where discrimination occurred within the United States). In charges alleging discrimination inside the United States, therefore, questions of nationality will typically arise, if at all, only in assessing the applicability of specific treaty protections. See Section II, infra.

5. In making the nationality determination, investigators should bear in mind that any named respondent must also be an "employer," or an otherwise covered entity, under the relevant statute. For example, to be an "employer" under Title VII, an entity must be engaged in an industry affecting commerce and must employ 15 or more employees in each of twenty weeks in the current or preceding calendar year. Title VII, Section 701(a). The definition of "employer" under the ADA is similar, except that an entity must have 25 or more employees to be covered through July 26, 1994, and 15 or more employees thereafter. ADA, Section 101(5).

6. A foreign entity will be found to be controlled only if it is, in effect, an integrated enterprise with an American employer. For purposes of assessing control under Section 109, the portion of the policy statement addressing the concept of joint employers is irrelevant.

7. See also Mas Marques v. Digital Equipment Corp., 637 F.2d 24, 24 EPD ¶ 31,415 (1st Cir. 1980) (in suit claiming extraterritorial discrimination on basis of national origin, finding wholly owned foreign subsidiary not integrated with American parent where only connection between two companies was that subsidiary purchased half its inventory from parent, and where each company had separate corporate structure, facilities, work force, business records, and personnel policies); compare Chaiffetz y. Robertson Research Holding, Ltd., 798 F.2d 731, 735, 41 EPD ¶ 36,525 (5th Cir. 1986) (in suit challenging discrimination within United States, adopting four-factor integrated enterprise test to assess whether a foreign parent and its American subsidiary were a single employer under Title VII); Linskey v. Heidelberg Eastern,# Inc., 470 F. Supp. 1181, 20 EPD ¶ 30,058 (E.D.N.Y. 1979) (same).

8. If it is determined that a foreign entity is in fact "controlled" by an American employer, investigators should consider naming both the U.S. and the foreign companies if warranted by the facts of the charge. See Policy Guidance on Overseas Application of the ADEA at p. 9 (failure of foreign firm controlled by an American employer to comply with ADEA "could result in liability for both the controlling firm and its subsidiary") (emphasis in original); compare Lavrov, 600 F. Supp. at 931-32 (finding Title VII inapplicable to foreign corporations, but prior to 1991 amendment). In cases in which a foreign entity is named directly, it must be an "employer" or an otherwise covered entity under the relevant statute.

It should be noted that attempts to apply Title VII or the ADA to foreign, as well as American, employers -- at least when the discrimination occurred abroad -- may raise questions about the Commission's personal jurisdiction over the foreign company, i.e., about the Commission's ability, independent of whether the company is a covered entity under Title VII or the ADA, to subject the company to any Commission processes or to enforce its subpoenas in court. See, e.g., Lavrov, 600 F. Supp. at 930; Mas Marques v. Digital Equipment Corp., 637 F.2d 24, 28, 24 EPD y 31,415 (1st Cir. 1980) (refusing to exercise personal jurisdiction over foreign subsidiary of American company). As a general rule, due process requires that an employer have minimum contacts with the United States before such jurisdiction may be asserted. See,e.g., Commission Decision No. 85-16, CCH Employment Practices Guide ¶ 6857 (even if respondent is a Title VII employer, due process requires minimum contacts for it to be named in charge); Lavrov, 600 F. Supp. at 930 (noting cases holding that presence of American parent may occasionally be sufficient to assert personal jurisdiction over a subsidiary where the subsidiary is "a mere instrumentality" of the parent). These contacts must be assessed on a case-by-case basis. If questions arise about whether jurisdiction should be asserted over foreign employers in such charges, investigators should consult with their Regional Attorney.

9. Although the term "employer" is generally used for ease of reference, Section 109 provides a foreign laws defense for all entities covered under Title VII and the ADA, including employment agencies, labor organizations, and foreign corporations controlled by American employers. It should also be noted that, independent of the defense provided by Section 109, respondents may assert in some cases that obligations imposed by international treaty dictated their discriminatory conduct abroad. See, e.g., Commission Decision No. 90-1, CCH Employment Practices Guide ¶ 6875 (rejecting respondent's claim that treaties and foreign law mandated discriminatory treatment of charging parties in Turkey). Investigators should contact the Attorney of. the Day when a treaty-based defense is raised in charges alleging extraterritorial discrimination. (S)he will then contact the Department of State.

10. As is typically true of statutory defenses or exemptions, it is the employer's burden to prove that the foreign laws defense is applicable and that the standards of the defense are satisfied. Cf., International Union, United Automobile, Aerospace & Agricultural Implement Workers of America, UAW v. Johnson Controls, 499 U.S. 187, 111 S. Ct. 1196, 1204, 55 EPD ¶ 40,605 (1991) (fetal protection policy violates Title VII unless employer can prove that sex is a bona fide occupational qualification); EEOC Compliance Manual, Vol. II, Section 625.4 (b). This is the Commission's position on the identical defense under the ADEA. See Policy Guidance on ADEA Foreign Laws Defense at pp. 3, 6, 7 (referring to proof burdens on an employer); see also Mahoney v. RFE/RL, Inc., 818 F. Supp. 1, 60 EPD ¶ 41,959 (D.D.C. 1992) (without discussion, assigning burden of proving an ADEA foreign laws defense to employer). An employer operating in a foreign country has the best information about the existence of any applicable foreign law, the constraints on its operations that the law imposes, and the alternatives available to it in complying with the requirements both of that foreign law and of Title VII or the ADA. As a result, it is appropriate for the employer to demonstrate that all elements of a foreign laws defense are met.

11. Example 2 of the Policy Guidance on the ADEA Foreign Laws Defense makes clear that an entity's corporate charter will not be treated as a foreign law simply because the charter is registered with a foreign government agency. Example 3 of that guidance indicates that a bill passed by one house of a foreign legislature will not be regarded as a foreign law if the Constitution of the foreign country requires that a bill be passed by both houses of the legislature before being given the force and effect of law within the country.

12. Cf. also Abrams v. Baylor College of Medicine, 581 F. Supp. 1570, 1576, 1577, 34 EPD ¶ 34,303 (S.D. Tex. 1984) (finding violation of Title VII where employer rejected Jewish applicants for rotation program in Saudi Arabia based merely on informal conversations with Saudi officials; "various gleaned impressions to the effect that the Saudis did not want any Jews in their country;" and a "paternalistic 'concern' for the safety of Jews traveling to Arab lands"), aff'd in relevant part, 805 F. 2d 528, 41 EPD ¶ 36,682 (5th Cir. 1986); Fernandez v. Wynn Oil Co., 653 F.2d 1273, 1276-77, 26 EPD ¶ 32,060 (9th Cir. 1981) (stereotypes that South American clients would refuse to deal with female executive insufficient to provide BFOQ for sex discrimination in denying job to woman in United States).

13. The laws of the country in which the workplace would, absent the discrimination, have been located may be relevant in cases alleging, for example, that an American employer with offices in Country X has refused to transfer a female employee in that country to its offices in Country Y because of Country Y's statutory restrictions on the employment of women. Because the charging party in such a case would have had a workplace in Country Y, it is that country's laws that would be relevant for purposes of the foreign laws defense, even though the charging party's then current workplace is elsewhere. Cf. Commission Decision No. 85-10, CCH Employment Practices Guide ¶ 6851 (finding that respondent had articulated a legitimate, nondiscriminatory reason for failure to hire female charging party in U.S. for job in foreign country where that country would not approve charging party's application for employment or issue her a work permit).

14. Personal jurisdiction over a foreign employer will not typically be in question in charges which allege that the foreign employer does business within the United States and that the discrimination arises from that business. See Commission Decision No. 84-2, supra (asserting jurisdiction over foreign respondent that recruited applicants in the United States in charge alleging discrimination in the recruitment process). Of course, any foreign respondent must be a covered entity under either Title VII or the ADA, as relevant. Id. (foreign respondent was an "employer" engaged in commerce under Title VII based on its recruitment activities in the United States).

15. If the respondent is a foreign state, or an agency or instrumentality of a foreign government, it might also claim to be insulated from Title VII and the ADA by the Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1602 et seq. ("FSIA") (1988 & Supp. III 1991). The question whether a company is an agency or instrumentality of a "foreign state" under the FSIA may depend, in part, on the extent to which the company is owned by a foreign government. See 28 U.S.C. § 1603(b); see also Commission Decision No. 85-11, CCH Employment Practices Guide ¶ 6852 (educational and cultural exchange center was a "foreign state" because fully funded by foreign government). Even if an employer is a "foreign state," however, it is not immune from suits based, among other things, on "a commercial activity carried on in the United States." 28 U.S.C. § 1605(a)(2). The legislative history of the FSIA states that "activities such as a foreign government's . . . employment or engagement of laborers, clerical staff or public relations or marketing agents" are considered commercial, as is "the employment of American citizens or third country nationals by the foreign state in the United States." H.R. Rep. No. 1487, 94th Cong., 2d Sess. 16, reprinted in 1976 U.S. Code Cong. & Ad. News 6604, 6615. See also Commission Decision No. 85-11, supra (discussing scope of "commercial activity" exemption from immunity and noting that governmental purpose of activity does not assure immunity). Investigators should contact the Attorney of the Day if questions concerning the FSIA arise.

16. As noted in note 9, supra, the provisions of a treaty might also be raised as a defense to a charge that an American or American-controlled entity has engaged in extraterritorial discrimination. Investigators should contact the Attorney of the Day in such circumstances.

17. The Seventh Circuit sets governing precedent for courts located in Illinois, Wisconsin, and Indiana.

18. As noted in text previously, Sumitomo and Fortino interpreted only the U.S./Japanese FCN treaty. As a result, the Commission will consult with the Department of State on whether place of incorporation is the controlling factor in assessing the coverage of other FCN treaties, or on the treaty rights of U.S. subsidiaries owned by non-Japanese foreign corporations. As noted previously, therefore, the Attorney of the Day should be contacted whenever the provisions of other FCN treaties are asserted as a defense.

19. Rejecting the reasoning of Commission Decision No. 86-6, supra, the court in Lemnitzer v. Philippine Airlines, 783 F. Supp. 1238, 1243, 58 EPD ¶ 41,319 (N.D. Cal. 1991), read the terms of a U.S.-Philippine Air Transport Agreement ("ATA") to bar claims that a foreign employer's preference for Philippine citizens discriminated on the basis of age and national origin. The ATA provided that "the designated airline . . . may, in accordance with the laws and regulations of the other Party relating to entry, residence and employment, bring in and maintain in the territory of the other Party managerial, sales, technical, operational and other specialist staff required for the provision of air transportation." The district court reasoned that the language exempted the airline from antidiscrimination laws for purposes of the referenced positions. The Commission disagrees with this ruling and concludes that treaties that permit an employer to bring in staff "in accordance with [U.S.] laws . . . relating to . . . employment," fully subject the employer to U.S. antidiscrimination laws. See Commission Decision No. 86-6, supra; Brief of the Equal Employment Opportunity Commission as Amicus Curiae in Lemnitzer v. Philippine Airlines, No. 92-17073 (9th Cir., filed April 28, 1993). Even if the language of the ATA could be analogized to that of FCN treaties like those at issue in MacNamara and Wickes, as discussed above, the Commission's position is that the right conferred by such treaties is only to prefer one's own citizens because of their citizenship, not to prefer people on bases prohibited by Title VII, the ADA or the ADEA. Ibid.