Equal Emp't Opportunity Comm'n v. Mgmt. Hospitality of Racine, Inc.

• Decision Date: 09 January 2012
• Docket Number: No. 10–3247.,10–3247.
• Parties: EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff–Appellee, v. MANAGEMENT HOSPITALITY OF RACINE, INC. d/b/a International House of Pancakes, Flipmeastack, Inc. and Salauddin Janmohammed, Defendants–Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

114 Fair Empl.Prac.Cas. (BNA) 145

666 F.3d 422

95 Empl. Prac. Dec. P 44,380

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff–Appellee,

v.MANAGEMENT HOSPITALITY OF RACINE, INC. d/b/a International House of Pancakes, Flipmeastack, Inc. and Salauddin Janmohammed, Defendants–Appellants.

No. 10–3247.

United States Court of Appeals, Seventh Circuit.

Argued April 5, 2011.Decided Jan. 9, 2012.

Paula R. Bruner (argued), Attorney, Equal Employment Opportunity Commission, Washington, DC, for Plaintiff–Appellee.

Robert M. Mihelich (argued), Attorney, Law Offices of Robert M. Mihelich, New Berlin, WI, for Defendants–Appellants.

Before EASTERBROOK, Chief Judge, BAUER, Circuit Judge, and YOUNG, District Judge.^*YOUNG, District Judge.

The Equal Employment Opportunity Commission (“EEOC”) brought this action on behalf of two servers, Katrina Shisler and Michelle Powell, who were employed at an International House of Pancakes franchise in Racine, Wisconsin (the “Racine IHOP”), alleging that the servers were sexually harassed in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. A jury found in favor of Shisler and Powell on the hostile work environment claim, and against the Defendants, Management Hospitality of Racine, Inc. (“MHR”) d/b/a International House of Pancakes, Flipmeastack, Inc., and Salauddin Janmohammed. The jury awarded compensatory damages to Shisler and Powell, and awarded punitive damages to Powell.

Following the jury verdict, the EEOC filed a document entitled EEOC's Post–Trial Motions that addressed two motions: a motion for judgment against Defendants Flipmeastack and Salauddin Janmohammed and a motion for an order of injunctive relief. The Defendants filed a Motion for Judgment as a Matter of Law or Alternatively for a New Trial or Remittitur. By Decision and Order dated August 31, 2010, the district court denied the Defendants' motions, granted the EEOC's motions, and entered judgment in favor of the EEOC, and an injunction against Flipmeastack, Inc. This appeal followed. For the reasons set forth below, we reverse in part, and affirm in part.

I. Background

The recitation of the relevant facts that follow are presented in the light most favorable to the EEOC, as they relate to the Defendants' Rule 50 motion and the jury's verdict. Molnar v. Booth, 229 F.3d 593, 597 (7th Cir.2000). All other facts necessary for resolution of this appeal, including the facts relevant to the district court's conclusion that Flipmeastack was an “employer” of Shisler and Powell, will be addressed in the Discussion Section.

A. The Defendants

Janmohammed was the principal owner and franchisee of twenty-one IHOPs, including the Racine IHOP. He operated the Racine IHOP under the franchise name of MHR ¹, and was its president and sole shareholder. MHR contracted with Flipmeastack, a company solely owned by Janmohammed's wife, Victoria Janmohammed, to provide management consulting services for his IHOPs. These services included accounting and payroll, corporate IHOP franchise reporting and compliance, and human resources assistance. In addition, Flipmeastack hired the district managers, who, in turn, hired the general managers of each restaurant in the district, and oversaw the day-to-day operations of those particular restaurants. In 2005, Steve Smith was the district manager of the Racine IHOP, Michelle Dahl was the general manager, and Nadia Del Rio and Rosalio “Junior” Gutierrez were the assistant managers. The employees of each restaurant, including the general manager, assistant managers, and servers, were employees of MHR.

B. The Sexual Harassment Policy

In 2005, Flipmeastack formulated and updated the Sexual Harassment and Diversity Policy for managers and employees of MHR. The policy indicated that “any form of unlawful harassment of co-workers or members of the public is absolutely forbidden, regardless of whether it is verbal, physical, or visual harassment.” It also stated that employees “will report any instances of improper behavior to my manager or company representative.” Victoria Janmohammed confirmed that Gutierrez, Del Rio, and Dahl were managers or “company representatives” within the meaning of the policy, and that a complaint to any one of those three would be effective. As the general manager, Dahl was responsible for maintaining a workplace free of sexual harassment and for reporting instances of sexual harassment to upper management, and Del Rio was responsible for training all new hires. This training consisted of showing all new hires a sexual harassment videotape, handing them a copy of the sexual harassment policy, and asking them to read and sign it. Both Shisler and Powell viewed the videotape and signed Flipmeastack's sexual harassment policy. Shisler's and Powell's signed copies of the sexual harassment policy, like all copies signed by IHOP servers, were locked in a file cabinet. The complaint procedure was not available in print.

In 2005, corporate IHOP directed that a crisis management guidelines poster be displayed in every IHOP restaurant. The poster provided a list of telephone numbers in case of an emergency, such as an armed robbery, flood, earthquake, or “other emergency,” such as a “discrimination claim.” The poster included the telephone number of Flipmeastack, the corporate number of IHOP, and the cell phone number of Smith. Neither Shisler nor Powell had any recollection of seeing the poster in the Racine IHOP.

C. The Claimants

Shisler, a teenager, worked at the Racine IHOP on two different occasions. During her first term of employment in January 2004, Shisler testified that the general manager of the Racine IHOP, Charles Hecker, was sexually harassing a female server named Christine. Shisler gave Smith a written letter informing him of that fact, and complaining that she and her boyfriend were receiving unfair work assignments. According to Shisler, Smith's response was “passive” and he never “really sa[id] whether or not he was going to take care of it.” Shisler never heard from Smith regarding those issues; however, she testified that Hecker started to treat her differently, and “stated things that he only could have either been told, or read himself in the letter.” After things worsened with Hecker, Shisler “called the Corporation” and was told she “had to go to [Smith] about it.” In light of Hecker's treatment of her, she did not complain again to Smith. Ultimately, Hecker fired Shisler.

Her second term of employment began on March 3, 2005. By this time, Dahl served as the general manager of the Racine IHOP. Gutierrez, who was approximately 10 years older than Shisler, was relatively new to the position and worked as the night manager (5:00 p.m. to 3:00 a.m.), while Shisler worked the second shift (3:00 p.m. to 11:00 p.m.); consequently, their schedules overlapped. Shisler testified that whenever she worked with Gutierrez, he made sexually charged comments to her, including, “I want to take you in the back and fuck you over the pancake batter,” “I bet you're kinky,” and “you like it rough.” Gutierrez even propositioned her for three-way sex with his (allegedly) bisexual girlfriend. Gutierrez stared at her body, breasts and buttocks, like she was “a piece of meat,” rubbed her shoulders and pressed his body up against hers, and made her feel very “uncomfortable.” Shisler “told him to get the fuck away from [her].” She felt “bullied” by him and felt “dirty” after he told the cooks in Spanish that he wanted to have sex with her. On March 18, 2005, Shisler, along with two other servers, reported Gutierrez's behavior to Del Rio. Shisler told Del Rio that she would have to be “blind” if she did not “see it going on.” Del Rio “blew [them] off,” shook her head, and called them “silly girls.”

At some point after Shisler reported Gutierrez's behavior to Del Rio, Gutierrez “slap groped” her buttocks as she was bending over to pick up hot sauce from the floor. Shisler told Gutierrez to “get the fuck off [her].” On March 27, 2005, Shisler reported Gutierrez's behavior to Dahl, who said that this was “none of [her] concern” and then said “we're done here.” After her complaints fell on deaf ears, Shisler “gave up” and kept working “because [she] needed the money.” On April 3, 2005, Dahl terminated Shisler for violating the Racine IHOP's coupon policy, which barred servers from possessing coupons and giving them to customers.

Powell, also a teenager, worked at the Racine IHOP from October or December 2004 until June 2006. Powell generally worked the first shift (6:00 a.m. to 3:00 p.m.), so she worked with Gutierrez when their schedules overlapped—approximately once a week. Powell testified that in late February 2005, Gutierrez began to make offensive comments to Powell such as her “ass looked good in them pants.” Initially, Powell thought Gutierrez's comments were “inappropriate,” but “laughed it off, thinking it was a joke[.]” Powell's thoughts changed when “his harassment continued and became more severe,” to the point where “she tried to avoid him at all costs.”

Gutierrez pulled her ponytail whenever he could and told her that she “liked it because [she] would like [sex] rough.” Gutierrez also whispered in her ear that he would like to “eat [her] out” and left a voicemail on Powell's cell phone asking Powell “to hook up” with him. On one occasion while Powell and Gutierrez were in the kitchen, Gutierrez told the cooks in Spanish “how badly he wanted to fuck [Powell] and [she] wouldn't let him” and then translated what he said to her. He also told her “he thought [she] would get freaky with sex.” On another occasion, Gutierrez took Powell into the dry storage area and pressed himself up against her while telling her that he “would like to do [her] from behind.” Powell also recalled that when Gutierrez walked past her, he would frequently brush up against her breasts and buttocks. Powell repeatedly objected to Gutierrez's behavior, and asked him...