Virginia Business Law Update : Virginia Business Lawyers & Attorneys : PCT Law Group : Litigation Defenses, Contract Disputes, Business Formation : Northern Virginia, Arlington, Fairfax, Alexandria

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The Eastern District of Virginia, Alexandria Division, recently decided a case of apparent first impression involving the Native Corporations exception to Title VII’s prohibition on unlawful employment practices. The Court concluded that there were too many layers of ownership between the employer defendant and the exempt Native Corporations company, and thus, the race discrimination case against it could go forward to trial.

In Tony Fox v. Portico Reality Services Office, a former foreman at Portico’s Manassas, Virginia office alleged he was treated differently from other non-African-American employees. During his employment with Portico, he claimed that he was the subject of numerous offensive racial remarks, was not given a regularly-scheduled pay raise like other employees, and was eventually discriminatorily fired from his job.

Portico requested summary dismissal of the discrimination claim on the basis that it was a wholly-owned, indirect subsidiary of NANA Regional Corporation, an Alaskan Native Corporation. Certain groups and entities, such as Indian tribes, private membership clubs and Alaska Native Corporations are not considered to be “employers’ under Title VII’s statutory definition, and thus, are not subject to its prohibitions. Alaska Native Corporations play special roles in controlling lands and funds for Alaskan Natives, and the underlying purpose of its exception was to permit hiring favoritism toward Alaska Natives without violating Title VII.

Here, Portico is an Alaska limited liability company, but with its principal place of business in Virginia. Portico’s sole member, Qivliq LLC is a wholly-owned subsidiary of NANA Development Corporation. NANA Development is a wholly-owned subsidiary of NANA Regional Corporation - the Native Corporation. In interpreting the statute narrowly, the Court ruled that the Native Corporation exception applies to subsidiaries only where the Native Corporation directly owns the subsidiary.

It is important to note that Section 1981 of the Civil Rights Act of 1866, which provides a separate and independent basis for relief for race discrimination in private employment, contains no similar exception for Alaska Native Corporations. Thus, even Native Corporations and their direct subsidiaries may be held liable under this statute.