Japanese Parent Company May Be Liable for Employment Decisions of Its US Subsidiary

The U.S. Court of Appeals for the Second Circuit recently decided a case that should be taken into consideration when Japanese (and other foreign-based) companies determine the level of active involvement that their parent company will have in making employment decisions affecting U.S.-based employees. In Brown v. Daikin Am. Inc., the plaintiff, Todd Brown, filed a race and national origin discrimination lawsuit against both his employer, Daikin America, and its Japanese parent company, Daikin Industries, Ltd., located in Japan.

The federal district court (the lowest level federal court) for the Southern District of New York (which includes New York City) had held that Brown failed to state a claim against the Japanese parent company, Daikin Industries, on his race and national origin discrimination claims. The court held, among other things, that Daikin Industries, as the parent company, was not Brown’s “employer,” a primary element of a discrimination claim under federal, state, and New York City anti-discrimination laws. On appeal by the plaintiff, the Second Circuit of Appeals “reversed,” finding that the American subsidiary and the Japanese corporate parent were, on the fact before it, part of a “single integrated enterprise” and that the parent could therefore be considered Brown’s “employer.”