Most employment law attorneys previously believed that holding a small business with less then 15 employees liable under Title VII was impossible, pursuant to the definition of “employer” in Title VII. However, the Supreme Court recently ruled that a plaintiff can recover from an employer with fewer than 15 employees under Title VII if the employer fails to object to the lawsuit in a timely manner. Arbaugh v. Y & H Corp. , d/b/a The Moonlight Café, 546 U. S. ___, 126 S. Crt. 1235 (2006). Attorneys defending small businesses against a Title VII claim need to be aware that the claim that their client is not an “employer,” pursuant to the terms of the statute, can be waived if it is not raised early enough in the litigation.

The Supreme Court’s decision arose from a lawsuit filed by a former employee of a small business. Jenifer Arbaugh brought a Title VII sexual harassment action in federal court against her former employer, Y & H Corporation. Ms. Arbaugh, a bartender and waitress at the Moonlight Café in New Orleans, claimed that she was forced to quit her job because of sexual harassment by her supervisor. Ms. Arbaugh filed suit against the café’s owner, Y & H corporation, alleging a Title VII cause of action with jurisdiction arising under 28 USC §1331, as well as Louisiana state law claims that where subject to supplemental jurisdiction. Y & H admitted the jurisdictional allegations, but denied the factual contentions and merits of the claim. The case was tried to a jury and the jury returned a verdict in favor of Ms. Arbaugh for $40,000.
The district court judge entered judgment on the jury’s verdict. Two weeks after the district court entered judgment on the jury verdict, Y & H moved to dismiss the entire action for lack of federal subject-matter jurisdiction. For the first time since the litigation began, Y & H asserted that it ha