Posted on: April 23rd, 2018

Patricia Georgesen started a small business named Derby Insurance Agency (Derby), a subchapter S corporation, in 1991.  Her husband also worked at Derby Insurance.  In 1998, Joanne Cote began working at Derby as a customer service representative.  On October 12, 2012, Derby sold its assets, goodwill, and book of business to Derby Insurance Services, Inc. (Services).

Cote filed a complaint of discrimination with the Iowa Civil Rights Commission on April 10, 2013.  In response, Derby filed a motion for summary judgment, alleging that the Iowa Civil Rights Act did not apply because Derby regularly employed fewer than four individuals, not counting Patricia’s family members, citing the family member exception contained in Iowa Code section 216.6(6)(a).

The Iowa Supreme Court took up the issue to determine if a corporate employer may claim the family-member exception to the numerosity requirement in section 216.6(6)(a) of the Iowa Code.  Derby argued that when the employer is a corporation, the family members of the sole owner should be considered the employer’s family members.  Of note, Iowa Code section 216 prohibits various discriminatory employment practices, but the statute does not apply to any employer who regularly employs less than four individuals.  The Iowa Supreme Court held that corporate employers cannot have family members as applied to section 216.  As such, the Court determined that Derby did not qualify for the family-member exception.

Cote v. Derby Ins. Agency, Inc., No. 16-0558, 2018 WL 1224522 (Iowa Mar. 9, 2018)

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