Buying a business? Don’t acquire employment lawsuit

When acquiring another business, companies sometimes unwittingly buy an employment lawsuit. Recently, the U.S. 10th Circuit Court of Appeals (the federal appeals court whose rulings apply to Oklahoma employers) explained when a successor business can be held liable for discriminatory acts committed by its predecessor.

Bad actor

In 2009, Larry Whitten bought the Paragon Hotel in Taos, New Mexico, and renamed it the Whitten Inn. The hotel was staffed by many long-time Hispanic employees, whom Whitten treated horribly. He announced employees weren’t allowed to speak Spanish in his presence, and he consistently treated white employees more favorably. His offensive racial and ethnic comments were commonplace, including:

• Referring to housekeepers as “wetbacks”;
• Stating he was “glad to get rid of all the Mexicans”; and
• Calling Hispanic employees “Paco,” “Sanchez,” or “Buckwheat” rather than their real names.

When employees complained about mistreatment, Whitten fired them.

Hotel sells, EEOC lawsuit advances

Unsurprisingly, former Whitten Inn workers filed discrimination charges against the company with the Equal Employment Opportunity Commission (EEOC). In July 2013, the EEOC informed Whitten that during its investigation the agency had found reasonable cause to believe the hotel had discriminated and retaliated against its Hispanic employees.

In May 2014, Jai Hanuman, LLC purchased the hotel from Whitten’s company and renamed it the El Camino Lodge.