Michigan Supreme Court’s Rouch World Decision Means Big Changes for Small Businesses

By Adam Ratliff and Steve Palazzolo

Originally featured in SBAM’s FOCUS Magazine

On July 28, the Michigan Supreme Court released its decision in one of its most closely watched cases of the year. In Rouch World, LLC v. Department of Civil Rights, the Court held in a 5-to-2 decision that Michigan’s Elliott-Larsen Civil Rights Act (ELCRA) prohibits discrimination due to an individual’s sexual orientation. Small businesses should take note—the law applies to nearly every public-facing business, employer and landlord, among others.

The case stems from a complaint filed with the Michigan Department of Civil Rights by a same-sex couple that had been denied the opportunity to host their wedding reception at an event center. The owners of the event center refused to host the reception based on sincerely held religious beliefs that define marriage as between one man and one woman.

The case was expedited to the Michigan Supreme Court, presenting the question of whether the law’s prohibition on discrimination “because of… sex” included a prohibition due to an individual’s sexual orientation. The Court ruled in favor of the same-sex couple.

In doing so, the Court closely followed the U.S. Supreme Court’s 2020 decision in Bostock v. Clayton County, GA, 590 U.S. __, 140 S.Ct. 1731, which held that Title VII of the Civil Rights Act of 1964—the federal statute that prohibits discrimination in employment decisions “because of sex”— applied to alleged acts of discrimination based on sexual orientation. The Michigan Court agreed, explaining that discrimination against a male employee because he is attracted to other men, is discrimination based on sex, meaning the employee would not have been discriminated against if the employee were a woman attracted to men.

The Court did not address whether the event center’s or its owners’ religious beliefs would allow them to escape the discrimination ban because of constitutionally protected religious liberties; that issue is for future litigation.

The Court also did not address a companion case, which had raised the question of whether the same Michigan law provides protection against discrimination based on gender identity, although a lower Michigan court has already applied the same reasoning to hold that it does prohibit gender-identity discrimination.

The Michigan Supreme Court’s decision affects nearly every small business in the state, and there are a few simple steps small businesses can take in response.

First, consider whether your business falls within the scope of ELCRA, the law at issue in the case. The answer is very likely “yes.” As noted above, ELCRA applies to nearly every public-facing business, employer and landlord in Michigan. This is because ELCRA prohibits discrimination by places of public accommodation, by educational institutions, in housing and in employment.

So while Rouch World dealt with a specific place of public accommodation—a wedding venue—the Court’s holding that “sex” includes discrimination on the basis of “sexual orientation” applies equally to each of ELCRA’s prohibitions (i.e., employment, housing and education too).

And, as in the facts of the Rouch World case, ELCRA’s application to places of public accommodations prohibits discrimination against customers or clients. ELCRA defines a place of “public accommodation” as all businesses and facilities available to the public. So, like the wedding venue owners in the case, all Michigan businesses should heed the ruling and consider their public-facing policies and workforce training accordingly.

The same is true from an employer standpoint. An “employer” under ELCRA is anyone who employs one or more employees. Notably, this is more expansive than the federal Title VII, which only applies to employers with 15 or more employees.

Employers should consider their relevant policies. Any policy prohibiting discrimination or retaliation should be updated to also specifically prohibit discrimination or retaliation on the basis of sexual orientation. In light of the current legal landscape, employers should consider including prohibitions of discrimination based on gender identity too.

While it is true that the Rouch World decision did not deal with gender identity specifically, a lower Michigan court has held that it is encompassed by the statute, as did the U.S. Supreme Court in relation to Title VII. Adding sexual orientation and gender identity to the list of protected categories in policies and policies against harassment are good places to start.

Employers should also consider reviewing their job applications and employee handbook acknowledgments. As a result of the Court’s ruling, claims based on alleged discrimination due to sexual orientation are no longer subject to Title VII’s prerequisite that the employee file a claim with the Equal Employment Opportunity Commission or Michigan Department of Civil Rights within 300 days of the alleged discrimination.

Now, like other ELCRA claims, a potential plaintiff has up to three years to file a lawsuit, without any prerequisite. Traditionally, employers and employees in Michigan have been able to shorten this timeframe by agreement to as short as 180 days, and the Michigan Court of Appeals just affirmed as much in a July 21, 2022, opinion in Adilovic v. Monroe, LLC, Case No. 357342. However that issue is also under review in a case before the Michigan Supreme Court right now. Small businesses should watch that case, McMillion v. City of Kalamazoo, and consider their employee applications and handbook acknowledgements accordingly.

The Court’s decision in Rouch World undoubtedly expanded the world of potential liability for small businesses. But by assessing exposure and reacting accordingly, businesses can ensure that they remain compliant.

Adam Ratliff is a trial and appellate litigator focusing on complex and high-stakes matters, advising clients at all stages of business and contractual disputes—from pre-litigation planning through trial or arbitration and on appeal. Adam has particular experience in the automotive supply chain. This work includes counseling automotive clients on emergency supply disputes, having both successfully obtained and defended against emergency injunctions. As a specialist in appeals, Adam brings a successful track record and experience before state and federal courts, including as a member of a team that argued in the U.S. Supreme Court.

Steve Palazzolo has extensive and varied experience counseling clients on all aspects of the employment relationship. His practice focuses on employee relation issues in both union and nonunion workplaces. He assists employers in navigating all major federal and state labor and employment laws and international labor relations. In addition to counseling clients on day-to-day labor and employment matters, Steve’s services extend to the labor and employment law aspects of mergers and acquisitions, employee benefits and employment and civil rights litigation. He advocates for organizations in the automotive supply, agriculture, finance, food processing, hospitality, higher education and health care industries, ranging from start-ups to large Fortune 500 clients. Steve is also an in-demand speaker for many industry organizations.