Within the 9th Circuit, does the National Bank Act preempt Title VII of the Civil Rights Act of 1964? Here’s my point of view.
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THE NATIONAL BANK ACT
The National Bank Act provides, inter alia, that a national bank shall have the power “[t]o elect or appoint directors, and by its board of directors to appoint a president, vice president, cashier, and other officers, define their duties, require bonds of them and fix the penalty thereof, dismiss such officers or any of them at pleasure, and appoint others to fill their places.” 12 U.S.C. § 24(Fifth) (emphasis added).
This is also known as the “at-pleasure provision” of § 24(Fifth) that is part of the scheme of federal laws governing the duties and powers of federally chartered banks. Thus, as a threshold matter, a federally chartered bank seeking to utilize the at-pleasure provision to preempt an employee’s claims for relief under other laws must first show that the employee was (1) appointed by the board of directors, (2) terminated by the board of directors, and (3) an officer.
THE PURPOSE
The original congressional intent behind the at-pleasure provision of the National Bank Act was to ensure the financial stability of the banking institutions by affording them the means to discharge employees who were felt to compromise an institution’s integrity. Kroske v. United States Bank Corp., 432 F.3d 976, 983-84 (9th Cir. 2005) (internal citations and quotation marks omitted).
Accordingly, courts uniformly have concluded that a bank’s power to dismiss at pleasure is analogous to dismiss at will, implying the absence of a contractual relationship between employer and employee. Id. at 984 (internal citations and quotation marks omitted).
THE CIVIL RIGHTS ACT OF 1964
On the other hand, Title VII of the Civil Rights Act of 1964 makes it unlawful for certain employers (e.g., a bank) to discriminate against an individual on the basis of race, color, religion, national origin, or sex; additional organizational forms are within purview of Title VII, but they are beyond the scope of this article.
Title VII also makes it illegal to retaliate against an individual because the person complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit.
THE INTERSECTION
The intersection of the at-pleasure provision and Title VII presents a potential conflict of laws; and the 9th Circuit, in Kroske v. US Bank Corp, resolved the conflict in favor of bank officers both hired and fired by the board of directors. See Kroske v. United States Bank Corp., 432 F.3d 976 (9th Cir. 2005).
In Kroske, Kathy Kroske was a bank officer that was both hired and fired by the board of directors, and Kroske subsequently filed suit against the bank alleging age discrimination under Washington Law Against Discrimination (WLAD). Accordingly, one of the issues the court addressed was whether the at-pleasure provision preempted her age discrimination claim under WLAD?
The court, in reaching its conclusion (the analysis is beyond the scope of this article), found, inter alia, that federal anti-discrimination statutes were relevant to its inquiry because federally chartered banks are not exempt from liability under those laws. Id. at 986 (see Cooper v. Fed. Reserve Bank, 467 U.S. 867 (1984) (holding that members of a class of black employees of a Federal Reserve Bank could maintain separate actions against the bank under Title VII); see also Enforcement Guidance on Coverage of Federal Reserve Banks, EEOC Decision No. N-915-002 (1993) (concluding that Federal Reserve Banks are not executive agencies and are covered by Title VII, the ADEA, the Equal Pay Act (“EPA”), and the Americans with Disabilities Act (“ADA”) as private employers)).
The court went on to find that courts that have addressed the issue consistently have held that banks are subject to liability for discrimination under federal anti-discrimination laws irrespective of the bank’s right to dismiss an officer (or employee) at pleasure. Id. (internal citations and quotation marks omitted).
CONCLUSION
Thus, it would appear that the National Bank Act does not preempt Title VII of the Civil Rights Act of 1964.
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