A case that could have widespread implications for both Hawaii businesses and their workers in employment discrimination disputes will be heard by the Hawaii Supreme Court next month.

Hawaii law is clear that employers can be held liable for discrimination based on race or national origin. But a key issue for the high court to decide for the first time is whether supervisors can also be held liable for discrimination against workers.

The high court announced earlier this month that it will review a state appeals court decision that reinstated a lawsuit filed by a former car salesman against Wholesale Motors Co. and a supervisor.

Gerard Lales alleged in his wrongful termination lawsuit that he was fired in 2002 in retaliation for his complaints that supervisor Gary Marxen Sr. subjected him to derogatory remarks based on Lales’ French national origin.

Circuit Judge Randal Lee threw out Lales’ lawsuit, declared that it was "frivolous," and ordered him to pay Wholesale Motors and two others he sued $149,667 in attorney fees and $9,272 in costs.

In May, the Intermediate Court of Appeals set aside Lee’s ruling, including the award of nearly $160,000 in fees and costs.

The appeals court issued its decision in a memorandum opinion, which applies only to Lales’ case.

The Hawaii Supreme Court can now issue a ruling that becomes state law and binding on Hawaii courts.

The case has drawn attention from business groups that filed friend-of-the-court briefs contending that state antidiscrimination laws should not extend to supervisors.

But civil rights advocates filed briefs arguing that state law covers supervisors and the nearly $160,000 award in fees and costs deters victims from discrimination lawsuits.

Christopher Muzzi, attorney for Marxen and Wholesale Motors, which does business as JN Wholesale Motors, said he was pleased the high court granted his request to review the appeals court decision.

"It’s important from both the employers’ and employees’ standpoint as far as addressing discrimination in the workplace and making sure the process is fair to both sides," he said.

Lales’ lawyer, Daphne Barbee, said the case has potentially broad implications.

"I think the Supreme Court is taking this matter up so they can let everybody know that under our state laws and Constitution and rules that there is individual liability for supervisors who discriminate against employees," she said.

Lales, 56, was a Wholesale Motors salesman for nearly a year before he was fired. He alleged that Marxen made derogatory remarks, calling him a "stupid Frenchman."

Lales said he verbally complained to Marxen before the termination.

Marxen denied making the derogatory statements and Wholesale Motors said Lales was fired because he made misrepresentations that a truck he sold to a couple had air conditioning.

In 2007, Lee granted summary judgments of all claims in Lales’ lawsuit.

The judge ruled that Lales failed to establish that the company’s reason for termination was a cover-up for wrongfully firing him.

Lee acknowledged that Lales alleged he was subjected to verbal abuse and discrimination, but said Lales "lacks credibility."

In May, Appeals Court Chief Judge Craig Nakamura and appeals judges Daniel Foley and Alexa Fujise issued the 34-page opinion unanimously overturning Lee’s ruling.

The appeals court disagreed with Marxen’s argument that state law subjects only employers, not supervisors or managers, to liability for discrimination.

The appeals judges noted the high court has never directly addressed the issue, but said prior rulings by the Supreme Court support their conclusion.

The court also held that Lales’ allegations raised enough factual issues that precluded the judge from disposing the case prior to trial.

"I cried," Lales told the Star-Advertiser last week about his reaction to the appeals court ruling. "I couldn’t believe it. But I always believed in justice in America."

Muzzi said if the appeals court ruling is upheld, the concern is that there will be more discrimination lawsuits and more of them will go to trial.

The result would be increased costs to employers to pay for insurance and more demands on the legal system, Muzzi said.

"It encourages frivolous lawsuits," he said.

The Chamber of Commerce of Hawaii and the Hawaii Automobile Dealers Association filed briefs defending Lee’s ruling.

But the Hawaii Civil Rights Commission argued that state law covers discrimination by supervisors in providing "expansive civil rights protections for its people."

The Hawaii chapter of the National Employment Lawyers Association, which supports employees’ rights, also submitted a brief contending that the judge’s fee and cost award would have "a chilling effect on any victim of unlawful discrimination and would result in a drastic weakening of Hawaii’s antidiscrimination laws."

Another issue for the high court will be whether a defense recognized by the U.S. Supreme Court in discrimination and harassment lawsuits should apply in the case.

Under the defense, an employer must show attempts to prevent and correct any discrimination and that the complaining worker failed to take advantage of those antidiscrimination measures.

Lee invoked that defense in his ruling, but the appeals court ruled it wasn’t applicable because the alleged discrimination led to Lales’ termination.

The high court is scheduled to hear arguments in the case on Nov. 29.