DES MOINES, Iowa - The Iowa Supreme Court ruled Friday that a woman who says her boss at a small insurance agency flashed his genitals and frequently roamed the office with his pants unzipped can sue the boss and the company for sex discrimination based on a hostile work environment and intentional infliction of emotional distress.

The case centres on the Derby Insurance Agency in Sioux City, its owner and manager Kevin Dorn and the agency's office manager Joanne Cote.

Cote filed a lawsuit in 2014 claiming Dorn sexually harassed her and other female colleagues over seven years by exposing his genitals to some female employees and walking around the office with his pants unzipped and "gaping open" and trying to get the women to notice his erect penis in his pants.

Dorn and the company tried to convince the courts to dismiss the charges citing a 1965 Iowa law that says companies with fewer than four employees are exempt from the Iowa Civil Rights Act and family members can't be counted as employees. He said since the insurance business employed several family members they couldn't be counted as employees so the company fell beneath the four-employee standard and couldn't be held accountable for civil rights violations.

The Supreme Court for the first time found that incorporated businesses cannot use that law to escape civil rights actions concluding that "a corporation does not have family members and therefore cannot qualify for the family-member exception" in the Iowa law.

It's a sweeping change that means many small businesses including many family farms that are incorporated cannot avoid compliance with the Iowa Civil Rights Act just because it employs only a few family members.

The Supreme Court considered the appeal only to rule on the small business family exclusion aspect of the case. It left standing an August 2017 Iowa Court of Appeals ruling that said Cote had demonstrated enough evidence to allow the case to move forward to a jury trial.

"This court believes a reasonable jury could find that the repeated showing of an erection, covered or uncovered, to a female co-worker is the type of outrageous conduct for which a plaintiff may recover in tort," the court said.

The Supreme Court agreed saying "Dorn's conduct would lead an average member of the community to exclaim, 'Outrageous!' "

Cote's attorney, Stan Munger said she "is looking forward to going to trial and getting this resolved." She is seeking monetary damages.

Dorn's attorney, Ed Pohren said he had no comment. A number listed for Dorn repeatedly disconnected when called Friday.

The court found that most states do not have family-member exceptions in their antidiscrimination statutes. It said the Washington Court of Appeals in 1993 declined to apply that state's family-member exception to a corporation that employed its owner's family members.

"We found no case holding a corporation can have family-member employees excluded from state statutory numerosity thresholds," the court said.

News from © The Associated Press, 2018