Employment/HR Alert: Court Expands Potential Liability of Employers For Discrimination Claims by Temporary Workers from Staffing Agencies

PhilMorin.jpgHallet.jpgBy Philip J. Morin III and Veronica P. Hallett 

 

In a recent precedential opinion, Faush v. Tuesday Morning, Inc., ___ F.3d ___ (3d. Cir. Nov. 18, 2015), the U.S. Court of Appeals for the Third Circuit held that the defendant company could be found liable for discrimination claims asserted by a worker supplied by a temporary staffing agency for the purposes of Title VII of the Civil Rights Act of 1964 based upon the level of supervision and control the company exerted over the temporary worker.   

 

The result of this decision is that companies that use temporary workers will likely be considered joint employers of those workers under federal and state anti-discrimination laws.  Thus, the Faush opinion could significantly increase exposure for discrimination claims for employers who do business in the states within the Third Circuit, which includes Pennsylvania, New Jersey, and Delaware.

In Faush, the employer, closeout home-goods retailer Tuesday Morning, Inc., was alleged to have racially discriminated against Matthew Faush, a temporary worker assigned to Tuesday Morning’s facilities by the Labor Ready employment agency.  The trial court initially entered summary judgment in Tuesday Morning’s favor, finding that it was not Faush’s legal employer.  The Third Circuit, however, reversed that decision.  In doing so, it found the following factors important:

  • Although Faush was on Labor Ready’s payroll and not Tuesday Morning’s, Tuesday Morning remained responsible for compliance with prevailing wage laws.
  • Tuesday Morning’s payments to Labor Ready, which in turn paid Faush, were the functional equivalent of direct wages.  
  • Although Tuesday morning could not hire or fire one of Labor Ready’s employees, it had sole discretion to decide whether a Labor Ready employee was permitted to work in the Tuesday Morning facility.
  • Upon reporting to work, Faush’s work took place entirely on Tuesday Morning’s premises and Tuesday Morning provided the training, equipment, materials and supervision, thus exercising control over Faush’s work.
  • Temporary workers at Tuesday Morning’s facility performed work in a manner indistinguishable from the regular employees.

Under these circumstances, the Third Circuit held that a reasonable jury could conclude there was an employment relationship between Faush and Tuesday Morning, thereby subjecting Tuesday Morning to suit under Title VII and the Pennsylvania Human Relations Act. 

In the past, courts in this Circuit generally had not considered temporary workers to be “employees” of a staffing agency’s client under Title VII.  Thus, employers utilizing staffing agencies were shielded from liability to some extent.  However, under the decision in Faush, a company using an employment agency will likely be viewed as a joint employer, depending upon the circumstances of its use of temporary workers. 

In Faush, the Third Circuit explained that the key distinction between employees and independent contractors is “whether the common law of agency would recognize a master-servant relationship” between an employer and a worker.  However, there is “no shorthand formula or magic phrase that can be applied to find the answer, . . . all of the incidents of the relationship must be assessed and weighed with no one factor being decisive.”  This makes it difficult for employers to predict their liability with respect to temporary workers.  Consulting with counsel prior to entering into a written placement agreement with a temporary staffing agency to negotiate the language of the agreement is one approach that may help to limit the company’s exposure to claims.

The experienced labor and employment attorneys at Florio Perrucci Steinhardt & Fader, LLC, regularly advise employers in both the public and private sector regarding compliance with federal, state and local employment laws and how to minimize potential exposure to liability. 

Call Phil or Veronica at 908-454-8300 or contact your FPSF relationship attorney to discuss the impact of the Faush decision on your operations or any other human resources matters that impact your business.  

 

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