Generally, discrimination statutes require that a worker filing a discrimination lawsuit be an employee of the company being sued. However, a recent decision from the U.S. 3rd Circuit Court of Appeals (whose rulings apply to New Jersey employers) extended the reach of the potential “employment relationship” to include temporary workers who are employed by a staffing agency instead of by the company itself.
Mathew Faush was employed by Labor Ready, a staffing agency that provides temporary workers to a variety of companies, including Tuesday Morning, a home goods retailer. Tuesday Morning’s temporary workers perform routine tasks such as unloading merchandise, setting up displays, and stocking merchandise on shelves.
Before he was assigned to Tuesday Morning, Faush was interviewed and hired by Labor Ready. He was then assigned to work for Tuesday Morning under an “Agreement to Supply Temporary Employees” between Labor Ready and the retailer. He worked at Tuesday Morning for only 10 days.
Faush alleged that Tuesday Morning’s store manager accused him and other African-American temporary workers of stealing eyeliner pens and then told them to work in the back of the store with the garbage. When Faush and his fellow temporary workers attempted to speak with the store manager, a white employee blocked their path and used a racial slur. The store manager refused to hear their complaints or allow them in the front of the store because he was worried about loss prevention.
Fausch filed a race discrimination lawsuit against Tuesday Morning under both Title VII of the Civil Rights Act of 1964 and the Pennsylvania Human Relations Act (PHRA). The trial court dismissed his lawsuit, finding that Tuesday Morning wasn’t his employer and therefore couldn’t be liable under Title VII or the PHRA. The 3rd Circuit came to the opposite conclusion on appeal, however.
3rd Circuit’s Decision
First, the court of appeals ruled that the appropriate test for determining whether an employment relationship exists arose from the U.S. Supreme Court’s 1992 decision in Darden, the Supreme Court wrote that “in determining whether a hired party is an employee under the general common law of agency, we consider the hiring party’s right to control the manner and means by which the [work] is accomplished.”
The Supreme Court also provided the following nonexhaustive list of relevant factors:
The skill required;
The source of the instrumentalities and tools;
The location of the work;
The duration of the relationship between the parties;
Whether the hiring party has the right to assign additional projects to the hired party;
The extent of the hired party’s discretion over when and how long to work;
The method of payment;
The hired party’s role in hiring and paying assistants;
Whether the work is part of the regular business of the hiring party;
Whether the hiring party is in business;
The provision of employee benefits; and
The tax treatment of the hired party.
Moreover, Darden made it clear that two entities may be considered joint employers.
Turning to its own precedent, the 3rd Circuit explained that it generally focuses on “which entity paid [the workers’] salaries, hired and fired them, and had control over their daily employment activities.” In light of all the factors above, the 3rd Circuit determined that the lower court’s dismissal of the lawsuit was inappropriate, and a jury should decide whether Faush was “employed” by Tuesday Morning.
In reaching its decision, the 3rd Circuit found the following facts weighed against dismissal of the lawsuit:
Tuesday Morning bore certain responsibilities for the temporary workers’ wages, and it retained responsibility for compliance with wage laws.
Tuesday Morning paid Labor Ready for each hour worked by each temporary employee, including overtime, rather than the fixed rate that would be paid to an independent contractor.
Tuesday Morning had ultimate control over whether Faush and others were permitted to work at its store.
Tuesday Morning personnel gave the temporary workers their assignments, provided direct supervision, provided site-specific training, furnished equipment and materials, and verified the number of hours worked.
Additionally, in the agreement with Labor Ready, Tuesday Morning pledged to provide a workplace free from discrimination and comply with federal, state, and local employment laws, including Title VII. Finally, the 3rd Circuit gave some weight to the Equal Employment Opportunity Commission’s (EEOC) guideline that “a client of a temporary employment agency typically qualifies as an employer of the temporary worker during the job assignment” for purposes of Title VII. Faush v. Tuesday Morning, Inc., 2015 U.S. App. LEXIS 19977 (3d Cir., 2015).
A company that uses a temporary staffing agency to provide part of its workforce must remain aware that the requirements and protections of the discrimination statutes may apply equally to both permanent employees and temporary workers. You may want to review your agreement with the staffing agency and consider integrating contractual provisions under which the staffing agency agrees to defend and indemnify your company for claims filed by its employees against you.
We hope this information is valuable to you. If you have any questions regarding this alert, please do not hesitate to contact Holman HR.