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Fourth Circuit Adopts Joint Employer Doctrine for Title VII, Uses Hybrid of Control and Economic Realities Tests
Practical Law Legal Update 1-617-4946 (Approx. 7 pages)
Fourth Circuit Adopts Joint Employer Doctrine for Title VII, Uses Hybrid of Control and Economic Realities Tests
by Practical Law Labor & Employment
| Published on 20 Jul 2015 • USA (National/Federal) |
In Butler v. Drive Automotive Industries of America, Inc., the US Court of Appeals for the Fourth Circuit held that a staffing agency and its customer may be liable under Title VII of the Civil Rights Act of 1964 (Title VII) as joint employers and that it will apply a combination of the control test from common law agency principles with an economic realities test when evaluating whether entities are joint employers under Title VII.
On July 15, 2015, in Butler v. Drive Automotive Industries of America Inc., the US Court of Appeals for the Fourth Circuit held that Title VII allows joint employers to be liable for discrimination and harassment, and that it will apply a combination of the control test from common law agency principles with an economic realities test when evaluating whether entities are joint employers under Title VII. The court reversed a district court's grant of summary judgment to an automotive factory based on a finding that a temporary staffing agency was the employee plaintiff's sole employer. The Fourth Circuit applied the "hybrid" control and economic realities test to find that the automotive factory was the plaintiff's employer. (No. 14-1348, (4th Cir. July 15, 2015).)
Background
Brenda Butler worked at Drive Automotive Industries, obtaining her job through ResourceMFG, a temporary staffing agency. Both Drive and ResourceMFG controlled different aspects of Butler's employment. ResourceMFG:
- Paid Butler.
- Supplied Butler's uniform.
- Had a special parking lot in which Butler parked her car.
- Had ultimate responsibility for Butler's discipline.
Drive:
- Determined Butler's work schedule.
- Arranged portions of Butler's work-related training.
- Had its employees supervise Butler's work on the factory floor.
In 2010, Butler claimed that she was subjected to sexually harassing comments and conduct by one of her supervisors at Drive. Butler reported the harassment both to ResourceMFG and Drive, but neither entity took any action. When Butler reported to a manager at Drive a subsequent harassing incident involving that supervisor, the manager requested that ResourceMFG terminate Butler's employment. A few days later, the supervisor spoke with Butler and suggested that she could save her job by performing sexual favors for him. Butler refused, and shortly thereafter ResourceMFG informed Butler that she had been terminated from Drive.
In November 2012, Butler sued Drive and ResourceMFG in state court alleging that both entities violated Title VII. After the matter was removed to federal district court, Butler and Drive agreed to dismiss ResourceMFG from the case. In April 2013, the district court granted Drive's summary judgment motion, finding that Drive was not Butler's employer and could not be held liable under Title VII because it did not exercise sufficient control over Butler's employment. Butler appealed.
Outcome
The Fourth Circuit reversed the district court's grant of summary judgment to Drive, held that the joint employer doctrine could be applied to Title VII cases, adopted a hybrid of the control and economic realities tests for evaluating joint employment and found that Drive was a joint employer of Butler with ResourceMFG under that test. The court remanded to the district court to consider the merits of Butler's Title VII claims.
The Fourth Circuit noted that:
- Other circuits and district courts in the Fourth Circuit have recognized that two entities can be joint employers and both be held liable under Title VII if they share control over the terms and conditions of an employee's employment (Bristol v. Bd. of Cnty. Comm'rs, 312 F.3d 1213, 1218 (10th Cir. 2002) (en banc); Graves v. Lowery, 117 F.3d 723, 727 (3d Cir. 1997); Torres-Negrón v. Merck & Co., 488 F.3d 34, 40 n.6 (1st Cir. 2007); Arculeo v. On-Site Sales & Mktg., LLC, 425 F.3d 193, 197-98 (2d Cir. 2005); EEOC v. Skanska USA Bldg., Inc., 550 F. App'x 253, 256 (6th Cir. 2013); Murphy-Taylor v. Hofmann, 968 F. Supp. 2d 693, 725 (D. Md. 2013)).
- The Fourth Circuit has adopted the joint employment doctrine in cases under the FLSA, the NLRA, and the Migrant and Seasonal Agricultural Worker Protection Act (Schultz v. Capital Int'l Sec., Inc., 466 F.3d 298, 305-06 (4th Cir. 2006); Howard v. Malcolm, 852 F.2d 101, 102, 104-05 (4th Cir. 1988); NLRB v. Jewell Smokeless Coal Corp., 435 F.2d 1270, 1271 (4th Cir. 1970)).
- Some circuits have adopted the "control" test (advocated by Drive), which is based on common law agency principles and looks at various factors including whether an entity has authority to:
- hire and fire employees;
- make work rules;
- assign work;
- set compensation and benefit terms;
- supervise employee's day-to-day work activities; and
- control employee records.
- Other circuits have applied the economic realities test (advocated by Butler), which focuses on the degree to which an employee depends on a company for work and pay, regardless of which company is paying the employee and determining the employee's work status (see Hopkins v. Cornerstone Am., 545 F.3d 338, 343 (5th Cir. 2008) (FLSA case)).
- The Fourth Circuit has applied the economic realities test in FLSA and Migrant and Seasonal Agricultural Worker Protection Act cases (Howard, 852 F.2d at 104-105; Schultz, 466 F.3d at 304-305)).
- The Fourth Circuit has applied the hybrid test (advocated by neither party) incorporating both the common law control test and the economic realities test in an age discrimination case under the ADEA and separately directed a district court to evaluate whether volunteer firefighters were employees under Title VII (Garrett v. Phillips Mills, Inc., 721 F.2d 979, 981 (4th Cir. 1983); Haavistola v. Cmty. Fire. Co. of Rising Sun, Inc., 6. F3d 211, 219-220 (4th Cir. 1993)).
The Fourth Circuit found that:
- The joint employment doctrine:
- is consistent with Title VII's definitions;
- serves Title VII's main objective of eliminating discrimination in employment;
- recognizes the recent increase in temporary staffing companies employing workers but exercising little control over employees' daily work; and
- prevents companies that control workers' daily activities from avoiding liability by hiding behind temporary staffing agencies.
The Fourth Circuit held that:
- An employee can have multiple employers for Title VII purposes.
- Title VII allows joint employers to be liable for discrimination and harassment in violation of Title VII.
- It would apply a "hybrid" test (combining the control test with the economic reality test) when determining whether an entity was a joint employer. In particular, the circuit would inquire whether an entity:
- had authority to hire and fire the employee;
- had day-to-day supervision of the employee, including disciplining the employee;
- furnished equipment and the actual workplace used by the employee;
- possessed and is responsible for the employee's employment records;
- provided the employee with training, either formal or informal;
- had the employee assigned solely to the entity;
- assigned duties to the employee that are akin to duties assigned to the entity's regular employees;
- had the employee working for the entity for a significant length of time; and
- intended with the employee to enter into an employment relationship.
- None of the factors in the hybrid test are dispositive, but the first three factors are most important and the element of control remains the "principal guidepost" in the analysis of whether an entity was a joint employer.
- Under the hybrid test, Drive was a joint employer because:
- Drive exercised significant control over the terms of Butler's employment, including directing ResourceMFG to replace Butler;
- Drive's employees supervised both ResourceMFG's and Drive's employees;
- Drive's employees and ResourceMFG's employees worked together and essentially performed the same type of work and tasks; and
- Butler's work was closely tied to Drive's core business.
Practical Implications
In Butler, the Fourth Circuit:
- Joins the circuit courts that recognize the joint employment doctrine in Title VII cases (US Courts of Appeals for the First, Second, Third, Sixth and Tenth Circuits).
- Sets out the multi-factor test the Fourth Circuit will apply when considering joint-employer liability under Title VII.
- Furthers the emerging split among the circuits (that have recognized the joint employer doctrine in Title VII cases) about whether to apply the control, economic realities or hybrid test.
In light of this decision, companies in the Fourth Circuit should consider adjusting their Title VII liability risk assessments for entering staffing agreements and other temporary or contingent work relationships.