Third Circuit Adopts Joint Employer Test Under Title VII, Holding Staffing Agency Client Can Be Liable | Practical Law

Third Circuit Adopts Joint Employer Test Under Title VII, Holding Staffing Agency Client Can Be Liable | Practical Law

In Faush v. Tuesday Morning, Inc., the US Court of Appeals for the Third Circuit adopted a joint employer standard for claims brought under Title VII of the Civil Rights Act of 1964 (Title VII) and held that a staffing agency's client may be held liable as a joint employer for discrimination against the agency's direct employees who perform services at the client's worksite.

Third Circuit Adopts Joint Employer Test Under Title VII, Holding Staffing Agency Client Can Be Liable

by Practical Law Labor & Employment
Published on 25 Nov 2015 • USA (National/Federal)
In Faush v. Tuesday Morning, Inc., the US Court of Appeals for the Third Circuit adopted a joint employer standard for claims brought under Title VII of the Civil Rights Act of 1964 (Title VII) and held that a staffing agency's client may be held liable as a joint employer for discrimination against the agency's direct employees who perform services at the client's worksite.
On November 18, 2015, in Faush v. Tuesday Morning, Inc., the US Court of Appeals for the Third Circuit held that the joint employer test applied to The Employee Retirement Income Security Act of 1974 (ERISA) in Nationwide Mutual Insurance Co. v. Darden should be applied to Title VII cases. The Third Circuit held that a reasonable jury could find that a staffing agency's client was the joint employer of the agency's direct employees and vacated the district court's grant of summary judgment on the employee's Title VII race discrimination claims. ( (3rd Cir. Nov. 18, 2015).)

Background

Matthew Faush was an African-American employee of Labor Ready, a staffing firm that provides employees to several companies, including Tuesday Morning. Labor Ready assigned Faush to work at one of Tuesday Morning's stores, where Faush alleged he was subjected to several instances of racial discrimination, including:
  • Accusations of stealing.
  • The use of racial slurs by white co-workers.
  • Failure by Tuesday Morning's management to hear his complaints of discrimination.
  • The ultimate termination of his employment (along with other African-American workers).
Faush filed suit against Tuesday Morning, alleging violations of Title VII, the Pennsylvania Human Relations Act, and 42 U.S.C. §1981. The district court granted summary judgment to Tuesday Morning, holding that it was not Faush's employer and therefore was not liable for the alleged acts of discrimination. Faush appealed to the Third Circuit.

Outcome

The Third Circuit:
The Third Circuit noted that:
  • In Darden, the Supreme Court concluded that the ERISA definition of employee "explains nothing" and that Congress intended to describe the master-servant relationship as understood by common law doctrine (503 U.S. at 322-23).
  • The FLSA joint employer test used in Enterprise Rent-A-Car relies on the FLSA's broad definition of employee which does not apply in Title VII cases.
  • Darden considered the following factors relevant to the joint employer determination, though no single factor is dispositive:
    • the skill required to perform the work;
    • 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.
(Darden, 503 U.S. at 323-24.)
The Third Circuit found that:
  • Similar to the ERISA definition of employee, Title VII's definition of employee is devoid of content, and therefore the common law test governs Title VII claims.
  • A rational jury applying the Darden factors could find that Faush and Tuesday Morning had a common law employment relationship.
  • While Labor Ready set the employees' rates and paid their wages, Tuesday Morning also had some responsibilities regarding worker pay, such as:
    • verifying the number of hours worked;
    • ensuring compliance with labor and prevailing wage laws; and
    • notifying Labor Ready if any government-mandated minimum statutory wage should be paid to temporary employees.
  • Tuesday Morning's payment to the workers (through Labor Ready rather than to the temporary employees directly) was paid at an hourly rate, functionally indistinguishable from direct compensation to its own employees.
  • Although Tuesday Morning could not fire employees from Labor Ready, it did have the power to determine whether a worker could work at its stores.
  • Tuesday Morning controlled much of the daily activity of the workers, including:
    • assignment of work;
    • direct supervision of workers;
    • site-specific training; and
    • furnishing of materials.
  • Labor Ready employees who worked for Tuesday Morning performed the same tasks as those assigned to Tuesday Morning's employees.
  • Tuesday Morning contractually agreed to provide a workplace free from discrimination and unfair labor practices.
The court concluded that summary judgment should not have been granted because a reasonable jury could find the existence of a joint employer relationship under the circumstances. The court noted that this finding was consistent with both EEOC Guidance and decisions from sister circuits. However, it did not find that a joint employer relationship existed as a matter of law, as the Fourth Circuit has held under similar circumstances (see, for example, Butler v. Drive Automotive Indus. of Amer., Inc., 793 F.3d 404, 415 (4th Cir. 2015)).

Practical Implications

In Faush, the Third Circuit determined that a staffing agency's client can be liable as a joint employer for discriminatory acts that occur in its workplace against the staffing agency's employees. The court applied a multi-factor test, with no one factor being dispositive, and held that more than one entity can be liable as an employer for discriminatory conduct in the workplace. Employers should train their supervisors and managers, and notify their regular full-time workforce, that discriminatory conduct against all workers, including temporary workers, is prohibited.