When Decisions Matter.

Business May Be Liable for Discrimination Claims of Temp Agency Employee

In a case of first impression the US Court of Appeals for the Third Circuit, a federal appeals court covering Pennsylvania held, that a business may be held liable for a discrimination in the workplace claim brought by a temporary employee working under a contract with a temporary employment agency.

Tuesday Morning is a chain of retail stores selling small appliances, gifts and household furnishings.  While it was preparing to open a new location, it contracted with Labor Ready, a temporary employment agency, to provide employees to assist in setting up shelving, stocking inventory, and preparing the store.  Matthew Fausch was an African-American employee of Labor Ready who was assigned to work at the new Tuesday Morning location.  Fausch alleged that he was subjected to racial slurs and discrimination by the manager of the store, who was a Tuesday Morning employee.

Fausch filed a discrimination in the workplace suit against Tuesday Morning under Title VII, the federal law prohibiting racial discrimination by employers, and under the Pennsylvania Human Relations Act.  To bring these claims, Fausch had to show that he was an employee of Tuesday Morning.  Tuesday Morning filed to dismiss the lawsuit, arguing that Fausch was an employee of Labor Ready, not an employee of Tuesday Morning, and therefore Tuesday Morning could not be liable for an employment discrimination claim.

Fausch’s employment status was similar to that of many people employed by a temporary employment agency.

  • He was hired by Labor Ready, which completed his I-9 verification forms.
  • Labor Ready set Fausch’s pay rate and paid his wages, taxes, and social security.
  • Labor Ready maintained Fausch’s workers compensation insurance.
  • Tuesday Morning recorded Fausch’s hours and paid Labor Ready for each hour Fausch worked.
  • Tuesday Morning could have Fausch removed from the project if it was unhappy with his performance, although it could not terminate his employment with Labor Ready.
  • The store manager for Tuesday Morning had supervisory control over Fausch, trained him, and assigned him tasks to perform on a daily basis.
  • The work performed by Fausch was similar to the work performed by Tuesday Morning employees—the temporary employees were present to supplement the Tuesday Morning workforce.

The Court held that under these facts, Tuesday Morning exercised enough control over Fausch that it could be considered to be Fausch’s employer for purposes of discrimination claims under both Title VII and the Pennsylvania Human Relations Act.  The Court noted that it did not have to decide which of the two entities—Labor Ready or Tuesday Morning—was Fausch’s employer.  Both could be Fausch’s employer for purposes of an employment discrimination claim.

The concept of joint employer status is an increasing trend, and this decision, issued on November 18, 2015, is the most recent example of expanding liability of employers for employment-related claims from persons who are not directly employed by the employer.  Employers should apply the same standards of conduct to temporary workers as they do to their employees.  Be sure that policies prohibiting harassment and discrimination in the workplace benefit direct employees as well as temporary and contract employees working under a contract with a temporary staffing agency.  Employers should require its employees and its temporary and contract employees to adhere to these non-discrimination and anti-harassment policies.  Finally, employers should check with their insurance agent or broker to verify that their employment discrimination coverage or other liability coverage extends to discrimination claims brought by temporary or contract employees hired through temporary staffing agencies.

For these and other employment questions, please contact our employment law attorneys.  We stand ready to answer your questions and provide legal guidance through the ever-changing maze of employment laws and regulations.

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