An increasing trend in the business world is for companies to hire workers to perform work through temporary staffing companies. When these workers suffer discrimination in the workplace, questions arise as to the legal determination of which entity or entities are the legal “employer” subject to workplace discrimination claims. In Faush v. Tuesday Morning, Inc. no. 14-1452 (November 18, 2015), the Third Circuit Court of Appeals reversed the Eastern District of Pennsylvania Court and held there was more than sufficient evidence that a company that hired a staffing company to supply workers could be deemed an employer that can be sued for racial discrimination.
In Faush, the worker was officially employed by Labor Ready, a staffing firm that provides temporary employees to a number of clients, including retailer, Tuesday Morning, Inc. Over the course of a month, Labor Ready sent temporary employees to a new Tuesday Morning store to perform certain work. The worker claimed that he and other African-American temporary employees who were working at the Tuesday Morning store were subject to disparate treatment based on their race and use of a racial slur.
Title VII, the federal law that prohibits race discrimination in the workplace and forbids discrimination by employers, employment agencies, labor organizations, and training programs. In Faush, the Third Circuit held that the appropriate test for determining whether an employment relationship exists is found in the United States Supreme Court case, Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318 (1992), where the determination of whether a hired party is an employee is made under the general common law of agency. Criteria to be considered include the hiring party’s right to control the manner and means by which the product or service is accomplished, which requires consideration of many factors including: the skill required; the source of the instruments 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. All of the incidents of the relationship must be assessed and weighed with no one factor being decisive. In addition, the inquiry is not which of two entities should be considered the employer of the person in question, as the law clearly permits a finding that two different entities may be “co-employers” or “joint employers” of one employee for purposes of Title VII.
Among the factors that the Court found compelling enough to find an employment relationship in Faush was primary responsibility for ensuring compliance with prevailing-wage laws; rather than paying a fixed rate for the completion of a discrete project, compensation was based on each hour worked by each individual temporary employee at an agreed-upon hourly; maintaining ultimate control over whether the employee was permitted to work at a store; and overwhelming control over assignments, direct supervision, site-specific training, furnishing equipment and materials. In Faust, the court concluded that unlike a contractor relationship, in which an agency is hired to perform a discrete task and oversees its employees’ work in the completion of that project, the employees were hired on an hourly basis to perform services under the supervision of management, which exercised control over the temporary employees’ daily work activities. Interestingly, the court noted that its holding “will pertain to a large number of temporary employment arrangements, with attendant potential liability under Title VII for the clients of those temporary employment agencies.
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