Friday, December 11, 2015

3d Circuit on "Joint Employers" Under Title VII

A retailer, Tuesday Morning, needed some workers to help out with its new store. So, it hired some temporary workers from a staffing firm called Labor Ready. One of those workers sued Tuesday Morning, alleging race discrimination. The trial court granted summary judgment in favor of the retailer on the basis that Tuesday Morning was not the worker's employer - Title VII only allows employees (or applicants) to sue employers.

Not official use,
Recently, the Third Circuit vacated, concluding that a reasonable jury could conclude that Tuesday Morning was the worker's "joint employer." Faush v. Tuesday Morning, Inc. (opinion here).

The Court applied the Darden factors from the Supreme Court opinion in Nationwide Mutual Insurance Co. v. Darden, considering:
"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."
The Third Circuit has traditionally focused on "which entity paid [the employees'] salaries, hired and fired them, and had control over their daily employment activities."

In Faush, the Court emphasized that the retailer paid the temporary workers on an hourly basis and was primarily responsible for ensuring their wages complied with government-mandated minimum wage and prevailing wage laws. The retailer also had the right to reject individual workers, and those workers were not guaranteed any pay or alternate assignment by the staffing agency. Finally, the retailer exerted a lot of direct control over the worker, it "gave [him] assignments, directly supervised him, provided site-specific training, furnished any equipment and materials necessary, and verified the number of hours he worked on a daily basis."

This case presents a mixed bag for employers. Employers will benefit from knowing that courts in the Third Circuit will use the Darden factors test - and there are worse tests (from the employer's perspective) out there. That said, the Court seemed to apply the factors in an extremely employee-friendly way.

Lessons Learned
What could the employer have done differently to avoid "joint employer" liability?

  • Paid the staffing agency based on the cost of the overall project, instead of paying per man-hour;
  • Not taken responsibility for ensuring wage and hour law compliance;
  • Agreed to leave the staffing decisions to the staffing agency (allowed the staffing agency to pull workers who weren't working out instead of the retailer having full discretion to reject someone); and
  • Identified project requirements, and then required someone from the staffing agency to supervise the workers and direct them as to how to complete the projects (using tools provided by the staffing firm). 
Yes, I realize there are practical reasons why the staffing firm and/or the retailer may not want the arrangement to work this way. And, maybe those burdens outweigh the risk of being a "joint employer." That's up to the retailer and the staffing firm to work out (probably with some input from legal counsel).