Temporary or Not: Contract Workers Are Still Employees for Discrimination Purposes

In our freelance economy, organizations have a great deal of flexibility and freedom when it comes to managing their workforces, with more and more organizations utilizing staffing agencies and contract workers for temporary, short-term, or project-based assignments. That flexibility and freedom, however, does not protect an organization from discrimination claims.

As far as employment is concerned, courts may view the organization as the de facto employer, even if the worker is an independent contractor or hired and paid by a separate staffing agency. A recent precedent-setting decision from the U.S. Third Circuit Court of Appeals highlights this risk.

In Faush v. Tuesday Morning, an African-American temporary employee hired by a staffing agency was placed with the agency’s client, retailer Tuesday Morning. After he was terminated by the retailer ten days into the assignment, he later filed a race discrimination lawsuit against Tuesday Morning citing violations of Title VII of the Civil Rights Act of 1964 and the Pennsylvania Human Relations Act (PHRA). Specifically, the plaintiff claimed that the store managers falsely accused him and other African-American temporary workers of theft, subjected them to racial slurs, blocked the plaintiffs from reporting their alleged mistreatment to senior management, and forced the plaintiffs to work in the back of the store. The trial court judge granted Tuesday Morning’s motion to dismiss the case, ruling that the store wasn’t the temporary worker’s employer and that it therefore couldn’t be found liable under Title VII or the PHRA. The employee appealed to the Third Circuit, which viewed the matter quite differently.

On appeal, the Third Circuit overturned the lower court’s dismissal, finding that “a rational jury” could indeed conclude the temporary worker was the retailer’s employee. Applying the U.S. Supreme Court’s 1992 ruling in Nationwide Mutual Insurance Co. v. Darden, the Third Circuit found the retailer met several tests for whether or not it acted as an employer, including:

  • Responsibility for the temporary worker’s wages and compliance with wage laws;
  • Control over the temporary worker’s assignments and hours worked;
  • Providing direct supervision and job-specific training, as well as equipment and materials needed for the work;
  • Control over whether the temporary employee was permitted to work at the store;
  • Signed the agreement with the staffing agency which included a pledge to comply with all applicable employment laws, including Title VII and the PHRA. This, noted the judges, demonstrated that the retailer knew that it “bore many of the legal responsibilities of a traditional employer, including compliance with Title VII.”

The court also cited an Equal Employment Opportunity Commission guideline that states “a client of a temporary employment agency typically qualifies as an employer of the temporary worker during the job assignment” with respect to Title VII. The lawsuit was remanded back to the trial court for reconsideration.

The Bottom Line for Employers

The Faush case is a sobering reminder that employers must treat all workers, whether regular full-time employees or temps or contract labor provided by a staffing agency, free from unlawful discrimination and in compliance with Title VII and other federal and state employment laws.

Addressing the potential risk before it happens is highly recommended, including:

  • Updating and revising employment policies and workplace guidelines
  • Reviewing contracts and agreements with staffing agencies, suppliers, and vendors who supply labor to your workplace
  • Training and education for managers and other responsible for hiring and overseeing temporary and contract workers, as well as direct employees who collaborate with temporary and contract workers
  • Review of business insurance policies to determine coverage for discrimination claims

Using temporary workers provides significant benefits for employers — but they do not come without responsibility. If you have any questions about the advantages and potential risk of utilizing alternative labor in your workplace, please contact us.

Posted in Employment Law.