November 2015 FBA Labor and Employment Law Third Circuit Update
Stephen E. Trimboli, Esq.
Trimboli & Prusinowski, L.L.C.
Clients of temporary employment agencies can be deemed the employers of temporary employees for purposes of Title VII liability.
Faush v. Tuesday Morning, Inc., _ F.3d _ (3d Cir. 2015), 2015 WL 7273268, C.A. 3, (N.J.), November 18, 2015, available at www2.ca3.uscourts.gov/opinarch/141452p-3.pdf
Tuesday Morning, Inc., is a closeout home-goods retailer that was opening a new store in Pennsylvania. It is also a client of Labor Ready, a staffing firm that provides temporary employees. Labor Ready supplied Tuesday Morning with temporary employees for approximately one month to assist in preparation for the new store’s opening by unloading merchandise, setting up display shelves, and stocking merchandise. The temporary employees were a stopgap measure because the new store did not yet have a full complement of its own workers.
Under their agreement, Labor Ready set the temporary employees’ rates of pay, paid their wages, taxes and social security, maintained their workers compensation insurance, and completed their I-9 employment verification forms. Labor Ready also fielded sick calls from the temporary employees. Tuesday Morning was prohibited assigning temporary employees to any position requiring the control or custody of cash and valuables or the operation of machinery, or to any duties not consistent with temporary employees’ skills and abilities. However, within these parameters, Tuesday Morning had day-to-day control of the services of the temporary employees. Tuesday Morning approved the time cards for each temporary employee; supervised and directed their work activities; and, provided any necessary safety training and equipment. Tuesday Morning bore responsibility for compliance with applicable labor, employment discrimination and prevailing wage laws, and for notifying Labor Ready of any applicable mandatory statutory wages. Tuesday Morning had the right to request the replacement of any temporary employee with which it was unhappy.
The manager of the new Tuesday Morning store admitted in deposition that he exercised supervisory control over the temporary employees, trained them, and assigned them duties on a daily basis that were no different from the assignments given to his regular employees.
Matthew Faush, an African-American, was one of the temporary employees assigned to Tuesday Morning by Labor Ready. He lasted there for ten days. During that time, he and his fellow African-American temporary employees allegedly encountered racial discrimination. The store manager allegedly accused them of stealing to eyeliner pens, allegedly stating, “my people wouldn’t do that.” The African-American temporary employees were allegedly instructed to spend one entire day working in the back of the store with the garbage. When they attempted to speak to the manager, a white employee allegedly blocked their path, and the manager allegedly refused to speak to them, claiming that an alarm had been triggered and that he was concerned about loss prevention. Finally, all of the African-American temporary employees, including Faush, were allegedly “terminated.”
Faush filed suit against Tuesday Morning under Title VII of the Civil Rights Act of 1964, 42 U.S.C. Section 1981, and the Pennsylvania Human Relations Act (PHRA). The District Court granted Tuesday Morning summary judgment, concluding as a matter of law that Tuesday Morning was not Faush’s employer for purposes of Title VII and the PHRA, and that Faush had failed to establish a claim under Section 1981. On appeal, the Third Circuit vacated the dismissal of Faush’s Title VII and PHRA claims, and remanded those claims for trial.
To prevail on his Title VII claim, Faush must demonstrate the existence of an “employment relationship” with Tuesday Morning. In the absence of a content-specific definition of “employee” under Title VII, the Faush Court applied the definition of “employee” adopted by the Supreme Court in Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 322-3 (1992), under the Employee Retirement Income Security Act, which likewise lacks a content-specific definition of “employee.” Under Darden, “employment” is defined as “the conventional master-servant relationship as understood under the common-law agency doctrine.” The Faush Court declined to apply the Fair Labor Standards Act (FLSA) definition of “employee” articulated in In re Enterprise Rent-A-Car Wage & Hour Emp’t Practices Litig., 683 F.3d 462 (3d Cir. 2012) because the statutory definition of “employee” under the FLSA is broader than the common law agency standard.
Under the Darden standard, the court considers “the hiring party’s right to control the manner and means by which the {work} product is accomplished.” A non-exhaustive list of factors to consider includes:
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.
Although the court considers which entity pays the employee’s salaries, hires and fires them, and controls the employees’ daily work activities, there is “no shorthand formula or magic phrase that can be applied,” and “all of the incidents of the relationship must be assessed and weighed with no one factor being decisive.” Two entities may be “co-employers” or “joint employers” of one employee under the Darden standard and under Title VII.
Applying this standard, the Faush Court found ample basis on the record for a reasonable jury to conclude that Tuesday Morning was Faush’s employer for Title VII purposes. “Tuesday Morning’s extensive control over Faush’s activities could suffice to make him a common-law servant even though Labor Ready paid him and had the ultimate power to fire him.” Although Faush was paid and dispatched by Labor Ready, Faush:
worked under the direct supervision and control of Tuesday Morning managers who instructed the Labor Ready employees on the “details of the work they were doing.” … Moreover, Labor Ready disclaimed responsibility for supervising the temporary employees’ work, and on the rare occasions that a Labor Ready supervisor visited the Tuesday Morning store, she acted as a mere conduit for instructions from the Tuesday Morning manager.
The Faush Court also found support for its conclusion in the “applicable guidance from the Equal Employment Opportunity Commission,” (EEOC), which deems the client of a temporary employment agency to be an employer of a temporary worker for Title VII purposes during the job assignment. The courts may rely upon EEOC guidance as a source of informed judgment and experience. Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944).
The Faush Court recognized that its holding would affect a “large number of temporary employment arrangements” and impose potential Title VII liability on clients of temporary employment agencies. However, entities with more than 15 employees are already subject to Title VII, and such an outcome is reasonable “given the broad remedial policies behind Title VII, Congress’s decision to use the term ‘employee’ in its common law sense, and the Darden factors.”
Because PHRA jurisprudence follows the standards adopted for use under Title VII, the Faush Court’s reasoning required a remand and trial of Faush’s PHRA claim as well.
Section 1981 “offers relief when racial discrimination blocks the creation of a contractual relationship, as well as when racial discrimination impairs an existing contractual relationship, so long as the plaintiff has or would have rights under the existing or proposed contractual relationship.” Domino’s Pizza, Inc. v. McDonald, 546 U.S. 470, 476 (2006). To assert a viable Section 1981 claim, Faush would need to showing that “he has (or would have) rights under the existing (or proposed) contract that he wishes ‘to make and enforce.’” Id. at 479-80. Because Faush did not argue that he could make such a showing, his Section 1981 claim was properly dismissed.
