Use of Staffing Agencies Takes Another Hit in the Fourth Circuit

We previously reminded everyone about the difficulties vessel owners face in attempting to use staffing agencies to avoid liability for Jones Act negligence and unseaworthiness claims. (“Use of Staffing Agencies to Provide Temporary Labor Will Not Protect Vessel Owners From Jones Act Liability“). In a new decision from the U.S. Court of Appeals for the Fourth Circuit, the appellate judges effectively slam the door on efforts by employers to use staffing agencies to shield themselves from employment discrimination claims under Title VII. Brenda Butler v Drive Automotive Undustries of America, Incorporated and EmployBridge of Dallas Incorporated, No 14-1348 (4th Cir. July 15, 2015).

The gist of the Fourth Circuit’s decision, which applies to Virginia, North Carolina, South Carolina, Maryland, and West Virginia, is that use of staffing agencies will not shield employers from unfair employment practice claims, such as sexual harassment, arising under Title VII of the Civil Rights Act. Though not a maritime case, the decision will apply directly to marine employers who are heavy users of temporary labor.

Brenda Butler was dispatched by her staffing agency, Employbridge of Dallas, Incorporated (doing business as ResourceMFG), to work at a factory owned by Drive Automotive Industries, Incorporated. While working at the factory, she was subject sexual harassment in the form of verbal abuse by her supervisor, who was an employee of Drive Automotive. Ultimately, Butler was ordered to perform an assignment she did not believe she could safely perform, and she suffered additional verbal abuse when she refused. She complained about the supervisor’s conduct to higher ups in the chain at Drive Automotive and to the Human Resources Manager at ResourceMFG. The result was that Drive Automotive requested she be fired, and ResourceMFG complied.

Drive Automotive and ResourceMFG each exercised some control over Butler. She wore a ResourceMFG uniform, was paid by ResourceMFG, and parked in a ResourceMFG parking lot, and she could ultimately be disciplined or terminated by ResourceMFG. Drive Automotive could also cause Butler’s employment to be terminated, determined her work schedule, provided her supervisors and training, and owned the factory where she worked. So far as Butler was aware, in fact, she worked for “both” Drive Automotive and ResourceMFG.

Title VII of the Civil Rights Act provides that a company can be held liable for unfair employment practices prohibited by the Act only if it is an “employer” of the complainant. When Butler sued Drive Automotive and ResourceMFG, Drive Automotive defended by arguing that it was not Butler’s employer and therefore could not be sued for the activities of its employees as directed towards Butler. The U.S. District Court for the District of South Carolina, where the suit was brought, agreed, and Butler’s complaint was dismissed following Drive Automotive’s motion for summary judgment. The claim against ResourceMFG had been previously resolved.  The Fourth Circuit reversed the trial court and granted Ms. Butler a new trial against Drive Automotive.

Quickly deciding that one person can, indeed, work for multiple employers on the same job at the same time for Title VII purposes, the court of appeals adopted as the law of the Fourth Circuit what has been simply called the “joint employment doctrine.” Noting the rapid rise in the use of temporary labor in recent years, the court commented that “the joint employment doctrine thus prevents those who effectively employ a worker from evading liability by hiding behind another entity, such as a staffing agency.”

The challenge with all such doctrines is determining when they apply. Attempting to clarifying some of its earlier precedents, the court adopted a set of nine factors for use in determining whether someone is jointly employed by two or more entities:

1. Authority to hire and fire the individual;
2. Day-to-day supervision of the individual, including discipline;
3. Whether the putative employer furnishes the equipment used and the place of work;
4. Possession of and responsibility over the individual’s employment records, including payroll, insurance and taxes;
5. The length of time during which the individual has worked for the putative employer;
6. Whether the putative employer provides the individual with formal or informal training;
7. Whether the individual’s duties are akin to a regular employee’s duties;
8. Whether the individual is assigned solely to the putative employer; and
9. Whether the individual and putative employer intended to enter into an employment relationship.

Having created the list, the court then said none of these factors are totally dispositive. The first, second and third factors are the most important, and the ninth factor is nearly irrelevant. On top of everything, the court said the common-law element of control remains the “principal guidepost in the analysis.” If the nine factors identified by the court are not dispositive of the issue of control, however, we are not sure what other factors a court would consider.

For marine employers (or anyone using staffing agencies), there are a number of lessons. First, if a marine employer’s regular employees tend to harass and abuse temporary labor believing “they’re just temps, what can they do?” the answer is now clear – they can saddle the marine employer with a Title VII lawsuit. We also note that the nine-part test under the joint employment doctrine is very similar to the nine-part test for determining whether a temporary worker is actually the borrowed servant of a marine employer for Jones Act liability purposes. Again, as in the Weeks case, the lesson is clear: the courts are increasingly hostile to an employers use of staffing agencies to avoid compliance with workplace safety and, now, discrimination laws.