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Temp Agency Employees May Be Your Employees, Too

By: Brian Peterson
Bowles Rice Labor and Employment Alert
Summer 2015

Employers sometimes use temporary staffing agencies to supply labor in hopes that, if a temporary employee doesn't work out, they can part ways without the messy employment-related claims. These "try before you buy" relationships just got a little more risky.

In a July 15 published opinion, the U.S. Court of Appeals for the Fourth Circuit held that a manufacturer who requested the termination of a staffing agency employee was a joint employer with the staffing agency for Title VII purposes. In other words, it held that multiple entities may simultaneously be considered employers under Title VII. Brenda Butler v. Drive Automotive Industries, No. 14-1348 (4th Cir. July 15, 2015) (published).

The employer, Drive Automotive Industries, operated a factory and used a staffing agency called ResourceMFG to supply some of the labor. Under the arrangement, both exercised control over the staffing agency employees' employment. ResourceMFG issued the uniforms, paid the employees, provided a special parking lot for the employees and had ultimate responsibility for issues related to discipline and termination. Drive, on the other hand, set the employees' work schedules, arranged portions of their training and supervised the employees while they worked on the factory floor.

The plaintiff was a ResourceMFG employee who was told that she worked for "both" ResourceMFG and Drive. She also claimed she was repeatedly sexually harassed by a Drive supervisor while working at the factory. The plaintiff claims she reported the harassment to both her ResourceMFG supervisor and to a Drive supervisor named Lisa Thomas, who supervised the alleged harasser, but nothing was done.

Later, after she refused to work on a piece of machinery because she felt fatigued from working overtime the night before, the alleged harasser told her she was "a temp and could easily be fired." When she reported the encounter to Thomas, Thomas requested another supervisor at Drive to have the plaintiff terminated. The request was sent to ResourceMFG. The alleged harasser then allegedly contacted the plaintiff and told her that she could save her job by performing sexual favors for him. When she refused, ResourceMFG terminated her from Drive.

The lower court found that Drive could not be held liable under Title VII because it was not the plaintiff's employer. Instead, it found that ResourceMFG was the plaintiff's sole employer.

On appeal, the Fourth Circuit disagreed, reversed and remanded the case. The court held that both Drive and ResourceMFG were the plaintiff's employer. Before today, the Fourth Circuit had never expressly adopted the joint employment doctrine in the Title VII context, and it had never articulated a set of factors for determining when two entities would be considered joint employers.

In today's opinion, the Court articulated a "hybrid test," consisting of the following factors, to use in assessing whether an individual 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 employee 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.

Although no factor is dispositive, the court acknowledged that the first three factors (in bold above) are the most important.

Applying these factors, the court found that both Drive and ResourceMFG were the plaintiff's employer. While ResourceMFG had the actual power to fire, Drive had the power to request that ResourceMFG's employees be reassigned, and those requests were always followed. That gave Drive effective control over the plaintiff's employment. Drive also supervised the day-to-day activities of ResourceMFG's employees, and furnished all of the equipment and place of work. Many of the remaining 6 factors were also present.

If your company uses a staffing agency, but retains the right to have employees reassigned and supervises them alongside your own employees, then you very well could be deemed a joint employer with the staffing agency for Title VII purposes. Requesting the staffing agency to reassign a problem employee can result in liability in the same way as firing one of your own true W-2 employees.