Legal Clinic

The Liability Issues of Joint Employment

Question:  If I employ someone jointly with another employer, can I be liable for the other employer's discriminatory acts towards that employee?

Thursday, January 28, 2016
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Answer:  Yes -- but only if you, as a joint employer, participated in, or condoned, the discrimination.

First, you should determine whether you are, in fact, a "joint employer." Under Title VII, the ADEA and the ADA, two or more entities are joint employers if they share or co-determine the matters governing the essential terms and conditions of employment. Though different courts across the country have developed varying tests to determine if an entity is a joint employer, they will generally look to the control that an entity asserts over a person, including: (1) authority to hire and fire, promulgate work rules and assignments, and establish terms and conditions of employment; (2) day-to-day supervision, including discipline; (3) control of employee records, including payroll and taxes, and/or (4) where or how the work is performed.

However, being a joint employer with another entity does not automatically mean that you are equally responsible for any discrimination that may occur. To the contrary, most courts have found that a joint employer can only be held responsible if it participates in the discrimination or if it knew about, or should have known about, the discrimination but nonetheless failed to take steps to correct it. Burton, 798 F.3d at 229; Whitaker v. Milwaukee Cnty., 772 F.3d 802, 811 (7th Cir. 2014); Torres–Negrón v. Merck & Co., 488 F.3d 34, 41 n. 6 (1st Cir.2007); Llampallas v. Mini–Circuits, Lab, Inc., 163 F.3d 1236, 1244–45 (11th Cir.1998). Therefore, whether an employer is responsible for the discrimination of another co-employer is very fact-specific.

Often times, questions about potential joint employer come about as a result of the following relationships: contractor/subcontractors, staffing/temp agencies and franchisers/franchisees. If your company is in one of these relationships, the information that follows may be especially helpful.

Contractors/Subcontractors: Speaking generally, where one business subcontracts particular functions to another, it is often unlikely that the entity that contracts out the work will be considered a joint employer. See, e.g., Mays v. BNSF Ry. Co., 974 F.Supp.2d 1166, 1178 (N.D. Ill. 2013). Such a finding is not impossible, however, because the joint employer test focuses on the actual relationship, not the mere fact that a subcontractor is used. For example, in E.E.O.C. v. Skanska USA Bldg., Inc., 550 Fed. Appx. 253, 256 (6th Cir. 2013), a court determined that the general contractor could be a joint employer, even though it facially subcontracted out a particular function, because the general contractor oversaw the day-to-day conduct of the subcontractor's  workers, dealt with workers' complaints, removed workers from the job, etc. Thus, because the general contractor was a joint employer, it was exposed to liability for the discrimination that a worker alleged took place on the worksite and which the general contractor condoned, promulgated or did not correct. 

Staffing Agencies/Temp Agencies: Most courts have held that the entity in control of the workplace is liable for misconduct. Staffing agencies often retain a significant amount of control over employers, i.e. through payment of wages and the ability to discipline, hire and fire, thus can easily be found to be a joint employer exposed to liability for discrimination. See, e.g., Butler v. Drive Auto. Indus. of Am., Inc., 793 F.3d 404, 415 (4th Cir. 2015). Therefore, staffing agencies would be wise to monitor potential discriminatory practices in the entities in which they place employees, and to take corrective measures in their power when discrimination is detected. For example, in a recent Texas case, Burton v. Freescale Semiconductor, Inc., a court found that a staffing agency could be held responsible for disability discrimination under the ADA because it did not override the other employer's questionable decision to fire one of its employees after she filed a workers' compensation claim. 798 F.3d at 229. The staffing agency argued that, under the terms of its contract with the other employer, it had no choice but to follow the order to terminate the employee's employment; however, the court disagreed and pointed out that the contract required the staffing agency to comply with federal law, including the ADA. Id. The court also found it relevant that the staffing agency participated in the discrimination in that it initially expressed concern that the termination was "dubious," and then proceeded to participate in a "communication plan" wherein it appears that the employee was provided with false reasons for her discharge.  Id. 

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Franchisors and Franchisees: Courts have almost uniformly held that franchisors are not joint employers with franchisees unless special circumstances exist such that the franchisor exercises actual control over employee relations at the franchisee level. Because franchisors seldom tend to exert substantial control over the workers retained by franchisees, being found to be a joint-employer status is unlikely, though not impossible.

In sum, employers should carefully monitor the relationships that they have with other entities, especially when the relationship entails sharing or jointly managing employees.

Keisha-Ann G. Gray is a partner in Proskauer's labor and employment department, resident in the firm's New York Office. Proskauer Associate Lindsey Chopin, resident in Proskauer's New Orleans office, assisted with this article.


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