Labor & Employment Law Daily Common-law agency test adopted by CA-9 for ‘joint employment’ in Title VII; EEOC claims against fruit growers revived
Friday, February 8, 2019

Common-law agency test adopted by CA-9 for ‘joint employment’ in Title VII; EEOC claims against fruit growers revived

By Lorene D. Park, J.D.

Under the common-law agency test and through the operation of H-2A regulations, fruit growers had enough control to plausibly be liable as ‘joint employers’ for Thai workers’ abysmal living conditions.

Though a labor contract between two fruit growers and a recruiter delegated responsibility for housing, food, transportation, and wages to the recruiter, that did not absolve the growers’ legal responsibility for those “non-orchard-related matters” under the H-2A guest worker program. Adopting the common-law agency test for Title VII cases, and with a view toward the duties imposed by H-2A regulations, the Ninth Circuit found the growers had sufficient control to be “joint employers” of Thai workers recruited to work their orchards and subjected to deplorable living conditions. The question of liability for the recruiter’s actions, though, depended on whether the growers knew of the conditions and negligently failed to take corrective action. While the EEOC plausibly alleged one grower could be liable, more was needed as to the other. Dismissal was reversed with instructions to allow the agency to amend as to the second grower (EEOC v. Global Horizons, Inc., dba Global Horizons Manpower, Inc., February 6, 2019, Watford, P.).

Green Acre Farms and Valley Fruit Orchards are fruit growers in Washington state. In 2003, due to labor shortages, they entered agreements with Global Horizons, which recruited and hired temporary workers under the H-2A guest worker program. Under the labor contracts, the growers and Global Horizons agreed to share responsibility for managing the workers and fulfilling H-2A requirements. At the orchards, the growers provided oversight, setting quotas and inspecting work. Global Horizons agreed to provide housing, transportation, and wages, as well as “ancillary support, equipment, supplies, transportation and facilities,” which encompassed meals or cooking facilities. In exchange, the Growers agreed to pay Global Horizons for the wages and benefits, plus an additional fee for its services.

Discrimination. According to the EEOC, the growers and Global Horizons targeted poor Thai nationals, luring them with false promises of high wages and steady employment, and charging exorbitant recruitment fees. At the orchard, the defendants allegedly subjected Thai workers to poor working conditions, forcing them to work in extreme heat with few breaks, and threatening them with deportation. On non-orchard matters, the Thai workers were provided overcrowded and nearly uninhabitable housing that lacked adequate kitchen and bathroom facilities, sometimes lacked water or electricity, and sometimes were infested vermin.

After two workers filed discrimination charges in 2006, the EEOC investigated and filed suit under Title VII, alleging the growers and Global subjected the workers to poor work conditions, substandard living conditions, and unsafe transportation based on their race and national origin. The district court entered a default judgment against Global Horizons, which discontinued its defense and became insolvent. This case, therefore, focused on the liability of the growers.

District court proceedings. On a motion to dismiss, the district court divided the claims into “orchard-related matters” (working conditions at the orchards) and “non-orchard-related matters” (housing, meals, transportation, and payment of wages). It held that the EEOC plausibly alleged the growers were joint employers of the Thai workers on orchard-related matters, but not non-orchard-related matters. Claims based on the latter were dismissed. Thereafter, the court: (1) granted in part the growers’ motions to dismiss; (2) denied in part the EEOC’s motions to compel discovery; (3) granted the growers’ motion for summary judgment; and (4) awarded the growers’ attorney’s fees, finding the claims were frivolous from the start. The EEOC appealed each of these orders.

The Ninth Circuit reversed dismissal of the claims regarding non-orchard matters, which in turn affected each of the other issues and warranted reversal on those orders as well.

H-2A requirements and joint employer status. It was undisputed the growers were the Thai workers’ joint employers on orchard-related matters; the issue was whether the EEOC plausibly alleged they were joint employers on non-orchard-related matters. Here, the requirements of the H-2A program were relevant. To participate, an employer had to obtain a labor certification. To apply for a certification, the employer had to include a copy of the job offer to show it was offering sufficient pay and benefits. Employers also must provide H-2A workers with certain non-wage benefits as part of the job offer, like housing, meals, and transportation. An employer also must ensure transportation and housing satisfy applicable health and safety regulations, and must provide three meals a day at nominal cost or access to free cooking facilities.

Test for joint employer status. Noting that the Ninth Circuit has not yet adopted a test for joint employer status under Title VII, the appeals court explained that the statutory definition of “employer” is circular and, in cases like that, the Supreme Court has relied on common-law agency principles to analyze the existence of an employer-employee relationship. The appeals court concluded that this test should be applied in the Title VII context as well.

Thus, the “principal guidepost” would be the extent of control exercised over the details of the work, analyzed with the aid of a non-exhaustive list of factors, including the location of work, source of instrumentalities, extent of the worker’s discretion over when and how long to work, method of payment, provision of benefits, tax treatment, and whether the worker is in business and can hire assistants, among other considerations.

The appeals court explicitly rejected the economic-reality test for the Title VII context. The test focuses on the workers’ economic dependence on the alleged joint employer and was developed in the context of the FLSA and AWPA, statutes that differ materially from Title VII. The court acknowledged, though, that “there may be little functional difference among the common-law agency test, the economic-reality test, and a third test that blends elements of the first two (the so-called ‘hybrid’ test),” and that all three usually produce the same outcome.

Might be joint employers. Here, applying the common-law agency test and looking to the H-2A regs, the appeals court found that the EEOC plausibly alleged the growers were joint employers on non-orchard matters. In the typical employment relationship, employers don’t have control over housing, meals, and transportation, but here the H-2A program established a different, expanded employment relationship with foreign guest workers, legally requiring an “employer” to provide housing, transportation, and low-cost meals or cooking facilities, which under regulations constitute “material terms and conditions of employment.”

Moreover, regulations during the relevant time defined “employer” as an entity “which suffers or permits a person to work and (1) which has a location within the United States to which U.S. workers may be referred for employment, and which proposes to employ workers at a place within the United States and (2) which has an employer relationship with respect to employees under this subpart as indicated by the fact that it may hire, pay, fire, supervise or otherwise control the work of any such employee.” The regulations also state that “employers” using the H-2A program normally share certain characteristics, including a “fixed-site farm, ranch, or similar establishment.” Under these provisions, the growers qualified as “employers.”

Contract didn’t change analysis. The terms of the contracts between the growers and Global Horizons do not change this analysis. While they delegated to Global Horizons responsibility for housing, cooking facilities, transportation, and wages, that did not absolve the growers of legal obligations as “employers” under the H-2A regulations, which were imposed as a matter of law.

While most factors typically considered for the common-law agency test did not apply here, its “principal guidepost”—the element of control—was determinative and, under H-2A regulations, the EEOC plausibly alleged the growers were joint employers on non-orchard-related matters.

Basis for liability. That did not end the analysis, though, because as sister circuits have noted, “even if a joint-employment relationship exists, one joint employer is not automatically liable for the actions of the other.” Liability is imposed only if the defendant knew or should have known about the other employer’s conduct and “failed to undertake prompt corrective measures within its control” (the negligence standard).

Plausible to hold Green Acre liable, more needed on Valley Fruit. Here, the EEOC plausibly alleged Green Acre’s liability as a joint employer for Global Horizons’ discriminatory conduct. The agency alleged that some of the Thai workers complained directly to Green Acre personnel, including its co-owner, about their abysmal living conditions, unsafe transportation, and missing wages. They also told Green Acre that similarly situated Mexican employees were not subjected to the same substandard conditions. This gave rise to the plausible inference that Green Acre knew of the discriminatory conduct on non-orchard-related matters, that it had ultimate control over those matters, and that it failed to take corrective action.

The allegations were thinner, though, with respect to Valley Fruit because the complaint did not adequately allege that it knew or should have known about that conduct, a necessary condition to trigger its obligation to take prompt corrective action.

Reversed and remanded. Based on the foregoing, the appeals court reversed each of the orders challenged on appeal. It found that the lower court erred by dismissing the EEOC’s disparate treatment claim (and the related pattern-or-practice claim) on the ground that the growers were not joint employers of the Thai workers as to non-orchard-related matters. On remand, the court is instructed to grant the EEOC leave to amend its complaint with respect to Valley Fruit.

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