Staffing agency may be on the hook for client employer’s age discrimination
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Thursday, July 21, 2016

Staffing agency may be on the hook for client employer’s age discrimination

By Lisa Milam-Perez, J.D. A staffing agency can be held liable for a client’s discriminatory transfer request "only if it knows or should have known the client’s reasons were discriminatory," the Fifth Circuit held, in an ADEA case brought by an 83-year-old receptionist after the agency removed her at the client’s request. Reversing summary judgment in the staffing agency’s favor, the appeals court found it possible that the agency should have known that its client had a discriminatory intent—as evidenced by its failure to inquire further. The appeals court also chastised the court below for declaring of its own accord that the staffing agency was not the "employer" in this scenario for ADEA purposes—even though the agency had readily acknowledged that it was (Nicholson v. Securitas Security Services USA, Inc., July 19, 2016, Southwick, L.). Convinced that its 83-year-old receptionist was unable to perform new technology-related tasks, the client company asked the staffing agency to replace her. The agency removed the receptionist and sent the client a 29-year-old replacement. The agency then terminated the receptionist ten days later, concluding there were no other positions available for her. She filed suit against the staffing agency and the client company, contending they discriminated against her due to age. She settled her claim quickly with the client company, leaving only the staffing agency as a defendant. Staffing agency is the employer. Concluding, under the circuit’s four-factor "right to control" test, that only the client company had the power to control the work conditions of the agency-assigned workers, the district court held the staffing agency was not the plaintiff’s employer under the ADEA. But the court below had no reason to apply the test here, the appeals court said, because the staffing agency twice conceded that the plaintiff was its employee. First, its contract with her expressly stated that she was an employee of the staffing agency and was not an employee of the client company to which she was assigned. Also, the agency averred that it was the plaintiff’s employer in its answer to her complaint. Because the staffing agency admitted that it was the plaintiff’s employer, the appeals court accepted it as a fact. (The lower court should have, too.) Staffing agency liability. In its 2015 decision in Burton v. Freescale Semiconductor, Inc., the Fifth Circuit held that a staffing agency can be liable for a client’s discriminatory conduct if it either participates in the discrimination or "‘if it knows or should have known of the client’s discrimination but fails to take corrective measures within its control.’" Clarifying the panel’s standard here, the appeals court explained that a staffing agency "must have knowledge of the discrimination to establish its ‘participation’ or failure to take corrective action." To "participate" in the discrimination (the first prong) "implies that there must be knowledge of the discrimination," the court explained. And the second prong actually contains an "actual or constructive knowledge" standard. "We see no reason to read the two methods of creating liability differently. Any other interpretation would be contrary to the McDonnell-Douglas framework, which requires knowledge, actual or constructive, of discriminatory intent for there to be liability." Accordingly, the question here was whether the staffing agency knew or should have known that the client discriminated against the employee when it asked that she be removed as receptionist—and whether the agency participated in that discrimination in some way, or failed to take corrective action in response. Failure to investigate. In this case, there was no allegation the staffing agency had a discriminatory impetus of its own, independent of its client’s intent. And, the employee conceded that the agency had no actual knowledge of discrimination by the client. Rather, she argued that the agency should have known of the client’s discrimination. The appeals court found evidence to support her contention, enough to create a genuine fact dispute. Specifically, the agency failed in any way to investigate the circumstances of its client’s reassignment request. Indeed, "confusing and inconsistent" testimony from the agency’s HR manager suggested that the agency deviated from its standard procedure by not investigating why the client wanted the employee removed. Typically, it was the branch manager’s job "to check it out" when such a request was received from a client. While the HR manager didn’t remember a specific time when a client asked for an employee to be removed, it "was always investigated" when it happened. The agency’s deviation from routine practice in this case raised an inference that the agency should have known of the client’s possibly discriminatory transfer request—putting it on the potential hook for that discrimination. Failure to reassign. Another adverse action was the staffing agency’s failure to assign the employee to another position once she was removed from the client company, leading to her discharge 10 days later because there was no job for her. In its defense, the agency contended the employee refused to obtain a "security guard card," which might have qualified her for other opportunities, but this point was disputed. At any rate, she repeatedly testified that the agency treated her well, and that it didn’t discriminate against her—the only bad actor, in her view, was the client company. Also, because she had served at the client company for so long, her salary was far higher than any other receptionist jobs that might have been available. Thus, the appeals court found no error in the lower court’s resolution of this particular claim. It noted, though, that the court below might need to reevaluate once it considers anew whether the staffing agency acted properly upon receiving the client’s request that it remove the employee.

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