California staffing agencies can be held liable for workplace discrimination. However, in a recent decision of Duckworth et al. v. Tri-Modal Distribution Services Inc., a state appellate court ruled the staffing agency was not liable for alleged racial discrimination of two black employees who weren’t promoted. The court held that because the two workers were “leased” to the company they worked for – and that company had the authority over employment actions – the staffing agency was effectively off-the-hook.
As our Los Angeles racial discrimination attorneys can explain, this, like many similar cases comes down to the degree of control each firm had in employment-related decisions. As an increasing number of companies turn to staffing agencies to fill certain positions, the question of who the actual employer is becomes pertinent when determining who is responsible for employment-related discrimination claims. The question will be which entity retains substantial control and are in fact employers in all but name.
In the Ducksworth case, plaintiffs were decades-long customer service representatives at Tri-Modal. While other workers had been promoted over the course of their tenure, they were not. Plaintiffs alleged this was due to racial discrimination because they are black. One of the plaintiffs further alleged sexual harassment. She began dating the executive vice president of the firm, but when she declined to engage in a more sexual relationship, the pair broke up. Subsequently, plaintiff alleged several of her promotions were blocked by the executive.
The employees sued alleging racial discrimination as outlined in California Code section 12940 of California’s Fair Employment and Housing Act (FEHA).
Although Tri-Modal, a logistics firm, was named as a defendant employer in this case, the subject of the appeal before California’s Second District Court of Appeal, Division Eight, were two different staffing agencies. These companies supplied workers – including plaintiffs – to Tri-Modal. The trial court ruled the staffing agencies were not involved in employment action decisions, and thus granted those companies summary judgment on the claims.
In reviewing the summary judgment decision, the appellate court noted the pair were hired by the staffing agencies to work for the logistics firm. The staffing agencies processed things like health insurance, payroll, paid time off, social security taxes and workers’ compensation.
An executive of one of the staffing agencies stated in his deposition that he considered plaintiffs to be employees of his firm because it was the company who issued their pay checks. However, it was Tri-Modal that set the workers’ schedules, work assignments and determined raises and promotions. The workers did not interact with the staffing agency team on a daily basis, nor were they trained or supervised by those firms. The staffing agencies also did not manage work-related complaints (those were instead handled by the logistics company).
With these facts, the appellate court looked at past precedent, and specifically the 2008 appellate court case of Bradley v. California Department of Corrections and Rehabilitation (later cited by the California Supreme Court). In that case, the court held that employees can sue the contracting employer (which, in this case, would be Tri-Modal) without pursuing a claim against the staffing agency that hired them.
Here, the court held, the staffing agencies were “innocent bystanders,” and further that a company that hasn’t discriminated can’t be held liable for discrimination.
That doesn’t mean these employees are out of luck. It just means the correct defendant in this case is the logistics firm, not the staffing agency.