Third Party Agents Are Employers For Purposes Of FEHA Liability

Seyfarth Synopsis: In a case of first impression, the California Supreme Court decided FEHA claims can be litigated directly against certain agents of an employer. Raines v. U.S. Healthworks Medical Group.

The Facts

Kristina Raines and Darrick Figg received offers of employment that were conditioned on successful completion of preemployment medical screenings. These screenings were not performed by the potential employers, but rather by U.S. Healthworks Medical Group, which is a third party occupational health services provider.

These screenings included a detailed questionnaire about the applicant’s health background, including, whether the applicant was pregnant, what medications the applicant was taking, and whether the applicant had any prior job-related injuries and illnesses. Raines refused to answer some of the questions, and her offer of employment was revoked. Figg answered all of the questions and was then hired.  

Raines filed a class action complaint in California state court against U.S. Healthworks on the theory that the questionnaire violated California’s Fair Employment and Housing Act (FEHA). U.S. Healthworks removed the case to federal district court.

The Lower Court Decisions

FEHA prevents “any employer or employment agency” from “requir[ing] a medical or physical examination” of an applicant. But it allows employers to conduct examinations of a “job applicant after an employment offer has been made,” if the examination is “job related and consistent with business necessity.” FEHA defines “employer” as “any person regularly employing five or more persons, or any person acting as an agent of an employer, directly or indirectly.”

The federal district court initially dismissed the FEHA claims because it concluded that FEHA does not impose direct liability on agents of an employer such as third party providers.

On appeal, the Ninth Circuit certified the following question to the California Supreme Court:

Does California’s Fair Employment and Housing Act, which defines ‘employer’ to include ‘any person acting as an  agent of an employer,’ … permit a business entity acting as an agent of an employer to be held  directly liable for employment discrimination?

The California Supreme Court Decision

The California Supreme Court answered the question in the affirmative. In reaching its conclusion, the Court discussed two prior opinions, the plain language of FEHA and its legislative history, analogous federal court decisions, and public policy considerations. Ultimately, the Court concluded that:

An employer’s business entity agents can be held directly liable under the FEHA for employment discrimination in appropriate circumstances when the business entity agent has at least five employees and carries out FEHA regulated activities on behalf of an employer.

What Raines Means for Companies

As a result of the Raines decision, FEHA now applies more broadly than many thought. And, it will potentially be easier for plaintiffs to assert claims against their employer’s business partners.