On November 18, 2015, the Third Circuit in Faush v. Tuesday Morning, Inc. [1] held that a company who uses temporary employees from a staffing agency can be considered an employer for the purpose of Title VII of the Civil Rights Act of 1964 (Title VII) discrimination claims.

Factual Background. Plaintiff Matthew Faush (Faush) was employed by Labor Ready, a staffing agency that provides temporary employees to a number of clients including defendant retailer Tuesday Morning, Inc. (Tuesday Morning). Faush, along with a number of other individuals, were placed at a Tuesday Morning store to unload merchandise, set up display shelves and stock merchandise in preparation for the store’s opening. Faush was assigned at Tuesday Morning for approximately ten days and he worked approximately eight hours on each of these days.

In his complaint, Faush alleges that, while assigned at the Tuesday Morning store, he was accused of stealing by the store manager who remarked that “[his] people wouldn’t do that.” Later, he claims he was reassigned to work in the back of the store with the garbage. He also claims that a white Tuesday Morning employee used racial slurs towards him. Finally, Faush alleges that, when he complained to the store manager about the racial slurs, the store manager told Faush that he would not be permitted on the store floor because an alarm had been triggered and the manager was concerned about loss prevention. Finally, Faush claims that he was ultimately terminated.

Procedural Background. Faush sued Tuesday Morning, alleging racial discrimination under Title VII and the Pennsylvania Human Rights Act. The district court granted summary judgment to Tuesday Morning, dismissing the complaint and finding that Tuesday Morning was not Faush’s employer (as defined by Title VII) and, therefore, it could not be liable as a matter of law. Faush then appealed to the Third Circuit Court of Appeals.

The Court’s Analysis. The Third Circuit, applying the factors in Nationwide Mutual Insurance Co. v. Darden, [2] reversed summary judgment, reinstating Faush’s Title VII discrimination claims against Tuesday Morning. The Third Circuit, in adopting the Darden test, held that, when determining whether an employment relationship exists, a court must consider the hiring party’s right to control the manner and means by which the work is accomplished. [3]Darden provides a non-exhaustive list of relevant factors, [4] including:

  • the skill required;
  • the source of the instrumentalities and tools;
  • the location of the work;
  • the duration of the relationship between the parties;
  • whether the hiring party has the right to assign additional projects to the hired party;
  • the extent of the hired party’s discretion over when and how long to work;
  • the method of payment;
  • the hired party’s role in hiring and paying assistants;
  • whether the work is part of the regular business of the hiring party;
  • whether the hiring party is in business;
  • the provision of employee benefits; and
  • the tax treatment of the hired party.

After analyzing the evidence presented by Faush at summary judgment before the district court in light of the above Darden factors, the Third Circuit concluded that Faush and Tuesday Morning had an employment relationship. While Labor Ready did set Faush’s pay rate, paid his employment withholding taxes and maintained workers’ compensation insurance, Tuesday Morning was still responsible for ensuring that Faush received minimum wage, overtime wages, and prevailing-wage (where appropriate). And, while Tuesday Morning made payments to Labor Ready and not to Faush directly, the payments were functionally indistinguishable from direct compensation because it was based on the number of hours that Faush worked. Ultimately, Labor Ready verified with Tuesday Morning the number of hours that Faush worked for it on a daily basis.

Moreover, Tuesday Morning had direct supervisory control over Faush and provided training, equipment and directed the method and means by which Faush performed his assignments. And, while Tuesday Morning did not have the authority to terminate Faush’s employment with Labor Ready, it had ultimate control over whether Faush was permitted to be assigned to its store. Finally, while it is true that Faush (along with his other temporary co-employees) performed only unskilled tasks such as unloading and stocking merchandise, setting up display shelves and removing garbage, deposition testimony from Tuesday Morning’s store manager confirmed that these tasks were no different than those assigned to Tuesday Morning employees.

The Bottom Line. Employers who retain temporary employees by means of contracts with staffing agencies should not assume that they are escaping liability for discrimination and harassment claims under Title VII. As the Third Circuit explained above, such employers will commonly become “joint employers” for the purpose of defending Title VII discrimination and harassment claims.