Flexibility, specific expertise, tax benefits and cost savings are only a few of the advantages available to businesses using independent contractors. Add to that list the fact that Title VII and other federal discrimination laws may not protect independent contractors, and businesses are further tempted to go that route when looking for help. However, while a company may not be liable for discrimination against an independent contractor, it can be held liable for discrimination by an independent contractor.
In a recent case, Halpert v. Manhattan Apartments, Inc., No. 07-4074 (2d Cir. Sept. 10, 2009), a realtor, Manhattan Apartments, Inc. (MAI), retained a third party, Brooks, to recruit and hire staff. When interviewee Halpert was told by the recruiter that he was “too old” for the job, he filed suit against MAI under the federal Age Discrimination in Employment Act (ADEA). MAI sought to have the case thrown out because, it argued, the recruiter was an independent contractor, and therefore MAI could not be held liable for his actions. However, the controversy was not whether MAI was liable for discrimination against an independent contractor (an action typically not protected against under the ADEA), but whether MAI can be held liable for age discrimination by an independent contractor working as an agent for MAI. The Court answered this question with an unequivocal, “yes.”
This case could have a significant impact on all companies who use independent contractors, but especially those companies that plan to contract out human resource functions to a third-party contractor. Employers who think that using an independent contractor to conduct interviews will absolve them from compliance with federal anti-discrimination laws should think again. A company’s potential liability does not depend on whether the individual acting for the company is an actual employee or an independent contractor – either individual can be an agent for the company for purposes of federal anti-discrimination laws, regardless of his or her employment status for other purposes.
Companies working with independent contractors should be mindful of the following factors used to determine whether an intended independent contractor is actually an employee: the skill the job requires; who provides the equipment or tools; where the work occurs; the duration of the relationship; whether the worker provides services to others, and, most importantly, the extent of control over the worker’s schedule and manner of work. With careful thought and guidance, employers can structure their relationships with temporary workers in a way that enables them to enjoy the many benefits of an independent contractor while avoiding the hidden pitfalls.