The recent decision in Halpert v. Manhattan Apartments, 580 F.3d 86 (2d Cir. 2009), illustrates one of the potential pitfalls arising out of out-sourcing – an employer’s potential exposure in using independent contractors to perform traditional employer functions in the workplace. In Halpert, the plaintiff, seeking a job with defendant Manhattan Apartments Inc. (“MAI”), was interviewed by Robert Brooks, an independent contractor retained by MAI to do its interviewing and hiring. Brooks allegedly told the plaintiff that he was “too old” for the job. Halpert sued MAI, claiming age discrimination in violation of the federal Age Discrimination in Employment Act (“ADEA”), 29 U.S.C. § 621 et seq., which makes it unlawful for an employer “to fail or refuse to hire or discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s age.”

Although the lower court in Halpert ruled that the age discrimination laws did not apply to the discriminatory acts of an independent contractor acting on behalf of the employer, the Second Circuit Court of Appeals reversed, holding that employer liability under the ADEA is “direct” and attaches regardless of whether the employer uses its own employees to interview applicants or uses independent contractors to fulfill that role. As the Court observed, a similar rule adheres under Title VII, where the employer can be held liable for its own acts, the acts of customers, as well as for those of independent contractors acting as agents on its behalf.

In this era of widespread out-sourcing of various employer functions, the Court’s decision in Halpert underscores the importance of employers understanding that by vesting an “outsider” with authority to act on its behalf, the employer is likely to assume responsibility for that independent contractor’s discriminatory acts. Providing adequate training and guidance for the independent contractor is one way to reduce potential exposure, along with the careful drafting of the agreements establishing the relationship. Such agreements, for example, should clearly address subjects such as indemnification, liability, insurance, scope of agency, as well as reflect the employer's personnel and EEO policies.