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Fourth Circuit Says Host User of Temporary Employee Liable for Title VII Violations

    Client Alerts
  • July 27, 2015

Most employers using temporary workers from an employment agency assume that they are liable as employers for certain legal claims. While a reasonable assumption, until last week, this status had never been formally recognized in the Fourth Circuit Court of Appeals (which includes North Carolina and South Carolina). In Butler v. Drive Automotive Industries of Amer., Inc., the plaintiff was retained by the defendant through a temporary employment agency. She alleged that a Drive supervisor sexually harassed her and then had her assignment terminated in retaliation for her reporting his behavior to management.

The district court dismissed the complaint, concluding that Drive was not the plaintiff’s employer as defined under Title VII. The judge acknowledged that the temp agency and client can be joint employers, but stated that in this circumstance, Drive failed to meet this definition.

The Fourth Circuit reversed this decision, remanding the matter for trial. In its opinion, the court affirmed the lower court’s ruling that two companies can serve as joint employers under Title VII. While a number of district courts in the Fourth Circuit had reached this conclusion, the appellate court had never directly addressed the issue.

Next, the Fourth Circuit defined the appropriate test for determining joint employment. The court reviewed three similar but varied tests: the control test, the economic realities test and the hybrid test.  The control test, favored by the employer, emphasizes ability to hire and fire. The economic realities test, favored by the plaintiff, focuses on the degree of economic dependence on the business claimed as the employer.

The court rejected both of these tests in favor of the hybrid one. This test combines common law agency principles with the economic realities of the second test. The Fourth Circuit set forth a nine-point test for addressing this question. Three of these factors are most important:

  • authority to hire and fire the individual
  • day-to-day supervision of the individual, including employee discipline
  • whether the putative employer furnishes the equipment used and the place of work.
The Fourth Circuit stated that no one factor is determinative, and that each situation should be individually analyzed. In this case, the court concluded that the arrangement met the hybrid test for joint employment. Given that this arrangement was similar to most uses of temporary workers hired from agencies, other courts in the Fourth Circuit are likely to routinely conclude that they meet the definition of joint employment. While this decision does not change legal liabilities assumed to already exist, it does provide parties with guidance as to the factors used when workers are arguably employed by more than one entity.