January 15, 2020

A New Path to Employer Liability?

An employer uses an employment agency to fill its temporary vacancies.  A manager tells the agency rep that he does not want people of a certain…age, race, religion, sex, etc.  We know that an applicant that is denied an employment opportunity because of this bias could file a charge of discrimination against the employer. But could the agency sue the employer?

On January 15th, the 5th U.S. Circuit Court of Appeals said, “Yes!”  Specifically, the case involved a claim of race discrimination filed under 42 U.S.C. § 1981. But how or why could the agency sue? The agency as a corporate entity is not of a particular age, race, color, sex, etc.  The agency was not discriminated against. So, how could it have legal standing to sue?  Here was the court’s rationale.

The employer (1) “impinged on [the agency’s] right to contract” and (2) the basis was race in violation of § 1981.

Note 1: The court pointed out that the U.S. Supreme Court (“SCOTUS”) has not decided corporate liability under this law.  But other circuits have (1st, 3rd, 9th). Put this issue on your watch list. One day it may be before SCOTUS.

Note 2: The actual fact pattern in this case a bit different. The employer expressed a preference for Hispanic workers. When the agency sent a temp worker who was not Hispanic, the manager was “very upset.”  Remember, preferential treatment can create as much legal liability as adverse treatment.