In a 7-0 opinion, the California Supreme Court has said companies hired to provide health screening services for employers cannot shield themselves from state law discrimination lawsuits by arguing they were contracted by those employers to identify certain medical conditions.
Justice Martin Jenkins wrote the opinion, published Aug. 21.
The decision answered a question from the U.S. Ninth Circuit Court of Appeals, as it attempts to interpret provisions of California’s Fair Employment and Housing Act. Under that law, Jenkins explained, employers are largely forbidden from making “any medical or psychological inquiry” of job applicants.
Under the law, the term "employer" covers “any person regularly employing five or more persons, or any person acting as an agent of an employer, directly or indirectly.” Jenkins said the question is whether “an employer’s agents are subject to all the obligations and liabilities that the FEHA imposes on the employer itself.”
In the underlying case, named plaintiffs Kristina Raines and Darrick Figg filed a class action lawsuit alleging U.S. Healthworks Medical Group screenings illegally interfered with their employment. The plaintiffs said their potential employers required the screenings, which they alleged included “a written health history questionnaire that included numerous health-related questions having no bearing on the applicant’s ability to perform job-related functions.”
Among the contested screening subjects were venereal diseases, menstrual cycles, genital issues, mental illness, HIV, diarrhea, organ transplants and more. Raines said Front Porch Communications and Services rescinded its offer to hire her as a food service aide after she declined to provide the date of her last menstrual period.
The San Ramon Valley Fire Protection District hired Figg for its volunteer communication reserve. Raines added Figg as a plaintiff on her second amended complaint, at the same time she dismissed Front Porch as a defendant. The remaining defendants won a dismissal, which prompted a third amended complaint. The challenge of that dismissal was before the Ninth Circuit panel when, after oral arguments, it posed the question to the California Supreme Court.
Jenkins said the court, in a 1998 case, Reno v. Baird, held an individual that doesn’t qualify as an employer, such as a supervisor, can’t be subject to an FEHA discrimination suit. That opinion, however, didn’t address the potential of direct liability for independent contractors. In 2008, the court decided Jones v. Lodge at Torrey Pines Partnership, which extended the Reno opinion to retaliation claims.
However, he continued, “a business-entity agent is more likely than an employee agent to have comparable bargaining power to the employer, enabling it to negotiate such differences at the time that it initiates or renews its business relationship with the employer. Indeed, such negotiations might include the question of indemnification regarding any potential FEHA liability that might arise. Finally, the role of a business-entity agent is often formally defined by the terms of its contract with the employer. Therefore, its fault, if any, for the employer’s actions can be easily determined.”
The court noted state lawmakers, when adopting FEHA in 1980, subsumed a 1959 law that took its definition of “employer” with “agent-inclusive language” from the National Labor Relations Act, supporting the interpretation that direct FEHA liability can be imposed on a contracted business. Jenkins said there also “are various federal antidiscrimination laws that define employer in similar terms," further shaping the court's conclusion.
Martin said public policy considerations also favor imposing liability on contractors when “as is often the case, the business-entity agent has expertise in its field and has contracted with multiple employers to provide its expert service,” making such a business more likely to be “in the best position to implement industry-wide policies that will avoid FEHA violations.”
U.S. Healthworks argued liability can only be imposed when an agent has breached a duty owed specifically to a third party, like a job applicant. Jenkins said the court didn’t need to consider the degree to which employers dictated how U.S. Healthworks screened employees, while also noting the Ninth Circuit’s question wasn’t whether an employer had illegally delegated its FEHA obligations, but only if a contractor can be liable for violating its own FEHA obligations.
“A business-entity agent’s obligation to comply with FEHA and its consequent liability for FEHA violations results from the entity’s own engagement in FEHA-regulated activities on the employer’s behalf,” Jenkins wrote. “Thus, a rule holding that the business-entity agents of an employer can be held liable for FEHA violations neither delegates the employer’s FEHA obligations nor abrogates the employer’s FEHA liability. Nor will it lead to a double recovery for the plaintiff, as defendants argue; rather, it merely increases the number of defendants that might share liability for the plaintiff’s damages.”
The workers are represented by attorneys R. Scott Erlewine, Brian S. Conlon and Kyle P. O’Malley, of Phillips, Erlewine, Given & Carlin.
U.S. Healthworks is represented by Raymond A. Cardozo and Kathryn M. Bayes, of Reed Smith; and Tim L. Johnson and Cameron O. Flynn, of Ogletree, Deakins, Nash, Smoak & Stewart.
California Attorney General Rob Bonta filed a support brief for the workers.