California Court of Appeal Determines Customer of Staffing Agency Is Employer Because of Direction and Control 


From JDSupra, Eric Witt discusses a case in which the client of a staffing was found to be an employer under California’s Fair Employment and Housing Act (FEHA). Eric writes:

In Jimenez v. U.S. Continental Marketing, Inc., the California Court of Appeal addressed whether the plaintiff and appellant, Elvia Velasco Jimenez, was an “employee” of a contracting employer under the California Fair Employment and Housing Act (FEHA). In answering this question, the court also provided useful guidance to California businesses on the standard for whether an employment relationship exists under the FEHA. This guidance is particularly relevant for staffing companies and their clients because there can be ambiguity as to which company employs these workers. This question was highly consequential to the parties because, unless Jimenez could establish that she was an employee of the contracting employer under the FEHA, she could not prevail on her claims against that company for harassment, retaliation, failure to prevent harassment or retaliation, and wrongful termination.

Jimenez was a “direct employee” of a staffing agency named Ameritemps, Inc., which assigned her to U.S. Continental Marketing, Inc. (USCM), a manufacturer of shoe care products. At the time USCM terminated her engagement, Jimenez oversaw the production work of up to 30 workers. Ameritemps was responsible for tracking work time, providing benefits and paying Jimenez. With respect to her day-to-day experience at USCM, however, there was virtually no difference between Jimenez and direct employees of USCM.  Jimenez used USCM’s equipment, she was expected to comply with USCM’s policies, she supervised and in turn was supervised by USCM’s direct employees, and USCM sent her to its clinic for any on-the-job injuries.

USCM investigated complaints of bullying against Jimenez, concluded she had violated USCM’s anti-bullying policy and issued a warning to her. During this same time period, Jimenez brought a complaint of harassment against a co-worker. USCM investigated the complaint but concluded that the allegations could not be corroborated and declined to discipline the alleged harasser or Jimenez. For reasons that are unclear from the opinion, USCM terminated its relationship with Jimenez, and soon thereafter, Ameritemps terminated her employment.

At trial, USCM’s attorneys framed the relevant inquiry as whether USCM or Ameritemps had more control over Jimenez, which suggested there could be only one employer – the company that exercised more control. Jimenez’s claims against USCM for harassment, retaliation, failure to prevent harassment or retaliation, and wrongful termination were tried by a jury, and by a margin of 9 to 3, the jury responded no on a special verdict form to the question “Was Elvia Velasco Jimenez employed by U.S. Continental Marketing, Inc.?” For reasons that are unclear, the verdict form for the claim of failure to prevent harassment or retaliation did not include the preliminary question of whether Jimenez was employed by USCM, and the jury responded by an 11 to 1 margin in favor of USCM to the question “Did U.S. Continental Marketing, Inc. fail to take all reasonable steps to prevent harassment or retaliation?” Jimenez filed a motion for a new trial, arguing that the jury’s finding that she was not USCM’s employee was contrary to law, which the trial judge rejected. This appeal followed.

The Court of Appeal rejected the “contest of influence” argument advanced by USCM. Whether a company is an employer of a particular worker is evaluated individually and not in relation to the worker’s connection to another employer. The court observed that although FEHA does not define employee, an administrative agency charged with interpreting FEHA, the Fair Employment and Housing Council (FEHC), defines employee as “any individual under the direction and control of an employer under any appointment or contract of hire or apprenticeship, express or implied, oral or written.” The FEHC definition is consistent with the “common law test” for an employment relationship, which emphasizes the direction and control exercised by a business over the worker. Direction and control can be shown by many factors but primarily depend on whether the worker must obey instructions from the business and whether the services may be terminated at any time. The court explained, “The employment relationship exists for FEHA purposes within the context of the control retained.” The court also concluded that the matters handled by Ameritemps, including hiring, payment of wages, provision of benefits and time-tracking, were irrelevant to whether Jimenez was an employee of USCM, because those matters did not bear on the direction and control that USCM exercised over Jimenez at its work facility. In light of the substantial direction and control USCM exercised over Jimenez, which USCM “rebutted only by direction and control evidence outside the bounds of the contractual context,” the court concluded that the jury’s determination was contrary to the law. The court affirmed the judgment with respect to Jimenez’s failure-to-prevent claim because the jury’s verdict addressed the merits of that claim. The court reversed the judgment in all other respects and remanded the case with the directive that the court instruct the jury on retrial that USCM was Jimenez’s employer.

Source: California Court of Appeal Determines Customer of Staffing Agency Is Employer Because of Direction and Control | BakerHostetler – JDSupra

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