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California Supreme Court:
Business Acting as Agent of Employer Faces FEHA Liability
Company That Provides Service of Screening Job Applicants for Potential Employer Could Be Forced to Pay Damages for Posing Impermissible Health Questions as If It Were, Itself, the Employer, Opinion Says
By a MetNews Staff Writer
A business entity that acts as an agent for an employer can, under some circumstances, be held directly liable for employment discrimination, the California Supreme Court held yesterday, responding to a question certified to it by the Ninth U.S. Circuit Court of Appeals.
The federal appeals court has before it the appeals of two persons who were, as a condition of employment, required to pass a medical screening conducted on behalf of the prospective employers by U.S. Healthworks Medical Group. Its screening included questions, on a form, of a highly personal nature, seemingly unrelated to fitness for employment.
Plaintiff Kristina Raines declined to complete the form and the conditional job offer she had received from Front Porch Communities and Services was rescinded. Plaintiff Darrick Figg did answer the questions, passed the exam, and was hired by San Ramon Valley Fire Protection District.
Rains on Oct. 23, 2018, brought a putative class action against U.S. Heathworks in the San Diego Superior Court. The defendant removed it to the U.S. District Court for the Southern District of California based on diversity of citizenship and a potential recovery in excess of $5 million.
Figg was added as a plaintiff in a second amended complaint, filed Feb. 19, 2020.
District Court’s Action
On Jan. 25, 2021, Chief Judge Dana M. Sabraw dismissed with prejudice claims under the California Fair Employment and Housing Act (“FEHA”), the Unruh Civil Rights Act, and for invasion of privacy, and dismissed, with leave to amend, a claim under California’s Unfair Competition Law. The plaintiffs opted not to amend, the action was dismissed, and they appealed.
The Ninth Circuit’s query to the California Supreme Court related to the claim under the FEHA. That act, contained in the Government Code, renders it unlawful, under §12940(e)(1), “for any employer…to make any medical or psychological inquiry of an applicant to make any inquiry whether an applicant has a mental disability or physical disability or medical condition.”
Sec. 12926(d) specifies:
“ ‘Employer’ includes any person regularly employing five or more persons, or any person acting as an agent of an employer, directly or indirectly….”
Question Posed
The Ninth Circuit on March 16, 2022 asked:
“Does California’s Fair Employment and Housing Act. which defines ‘employer’ to include ‘any person acting as an agent of an employer,’ Cal. Gov’t Code § 12926(d), permit a business entity acting as an agent of an employer to be held directly liable for employment discrimination?”
A three-judge panel—comprised of Circuit Judges Johnnie B. Rawlinson and Paul J. Watford, joined by District Court Judge Jed S. Rakoff of the Southern District of New York, sitting by designation—explained:
“The crucial question of state law is whether the Fair Employment and Housing Act (FEHA) allows employees to hold a business entity directly liable for unlawful conduct when the business entity acted only as the agent of an employer, rather than as an employer itself.”
The federal judges continued:
“Whether FEHA’s definition of the term “employer” includes a business entity acting as an employer’s agent is an unresolved question of California law with significant public policy implications. California has millions of employees who could be impacted by a decision defining the scope of liability for business entities acting as agents of their employers. To protect employees, FEHA instructs courts to construe its provisions ‘liberally’ in accordance with its broad remedial purposes, Cal. Gov’t Code § 12993(a), but it is unclear whether the Legislature intended FEHA’s definition of ‘employer’ to create direct liability for business entities acting only as agents of an employer.”
Supreme Court’s Response
The California Supreme Court on April 27, 2022, agreed to decide the issue. Justice Martin J. Jenkins wrote for a unanimous court in declaring in the opinion filed yesterday:
“We answer the Ninth Circuit’s question as follows: The California Fair Employment and Housing Act, which defines ‘employer’ to ‘include[]’ ‘any person acting as an agent of an employer’ (§ 12926, subd. (d)), permits a business entity acting as an agent of an employer to be held directly liable as an employer for employment discrimination in violation of the FEHA in appropriate circumstances when the business-entity agent has at least five employees and carries out FEHA-regulated activities on behalf of an employer. We do not decide the significance, if any, of employer control over the act(s) of the agent that gave rise to the FEHA violation, and we also do not decide whether our conclusion extends to business-entity agents that have fewer than five employees. We base our conclusion on our interpretation of the FEHA’s definition of employer (§ 12926, subd. (d)); we express no view of the scope of a business entity agent’s possible liability under the FEHA’s aider and abettor provision (§ 12940, subd. (i)).”
Jenkins said “[t]he most natural reading” of §12926(d) “is that a ‘person acting as an agent of an employer’ is itself an employer for purposes of the FEHA.” He acknowledged, however, that in the 1998 decision in Reno v. Baird, the state Supreme Court held that a supervisor of a defendant-employer is not personally liable under that act for employment discrimination based on being an “agent.”
Then-Justice Ming Chin said in Reno:
“By limiting the threat of lawsuits to the employer itself, the entity ultimately responsible for discriminatory actions, the Legislature has drawn a balance between the goals of eliminating discrimination in the workplace and minimizing the debilitating burden of litigation on individuals….
“[W]e conclude that individuals who do not themselves qualify as employers may not be sued under the FEHA for alleged discriminatory acts.”
Jenkins said in yesterday’s opinion:
“In Reno, however, we declined to address the question presented in this case: whether section 12926, subdivision (d) permits direct liability for other types of agents, such as business entities acting as independent contractors.”
He wrote that Reno and the 2008 Supreme Court decision in Jones v. Lodge at Torrey Pines Partnership—which extended Reno to FEHA actions against nonemployer individuals based on retaliation—“do not control the outcome here” because different considerations come into play.
The case is Raines v. U.S. Healthworks Medical Group, 2023 S.O.S. 3062.
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