Who Did It? California Affirms That Staffing Agencies May Avoid Liability If Agencies Do Not Participate in Worksite Employer’s Employment Decisions

In Ducksworth v. Tri-Modal Distribution Services (Second Appellate District, April 7, 2020), the California Appellate Court affirmed a judgment from the Superior Court of Los Angeles that a staffing agency, which was not involved in decisions made by the worksite employer, could not be held liable for workplace discrimination.

In Ducksworth, Plaintiffs Bonnie Ducksworth and Pamela Pollock filed suit against worksite employer Tri-Modal Distribution Services along with two staffing agencies, Scotts Labor Leasing Company, Inc. and Pacific Leasing, Inc., for racial discrimination under the Fair Employment and Housing Act. Plaintiffs alleged that Defendants failed to promote them because they were African-American.

Defendants Scotts Labor Leasing Company, Inc. and Pacific Leasing, Inc. tracked and processed payroll, health insurance, workers compensation, vacation, holiday, sick pay, tax, and social security payments for the worksite employer Tri-Modal. Additionally, the name on the Plaintiffs’ paychecks was either Scotts or Pacific at different points in time. However, the evidence showed that Scotts and Pacific were not involved in the decision-making surrounding employee promotions at Tri-Modal. Based on this evidence, Scotts and Pacific moved for summary judgment. Of particular importance, it was undisputed that: “The decision to promote an employee leased to by [sic] Scotts or Pacific to Tri-Modal is made solely by Tri-Modal. Scotts or Pacific do not provide any input, have any authority or make any decision regarding the promotion of any employees leased to Tri-Modal.”  Thus, the Superior Court granted summary judgment in favor of Scotts and Pacific. Plaintiffs appealed the ruling.

On appeal, the appellate court relied on California state regulation 2 CCR 11008(c)(5) promulgated by the Fair Employment and Housing Commission. This regulation states: “An individual compensated by a temporary service agency for work to be performed for an employer contracting with the temporary service agency is an employee of that employer for such terms, conditions, and privileges of employment under the control of that employer. Such an individual also is an employee of the temporary service agency with regard to such terms, conditions, and privileges of employment under the control of the temporary service agency.” Cal. Code. Regs., 2 § 11008(c)(5). Relying on this regulation, the appellate court reasoned that because Scotts and Pacific were not involved in Tri-Modal’s decision-making about which employees to promote, Scotts and Pacific could not be held liable for terms, conditions and privileges of employment not under their control. As such, the appellate court affirmed summary judgment for Scotts and Pacific.

This ruling is an important reminder for staffing agencies to clearly establish the level and scope of control and decision-making they will exercise over employees they place to perform work at the worksite employer. 

If you have any questions about this article or the Ducksworth ruling, please contact Guillermo Tello (gtello@ClarkHill.com), Paymon Mondegari (pmondegari@clarkhill.com), or another member of Clark Hill’s Labor and Employment Practice Group.