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Co-Employers Both Liable under the ADA

By Caitlin Haney, Litigation News Associate Editor – January 29, 2016

 

Staffing agencies and their clients (joint-employers) who cite inconsistent justifications for terminating an employee are precluded from summary judgment victory in a discriminatory termination case, according to Burton v. Freescale Semiconductor, et al.Further, joint-employers that retroactively document a worker’s shortcomings after deciding to terminate the worker open themselves to an inference of pretext under the Americans with Disabilities Act. Section leaders say the decision demonstrates how to advise parties seeking to avoid or prosecute a potential joint-employment relationship.


ADA and Retaliation Claims
The defendant Freescale Semiconductor, Inc. relied on temporary employees provided by the defendant Manpower of Texas, L.P., a staffing agency. The plaintiff began working for Freescale as a temporary employee in 2009. The first two years of her employment were uneventful, and she received positive to neutral performance reviews. In 2011, the plaintiff began experiencing some performance issues at Freescale, including inhaling chemical fumes when she failed to follow safety procedures. Inhaling the fumes allegedly caused the plaintiff to experience chest pains and heart palpitations, for which the plaintiff filed a workers’ compensation claim.


Approximately two weeks after filing her workers’ compensation claim, the plaintiff’s supervisor at Freescale decided to terminate her employment. The plaintiff, however, was not actually terminated for another month. The staffing agency requested documentation from Freescale to support the termination. Freescale provided documentation of four supporting events, including unauthorized Internet use. The plaintiff’s supervisor testified that the plaintiff’s unauthorized Internet use was the “final straw.”


A different employee testified that she informed the supervisor about the unauthorized Internet use only after the termination decision had been made. Other events used to support the plaintiff’s termination also occurred only after the supervisor’s decision to terminate. Freescale and Manpower issued position statements for the EEOC that differed as to the time and reasons for the plaintiff’s termination.


The plaintiff brought two claims: one under the Americans with Disability Act alleging discriminatory termination, and another claim under the Texas Labor Code alleging retaliatory termination based on her filing a workers’ compensation claim. The U.S. District Court for the Western District of Texas granted the defendants’ motion for summary judgment, holding that the defendants had asserted legitimate reasons for terminating the plaintiff. The district court also dismissed the plaintiff’s retaliation claim, because Freescale did not provide the plaintiff’s workers’ compensation coverage, and there was no evidence that Manpower acted with a retaliatory motive.


The U.S. Court of Appeals for the Fifth Circuit agreed that the plaintiff’s retaliation claim failed as a matter of law. But, the court of appeals found that there was enough evidence to raise an inference of pretext regarding the plaintiff’s ADA claim, given the defendants’ after-the-fact documentation, and reversed the district court’s decision.


Employer Liability Standard
Both defendants asserted that they were not proper defendants. Freescale argued that it was not an “employer” under the ADA because the plaintiff was actually employed by the staffing agency. However, in applying the “hybrid economic realities/common law control test” articulated in Deal v. State Farm County Mutual Insurance Company of Texas, the Fifth Circuit found that Freescale did in fact have the right to control the plaintiff’s conduct, which was enough to find Freescale a proper defendant.


The staffing agency, on the other hand, argued that it was not a proper defendant because it was a Freescale manager who decided to terminate the plaintiff. Relying on an Equal Employment Opportunity Commission Enforcement Guide, the Fifth Circuit found that a staffing firm is liable if it participates in the client’s discrimination or if it knew or should have known about the client’s discrimination and failed to take corrective measures. The appellate court ruled that the staffing agency had an independent obligation to comply with the ADA and that a purported contractual obligation to fire an employee was no defense.


Although “each circuit has its own variations” the “hybrid standard used by the Fifth Circuit is pretty consistent with other circuits,” says Kindall C. James, Houston, TX, web editor of the ABA Section of Litigation’s Employment & Labor Relations Committee. The Fifth Circuit’s standard is “phrased differently” but is “in accord with the Eleventh Circuit’s standard,” adds Brian Koji, Tampa, FL, former cochair of the Section of Litigation’s Employment & Labor Relations Committee.


Effects of the Decision on Employers
This decision illustrates that “it is difficult for companies engaging contract labor to protect themselves entirely from being deemed a joint employer,” says James. If the client employer is “going to insist on the right to control the employee, then just accept that you are going to be a joint employer and turn your attention to the contract with the co-employer and carefully spell out who has what authority and who is responsible when things go wrong,” recommends Koji. This includes working out indemnification agreements between the two co-employers during the negotiation process.


Staffing agencies, for their part, can attempt to avoid liability by “remaining independent, staying out of the principal company’s decision-making process, and conducting its own investigation into any complaints,” James suggests. Staffing agencies then need to “document those steps and communications,” adds James.


Defense attorneys representing co-employers should “try and work together and make sure that you are consistent” in your reasoning for an employment action, recommends Koji. It is essential that defendants are “consistent in documentation and documents provided in litigation,” notes James. Inconsistent stories of co-employers is, in Koji’s view, “a plaintiff’s attorney’s dream.”


Keywords: Americans with Disabilities Act, co-employers, Fifth Circuit, joint employers, staffing agencies


 
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