Yesterday on Monday, August 21, the California Supreme Court (“Supreme Court”) in Raines v. U.S. HealthWorks Medical Group (“Raines”) held that businesses that perform employment-related tasks for other companies, such as screening job applicants, can be held for discrimination under state law.
Screenings under FEHA
In Raines, the plaintiffs claimed that U.S. HealthWorks Medical Group (“HealthWorks”), which contracted with employers to conduct medical screenings of their job applicants, asked intrusive questions prohibited by California’s Fair Employment and Housing Act (“FEHA”). Under FEHA, employers are prohibited from making medical inquiries unless they are job-related and consistent with business necessity. State law defines “employer” to include “any person acting as an agent of an employer, directly or indirectly.” HealthWorks denied wrongdoing, arguing that it asked questions as required by individual employers.
Court of Appeals’ Question
After a California federal judge dismissed the case, ruling that HealthWorks did not qualify as an employer under the law, plaintiffs appealed to the 9th U.S. Circuit Court of Appeals (“Court of Appeals”). Last year, the Court of Appeals asked the California Supreme Court to decide whether FEHA imposes obligations on third parties such as HealthWorks. Specifically, whether a business entity, acting as an agent of an employer, is to be held directly liable for employment discrimination.
California Supreme Court’s Ruling
In answering the Court of Appeals’ question, the Supreme Court unanimously held that workers can sue third-party businesses for independently engaging in discrimination because state law defines the term “employer” to include an employer’s “agents.” According to the Supreme Court, FEHA is designed to broadly protect workers, so exempting businesses whose decisions can affect working conditions would go against the purpose of FEHA. This interpretation “extends FEHA liability to the entity that is in the best position to implement industry-wide policies that will avoid FEHA violations.” The Supreme Court did not decide on the significance, if any, of employer control over the act(s) of HealthWorks, and whether their ruling extends to agents with less than five employees.
For more information on employment discrimination under California’s Fair Employment and Housing Act, please contact us at info@mnklawyers.com.
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