• Sun. Oct 1st, 2023

News Eyeo

All Important News

California Broadens Liability for Business-Entity Agents under the FEHA


Sep 5, 2023

On August 21, 2023, the California Supreme Court made a ruling stating that business-entity agents could be held liable for violations of the Fair Employment and Housing Act (FEHA) even if the individuals affected were not their employees. This ruling specifically applies to business-entity agents with at least five employees who engage in FEHA-regulated activities on behalf of an employer.

The case that brought about this ruling, Raines v. U.S. Healthworks Medical Group, involved plaintiffs Kristina Raines and Darrick Figg. Both individuals received job offers from different organizations but were required to undergo a preemployment medical screening conducted by a third party, U.S. Healthworks Medical Group (USHW). The plaintiffs alleged that USHW violated FEHA by including questions in the medical screening that were unrelated to job-related functions. Raines refused to answer these questions and her job offer was rescinded, while Figg completed the entire medical screening and was hired.

Initially, the federal trial court dismissed the plaintiffs’ FEHA claims on the basis that agents of an employer, like USHW, cannot be held liable under FEHA. The plaintiffs appealed this decision, leading the U.S. Court of Appeals for the Ninth Circuit to seek clarification from the California Supreme Court on whether business-entity agents can be directly held liable for employment discrimination under FEHA.

The California Supreme Court had previously established that not all agents of an employer could be held liable for FEHA violations. In previous cases, such as Reno v. Baird in 1998 and Jones v. Lodge at Torrey Pines Partnership in 2008, the court declined to extend liability to individual supervisory employees for discriminatory and retaliatory acts, respectively. These decisions were based on exemptions in FEHA for employers with fewer than five employees and the potential conflict between supervisors and employers.

However, in its ruling, the California Supreme Court determined that a business-entity agent could be held liable for its own violations of FEHA. The court distinguished business-entity agents from individual agents, highlighting that the former could bear the economic burden of liability without conflicting with the employer. The court also emphasized the importance of treating business entities as employers under FEHA when they provide services that impact the employer’s employees and violate FEHA’s antidiscrimination policies.

The court clarified that a business-entity agent can only be held directly liable for FEHA violations if they engage in FEHA-regulated activities on behalf of an employer and cannot be made to bear an employer’s liability. This ruling expands the potential defendants in FEHA cases without increasing the recovery a plaintiff may receive. The court did not address the impact of employer control over the business-entity agent or whether the ruling applies to agents with fewer than five employees.

As a result of this ruling, plaintiffs are likely to name business-entity agents in FEHA cases involving prohibited acts. While the number of lawsuits filed may not increase, plaintiffs may be more inclined to sue business-entity agents if they believe they have greater financial resources. Business-entity agents may also revise their contracts to include indemnity clauses and hold-harmless provisions as a response to this ruling.

The exact scope of the court’s ruling is yet to be determined, and further litigation is expected to define the extent of potential liability.

By Editor

Leave a Reply