The EEOC has issued Enforcement Guidance, No. 915.002 (Dec. 3, 1997) to its staff regarding the application of EEO laws to contingent workers placed by temporary employment agencies, contract firms, and other firms that hire workers and place them in job assignments with the firm’s clients. The EEOC uses the term "staffing firm" to refer to these types of firms. Among other things, the Guidance explains the EEOC’s position regarding the circumstances under which the staffing firm, the client firm, or both may be liable for employment discrimination against the worker. This Guidance expands significantly upon previous policy statements issued by the Commission regarding the concepts of integrated enterprise and joint employers. It remains to be seen whether the courts will follow the EEOC’s expansive standard for staffing firm liability.

Three general categories of staffing arrangements are discussed in the Guidance:

1. Temporary employment agencies: Such agencies generally employ individuals who are placed with clients on a temporary basis at the client’s worksite. The client typically controls the individual’s working conditions, supervises the individual, and determines the length of the assignment. Secretarial and other office services are often provided by temporary agencies.
1. Contract firms: These firms generally perform a certain service on a long-term basis for a client. They hire their own employees and place them, including supervisors, at the client’s worksite. The contract firm assumes full operational responsibility for performing an ongoing service. Janitorial services, landscaping services, and data processing firms are examples of such firms.
2. Other types of staffing firms: Many other variants of the staffing firm/client relationship exist. For example, the client may put its employees on the staffing firm’s payroll and lease them back. The purpose of such an arrangement is to transfer responsibility for administering pay and benefits from the client to the staffing firm. These firms are often referred to as "PEOs," or professional employer organizations.

The Guidance points out that an employer may be liable for discrimination against its employee, or against an individual who is not its employee.

In most circumstances, staffing firm workers are employees rather than independent contractors. This is because the right to control the means and manner of work performance rests with the staffing firm and/or its client, rather than with the worker. (Coverage Issues, 1.) Workers placed by temporary agencies and contract firms usually are employees of those firms.

Where the staffing firm is a temporary agency, it is common for both the firm and the client to have control over the worker’s employment. The worker is an employee of both employers in these circumstances. Where the staffing firm is a contract firm, the client frequently has little control over the worker, and the worker is an employee of the staffing firm only. The determination whether a particular worker is an employee of the staffing firm, the client, or both must be made on a case-by-case basis.

An employer can be held liable for discriminating against an individual who is not its employee. The anti-discrimination statutes prohibit an employer from interfering with an individual’s employment opportunities with another employer. Thus, a staffing firm that discriminates against its client’s employee, or a client that discriminates against a staffing firm’s employee, is liable for unlawfully interfering with the individual’s employment opportunities. (Coverage Issues, 3.)

Discriminatory Assignment Practices

A staffing firm is obligated, as the employer, to make job assignments in a nondiscriminatory manner. It also is obligated as an employment agency to make job referrals in a nondiscriminatory manner. The staffing firm’s client is liable if it sets discriminatory criteria for the assignment of workers. (Discriminatory Assignment Practices.)

For example, if a worker is denied an assignment by a staffing firm because the client refuses to accept the worker for discriminatory reasons, both the staffing firm and the client are liable for discriminatory conduct. The staffing firm may be liable as an employer of the worker, as a third-party interferer with the worker’s employment opportunity with the client, and as an employment agency for discriminatory referrals. The client may be liable as a joint employer or as a third-party interferer with the worker’s employment opportunities. (Discriminatory Assignment Practices, 7(a) and 7(b).)

A client of a staffing firm is obligated to treat workers assigned to it in a nondiscriminatory manner. Where the client fails to fulfill this obligation, and the staffing firm knows or should know of the client’s discrimination, the staffing firm must take corrective action within its control. (Discrimination At Work Site, 8.)

Sexual harassment of a worker by the client is a typical example of client discrimination. The client may be liable as an employer or as a third-party interferer. The staffing firm is also liable as an employer if it knew, or should have known, of the harassment and failed to undertake adequate corrective action. The Guidance states that merely informing the client of a harassment complaint would not be sufficient action by the staffing firm to avoid liability. Rather, according to the EEOC, the firm should assert the right of the worker to be free of harassment and refuse to assign other workers until the client undertakes the necessary corrective and preventive measures. (Id.)

While staffing firms and their clients may not discriminate in the payment of wages, the Guidance recognizes that wage differentials between temporary and permanent workers are not discriminatory where the client always pays permanent workers more than temporary workers in the same jobs. (Discriminatory Wage Practices, 10.)

The Guidance states that, where the staffing firm and the client are both liable for discrimination against a worker, their liability is joint and several. This means that the worker may recover the full amount of a judgment for back pay, front pay, and compensatory damages, and for liquidated damages under the Equal Pay Act, from either of them. Neither entity has a right of contribution from the other. Punitive damages under Title VII, the ADA, and for retaliation under the Equal Pay Act and the ADEA, and liquidated damages under the ADEA, are individually assessed and borne by each entity in accordance with its respective degree of reckless or malicious misconduct. (Allocation of Remedies, 11.)

In Title VII and ADA cases, however, no employer may be required to pay more in compensatory and punitive damages than permitted under the applicable statutory cap. That is, the worker can recover compensatory and punitive damages from each employer, up to that employer’s statutory cap. For example, if the cap for the client is $50,000, the cap for the staffing firm is $100,000, and the worker is awarded $150,000 in compensatory and punitive damages, the worker may recover $50,000 from the client and $100,000 from the staffing firm, in addition to any damages not subject to the caps. (Id.)