In the modern workplace, it is common for companies to contract outside labor forces to meet their business objectives. “Contractors” often work side-by-side with a company’s traditional employees, and it is sometimes difficult to discern to whom workers “belong.” The answer to this question becomes particularly important when problems arise, such as allegations of discrimination, harassment or retaliation. To whom should the worker complain? Whose responsibility is it to investigate? Who should impose discipline if necessary? Who is liable if discrimination laws were violated? The answers to these questions relate to what company is considered to be the worker’s “employer” — and it could be more than one.

The analysis begins with the definitions of “employer” and “employee” under applicable anti-discrimination laws, which are similarly circular.

For example, under Title VII, the term “employer” means “a person engaged in an industry affecting commerce who has fifteen or more employees ….” Even less enlightening, the term “employee” is defined to mean “an individual employed by an employer.”

In the absence of clear statutory guidance, courts have thus engaged in fact-specific inquiries focusing on the circumstances presented, recognizing that more than one entity may qualify as the “employer” — the “joint employer” theory.

While courts have applied different tests to determine whether an entity qualifies as joint employer, courts have focused their inquiries primarily on the degree of control that the potential “employer” has over the worker in question. A pair of recent decisions from the United States District Court for the Eastern District of Virginia, in the case of Signore v. Bank of America, N.A., et al., provide useful guidance regarding factors that can be considered in evaluating joint employer liability.

In Signore, the plaintiff worked as a customer relations manager at Bank of America (BANA) through a temporary staffing agency known as DISYS. The plaintiff, contending that she had been discriminated against based on her age, disability and religious beliefs, brought suit against DISYS, BANA and a related subsidiary, alleging violations of the ADA, ADEA and Title VII. The plaintiff contended that she was harassed and discriminated against by her BANA supervisor, and alleged that she complained of the conduct to both BANA and DISYS, to no avail. According to the plaintiff, she was told by DISYS not to “make waves” after her initial complaint and was later informed by DISYS at the request of BANA that she was on “final warning” after another incident with the same BANA supervisor.

BANA moved to dismiss the federal employment law claims, inter alia, on the grounds that it was not the plaintiff’s employer. In addressing that part of BANA’s motion, the district court noted that the central inquiry, derived from common law agency principles, was the degree of control exercised by the company over the individual employee.

The district court then cited a series of non-exclusive factors set forth by the United States Court of Appeals for the 4th Circuit (the so-called “Garrett factors”) that should also be considered in evaluating whether an employment relationship exists:

(1) the kind of occupation, with reference to whether the work usually is done under the direction of a supervisor or is done by a specialist without supervision; (2) the skill required in the particular occupation; (3) whether the “employer” or the individual in question furnishes the equipment used and the place of work; (4) the length of time during which the individual has worked; (5) the method of payment, whether by time or by the job; (6) the manner in which the work relationship is terminated; i.e., by one or both parties, with or without notice and explanation; (7) whether annual leave is afforded; (8) whether the work is an integral part of the business of the “employer”; (9) whether the worker accumulates retirement benefits; (10) whether the “employer” pays social security taxes; and (11) the intention of the parties.

In assessing these factors in the context of the plaintiff’s claims, the district court noted that her allegations indicted that both BANA and DISYS were responsible for her hiring, firing and discipline, but concluded that such evidence of dual control did not prevent BANA from qualifying as the plaintiff’s employer under the theory of joint employer liability and that plaintiff had pled sufficient allegations to survive a motion to dismiss on the employer issue. The defendants’ motions to dismiss were granted in part on certain other grounds, and the plaintiff was allowed to amend.

In response to the amended pleading, the defendants filed another round of motions to dismiss, including a motion by DISYS that the pleading did not sufficiently allege an employment relationship for purposes of the claims presented. In evaluating DISYS’s motion, the court engaged in a similar inquiry, noting at the outset that the mere fact that the plaintiff received her paycheck from DISYS was not determinative.

After assessing the degree of control exerted by DISYS and the other Garrett factors, the court held that the plaintiff alleged sufficient facts to establish that DISYS was her employer, as well as BANA. In reaching this conclusion, the district court cited the plaintiff’s allegations that DISYS had hired her, placed her with BANA, told her to “go back to her desk” and not to “make waves” in response to her age discrimination complaints, and later informed her that she had been placed on “final warning.”

The district court also noted that even where a company can be said to be a worker’s joint employer, the worker still must show that the company knew or should have known about the conduct at issue and failed to take action within its control to stop it. In describing this obligation, the district court cited EEOC guidance, noting that appropriate corrective measures “may include: ‘1) ensuring that the client is aware of the alleged misconduct; 2) asserting the firm’s commitment to protect its workers from unlawful harassment and other forms of prohibited discrimination; 3) insisting that prompt investigative and corrective measures be undertaken; and 4) affording the worker an opportunity … to take a different job assignment at the same rate of pay.’”

While acknowledging that facts developed at a later stage of the proceedings would be necessary to establish employment status and ultimate liability, the court held that the allegations were sufficient to survive a motion to dismiss.

The Signore decisions, and others like them, highlight the need for companies to evaluate their policies and practices regarding the use of contract labor to make sure their goals are being achieved without unnecessary exposure to liability. While not used in all jurisdictions, the Garrett factors cited in Signore are helpful. Among the circumstances that companies using contract labor forces should consider are: the amount of supervision and direction being exerted over the day-to-day activities of contractors by the company’s supervisors; the written and unwritten protocols that exists for addressing concerns raised by contract workers; the duration of placements for individual contractors; and whether contractors are allowed to participate in benefits normal provided to traditional employees.

For companies that provide contract labor, it is also important to establish effective mechanisms for addressing concerns raised by contractors regarding the workplace environments into which they have been placed. By doing so, exposure to liability can be reduced, even if the company is found to be a “joint employer.”