The California Supreme Court Expands Who is an Employer Subject to State Anti-Discrimination Laws

In a unanimous decision, the California Supreme Court recently held that some business entities could be liable for violations of the Fair Employment and Housing Act (“FEHA”), even where they did not employ the plaintiff.

The case, Raines v. U.S. Healthworks Medical Group, et al., was before the court after the U.S. Court of Appeals for the Ninth Circuit certified the following question: “Does California’s Fair Employment and Housing Act, which defines ‘employer’ to include ‘any person acting as an agent of an employer,’ Cal. Gov’t Code § 12926(d), permit a business entity acting as an agent of an employer to be held directly liable for employment discrimination?” The Supreme Court said “yes.”

In Raines, the plaintiffs filed a class action lawsuit in which they alleged their employers illegally made them employment offers conditional on their ability to pass preemployment medical screenings conducted by U.S. Healthworks Medical Group (USHW). According to the plaintiffs, USHW’s screenings required applicants to complete a health history questionnaire which sought information unrelated to employment such as sexual history, pregnancy, and cancer diagnoses. USHW moved to dismiss the plaintiffs’ complaint, and the District Court granted the motion. As to the FEHA claims, the trial court held the statutes do not bar discrimination by an agent of an employer. Before deciding on the plaintiffs’ appeal, the Ninth Circuit sought input from the California Supreme Court.

The Court rejected USHW’s argument that agents cannot be directly liable for discrimination or retaliation. The Court distinguished previous cases in which it held that individual agents could not be liable because the FEHA only applied to employers with five or more employees. Here, the agent of the employer employed greater than five employees and was itself an “employer” under the FEHA as to its own employees.

The Court declined to define which agent-employers could be liable, so it will be up to lower courts to determine the scope of this new rule. Nevertheless, businesses which provide employment-related services to other employers should plan for potential lawsuits from their clients’ employees.

A copy of the case can be found here.

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