October 6, 2023: Written By Christopher M. Leddy Esq. & David Frankel, Esq.
An ever-present concern in the staffing industry is liability for a client’s violation of labor laws. A recent Fifth Circuit Court of Appeals decision, Arredondo v. Elwood Staffing Services, Inc., may help alleviate this concern. In Arredondo, the Fifth Circuit found that a staffing agency, Elwood Staffing Services (the “Agency”), was not liable for Title VII violations against its employees by a client (the “Client”). Below is a summary of Arredondo and a few relevant rules for staffing agencies. Keep in mind that Arredondo is a Fifth Circuit case and, as such, the contents of this article may not be applicable to your staffing agency.
In Arredondo, the Agency placed two women, Arredondo and Coleman, at a client site. Both Arredondo and Coleman worked under a Client supervisor, Mitre, and a Client manager, Carrasco. Coleman submitted a complaint to the Client’s HR team, accusing (i) Mitre of sexual harassment and (ii) both Mitre and Carrasco of racial discrimination. The Client subsequently terminated Coleman. The Agency learned about the termination and informed Coleman that she may apply for other jobs, but she did not. Arredondo alleged that she was sexually harassed by Mitre, and Arredondo resigned from the Client before informing the Agency. Both Coleman and Arredondo sued the Agency and Client for violations of Title VII.
Both Coleman’s and Arredondo’s claims against the Agency failed for several reasons, including (i) the Agency did not take any adverse employment actions; (ii) the Agency did not participate in, know, and was not in a position where it should have known of the Client’s actions; and (iii) the Agency took proper corrective action after learning of the Client’s actions. Likewise, Arredondo’s claims against the Agency failed because the Agency did not have actual or constructive knowledge (i.e., that the Agency should have known if it exercised reasonable care) of the Client’s actions, and Arredondo only reported the abuse after she resigned.
Key Takeaways:
Do not take adverse action against employees for engaging in legally protected activities.
Staffing agencies can be liable both for their own discriminatory conduct and the conduct of their clients when a staffing agency knew or should have known of its client’s discriminatory behavior yet failed to take corrective actions within their control.
Maintain proper harassment, discrimination, and retaliation policies.
For your staffing industry legal needs, please reach out to our Staffing Team at Becker LLC and we will be happy to offer some guidance.