For companies with five or more on payroll, California’s Fair Employment and Housing Act (FEHA) protects workers from employer discrimination based on protected classifications such as race, religion, gender, and disability.

In Raines v. U.S. Healthworks Medical Group (August 21, 2023), the California Supreme Court has broadened “employer” to include certain “business-entity agents” servicing companies on employment-related matters such as pre-hiring or for-promotion screening, testing or background checks.  The expansion likely reaches all major, nationwide firms offering artificial intelligence systems to assist employers in such applicant or employee evaluations. See, Workplace Artificial Intelligence, EEOC Goes Old School; Data In, Equal Opportunity Out (May 26, 2023)

Christina Raines applied for and received a conditional offer as a food service aide from Front Porch Communities and Services. To complete hiring, Front Porch required her to pass a medical screening conducted by third-party and nationwide vendor U.S. Healthworks Medical Group (USHW). Ms. Raines claimed USHW “required job applicants to complete a written health history questionnaire that included numerous health-related questions having no bearing on the applicant’s ability to perform job-related functions,” including for example “venereal disease… problems with menstrual periods …  penile discharge, prostate problems … or … a history of tobacco or alcohol use.”  The questionnaire also asked whether the “job applicant was pregnant, sought information regarding medications taken, and required the job applicant to disclose prior job-related injuries and illnesses.”

Ms. Raines’s class action suit claimed Front Porch and USHW violated FEHA when she declined to answer a menstrual-related question, causing the exam’s termination and Front Porch’s revocation of the employment offer. The lawsuit alleged USHW should be included as an “employer” by FEHA’s inclusion of “any person acting as an agent of an employer, directly or indirectly” within that term.

USHW pushed back, asserting that California court decisions had found other employer agents – an employer’s managers and supervisors – not within that definition.  The Court was not convinced.  Its exclusions of such individuals stemmed from the several distinguishing factors, including the chaos of potentially putting executives on the FEHA hook for every personnel decision they make.   The Court found USHW, on the other hand, was a large firm which can afford its defense and should be responsible for making sure its screening methods did not violate FEHA.  The questionnaire’s irrelevant and privacy-invading questions would be a case-in-point.

Thus, the Court ruled FEHA “permits a business entity acting as an agent of an employer to be held directly liable as an employer … in appropriate circumstances when the business-entity agent has at least five employees and carries out FEHA-regulated activities on behalf of an employer.”

Take-Aways:

The Raines decision creates separate FEHA discrimination liability for the actual hiring entity (if it employs at least five persons) and for any business entity (with its own payroll of five-or-more) providing employment-related services to the actual hirer.  It is thus feasible that a business with less than five employees could be outside FEHA discrimination claims while its nationwide testing service would not.

In addition to clear responsibility to ensure all third-party screening services are free of discriminatory content or effect, any employer retaining such vendors should be alert to service contract terms placing all obligation on that employer to defend the third-party and cover the latter’s resulting FEHA liabilities.

For further information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

See also,

• Take Heed Responding to Harassment and Discrimination Complaints Correctly – Harassment, Seriously (July 28, 2023)
• Name Changer – Department of Fair Employment and Housing is Now the “Civil Rights Department” (September 1, 2022)
• Preventing Workplace Discrimination: Accommodating Disabilities, Made Simple – New Guidelines Package Available for California Employers (August 24, 2017)

Tim Bowles
August 25, 2023