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Policy Statement on control by third parties over the employment relationship between an individual and his/her direct employer

  NOTICE Number
EEOC 915
Date
    5/20/87
  1. SUBJECT: Policy statement on control by third parties over the employment relationship between an individual and his/ her direct employer.
  2. PURPOSE: This policy statement sets out the Commission’s view on the extent to which Title VII of the Civil Rights Act of 1964, as amended (Title VII or the Act), 42 U.S.C. § 2000e et seq. (1982), covers entities that are not an individual’s direct employer but that have the ability to control or interfere with the employment relationship between that individual and his/her direct employer.(1)
  3. EFFECTIVE DATE: May 20, 1987
  4. EXPIRATION DATE: November 28, 1987 [This document is cited with approval in the 1998 New Compliance Manual, Section 2, Threshold Issues. Thus, it remains in effect despite its expiration date.]
  5. ORIGINATOR: File behind page 605- 32 of EEOC Compliance Manual, Volume II, Section 605, Jurisdiction.
  6. INSTRUCTIONS: File behind page 605- 32 of EEOC Compliance Manual, Volume II, Section 605, Jurisdiction.
  7. SUBJECT MATTER:

Individuals have filed charges alleging discrimination in employment by respondents who are not their employers or prospective employers. In such a case, the issue arises concerning whether the respondent is within Title VII jurisdiction since it is not the charging party’s employer.

For instance, in a previous policy statement,(2) the Commission considered a situation where a county jail had implemented a work release program for prisoners. The jail selected the prisoners who could participate in the program and reserved the right to approve or disapprove their employment. The charging party, a Black prisoner, received an offer of employment at a barber shop; however, the jail refused to approve his employment. He alleged that the jail’s refusal was because of his race. The Commission concluded that the jail was covered by Title VII, even though it was not the charging party’s employer, because it had the ability to control or interfere with the employment relationship between the inmate and his potential employer, the barber shop.(3)

The Commission relied upon a number of court cases(4) that have interpreted the language of § 703(a)(1) of Title VII to include situations where a third party, who is a § 701(b) employer,(5) has the ability to control or interfere with the employment opportunities of another employer and its employee.

Sibley Memorial Hospital v. Wilson(6) is the seminal case addressing this issue. In that case, the plaintiff, a male nurse, had been referred to care for a female who was a patient in the defendant hospital. The hospital refused to allow him into its facility to care for her, and he sued the hospital alleging sex discrimination under Title VII.

The hospital took the position that “since no direct employment relationship between itself and appellee [Wilson] was ever contemplated by either of them, it is not an employer under the Act with respect to him.”(7) In deciding against the hospital’s position, the appellate court reiterated the Congressional purpose of Title VII “to achieve equality of employment opportunities... “(emphasis in original)(8) and concluded as follows:

To permit a covered employer to exploit Circumstances peculiarly affording it the capability of discriminatorily interfering with an individual’s employment opportunities with another employer, while it could not do so with respect to employment in its own service, would be to condone continued use of the very criteria for employment that Congress has prohibited.(9)

In further support of its finding, the court relied upon the language of the Act itself. It noted that § 703(a)(1)(10) prohibits an employer from discriminating against any individual with respect to his conditions or privileges of employment and that the term individual need not be limited to employees, but should be given its ordinary meaning so long as that does not conflict with the purpose of the Act.(11) Also, it noted that the Act, in providing for filing of complaints in § 706(b)(12), used the phrase “person aggrieved,” a denotation that may encompass individuals who are not “employees,” and that the Act provides for remedies for a group of persons encompassing more than direct employees.(13)

This policy statement discusses some sub-issues that may arise in charges involving an allegation that a third party, not the direct employer of the charging party, has discriminatorily interfered with the employment relationship between the charging party and his/her actual employer. Those sub-issues are: 1) the nature of the relationship between the individual and his/her direct employer; 2) whether the third party interferer must be a § 701(b) employer before there is jurisdiction under Title VII; 3) whether the direct employer must be a covered employer before there is jurisdiction under Title VII; and 4) the nature of the control or interference exercised by the third party.

The nature of the relationship between the individual and his/her direct employer.

It is the Commission’s view that, in order for there to be jurisdiction over a third party interferer, the relationship between the individual and his/her direct employer must be one of employment; that is, the individual must be an employee or prospective employee of the direct employer and not an independent contractor.

Sibley and Puntolillo v. New Hampshire Racing Commission,(14) the first two cases to consider whether a third party could be liable for interfering with an individual and the person for whom (s)he works, did not discuss whether the nature of that relationship was one that must be covered by Title VII. They found jurisdiction under Title VII over the third parties without deciding whether the relationship between the individuals and the person for whom they work had a nexus in employment.(15)

In Smith v. Dutra Trucking Co.,(16) the Ninth Circuit Court of Appeals affirmed a district court opinion that distinguished both Sibley and Puntolillo on the basis of the nature of the relationship between the individual and the person for whom (s)he worked. In Dutra Trucking Co. the plaintiff alleged that the defendant had discriminatorily denied her the opportunity to provide trucking service to another company, who would have been her employer. The court agreed that the Act proscribed the discriminatory interference with an employment opportunity by a third party who is not the individual’s direct employer.(17) However, it found that the relationship allegedly interfered with must be “in the nature of employment,” and that the plaintiff would have been an independent contractor, not an employee, of the company for whom she attempted to work.(18) The court notes that, while Sibley and Puntolillo speak in terms of interference with employment opportunities, the plaintiffs in those cases were arguably independent contractors and that those decisions cannot be applied to independent contractual relationships since that would lead to a cause of action for interfering with a type of relationship not covered by the Act.(19)

Several courts have applied the Sibley rationale without considering whether the relationship between the direct employer and the employee is one of employment;(20) while others, primarily in the Ninth Circuit Court of Appeals, have followed the reasoning in Dutra.(21)

It is the Commission’s view that the reasoning in Dutra is correct and that the relationship interfered with must be in the nature of employment. It is a well recognized precept of Title VII law that, in order for Title VII to come into play, “there must be some relationship with an employment situation.”(22) Therefore, in a case where the issue is whether an individual is an employee or an independent contractor, the courts and the Commission have held that an independent contractual relationship is not covered by Title VII because the relationship has no nexus with employment.(23)

To extend Title VII coverage to a situation where a third party allegedly interfered, on a prohibited basis, with an independent contractual relationship would be to encompass “a type of relationship which is itself not covered by the Act.”(24)

Whether the third party must be a § 701(b) employer before there is jurisdiction under Title VII.

It is the Commission’s view that a third party who is accused of discriminatorily interfering in the employment relationship between an individual and his/her employer must be a § 701(b) employer in order to be covered by the Act.

Section 703(a)(1) makes it “an unlawful employment practice for an employer... otherwise to discriminate against any individual with respect to his... conditions or privileges of employment”(25) (emphasis added). The plain reading of § 703(a)(1) means that one must be an employer within the meaning of § 701(b) in order to be prohibited from discriminatorily interfering with an individual’s employment opportunities.

The majority of the cases agree with this view.(26) In Sibley, the court, in referring to the third party interferer, specifically stated, “[t]o permit a covered employer to exploit circumstances....” (emphasis added). Even the Ninth Circuit, which distinguishes the Sibley line of cases, agrees that the third party must be a § 701(b) employer in order to be covered by the Act.(27)

Whether the direct employer of the individual must be a § 701(b) employer before there is jurisdiction over the interfering party.

Instances may arise where the third party argues that it is not covered by Title VII because the direct employer of the aggrieved party does not have 15 or more employees and, therefore, since the employment activities of the direct employer are not covered by the Act, neither are those of the third party.

It is the Commission’s position that the employer of the aggrieved party need not be a § 701(b) employer in order for there to be jurisdiction over a third party who is alleged to have interfered with an employment relationship between that employer and its employee.

Our research disclosed no court cases which have discussed this issue. Even in those cases where the employer arguably did not meet the requirements of § 701(b),(28) the courts did not specifically mention that fact in their analyses.(29)

In a charge involving interference with an employment relationship by a third party, the substantive inquiry is whether that third party has violated § 703(a)(1); therefore, the proper jurisdictional issue is whether it meets the definition of an employer under section 701(b), not whether the charging party’s direct employer does. It is our view that the benefit of the exemption in § 701(b) for small employers inures to the party whose status is in issue.

This interpretation is also consistent with the legislative purpose behind the exclusion of small businesses from the term employer in § 701(b).

Congress felt that it was inappropriate to attempt to regulate businesses of a smaller size.(30) At the heart of this reasoning was its view that the working relationships in a small business are so vital and intimate that small employers should be allowed to hire according to their own personal preferences without interference by the federal government.(31) If jurisdiction over a third party is determined by the size of the direct employer, it is possible for a § 701(b) employer to interfere with the employment relationship between an individual and an exempt employer; thereby allowing that third party to interfere with the personal preferences of the exempt employer that Congress meant to protect.

The nature of the control or interference exercised by the third party.

The nature of the control exercised by the third party will always be a product of each specific factual situation. Therefore, it is difficult to provide a general rule that will fit every case. However, in Sibley, the court thought it significant that the Act directly addressed labor unions and employment agencies, “institutions which have not a remote but a highly visible nexus with the creation and continuance of direct employment relationships”(32) between other parties, and the court found that the hospital had such a nexus to the nurse and the patient.(33) It is the Commission’s view that a sufficient nexus will exist where the third party has the ability to thwart the creation or continuance of a direct employment relationship or where it has the ability to affect the terms, conditions, or privileges of employment.

Situations where courts have found sufficient nexus include: control over access to premises or interference with access to a potential client;(34) control over the design or administration of examinations;(35) ability to appropriate funds;(36) enforcement of state laws;(37) control over a benefit of employment;(38) providing adverse references to prospective employers;(39) and control over granting or renewing an employment contract.(40)

Insufficient nexus was found where the third party monitored a service contract(41) and where the third party only prepared and graded the employment test that the direct employer used.(42) In one case involving a nurses’ referral agency, the court found that the facts, as alleged by the individual plaintiff, did not show that the registry had interfered with his employment opportunities.(43)

 

 

 

 

 

_____________       Approved: __________________________________
Date                           Clarence Thomas
                               Chairman

 

 

 

 

 

Footnotes

1. This policy statement also applies to charges arising under the Age Discrimination in Employment Act 29 U.S.C. § 624 et seq. (1982). See, EEOC v. KDM School Bus Co., 612 F. Supp. 369, 38 EPD ¶ 35,763 (S.D.NY. 1985).

2. Policy statement on work release programs, N-915, May 1986.

3. Id.

4. Gomez v. Alexian Brothers Hospital, 698 F.2d 1019, 31 EPD ¶ 33,328 (9th Cir. l983); Spirit v. Teachers Insurance and Annuity Association, 691 F.2d 1054, 30 EPD ¶ 33,072 (2nd Cir. 1982); Lutcher v. Musicians Union Local 47, 633 F.2d 880, 24 EPD ¶ 31,402 (9th Cir. 1980); Sibley Memorial Hospital v. Wilson, 488 F.2d 1338, 6 EPD ¶ 8964 (D.C. Cir. 1973); Beverley v. Douglas, 591 F. Supp. 1321 (S.D.N.Y. 1984); Pao v. Holy Redeemer Hospital, 547 F.

Supp. 484 (E.D. Pa. 1982); Smith v. Dutra Trucking Co., 410 F. Supp. 513, 13 EPD ¶ 11,460 (N.D. Ca. 1976), aff’d mem. 580 F.2d 1054 (9th Cir. 1978); Puntolillo v. New Hampshire Racing Commission, 375 F. Supp. 1089, 8 EPD ¶ 9671 (D. N.H. 1974).

5. Throughout this policy statement, the terms “§ 701(b) employer” or “covered employer” refer to these persons who meet the jurisdictional requirements set forth in § 701(b) of the Act, regardless of whether they are the actual employer of the aggrieved party. Section 701(b) states in pertinent part,

[T]he term “employer” means a person engaged in an industry affecting commerce who has fifteen or more employees for each working day in each of twenty or more calendar weeks in the current or proceeding calendar year....

6. 488 F.2d 1338 (D.C. Cir. 1973).

7. See Id. at 1340.

8. See id. at 1340.

9. Id.

10. Section 703(a)(1) provides:

(a) It shall be an unlawful employment practice for an
employer--

(1) to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment because of such individual’s race, color, religion sex, or national origin;

11. Sibley Memorial Hospital, 488 F.2d at 1341.

12. Section 706(b) states, “[w]henever a charge is filed by or on behalf of a person claiming to be aggrieved....”

13. Sibley Memorial Hospital, 488 F.2d at 1341-42.

14. 376 F. Supp. 1089 (D.N.H. 1974).

15. See Sibley Memorial Hospital, 488 F.2d at 1340 (relationship was between a female patient and a male nurse); Puntolillo, 375 F. Supp. at 1090 (relationship was between the driver/trainer of a horse and the horse’s owner).

16. 410 F. Supp. 513 (N.D. Ca. 1976), aff’d mem. 580 F.2d 1054 (9th Cir. 1978).

17. Id. at 518.

18. Id.

19. Id. at 518 n.11.

20. See Pao, 547 F. Supp. 484; Shehedah v. Chesapeake and Potomac Telephone Company of Maryland, 595 F.2d 711 (D.C. Cir. 1978); Puntolillo, 375 F. Supp. 1089; Cf. Doe v. St. Joseph’s Hospital of Fort Wayne, 39 EPD ¶ 39,995 (7th Cir. 1986) (court refused to grant summary judgment to defendant stating that it is far from certain that the doctor-patient relationship would not be protected under a Sibley analysis”).

21. See Gomez, 698 F.2d 1019; Lutcher, 633 F.2d 880; Beverley, 591 F. Supp. 1321. See also KDM School Bus Co., 612 F. Supp. 369 (ADEA). Also, many other courts have been silent on this issue; however, in those cases the relationships were ones of employment. See Spirt, 691 F.2d 1054; Baranek v. Kathleen Kelly, et. al, 39 EPD ¶ 35,977 (D. Mass 1986); Barone v. Hackett, 602 F. Supp. 481, 35 ¶ EPD 34,838 (U. R.I. 1984); Vanguard Justice Society, Inc. v. Hughes, 471 F. Supp. 670, 20 EPD ¶ 30,077 (D. Md. 179); Gill v. Monroe County Department of Social Services, 79 F.R.D. 316 (W.D.N.Y. 1978); Curran v. Rothland Superintending School Committee, 435 F. Supp. 1063, 15 EPD ¶ 7871 (S.D. Me. 1977).

22. See Lutcher, 633 F.2d 880, 883; Mathis v. Standard Brands Chemical Industries, Inc., 10 EPD ¶ 10,306 at 5246 (N.D. Ga. 1975).

23. Mathis, 10 EPD ¶ 10,306. For cases discussing whether an individual should be considered an employee or an independent contractor, see Spirides v. Reinhardt , 613 F.2d 826 (D.C. Cir. 1979).

24. Dutra, 410 F. Supp. at 518 n.11.

25. See supra note 10.

26. Gomez, 698 F.2d at 1021; Lutcher, 633 F.2d at 883 n.3; Sibley, 488 F.2d at 1341; Curran, 435 F. Supp. at 1073; Puntolillo, 375 F. Supp. at 1092. See also Beverley, 591 F. Supp. at 1327; Pao, 547 F. Supp. at 494; Dutra, 410 F. Supp. 513. But See Spirit, 691 F.2d at 1063; Vanguard Justice Society, 471 F. Supp. at 696.

27. See, Gomez, 698 F.2d at 1021; Lutcher, 633 F.2d at 883 n.3.

28. See Sibley Memorial Hospital, 488 F.2d 1338; Doe, 39 EPD ¶ 39,995; Beverley, 591 F. Supp. 1321; Pao, 547 F. Supp. 484; Puntolillo, 375 F .Supp. 1089.

29. There is some indication in Sibley Memorial Hospital, 488 F.2d at 1341, that the direct employer need not be a § 701(b) employer in order for there to be Title VII jurisdiction over the third party. In describing the interfering party, the court uses the phrase “a covered employer;” however, in describing the direct employer, the court discusses interfering with the employment opportunities of “another employer.”

30. See generally 110 Cong. Rec. 13088 (1964) reprinted in Legislative History of Titles VII and IX of Civil Rights Act of 1964 at 3107 (hereinafter cited as Legislative History).

31. See, e.g., 118 Cong. Rec. 24019-10 (1972), Legislative History at 1298- l300 (remarks of Senator Fannin); 118 Cong. Rec. 2391 (1972), Legislative History at 1282 (remarks of Senator Cotton); Cong. Rec. 3171 (1972), Legislative History at 1375 (remarks of Senator Ervin).

32. 488 F.2d at 1342.

33. Id.

34. Sibley Memorial Hospital, 488 F.2d 1338; Beverley, 591 F .Supp. 1321; Pao, 547 F. Supp. 484; Dutra, 410 F. Supp. 513.

35. Vanguard Justice Society, 471 F. Supp. 670; Gill, 79 F.R.D. 316; Compare Vulcan Society v. Fire Department of City of White Plains, 82 F.R.D. 379, 20 EPD ¶ 30,130 (S.D.N.Y. 1978) (court held that preparing and grading examinations by defendant was insufficient control to be considered an employer).

36. Vanguard Justice Society, 471 F. Supp. 670; Curran, 435 F. Supp. 1063.

37. KDM School Bus Co., 612 F .Supp. 368 (ADEA); Barone, 602 F. Supp. 481.

38. Spirt, 691 F.2d 1054; Barone, 602 F. Supp. 481; Puntolillo, 375 F. Supp. 1089.

39. Shehedah, 595 F.2d 711.

40. Gomez, 687 F.2d 1019; Lutcher, 633 F.2d 880.

41. Barlow v. Avco, 527 F. Supp. 269 (E.D. Va. 1981); but See Baranek, 39 EPO ¶ 35,977 (third party was a major funding and contract source for the direct employer; court found complaint alleged sufficient facts to raise control issue and denied motion to dismiss for failure to state a claim).

42. Vulcan Society, 82 F.R.D. 379.

43. Schrock v. Altru Nursing Registry, 810 F.2d 658 (7th Cir. 1987).