FEHA Can Hold Employment-Related Service Providers Liable for Violations

August 31, 2023

The California Supreme Court recently announced a ruling concerning the California Fair Employment and Housing Act (FEHA) and how it affects businesses. This ruling specified how businesses performing employment-related activities for others must comply with FEHA. For example, FEHA will hold the company screening job applicants liable for discrimination, not the company that received the screened employees.

How It Started

This decision expands those accountable for complying with anti-discrimination laws in California. The Supreme Court referred to the state’s definition of employer changed to include an employer’s agent. As such, employees can sue third-party businesses for independently engaging in discriminatory behavior. 

This case began when employees filed a class action against third-party medical providers. According to the plaintiffs, the job screening involved inappropriate medical questions. At first, a California federal judge dismissed the case, explaining that the law did not consider third-party agents an employer.

However, the San Francisco-based Ninth Circuit Court of Appeals asked the California Supreme Court to review the case. The Ninth Circuit requested the Supreme Court to determine whether FEHA applies to third parties, determining whether employers’ agents should maintain direct liability for discrimination.

The Decision

The Supreme Court announced that FEHA protects workers throughout the hiring process; it does not matter if they outsource any step to a third party. As such, exempting businesses from liability would counter FEHA’s purpose. Justice Martin Jenkins wrote, “This interpretation extends FEHA liability to the entity that is in the best position to implement industry-wide policies that will avoid FEHA violations,” emphasizing the decision.

Furthermore, the state’s Attorney General’s office filed an amicus brief last year, which supports the plaintiffs today. Had lawmakers intended to exempt businesses from liability, they would have included the intention in the law. Such an exception could have happened any time over the last six decades, but because it did not, the law decisively holds third parties liable. As such, FEHA can hold businesses with at least five employees responsible for acts of discrimination when working on behalf of another employer.

This case reminds employers to choose their third-party agents carefully. They should also monitor the agents to ensure compliance with laws like FEHA. This decision makes employers and their third-party agents more vulnerable to lawsuits during the hiring process. As such, employers should consider working with an experienced and trustworthy background check company. The right partner will ensure compliance, reducing legal disputes while providing accurate and compliant reports.

Keep your business compliant with new laws and regulations with JDP’s reliable background checks. Speak with a sales representative today.