California Supreme Court Ruling: Third-Party Businesses Liable for Discrimination under State Law

The California Supreme Court has issued a significant ruling, asserting that businesses providing employment-related services for other companies, such as screening job candidates, can be legally responsible for acts of discrimination under the state's laws.
 

In a unanimous decision by the seven-member court, it was emphasized that the legal definition of an "employer" in state law extends to encompass the concept of "agents" of the employer. Consequently, workers are now empowered to bring forth lawsuits against third-party enterprises that engage in independent discriminatory practices. The case under consideration centers on allegations against U.S. HealthWorks Medical Group, which collaborates with employers to carry out medical evaluations on job seekers. These evaluations allegedly involved intrusive inquiries that violated California's Fair Employment and Housing Act (FEHA).
 
The issue was brought before the California Supreme Court following a query from the 9th U.S. Circuit Court of Appeals, seeking clarification on whether the FEHA imposes obligations on third-party entities like U.S. HealthWorks. The Supreme Court, in its recent ruling, expressed that the legislative intent behind FEHA was to provide broad protection for workers. To exempt businesses whose decisions can influence working conditions would contradict that intent.
 
In writing for the court, Justice Martin Jenkins stated, "This interpretation expands FEHA liability to the entity that is best positioned to implement industry-wide policies aimed at preventing FEHA violations."
 
Randy Erlewine, the lead attorney representing the plaintiffs, praised the court's decision, emphasizing that businesses cannot evade accountability when they breach FEHA provisions. In a statement, Erlewine remarked, "We are pleased that the highest court in the state has resolved this crucial legal matter and upheld workers' rights."
 
No immediate response was received from U.S. HealthWorks' legal representatives regarding the ruling.
 
The plaintiffs in the proposed class action, dating back to 2019, contend that U.S. HealthWorks employs a health-history questionnaire in its medical evaluations that oversteps boundaries and infringes on FEHA regulations. The company asks applicants to divulge information such as prescription medications, including birth control usage, and details about pregnancies or previous workplace injuries.
 
U.S. HealthWorks has denied any wrongdoing, asserting that the inquiries were in line with the requirements set by individual employers.
 
The FEHA stipulates that employers cannot make medical inquiries unless they are pertinent to the job and consistent with business necessity. The law defines an "employer" as "any person acting as an agent of an employer, directly or indirectly."
 
In a prior ruling, a federal judge in California ruled that U.S. HealthWorks did not fit the definition of an employer under the law and dismissed the case.
 
The 9th Circuit, situated in San Francisco, noted last year that the California Supreme Court had not yet clarified whether agents of employers could be held directly accountable for instances of discrimination. Therefore, it solicited the Supreme Court's intervention in resolving the matter.
 
The California Attorney General's office, led by Democrat Rob Bonta, submitted an amicus brief supporting the plaintiffs. The Attorney General's office argued that if state legislators had intended to exempt all agents from liability, they would have explicitly incorporated an exception in the FEHA. Over the past six decades, the FEHA has undergone multiple amendments, lending weight to the AG's perspective.