By: Elise D. Rice

This summer, the California Supreme Court, had the occasion to elucidate the meaning of the term “employer” used in the Fair Employment and Housing Act, Government Code Section 12900 et seq. (“FEHA”). The case was brought by Kristina Raines (“Raines”) and Darrick Figg (“Figg”), the plaintiffs, who sued on behalf of themselves and a putative class. They sued several companies, including U.S. Healthworks Medical Group (USHW), a leading provider of occupational health, who acted as the agent of the plaintiffs’ employers. USHW conducted medical screenings for Plaintiffs, requiring them to complete a written health history questionnaire that included a variety of health-related questions that Plaintiffs believed had no significance to their employment capabilities. The questions included whether the applicant had ever had sexually transmitted diseases, mental illnesses, cancer, or hair loss.

The plaintiffs’ offers of employment were conditioned on successful completion of preemployment medical screening. Raines declined to answer a question on the preemployment medical screening, the exam was terminated and her offer of employment was revoked. Figg, on the other hand, answered all of the questions, successfully passed the screening, and was hired for the position.

The case was filed in state court, but the defendants removed the case to federal court.  After a successful motion to dismiss, the matter was appealed by the plaintiffs to the Ninth Circuit Court of Appeals, who asked the California Supreme Court to answer the question of whether the FEHA, which defines “employer” to include “any person acting as an agent of an employer”, Cal. Gov’t Code Section 12926(d), permits a business entity acting as an agent of an employer to be held directly liable for employment discrimination. (Raines v. U.S. Healthworks Medical Group (9th Cir. 2022) 28 F. 4th 968, 969.) California’s high court answered that question in the affirmative.  That is, under the FEHA, a business entity agent of an employer can be held directly liable for employment discrimination when the agent has at least five employees and conducts FEHA regulated activities on behalf of the employer. (Raines v. U.S. Healthworks Med. Grp., No. S273630, 2023 Cal. LEXIS 4619, at *3 (Aug. 21, 2023).) Justice Jenkins authored the opinion which was issued on August 21, 2023. Justices Corrigan, Liu, Kruger, Groban, and Evans concurred.

How did the Court Come to Its Determination?

The Court conducted a deep analysis to clarify the meaning of “employer” under the FEHA. The Court reflected on prior decisions, examined the provision’s plain language, reviewed the legislative history, and considered defendants’ arguments.  In its prior decisions interpreting section 12926(d), Reno v. Baird (1998) 18 Cal.4th and Jones v. Lodge at Torrey Pines Partnership (1998) 42 Cal. 4th 1158, the Court concluded that both cases to did not resolve the question presented by the Ninth Circuit.

In Reno, the issue was whether an employer’s supervisory employee could be personally held liable under the FEHA for their acts of employment discrimination. The Court concluded that section 12926(d)’s agent-inclusive language did not impose liability on all agents such as individual employees of the same employer. To adopt such interpretation would be inconsistent with section 12926(d)’s exemption for employers with fewer than five employees. To impose such liability would create a chilling effect, instilling fear in supervisors that should they be held directly liable, they could potentially face financial ruin regardless of whether the case had merit or not.  The court in that case also considered that it would lead to a conflict of interest between supervisory employees and their employer. (Reno, supra, 18 Cal.4th at pp. 651-653.) These reasons amongst several others lead the Court to conclude that notwithstanding the agent-inclusive language of section 12926(d), individuals that do not qualify as employers may not be sued under the FEHA. (Reno, at p. 663.)

In Jones, the Court extended Reno’s holding to a claim of retaliation in violation of section 12940(h), ruling that supervisorial employees are not liable under the FEHA for retaliatory actions. (Jones, supra, 42 Cal.4th at pp 1173-1174.) The retaliation provision has broad language, referring to not only the “employer” but to “any ….labor organization, employment agency, or person.” (Section 12940(h).) The Court reasoned that it would be inconsistent to impose liability on supervisors for retaliation while exempting small employers from it. (Id. at pp 1167-1168.) For the same reasons it provided in Reno, the Court would not impose individual liability upon supervisors as doing so would place supervisors in danger of lawsuits every time they made a personnel decision. (Id. at p. 1167.)

The present case involves a business entity agent with more than five employees. Unlike in Reno and Jones, the Court was not required to harmonize competing statutory mandates.

When interpreting statutory provisions that need clarification, courts are tasked with determining Legislative intent.  Courts will begin by assessing the plain meaning of the language.  If the language is clear enough, courts generally follow it notwithstanding any absurdities that could stem from the plain meaning. Should there be ambiguity in the plain meaning, courts will consider the statute’s purpose, legislative history, and public policy.

In the present case, the Court concluded that the provision’s most natural reading imposes FEHA liability on the business entity agents of employers, but because it found some ambiguity, the Court went on to review the statute’s Legislative history. The FEHA was enacted in 1980 when the Fair Employment Practices Act (“FEPA”) and the Rumford Fair Housing Act were combined. The FEPA was a direct source of the FEHA’s definition of “employer.” The FEPA’s definition of “employer” dated back to the agent-inclusive language from the National Labor Relations Act (“NLRA”), a federal law assuring fair labor practices and workplace democracy. This trail of history assisted the Court in its analysis because a multitude of National Labor Relations Board (“NLRB”) decisions interpreted the NLRA’s definition of the term “employer” to impose employer status on certain employer agents. These decisions presume that the Legislature’s intentions for FEPA’s agent-inclusive language was to impose direct liability for the agents of an employer under appropriate circumstances. (Cf. Yamaha Corp. of America v. State Bd. Of Equalization (1999) 73 Cal.App.4th 338,353.) This, in turn, also leads to the reasonable conclusion to interpret the FEHA’s language in a similar way.

When interpreting state law, state courts will find federal court interpretations of federal laws using similar language due to the federal laws’ persuasive authority. (See Williams v. Chino Valley Independent Fire Dist. (2015) 61 Cal.4th 97, 109.) In its discussion of several federal court cases, the Court found these cases held that under federal civil rights law, direct liability can be imposed on the institutional agents of their employer if those agents are directly engaged in an industry affecting commerce and are directly responsible for the civil rights violation at issue. (Raines v. U.S. Healthworks Med. Grp., No. S273630, 2023 Cal. LEXIS 4619, at *29 (Aug. 21, 2023).)

The Court also found support for its conclusion in the public policy that served as a foundation to the FEHA’s enactment. Business agent entities contracting with employers to provide services directly affecting the employees allows for the imposition of FEHA liability not only on the employer, but also directly on the business entity agent responsible for the FEHA violation. This extends liability to the entity in the best position to implement industry standards that avoid FEHA violations. Such policies in place help to prevent and deter discriminatory actions in the workplace.

When taking the Defendants’ arguments into consideration, the Court found that Defendants’ focus was on different issues and not the sole issue of whether, pursuant to the FEHA, business entity agents of an employer can be held liable for their own FEHA violations. The issue had nothing to do with the common law of agency nor did it provide any evidence to show that there was employer control of the agent. The Court was not persuaded by Defendants’ arguments and affirmed their holding.

What Does This Mean Going Forward?

The FEHA was put in place to protect Californians from both employment and housing discrimination and is contemplated heavily when brought before California’s justice system. As established by the present case, business entity agents with over five employees can be held directly liable for their own FEHA violations.

In order to mitigate an entity’s risk, preventative measures should be considered when such entities are negotiating their contact as a supplier and providing their services. Agencies that provide HR services or conduct screenings during potential employee hiring processes can also prevent risk of finding themselves in legal trouble by assessing their screening questionnaires and processes, narrowing questions and exams down to criteria relevant to job qualifications.

If there is an iota of a chance that an employee feels they are being discriminated against, they can file their claim and more business entity agents may find themselves more exposed than ever to litigation. Now is the time for such entities to consult with an attorney experienced in the area to mitigate the risk of potential FEHA litigation in the future.

Kindly be aware that this article is not intended to serve as legal advice and is merely written for informational and educational purposes. If you are in a complex situation, seek help from an attorney well versed in the area. Contact our office to speak with one of our experienced attorneys today.

Click here to review Raines v. U.S. Healthworks Med. Grp., No. S273630, 2023 Cal. LEXIS 4619 (Aug. 21, 2023) in full detail.

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