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California Supreme Court ruling expands the scope of potential defendants under FEHA

10/23/23

By: Tyler J. Jacobs and Daniel Parker Jett

The California Supreme Court recently issued a ruling in Raines v. U.S. Healthworks Medical Group, 15 Cal.5th 268, 312 Cal.Rptr.3d 301 (Aug. 21, 2023), which resulted in substantial legal implications on business entities acting as agents of employers. In Raines, the California Supreme Court ultimately expanded the scope of those subject to liability under the Fair Employment and Housing Act (“FEHA”) [Cal. Gov. Code, §§ 12920, et seq.] to contracted vendors of an employer – such as those performing pre-hire physicals for employers.

In a class action lawsuit, two employees alleged that they were hired by different employers on the condition they pass a pre-employment medical screening contracted to Defendant U.S. HealthWorks Medical Group, Inc. (“USHW”)  As part of the medical screening, USHW administered a health background questionnaire with a series of detailed health history questions which were intrusive and unrelated to the functions of their job. FEHA makes it an unlawful employment practices for “any employer” “to require any medical or psychological examination of any applicant, to make any medical or psychological inquiry of an applicant, to make any inquiry whether an applicant has a mental disability or physical disability or medical condition, or to make any inquiry regarding the nature or severity of a physical disability, mental disability, or medical condition.” Gov. Code, § 12940, subd. (e)(1). Pre-hire medical and psychological examinations and inquiries are permissible, provided that the questions are job-related and consistent with business necessity. Gov. Code, § 12940, subd. (e)(3). FEHA defines an “employer” to “include[] any person regularly employing five or more persons, or any person acting as an agent of an employer, directly or indirectly…” Gov. Code, § 12926, subd. (d).  

The District Court initially ruled for USHW, finding that FEHA does not impose liability on agents like Defendant. The employees appealed to the Ninth Circuit Court of Appeals, and the Ninth Circuit certified a question for consideration by the California Supreme Court.

The California Supreme Court held that a business entity like USHW, acting as an agent of an employer, may be sued directly under FEHA. In its reasoning, the Supreme Court relied on the legislative history of FEHA and other antidiscrimination laws, public policy considerations, and federal court decisions. The Supreme Court explained that agents who perform activities regulated by FEHA fall within the statutory definition of “employer ” under Section 12926(d). Thus, the meaning of “agent” under FEHA is broader than employee agents under respondeat superior. An employer’s “business entity agents” may be directly liable for employment discrimination when the business entity agent has at least five employees and performs “FEHA-regulated activities” on behalf of an employer or prospective employer.

The California Supreme Court’s ruling was limited to this one issue and did not address: (1) the impact on liability under such circumstances when the employer has any degree of control over the business entity agent; (2) other scenarios under which the business entity agent may be held liable; (3) whether business entity agents with fewer than five employees may be held liable under FEHA.

The lesson to all vendors and contractors who perform pre-hire medical screenings on behalf of employers, and to the employers who hire those vendors, is to be sure to review all questions presented to a job applicant during a pre-hire physical and pare those questions down to a bare minimum, otherwise you may be subject to a similar class action lawsuit that may be as cut-and-dried as presentation of black-and-white medical questionnaires to prospective employees.

For more information, please contact Tyler J. Jacobs at tjacobs@fmglaw.com, Daniel Parker Jett at djett@fmglaw.com, or your local FMG attorney.