Raines v. U.S. Healthworks Medical Group Rains Down Liability Under FEHA To Business-Entity Agents

CATEGORY: Blog Posts
CLIENT TYPE: Public Employers
PUBLICATION: California Public Agency Labor & Employment Blog
DATE: Aug 24, 2023

On August 21, 2023, the California Supreme Court’s decision in Raines v. U.S. Healthworks Medical Group significantly expanded the scope of potential liability under the Fair Employment and Housing Act (“FEHA”) to an employer’s business-entity agents that have five or more employees.

Case Background and Analysis

Plaintiffs Kristina Raines and Darrick Figg brought a class action lawsuit.  Raines received an employment offer from Front Porch Communities and Services, and Figg received an employment offer from the San Ramon Valley Fire Protection District.  Both of their offers were conditioned on passing a pre-employment medical screening that would be conducted by defendant U.S. Healthworks Medical Group (USHW).  Plaintiffs alleged the screening included a questionnaire that had many questions about their health information with no relation to their ability to perform their jobs.  Raines alleges that after she refused to answer questions about her last menstrual period, the exam was terminated and her employment offer was revoked.  Figg alleges he answered all the questions and was hired.  Plaintiffs believed the screening tests were overbroad and unrelated to the functions of any job, and sued the testing company USHW alleging the examinations violated FEHA, even though they were not employees of USHW.

Plaintiffs’ lawsuit was filed in state court, but removed to federal court, and among other things, alleged claims under FEHA.  Section 12940(e) of FEHA generally prohibits an “employer” from requiring pre-employment medical or mental examinations of applicants or making “any medical or psychological inquiry” of an applicant; however, such exams and inquires may be made “after an employment offer has been made but prior to the commencement of employment duties, provided that the examination or inquiry is job related and consistent with business necessity and that all entering employees in the same job classification are subject to the same examination or inquiry.”  FEHA section 12926(d) defines “employer” to “include[] any person regularly employing five or more persons, or any person acting as an agent of an employer, directly or indirectly . . . .”

The federal district court dismissed the FEHA claim, finding that FEHA does not impose liability on agents of an employer.  Plaintiffs’ appealed the dismissal to the United States Court of Appeals for the Ninth Circuit.

The Ninth Circuit heard oral argument and then asked the California Supreme Court to answer this question:  “Does California’s Fair Employment and Housing Act, which defines ‘employer’ to include ‘any person acting as an agent of an employer,’ Cal. Gov’t Code § 12926(d), permit a business entity acting as an agent of an employer to be held directly liable for employment discrimination?”  In the opinion of August 21, 2023, the California Supreme Court answered yes.  The court explained that the plain meaning and legislative history of FEHA, federal antidiscrimination laws, and public policy support the conclusion that an employer’s business-entity agents with at least five employees that “carr[y] out FEHA-regulated activities on behalf of an employer” can fall within FEHA’s definition of “employer” and may be directly liable for FEHA violations.  The Court specifically stated that it was not deciding the significance of any employer control over the agent’s acts that gave rise to the FEHA violation and whether its decision applies to business-entity agents with fewer than five employees.

What’s next on the horizon after Raines?

Public agencies, like other employers, routinely rely on business-entity agents to assist with employment and human resource tasks – such as pre-employment, post-offer medical and psychological examinations, fitness for duty examinations, recruiting, screening candidates, interviewing, the disability interactive process, and administering workers’ compensation or disability insurance claims.  After Raines, when these business-entity agents engage in FEHA violations, they may be directly liable for violations of FEHA.  Thus, they can not only subject the employer to FEHA liability, they can also now be directly liable themselves under Raines if they have at least five employees.  As a result, agencies may now see indemnification and hold-harmless provisions in contracts with these agents for these services.  In addition, many of these business-entity agents providing these services may be large corporations with deep pockets.  In Raines, the court notes that “plaintiffs allege that USHW … are large business enterprises operating on a national scale,” which factored into the Court’s decision.  When private business-entities with ample resources are engaged in FEHA-activities, individuals may have more incentive to bring lawsuits for perceived violations, against both the agent, and public entity employer.  (In Raines, Raines also sued the employer, but reached a settlement, and her lawsuit proceeded against the testing company).

Clear the fog when conducting pre-employment post-offer medical exams

The plaintiffs in Raines alleged questions on their health history questionnaire included asking about venereal disease, penile and vaginal discharge, problems with menstrual periods, diarrhea, constipation, and painful/frequent urination.  Under FEHA, pre-employment post-offer medical inquiries must be job related and consistent with business necessity.  Plaintiff Raines applied to be a food service aide who had routine kitchen staff duties, and Plaintiff Figg to serve as a member of the Fire Protection District’s volunteer communication reserve. In both situations, it is hard to see how these questions could all be job related and consistent with business necessity, yet broadly worded inquiries like this are often made in these types of examinations.

While public agencies may have legitimate concerns for pre-employment medical examinations to protect their employees and members of the public, narrowly tailoring the inquiry and limiting it to job related questions can be challenging – and can lead to litigation.  The examination scope is especially critical when the examination is focused on evaluating an applicant’s mental or psychological fitness for a job, because it can easily lead to claims of discrimination against mental disabilities.  Since public agencies often contract with third party providers to administer these examinations, it is essential public agencies stay vigilant and fully understand the nature and scope of the protocols the third party providers are using to ensure the examinations are always job-related and consistent with business necessity.

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