Staffing Company Can Assert Section 1981 Race Discrimination Claim Against Host Company

Many companies utilize staffing companies to provide temporary labor. In addition to concerns about whether they can be deemed a joint employer under Title VII for purposes of a race discrimination claim by a staffing company employee, host companies should be aware that they could also be sued by the staffing company for race discrimination under Section 1981.

In White Glove Staffing, Inc. v. Methodist Hospitals of Dallas, the hospital allegedly rejected an African-American worker because it wanted only Hispanic workers, and then canceled its agreement for staffing services. The staffing company then sued under Section 1981, which, among other things, prohibits race discrimination in the making of contracts. The trial court dismissed the case, on the basis that a corporation does not have a racial identity.

On appeal, however, the U.S. Court of Appeals for the Fifth Circuit joined several sister Circuits in holding that a corporation has standing to bring a Section 1981 claim as long as it suffers injury from the other party’s discriminatory actions. Thus, this case warns host companies that not only could they be subject to individual race discrimination claims under Title VII, but also to Section 1981 claims from the staffing agency if the company engages in discriminatory conduct against staffing agency employees that ultimately harms the staffing agency.