What Is a Staffing Company’s Liability for Harassment of Their Employees by the Client?

A recent case from the U.S. Court of Appeals for the Fifth Circuit provided some guidance on this question – and the answer turns on what the staffing company knew or should have known. (By the way, a client company can be liable for such harassment as a joint employer of the staffing company workers if it exercises sufficient control over their employment).

In Arredondo v. Elwood Staffing Services, Inc., two staffing company workers were assigned to a client company, where both were sexually harassed and one was sexually assaulted by a senior employee of the client company. One of the workers complained to the client employer and was fired following an investigation in which the client company determined the staffing company worker was at fault. She then reported the harassment to the staffing company, who told her to apply for another placement on its website, which she did not do because none of them met her criteria. The other worker resigned, and then told the staffing company of the harassment and assault. The staffing company contacted the client company, which conducted an investigation that resulted in the firing of the harasser. The workers sued both the client company and the staffing company under Title VII. The federal district court found that the staffing company could not be held liable for the harassment, although the client company could.

On appeal, the Fifth Circuit determined that the staffing company did not take any adverse action itself against the first worker, since it was not the one to fire her and it also directed her to apply for another placement. Moreover, the staffing company could only be liable for harassment by a client company employee of which it knew or should have known, and where it failed to take corrective action within its control.

As to the first worker, the staffing company was notified of the harassment after the worker was terminated by the client. It questioned the client company on the decision to fire the worker, and then directed the worker to apply for another placement, which she declined to do. The Fifth Circuit found that the staffing company was not required to do more than comply with its normal assignment process. The Fifth Circuit noted that there was nothing else the staffing company was legally required to do – it could not create job placements that met the worker’s criteria nor did it have the authority to force the client company to rehire her.

As to the second worker, she claimed that the staffing company should have known of the harassment because of the first worker’s complaint. However, there was nothing to indicate that the second worker was experiencing the same conduct (and in fact, she was a witness against the first worker in the client company’s investigation into the first worker’s complaint). She also claimed that she did not complain earlier because it would have been futile, given how the first worker was treated. However, once the second worker made her complaint, the staffing company contacted the client company, and the resulting investigation ended in the harasser’s termination – so a complaint was clearly not futile.

So the lessons for staffing company employers is to ensure that they have clear policies against harassment by client company employees that includes a complaint procedure, that they communicate these policies to their own employees, that they do not ignore information from their clients that suggest their employees might be experiencing discrimination or harassment, that they follow up with the client company if their own employee reports discrimination or harassment by a client employee, and that they make available alternative placements for their own employee as appropriate (whether the employee has been fired from the client or no longer wishes to work there).