Construction Law Update
January 2014
This Client Alert affects all general contractors and businesses that contract for major construction services and their potential liability for claims from non-employed workers. On December 10, 2013, the Sixth Circuit Court of Appeals—the federal court responsible for all of Ohio, Kentucky, Michigan, and Tennessee—reversed a district court’s decision to dismiss the Equal Employment Opportunity Commission’s (“EEOC”) Title VII racial discrimination suit against Skanska USA Building Inc. (“Skanska”). The Sixth Circuit held that there were sufficient legal grounds to try Skanska under a “joint employer” liability theory.
Skanska was a general contractor that managed the construction of a new hospital facility and Plaintiff was an employee of C-1, Inc., a subcontractor Skanska used to provide operators for buck hoists on its construction site. Skanska, as the general contractor, argued that it was not an “employer” under Title VII and thus not liable for the racial discrimination that one of C-1’s workers alleged occurred on the construction site. The EEOC, on behalf of Plaintiff, argued that Skanska was an employer under the “joint employer” liability theory, which states that entities that “share or co-determine those matters governing essential terms and conditions of employment” are considered “employers” and are thus subject to liability under Title VII. The District Court found in favor of Skanska and the EEOC appealed that ruling to the Sixth Circuit.
The Sixth Circuit reversed and determined that Skanska supervised and controlled the operators’ day-to-day activities without any oversight from C-1, the subcontractor. The Court held that “[t]he reality is that C-1 was a nonentity on the construction site. That the terms of C-1’s contract with Skanska envisioned a more active role for C-1 is besides the point. Viewed in the light most favorable to the plaintiffs, the record here is enough to support a determination Skanska jointly employed the operators.”
The significant evidence of “control” in this particular case was based on the following facts:
- Skanska supervised and controlled the day-to-day activities of the operators, including Plaintiff;
- Skanska could remove an operator from the site if the employee was “incompetent, disorderly or otherwise unsatisfactory”;
- Skanska set the work hours, collected time sheets and required safety training;
- Skanska employees supervised the C-1 employees;
- Skanska handled worker complaints about the conditions on site;
- Skanska removed operators from the job site, resulting in their employment being immediately terminated by C-1; and
- Skanska distributed a document identifying the operator’s duties, work hours, and breaks.
This case has potentially extensive implications for companies that use subcontracted workers, temporary workers, contract workers, and independent contractors. It is important to remember that if the reality of the business arrangement looks and feels like an employer-employee relationship, the company could potentially be liable as a joint employer for discrimination and other employment-related claims despite what the contract language states.
If you have any questions or would like to discuss the case summarized in this Client Alert in more detail, please do not hesitate to contact us.
