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EEOC's Joint Employer Claim Against Valero Fails

In EEOC v. Valero Refining-Texas, L.P., 2013 U.S. Dist. LEXIS 42776 (S.D. Tex. March 13, 2013), Judge Costa considered the application of the "joint employer" doctrine to a disability discrimination claim brought by the EEOC.

The facts of the case are simple and in fact fairly commonplace.  Valero operates a refinery in Texas City.  Valero hired a contractor (Modern EPC) to perform work at the refinery.  Valero requires that all contractors at its facility pass a written safety exam.

Modern EPC hired Bobby Bass to work on the job at the refinery.  Due to a disability, Bass is unable to read and thus is not able to take a written safety exam.  Modern requested that Valero accommodate Bass by allowing him to take the exam orally.  Valero refused and denied Bass access to the facility due to his failure to pass the safety exam.  Because it had no work for Bass, Modern had to terminate him.

The EEOC brought suit against Valero, alleging a violation of the Americans with Disabilities Act.  Valero moved for summary judgment on the ground that it was not Bass' employer.

Judge Costa noted that Fifth Circuit precedents are less than clear on this subject.  Judge Costa noted that Fifth Circuit case law has identified two different tests: the integrated enterprise test and the joint employer test:

The Fifth Circuit has not clarified which of two competing joint employer tests governs in employment discrimination cases. Valero urges this Court to follow the "single employer" or "integrated enterprise" test, which asks whether two entities represent an integrated enterprise by examining four factors: "(1) interrelation of operations, (2) centralized control of labor relations, (3) common management, and (4) common ownership or financial control." Under the other test, simply called the "joint employer" test, the "existence of a joint employer relationship depends on the control . . . one employer exercises, or potentially exercises, over the labor relations policy of the other."  A key difference is that the integrated enterprise factors ask whether two superficially separate entities should be treated as one entity, whereas the joint employer standard assumes that the alleged employers are separate entities and assesses whether the degree of control is nonetheless sufficient to treat both as employers.

Judge Costa elected to apply the joint employer test because it is a better fit for the facts of the typical case, and because it has more support in Fifth Circuit decisions.  Judge Costa then noted that the Second Circuit has identified five factors to be considered in applying the joint employer test:

Those five factors are "whether the alleged joint employer (1) did the hiring and firing; (2) directly administered any disciplinary procedures; (3) maintained records of hours, handled the payroll, or provided insurance; (4) directly supervised the employees; or (5) participated in the collective bargaining process."

Applying those factors, Judge Costa found that Valero was not a joint employer of Bass.  Judge Costa concluded "that Valero's exclusion of Bass from its premises, without more, does not amount to the control required to satisfy the joint employer standard."  Judge Costa was unpersuaded by the EEOC's public policy arguments:

The Court therefore concludes that the undisputed facts demonstrate that Valero was not Bass's employer.  At oral argument on this motion, counsel for the Commission advanced a number of policy reasons why a company in Valero's situation should have to comply with the ADA.  But the independent contractor "hole" in federal antidiscrimination law has long been criticized, and Congress has yet to enact a "fix."  And Valero does not enjoy immunity under the ADA for its reading requirement; an individual with a reading disability who applies for a job with Valero at the refinery and is rejected may bring a claim.  With respect to Bass's situation, however, Valero is not a covered entity subject to suit.

It will be interesting to see whether the EEOC presses the issue on appeal in this case or in other cases.  As Judge Costa noted, the use of independent contractors creates a "hole" in the discrimination laws.  As shown by this case, an employee like Bass is stripped of the protections of federal law because he works for a contractor.  With the ever-increasing use of independent contractors in the workplace, cases involving this issue will only become more frequent.

David C. Holmes is a Houston employment lawyer with The Law Offices of David C. Holmes