Are You Liable When Your Contractor’s Employee Is Sexually Harassed at the Worksite?

Your company operates industrial plants. For our discussion, the specifics don’t matter much. (Work with me on this, OK?) You often need a lot of workers, so you engage staffing agencies and/or contractors and hire many of your workers through them. Your company has been sued by one of those workers, often referred to as a “temp”. The temp alleges that employees provided by the same staffing agency that assigned her sexually harassed her. She has sued your company and the staffing agency. Who’s liable? Your company? The staffing agency? Neither? Both?

Do you already have an opinion? Do me a favor. Hold off until we get more facts. Read on and let’s see how this type of scenario could unfold.

So, how about we look at a real, live case example, hmmm? Here we go. The case is Adams v C3 Pipeline Construction Inc et al No. 20-2055 , 10th Circuit Court of Appeals, Nov. 2, 2021). Here, in a nutshell, is what went down:

Alpha Crude Connector (ACC) is an LLC that operated a 515-mile crude oil pipeline system in New Mexico and Texas. C3 Pipeline Construction, Inc (C3) is a staffing agency/contractor that provided construction and maintenance services on this system under a contract with Alpha Crude. (I won’t get into the details of other parties that were successors in interest to the main, original parties as that is really not germane to our discussion.)  C3 employed Jessica Adams on a construction crew at ACC’s site in New Mexico.

Ms. Adams brought claims in the state court in New Mexico, under Title VII of the Civil Rights Act, the New Mexico Human Rights Act and other state tort laws against C3. (Ultimately, one of the defendants removed the case to the federal courts.)  In her complaint, she alleged that “Mike Carrithers, Purchasing Manager,for C3, Danny Robertson, and Craig Arnault, Foreman of the C3 Pipeline crew based out of Hobbs, New Mexico, all while acting during and within the course and scope of their employment, sexually harassed [her] and made it a condition of her employment with C3 and [Alpha Crude] that she perform sexual favors for them in order to keep her job.”  She also alleged that Arnault sent her “offensive and unwanted pornographic images, by making sexually explicit comments, by engaging in unwanted touching, by making comments with reference to [her] participating in sexual activity, and by forcing [her] to participate in sexual activity with him in order to keep her job with Defendants.

Ms. Adams stated that she and other workers complained of the harassment and that “[i]n response to her complaints and defiance, Arnault repeatedly threatened to fire [her] for complaining and also when she refused to perform sexual acts with him.”, and that no one took any steps to investigate her complaints. ACC’s successor in interest, Plains American Pipeline (Plains), predictably moved to dismiss the claim against it, arguing that C3, the staffing agency/contractor was her employer and therefore Plains was not liable as an employer. Ms. Adams sought to amend her complaint to include a premises liability claim against ACC and the court denied that motion. C3 apparently didn’t answer the complaint against it. The District Court agreed, based on the wording of the Master Services Agreement between ACC and C3 that it was not Ms. Adams’ employer and therefore via a summary judgment ruling dismissed Ms. Adams’ claim, and granted a default judgment against C3. Ms. Adams appealed.

On appeal the 10th Circuit ruled that ACC and its successor(s) cannot be held liable for the alleged sexual harassment by C3 employees under anti-discrimination laws, but granted her leave to file claims against the company stemming from its control of the worksite (i.e. the premises liability claim).

Here’s a bit more detail: The three-judge appellate panel found that Ms. Adams had sufficiently alleged that ACC controlled the New Mexico site where she worked for C3 Pipeline Construction Inc, so she could file an amended complaint accusing the company of premises liability.

Under New Mexico law, generally a company that hires a contractor won’t be liable for injuries to the contractor’s employees– except where the company controls the premises on which the work is being performed, as was the case here.

The court did, however, dismiss her claim that Plains (ACC’s successor) was her joint employer. Wait. Why? When a contractor/staffing agency provides a business with contingent workers, aka “temps” isn’t that business a joint employer with the contractor/staffing agency? Usually, yes. That means that both the staffing agency/contractor and the client would be jointly liable for discrimination, harassment and safety violations with respect to all such employees.

Why wouldn’t that apply here? The court focused on the fact that C3 alone controlled Ms. Adams and the harassing workers. ACC didn’t have the power to fire, discipline or supervise Ms. Adams, nor did it have any control over the alleged harassers. In most cases, the client on whose premises the temps are working does control the employees. When a staffing agency provides on-site supervision, however (which appears to have happened here) then the scale will often tip toward the staffing agency bearing sole (or at least primary) liability.

It’s not clear whether the distinction drawn by the 10th Circuit really matters, however. Under a premises liability theory, a business can be liable for failing to provide a safe environment for those working or visiting. ACC may not have controlled the employees, but it did control the worksite. Does control of the worksite automatically mean control of everyone on it though? We will only know if that claim actually goes forward. I strongly suspect that this ruling will result in a settlement and therefore we won’t get an answer to that question.

What does this ruling really mean for employers, though? Effectively, it may not really change anything. If you are a company that uses contractors and staffing agencies, and you have workers on your premises that you do not directly employ, you will probably bear at least some liability for those workers’ safety. That includes taking reasonable steps to ensure that ALL workers are free from harassment, discrimination, and bullying.

ACC and Plains could have avoided this lawsuit by investigating and engaging its friendly employment counsel BEFOREHAND. Now it will likely be paying her a settlement, in addition to its own legal fees.

If you get a harassment complaint from any worker, whether or not it’s a direct employee, learn from this case.

Enough said– for now.  See you next time.

Are you an employer interested in proactively addressing workplace challenges and company culture? Visit my website, to contact me for a complimentary 20-minute consultation. 

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Contents of this post are for educational/informational purposes only, are not legal advice, and do not create an attorney-client relationship. Consult with competent employment counsel in the state(s) in which you employ people with your specific questions.

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