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Consulting and Outsourcing

Supervisors, Managers, and Contractors – Oh My!

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Imagine the following scenario:

Lacking internal resources, a company out-sources IT functions for a technology-based project.  To meet the company’s needs, this “QA Project” is ultimately staffed with four IT professionals, none of whom is from the same agency or a company employee.  Rather, each is an employee of the placement agency from which they came, on a contract assignment with the company. 

The QA Team is effectively “led” by a Project Team member who is designated the Team “Lead” because she has the most QA and consulting experience.  Accordingly, the Lead is tasked with coordinating the Project Team, confirming their time, as reported on their self-reported time sheets, and communicating directly with the Company’s Chief Technology Officer – who ultimately bears responsibility for budgeting, directing, managing, approving, rejecting, and tasking the Project to close.  The QA Project lasts several months.

During the course of the Project, the QA Team shares an office and spends considerable time together.  At some point during the Project, the Team Lead makes a comment to a Team member that the Team member perceives as racially and ethnically disparaging.  The Team member brings a civil rights complaint with the EEOC and the State Department of Labor, citing the company as his “employer” and the Team Lead as his “Manager”.  The remark was not reported to the company, and the company did not learn of the remark until served with a charge. 

As the company’s representative, how would you respond?

While this fact pattern may sound like something taken from the annals of a law school exam, it is actually something that I have recently seen.

The practical, legal, and compliance issues presented by this fact pattern are many and frustrating.  But the Supreme Court has provided guidance.  Remember that under the Supreme Court’s 1998 decisions in Burlington Industries, Inc. v. Ellerth, 524 U.S. 742 (1998)and Faragher v. City of Boca Raton, 524 U.S. 775 (1998), if a harasser is not a supervisor, the employer is liable for the harassment only if it knew or reasonably should have known about the harassment and failed to stop it -- a negligence standard. 

If, however, the harasser is a supervisor, an employer could be vicariously liable for the harassment unless the employer affirmatively showed that it had exercised reasonable care to prevent and correct the harassing behavior and the employee unreasonably failed to take advantage of any preventive or corrective opportunities the employer provided that could have avoided or reduced the harm. (Note that this standard for supervisors applies only where there was not some form of tangible employment action—such as firing, demotion, or loss of compensation—which would create automatic liability for the employer.)

So, the million-dollar question is:  Who qualifies as a supervisor for purposes of determining an employer’s vicarious liability under Title VII?

Remembering that our fact pattern involves “contractors” and not “employees”, the Supreme Court’s recent decision in Vance v. Ball State University, __ U.S. __ (2013) is immensely helpful.  In Vance, the Courtheld that an individual must be able to “effect a significant change in employment status, such as hiring, firing, failing to promote, reassignment with significantly different responsibilities, or a decision causing a significant change in benefits.” 

In rendering this decision, the Court specifically rejected the EEOC’s position, which had more leniently defined a supervisor as someone who has the authority either to undertake or recommend tangible employment decisions affecting the employee or to direct the employee’s daily work activity.  What this means is that before the Vance decision – under the EEOC’s position -- our hypothetical could very well have resulted in a finding that the Team Lead contractor was a supervisor and that liability to the company could have attached, resulting in potentially significant risk to the company.  Now, however, it will be very hard for the EEOC to overcome the requirement that a contractor Team Lead exercised the kind of authority to “effect a significant change in employment status” that would satisfy the Vance standard.

Smart Tip: Carefully consider job descriptions and Employee Handbooks in light of these Supreme Court decisions.  Consistent use and definition of terms like “Supervisor”, “Leader”, and “Manager” is increasingly important. Remember also that contractors engaging in inappropriate or errant behavior on your company’s site can lead to liability under a negligence theory.  Be sure to take reasonable action when you know or reasonably should have known of errant action and/or could have reasonably acted to correct it. 

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Biography
Victoria T. Aguilar is the Founder and Managing Partner of The AR Group– a law and HR consulting firm that deliversaffordable services uniquely designed to add value to both large corporations and emerging companiesalike. A seasoned lawyer with nearly 20 years of law and HR compliance experience, Victoria has worked with Fortune 500 companies including GE, Time Warner Telecom and US WEST. She holds an undergraduate degree in Psychology from Boston College and a law degree from the University of Michigan.  Feel free to contact Victoria at 720-452-3300

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Growth in women's share of science, technology, engineering and mathematics (STEM) occupations declined to 27% in 2011from a high of 34% in 1990. While women make up nearly half of the workforce, they were 26% of the STEM workforce in 2011.

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