DC Federal Court Rules Government May be a Joint Employer for Purposes of Employment Discrimination Claim

December 18, 2020

By: Stephen B. Stern

    It is not uncommon for government contractors to receive guidance from government officials regarding the hiring and firing of employees, among other aspects of the employment relationship, on government contracts.  Such “control” leaves open the possibility that the government may be named a defendant in employment discrimination suits by employees of government contractors.  That is what happened in Al-Kharouf v. District of Columbia, Case No. 1:18-cv-00459, 2020 U.S. Dist. LEXIS 203290 (D.D.C. Oct. 30, 2020), where the United States District Court for the District of Columbia ruled that the District of Columbia Government (“DC” or “DC Government”) could be held liable for employment discrimination as a joint employer of the employee of a contractor.

    In Al-Kharouf, the DC Government entered into a contract with a private company named Optimal Solutions & Technologies, Inc. (“OST”), to help modernize the information technology it used for the unemployment system and tax oversight program (the “DOES project”).  OST was the primary contractor and it hired subcontractors, as appropriate, to assist with the project.  Nabil Al-Kharouf, Kadih Nahed, Derek Price, and Alena Svozil (collectively, the “plaintiffs”) were among the contractors that OST hired to work on the DOES project.  The plaintiffs claimed that, while working on the DOES project, they experienced discrimination by the Associate Director employed by the DC Government who helped oversee the DOES project.  They claimed the Associate Director gave preferential treatment to contractors of South Asian or Tamil-Indian descent, and removed contractors (including the plaintiffs) of other backgrounds and all of the plaintiffs were of “other” backgrounds.  The plaintiffs sued DC alleging discrimination under Title VII of the Civil Rights Act of 1964, as amended (“Title VII”), as well as 42 U.S.C. § 1981.  DC moved for summary judgment and the primary issue the court addressed was whether the DC Government could be named a defendant in the lawsuit as a joint employer, along with OST.

    The district court started its analysis by recognizing that two separate entities “may be joint employers of a single . . . workforce if they share or co-determine those matters governing essential terms and conditions of employment.”  The court then recognized that there are generally two different tests for determining joint employer status.  One examines the “economic realities of the work relationship[,]” which finds a joint employment relationship if there is a “right to control and direct the work of an individual, not only as to the result to be achieved, but also as to the details by which that result is achieved.”  The other test, referred to as the “Browning-Ferris test” (from a case decided by the National Labor Relations Board), considers whether a contracting entity “has retained for itself sufficient control of the terms and conditions of employment of the employees who are employed by the other employer.”  The court noted that, although each test applied its own factors, “the touchtone [for both tests] is control[,]” with the “extent of the employer’s right to control the means and manner of the worker’s performance . . . the most important factor to review.”  The district court concluded that it did not need to decide which test governed because, applying either test, revealed that there were genuine disputes of material fact that could establish the DC Government as a joint employer of the plaintiffs.

    Although the court agreed with DC that OST was “key” to the DOES project, it was “not so clear cut” that OST had “primary control over the means and methods” of completing the project.  On the one hand, the court found that OST maintained the methodology for screening potential candidates to work on the project and created a plan for the tasks, completion dates, milestones, resource allocation (including staffing), and estimated hours for the project.  In addition, the court found that OST created a policy and procedures manual to manage the relationships with subcontracting vendors.  On the other hand, the court found that a DC employee requested, reviewed, and selected the candidates assigned to the DOES project.  In addition, after being hired, the plaintiffs received a chapter from DC’s personnel manual, as well as access to DC computers, databases, and badges to work on-site to complete the project.

    Besides the foregoing facts, the court noted that there were factual disputes regarding DC’s involvement in the oversight of the plaintiffs’ day-to-day performance of the work on the DOES project.  In this regard, DC contended that it did not maintain personnel files, conduct performance reviews, or give reprimands.  In addition, DC did not manage the payment of the plaintiffs’ payroll, insurance, or taxes.  On the other hand, DC employees, including the Associate Director, supervised the plaintiffs.  To this end, the plaintiffs contended that a DC employee served as their “first-line supervisor” and that supervisor “regularly met and communicated with the [p]laintiffs about their work and status of tasks within projects[,]” as well as handled intraoffice personnel issues.  The plaintiffs further contended that another DC employee also supervised them and regularly met with them regarding their work and assignments, among other work-related matters.  Also in dispute was the degree of involvement the Associate Director had in removing the plaintiffs from the project.

    The court acknowledged that DC contended that it never intended to form an employer-employee relationship with any of its contractors’ employees and, in fact, DC specifically included contract provisions to this effect in the contract it entered into with OST, but the court noted that “labels are not everything.”

    Based on the evidence presented, the district court determined that granting summary judgment to DC would be improper.  In denying summary judgment, the court noted there were disputes of material fact and it was not the court’s role to determine how much weight should be given to each piece of evidence presented as summary judgment.  Thus, the plaintiffs’ discrimination claim under Title VII was allowed to proceed to trial.  

    The court’s decision in Al-Kharouf is significant to government contractors, as well as companies outside the government contracting sector where employees from multiple employers operate in the same work environment.  With respect to government contractors, they often find themselves in situations where they are taking directives from the government about which employees should be assigned to or removed from a particular project.  Taking such directions may expose the government contractor to liability for employment discrimination or other employment-related claims.  But government contractors understandably are reluctant to sue their government clients when the government exposes them to potential liability.  While the court’s decision in Al-Kharouf does not help government contractors sort out those business decisions, it does provide several guidelines for determining whether filing a third-party or cross-claim may have merit.  Outside the government contracting sector, such as in the consulting space, the same principles apply with respect to joint employment and multiple entities may be subject to liability for employment-related decisions.  Businesses in such situations may want to consider including provisions in their business contracts, such as indemnity clauses or reporting provisions that may allow the companies to avoid a potential claim by responding appropriately before the employment situation erodes to the point of a dispute, which could provide some measure of protection from potential liability.