NY Transit Agencies Escape Vicarious Liability for Contractors Alleged Discrimination

Hinshaw & Culbertson LLP

It is not uncommon for companies to contract their daily business operations to third-party companies.  In Motta et al v. Global Contact Services, Inc., the court addressed whether such relationships relieve the outsourcing company of any duties to address discrimination or harassment in the workplace.

The New York City Mass Transit Authority ("NYCTA") and Metropolitan Transportation Authority ("MTA") outsource their Access-A-Ride Call Center ("Call Center") operations to Global Contract Services ("GCS").  As part of their contract, GCS accepted responsibility for the employment, supervision and day-to-day operations of the Call Center.

A group of Black and Hispanic Call Center employees filed lawsuits against NYCTA, MTA and GCS alleging employment discrimination, sexual harassment, and retaliation under the New York State Human Rights Law ("NYSHRL") and New York City Human Rights Law ("NYCHRL"). In support of their claims, plaintiffs alleged they were paid wages under industry standard, were disciplined or moved to less desirable assignments in retaliation for complaining about the discriminatory wage, and were subjected to repeated sexual harassment by their supervisors, creating what many alleged was a hostile work environment. employees also filed additional claims under city and state law alleging NYCTA and MTA aided and abetted GCS's actions.

The Southern District of New York dismissed the employees’ claims holding they failed to plead a claim under either statute against either agency for aiding and abetting liability. In its holding, the court held NYCTA and MTA were not the employers or supervisors; nor did they exercise control over the employees’ workplace. The court further held that even if NYCTA and MTA's contract with GCS obligated it to comply with all applicable laws, the employees identified no contractual provision that would require the agencies to address the discrimination allegations.

The plaintiffs plan to appeal the district court’s ruling on the basis that once the agencies received notice of the discrimination, it had the power to terminate the GCGS contract, and by not acting they became aiders and abettors.  Please stay tuned for updates on the appeal.

Employers should keep in mind that the outcome in this case turned on the specific terms the parties’ agreement.  While it is a proper business practice to outsource business responsibilities, it does not give license to turn a blind eye.  Employers should be mindful of what is occurring within their company and address any known issues to avoid potential litigation and ensure a proper working environment.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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