Executive Summary: On March 7, 2022, a sharply divided panel of the Second Circuit (covering New York, Connecticut, and Vermont) addressed the question of what a Title VII plaintiff must claim to adequately plead the existence of an employer-employee relationship under the joint employer doctrine. See Felder v. United States Tennis Association (2d Cir. 2022). Generally, a company is only liable for discrimination against employees and applicants for employment; however, if a company does not directly employ a person, it may be liable as a joint employer. Felder is the first time the Second Circuit has confronted the question of what factors must be alleged to adequately plead a joint-employment relationship. Over a vigorous dissent, the court joined its sister circuits and concluded that non-exhaustive factors drawn from the common law of agency, including control over an employee’s hiring, firing, training, promotion, discipline, supervision, and handling of records, insurance, and payroll, are relevant to this inquiry.

In so holding, the court affirmed the lower court’s dismissal of the plaintiff’s Title VII claim against one defendant because he failed to allege that the entity would have exercised significant control over the terms of his employment by, among other things, training, supervising, and issuing his paychecks.

The Case

Plaintiff Sean Felder sued the United States Tennis Association (USTA) for race discrimination under Title VII. Over the course of several years, Felder worked as a seasonal security guard at USTA events, most importantly the U.S. Open in New York City. During this time, Felder worked for various security firms that contracted with the USTA to provide security at the Open.

One of these firms hired Felder to work the 2016 Open. Felder’s supervisor told him to go to the USTA’s credential office to pick up his security credentials for the Open. However, when Felder went to pick up his credentials, he was told his name was not in the system. Felder called his supervisor, who, according to Felder, stated that the USTA denied him credentials as retaliation for an earlier race discrimination claim (which settled in 2015) he brought against one of the security firms. Thus, Felder was unable to work the 2016 Open.

Felder sued the USTA under Title VII, alleging race discrimination and retaliation. The district court dismissed his claims, ruling that Felder had not adequately established an employee-employer relationship with the USTA.

In relevant part, the Second Circuit affirmed the dismissal. Both parties agreed the USTA was not Felder’s direct employer. The question was whether the USTA qualified as a joint employer. The court answered in the negative. It began by evaluating Congress’s intended meaning of the terms “employer” and “employee,” concluding that the Supreme Court has interpreted those terms under the general common law of agency. This meant that the court would apply a set of non-exhaustive factors including, among other things:

• the duration of the relationship between the parties
• whether the hiring party has the right to assign additional work to the hired party
• the extent of the hired party’s discretion over when and how long to work
• whether the alleged employer paid the employee’s salary
• whether alleged employer hired and fired the hired party
• whether alleged employer had control over the daily employment activities

The court thus held that it would find a joint-employer relationship when two or more entities share significant control over the same employee.

The court noted that in applying this test to the case before it, the factors presume an existing relationship between the parties. But the USTA denied Felder his credentials before he could start work at the Open. So, the court wrote that it would assess the pleading standards applicable to the joint employer relationship in situations where there is no meaningful relationship between the parties.

Citing many other Title VII cases from its sister circuits, the court framed the question as: “[w]ould the USTA have been Felder’s joint employer had Felder worked at the U.S. Open? If not, the USTA cannot be liable under Title VII.”

The court said no. Felder did not allege that the USTA had any control over his hiring or firing. Felder did not allege that the USTA instructed the security company to fire Felder upon the denial of his credentials. He did not allege that the security company hired him for the sole purpose of working at the USTA. He failed to allege that the USTA had any control over, much less role in, his hiring. Finally, Felder failed to allege that “the USTA would have been involved in training him, supervising him, issuing his paychecks, covering his insurance or other benefits, or controlling other means of his employment (such as providing his uniform or other tools needed for the position).”

Felder’s only allegation regarding the USTA’s control was that it could effectively reject the security firm’s employees by refusing to issue credentials to them. That, the court wrote, is not enough to adequately plead a joint-employer relationship. “The joint employer doctrine does not require that an entity exert no control over who may or may not work at its facilities, only that it may not exert significant control without being subject to Title VII,” the court wrote.

Thus, the court affirmed the dismissal of Felder’s Title VII claims.

Employers’ Bottom Line:

In a little less than a year, the Second Circuit has made it more difficult for plaintiffs to sue employers for wage and hour and discrimination claims. (See our May 6, 2021 Alert, “Second Circuit Panel Adopts Seemingly Heightened Pleading Standard for Willfulness in FLSA Overtime Cases.”) Companies or organizations that contract with other companies to provide services now have the guidance needed to help shield themselves from Title VII liability if they take precautions ensuring that they do not exert significant control over the alleged employee’s relationship with them.