Case Name: Cynthia MORGAN, Plaintiff-Appellant, v. SAFEWAY STORES, INC., and Safeway Arizona Federal Credit Union, Defendants-Appellees
Court: United States Court of Appeals for the Ninth Circuit
Jurisdiction: United States
Decision Date: 1989-09-06
Citations: 884 F.2d 1211
Docket Number: No. 88-1785
Parties: Cynthia MORGAN, Plaintiff-Appellant, v. SAFEWAY STORES, INC., and Safeway Arizona Federal Credit Union, Defendants-Appellees.
Judges: Before GOODWIN, Chief Circuit Judge, ALARCON and NELSON, Circuit Judges.
Reporter: Federal Reporter 2d Series
Volume: 884
Pages: 1211–1218

Head Matter:
Cynthia MORGAN, Plaintiff-Appellant, v. SAFEWAY STORES, INC., and Safeway Arizona Federal Credit Union, Defendants-Appellees.
No. 88-1785.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted Feb. 6, 1989.
Decided Sept. 6, 1989.
Grace Mcllvain and Dennis P. McLaughlin, Miller & Pitt, Tucson, Ariz., for plaintiff-appellant.
William R. Hayden and Tibor Nagy, Jr., Snell & Wilmer, Phoenix, Ariz., for defendants-appellees.
Susan M. Freeman and Richard S. Cohen, Safeway Arizona Federal Credit Union, Phoenix, Ariz., for defendants-appellees.
Before GOODWIN, Chief Circuit Judge, ALARCON and NELSON, Circuit Judges.

Opinion:
GOODWIN, Chief Circuit Judge:
Cynthia Morgan appeals a summary judgment in favor of her employer, Safeway Stores, Inc. ("Safeway") and her credit union, Safeway Arizona Federal Credit Union ("SAFCU"). She sued both defendants under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e-2 (1982), for the discriminatory denial of credit disability benefits.
I. Background
Safeway is an employer for title VII purposes. It provides its employees traditional compensation and fringe benefits, such as medical insurance and disability programs. In addition, it offers its employees the opportunity to join SAFCU.
SAFCU is a federal credit union organized under 12 U.S.C. § 1751-95 (1982 & Supp. IV 1986). To assure that members share a "common bond of occupation or association" or reside in a "well-defined neighborhood, community, or rural district," id. § 1759, an application for a federal credit union charter must contain a proposed "field of membership," id. § 1753. SAFCU listed Safeway and its affiliates as its field of membership. Throughout the period relevant to this action, SAFCU's field of membership consisted only of employees and their families of Safeway and SAFCU. By law, SAFCU's board of directors controls its affairs and, more specifically, establishes its lending policies. See id. § 1761b.
Morgan works for Safeway, and through her employment, is a member of SAFCU. In 1976, Morgan secured a SAFCU loan, and opted for SAFCU's credit disability policy. This policy excludes disability resulting from pregnancy or childbirth. Morgan became pregnant twice, and, pursuant to this policy, twice was denied credit disability benefits, once on May 25, 1979, and then again in April of 1982. Having filed timely charges with the EEOC, and having received a right-to-sue letter from the EEOC, Morgan commenced this title VII action.
Morgan moved for partial summary judgment on three issues: (1) both defen dants were "employers" under title VII, (2) the availability of the credit disability insurance policies at issue was a form of "compensation" or a "term, condition or privilege" of employment, and (3) the exclusions in those policies were discriminatory under title VII. Safeway and SAFCU cross-moved for summary judgment. The district court denied Morgan's motion for partial summary judgment and granted defendants' cross-motion for summary judgment on the ground that Safeway had no control over SAFCU's management or personnel decisions generally, or over SAF-CU's disability credit insurance policy in particular. This appeal followed.
II. Supplementation of the Record
Preliminarily, we dispose of a procedural question. Prior to argument, Morgan moved to supplement the record with newly discovered evidence, namely a Safeway employee magazine distributed in December of 1988. She claims the magazine contains evidence that Safeway provided substantial office support services to SAF-CU and an admission by Safeway that SAFCU membership is an employee benefit. We deny the motion for two reasons. First, Morgan has made no showing that the evidence concerning support services is in fact newly discovered. The fact such evidence is contained in a newly discovered publication does not explain why Morgan could not have obtained the same kind of evidence at an earlier date. Second, evidence that Safeway recently described SAFCU membership as an employee benefit is not probative of the degree of Safeway's control or influence over the SAFCU program challenged here. In any case, the purported new evidence does not add to the record. The original papers established that Safeway described SAFCU membership in its handbook as an employee benefit.
III. Title VII Claim
In 1978, Congress amended title VII "to prohibit sex discrimination on the basis of pregnancy." Pub.L. 95-555, 92 Stat. 2076 (codified at 42 U.S.C. § 2000e(k)). Thus an employer who treats pregnancy-related conditions less favorably than other medical conditions for purposes of employment benefits violates title VII. Newport News Shipbuilding & Dry Dock Co. v. EEOC, 462 U.S. 669, 684, 103 S.Ct. 2622, 2631, 77 L.Ed.2d 89 (1983). Congress, however, has added no similar provision to the Equal Credit Opportunity Act, 15 U.S.C. § 1691 (1982), the act prohibiting discrimination by creditors. Thus Morgan believes her only avenue of relief is title VII. Unfortunately, that title provides no relief here.
Title VII makes it unlawful for an "employer" or an "employment agency" to "discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's . sex." 42 U.S.C. § 2000e-2(a) & (b). In this case, the discriminatory policy was offered not by Morgan's employer, Safeway, but by a third party, SAFCU. Standing alone, SAFCU is not an "employer" within the meaning of title VII because it employs fewer than fifteen persons. See 42 U.S.C. § 2000e(b). Morgan contends, however, that the entity that discriminated against her was an "employer" within the meaning of title VII, consisting either of (1) the single employing entity composed of Safeway and SAFCU or (2) SAFCU alone which acted as the agent or instrumentality of Safeway.
A. Consolidation
This court follows the predominant trend for determining whether businesses should be treated as a single employer for title VII purposes, and applies the four-part test promulgated by the National Labor Relations Board. See Childs v. Local 18, Int'l Brotherhood of Electrical Workers, 719 F.2d 1379, 1382 (9th Cir.1983); see also Baker v. Stuart Broadcasting Co., 560 F.2d 389, 392 (8th Cir.1977). Thus this court treats two entities as one if they have (1) interrelated operations, (2) common management, (3) centralized control of labor relations, and (4) common ownership or financial control. Childs, 719 F.2d at 1382.
Assuming it is appropriate to apply the Childs test in this case, Morgan cannot prevail on a theory of consolidation. To establish common management, Morgan argued that members of SAFCU's board of directors were all Safeway employees. But she does not dispute the assertion that Safeway has no control over SAFCU's selection of board members, and that there are no overlapping directors. To establish centralized control of labor relations, Morgan argued that SAFCU employees are entitled to various insurance policies through Safeway and to profit sharing with Safeway employees. But Morgan presented no evidence disputing the affidavit of SAFCU's president that Safeway has no control over SAFCU's personnel decisions. Finally, Morgan presented no evidence of common ownership or financial control.
Thus Morgan failed to present evidence sufficient to create a genuine issue of material fact whether Safeway and SAFCU should be consolidated for title VII purposes.
B. Agency
Title VII "primarily govern[s] relations between employees and their employer, not between employees and third parties." City of Los Angeles v. Manhart, 435 U.S. 702, 718 n. 33, 98 S.Ct. 1370, 1380 n. 33, 55 L.Ed.2d 657 (1978). An employer, however, cannot avoid title VII liability by delegating discriminatory programs to third parties. Title VII specifically applies to "any agent" of a covered employer. Id.
The parties dispute the proper construction of "agency" for title VII purposes. Appellees argue that agency under title VII must be tested against the traditional indicia of an agency relationship, namely consent by one person that the other act on its behalf and the understanding that the principal is to control the undertaking. See Restatement (Second) of Agency § 1 (1958). Control, they argue, was absent here. Morgan counters that just as courts liberally construe the term "employer" for title VII purposes in order to advance the policy of that title, so too should they liberally construe the term "agent." Thus, she argues, control by the principal is not required; it is sufficient to establish cooperation, participation and interaction between the employer and the third party.
Even if the term "agent" is entitled to a liberal construction, and even if full control by the principal over the discriminatory program is not required, we find no authority to support the construction Morgan would require to prevail.
To establish employer responsibility for the discriminatory programs of third parties, the employer must be more than a broker, or other intermediary, that simply enables its employees to enter into arrangements with third parties; the employer must affirmatively, actively participate in the third-party program. See, e.g., EEOC v. Colby College, 589 F.2d 1139, 1141 (1st Cir.1978).
Courts basing employer liability on participation in the third-party program have emphasized the fact that the employer had some control over the terms of the program, and thus can be said to have perpetuated the discrimination. For example, in affirming a decision of this court holding an employer vicariously liable for a discriminatory deferred compensation plan administered by a third party, the Supreme Court emphasized the fact that the employer entered into a contract with the third party governing the terms by which the benefits would be provided. Arizona Governing Committee for Tax Deferred Annuity and Deferred Compensation Plans v. Norris, 463 U.S. 1073, 1088-91, 103 S.Ct. 3492, 3501-03, 77 L.Ed.2d 1236 (1983). In find ing an employer could be held liable for a similar discriminatory program, the First Circuit emphasized the fact that though a third party administered the program, premiums were determined by a formula established by the employer based on salary and position, and participation in the program was made mandatory by the employer. EEOC v. Colby College, 589 F.2d at 1141; see also Spirt v. Teachers Insurance & Annuity Association, 475 F.Supp. 1298, 1308 n. 16 (S.D.N.Y.1979) (same), aff'd in part, rev'd in part on other grounds, 691 F.2d 1054 (2d Cir.1982), cert. granted and judgment vacated, 463 U.S. 1223, 103 S.Ct. 3565, 77 L.Ed.2d 1406 (1983), on remand, judgment reinstated with modification on other ground, 735 F.2d 23 (2d Cir.), cert. denied, 469 U.S. 881, 105 S.Ct. 247, 83 L.Ed.2d 185 (1984). Finally, in stating that a parent corporation would have been vicariously liable for the discriminatory employment practices of a subsidiary, had it not been liable in its own right, the middle district of North Carolina noted that the parent and subsidiary shared a hiring office and coordinated employment policies. Hairston v. McLean Trucking Co., 62 F.R.D. 642, 663 (M.D.N.C.1974), vacated and remanded for further relief to plaintiffs, 520 F.2d 226 (4th Cir.1975). Moreover, because the parent applied the companies' mutual no-rehire and no-transfer policies to employees of the subsidiary, it perpetuated the discrimination practiced by the subsidiary of which it had knowledge. Id. at 662-63. Cf. also Crowder v. Fieldcrest Mills, Inc., 569 F.Supp. 825, 827 (M.D.N.C.1983) (insurance company that served as adviser to employer in latter's administration of health insurance program but who exercised no control over employer's insurance program not liable as agent of employer).
To support her argument that Safeway "participated" in SAFCU's discriminatory program, Morgan notes that Safeway sponsored SAFCU; Safeway promoted membership in SAFCU by offering such membership to its employees and their families; Safeway included SAFCU membership applications in its hiring handbook and listed SAFCU membership as a "benefit;" Safeway provided SAFCU with the benefits of a payroll deduction program for loan payments; Safeway provided SAFCU employees with the benefits of its own employee benefit programs; Safeway shared its interoffice mail system with SAFCU; Safeway knew that SAFCU offered credit disability insurance, and at least by 1979 when Morgan filed her first charge of discrimination, knew that SAFCU offered that insurance on a discriminatory basis.
Absent from the above facts is evidence of participation by Safeway in establishing or maintaining SAFCU's credit disability policy. Safeway did not specify the terms of that program by contract, see Norris, supra; it did not require its employees to secure credit disability insurance, see Spirt, supra; Colby College, supra; it did not establish any conditions for receiving SAFCU benefits, see id.; and it did not develop the terms of SAFCU's program in coordination with SAFCU, see Hairston, supra. By including applications in its handbook, Safeway no doubt facilitated membership in SAFCU, but such facilitation is insufficient to hold Safeway legally responsible for the terms of SAFCU's lending policies. By furnishing an interoffice mail system, Safeway facilitated to some degree the general operations of SAFCU, but such faciliation falls far short of active participation in the challenged program. Further, payroll deductions by employers to facilitate employee payments are common, but do not prove that the employer has or exercises any influence over the policy of the payee. Finally, even if we agreed that economic leverage over a credit union could constitute the necessary control for purposes of agency under title VII, the fact that Safeway sponsored SAF-CU and supplied some support services would not justify a trier of fact in finding that after its launching by Safeway, SAF- CU would have collapsed if Safeway had withdrawn its sponsorship.
We therefore conclude the district court correctly found SAFCU was not the agent of Safeway for title VII purposes.
AFFIRMED.
. Morgan points to this court's opinion in Norris to support her view that "participation" does not mean the employer must have taken an active role in the third-party program specifically challenged. Norris v. Arizona Governing Committee for Tax Deferred Annuity and Deferred Compensation Plans, 671 F.2d 330 (9th Cir.1982). Our opinion in Norris, however, does not support this view. In Norris, we noted Arizona could not successfully distinguish cases holding employers vicariously liable for third-party programs on the basis that the employers in those cases took an active role in administering or developing the program, because given the facts in Norris, Arizona's adoption of the plan constituted active participation in that plan. Id. at 334. Those facts included entering into a contract governing the terms of the plan. Thus no matter who developed the terms, Arizona specifically agreed to those terms by contract. Such active participation is absent here.