Opinion ID: 204093
Heading Depth: 1
Heading Rank: 6

Heading: Interpreting the Term Employer in Title VII

Text: The central issue in this appeal is whether HRD's relationship to the plaintiffs makes HRD their employer under Title VII. Title VII defines an employer as a person who is engaged in an industry affecting commerce who has fifteen or more employees ... and any agent of such a person. 42 U.S.C. § 2000e(b). A state may be such a person. Id. § 2000e(a). The text ties the definition of an employer to the meaning of employees. [12] Title VII defines an employee only as an individual employed by an employer. 42 U.S.C. § 2000e(f). The Supreme Court has recognized that this definition is completely circular and explains nothing. Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 323, 112 S.Ct. 1344, 117 L.Ed.2d 581 (1992) (addressing the question of whether a person was an independent contractor or an employee under ERISA). A series of Supreme Court decisions have established that when a statute contains the term employee but does not define it, a court must presume that Congress has incorporated traditional agency law principles for identifying master-servant relationships. [13] See Clackamas Gastroenterology Assocs., P.C. v. Wells, 538 U.S. 440, 444-47, 123 S.Ct. 1673, 155 L.Ed.2d 615 (2003); Walters v. Metro. Educ. Enter., Inc., 519 U.S. 202, 211-12, 117 S.Ct. 660, 136 L.Ed.2d 644 (1997); Darden, 503 U.S. at 322-23, 112 S.Ct. 1344; Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730, 739-40, 109 S.Ct. 2166, 104 L.Ed.2d 811 (1989). It is clear that the terms employer and employee under Title VII are to be defined with reference to these common law agency principles. See Walters, 519 U.S. at 211-12, 117 S.Ct. 660; De Jesús v. LTT Card Servs., Inc., 474 F.3d 16, 18, 22 (1st Cir.2007); Alberty-Vélez v. Corporación De P.R. Para La Difusión Pública, 361 F.3d 1, 6 (1st Cir.2004). The Supreme Court has recognized a series of non-exclusive factors used under the common law test. In Reid, the Court listed thirteen possible factors to determine whether a person was an independent contractor or an employer for purposes of the Copyright Act. Those factors are set forth below. [14] Reid, 490 U.S. at 751-52, 109 S.Ct. 2166. The Court in Darden then adopted and applied these factors as part of the common law test for determining whether a person was an employee under ERISA. Darden, 503 U.S. at 323, 112 S.Ct. 1344. In Walters, the Supreme Court endorsed the common law test, as used in Darden, for the purpose of defining an employer under Title VII. 519 U.S. at 211-12, 117 S.Ct. 660. Beyond that, the question of whether an employer had an employeethe criterion for being an employer under Title VIIturned upon whether an employment relationship existed on the day in question, regardless of whether the employee worked or was compensated on a given day. Id. In Clackamas, in deciding whether physician shareholders were employees or employers under the Americans with Disabilities Act (ADA), a statute that defines an employee and employer identically to Title VII, the Court again focused on the common law agency doctrine to define the term employee and cited to Reid and Darden. 538 U.S. at 444-45, 123 S.Ct. 1673. The Court rejected the argument that the term employer must be given a broader reading than the common law meaning in order to effectuate the statutory purpose of ridding the Nation of the evil of discrimination. Id. at 446, 123 S.Ct. 1673. Instead, it was swayed by two countervailing considerations in favor of the common law approach. Id. First, the Court observed, Congress's decision to limit the definition of an employer in Title VII to an entity with fifteen or more employees reflected its intent to limit liability and the costs of compliance and litigation for very small firms. Id. at 446-47, 123 S.Ct. 1673. Second, citing Darden, the Court again emphasized that congressional silence should be interpreted as an instruction to turn to the common law alone: Congress has overridden judicial decisions that went beyond the common law in an effort to correct `the mischief' at which a statute was aimed. Id. at 447, 123 S.Ct. 1673. Clackamas also gave more specific guidance about what the common law test required: At common law the relevant factors defining the master-servant relationship focus on the master's control over the servant. The general definition of the term servant in the Restatement (Second) of Agency § 2(2) (1957), for example, refers to a person whose work is controlled or is subject to the right to control by the master. See also id., § 220(1) (A servant is a person employed to perform services in the affairs of another and who with respect to the physical conduct in the performance of the services is subject to the other's control or right to control). In addition, the Restatement's more specific definition of the term servant lists factors to be considered when distinguishing between servants and independent contractors, the first of which is the extent of control that one may exercise over the details of the work of the other. Id., § 220(2)(a). We think that the common-law element of control is the principal guidepost that should be followed in this case. 538 U.S. at 448, 123 S.Ct. 1673. In particular, the Court in Clackamas was persuaded that courts should look to the guidelines in the EEOC's Compliance Manual to address the question of when a person is an employee. Id. at 448-50, 123 S.Ct. 1673. Those guidelines, in their current form, list the following, non-exhaustive factors as indications that a worker is in an employment relationship with an employer: [t]he employer has the right to control when, where, and how the worker performs the job; [t]he work does not require a high level of skill or expertise; [t]he work is performed on the employer's premises; [t]here is a continuing relationship between the worker and the employer; [t]he employer has the right to assign additional projects to the worker; [t]he employer sets the hours of work and the duration of the job; [t]he worker is paid by the hour, week, or month rather than the agreed cost of performing a particular job; [t]he worker does not hire and pay assistants; [t]he work performed by the worker is part of the regular business of the employer; [t]he employer is in business; [t]he worker is not engaged in his/her own distinct occupation or business; [t]he employer provides the worker with benefits such as insurance, leave, or workers' compensation; [t]he worker is considered an employee of the employer for tax purposes; [t]he employer can discharge the worker; and [t]he worker and the employer believe that they are creating an employer-employee relationship. 2 Equal Employment Opportunity Comm'n, EEOC Compliance Manual, § 2-III, at 5716-17 (2008). The guidelines emphasize that these criteria should be viewed in light of the totality of the circumstances based on the parties' relationship. Id. § 2-III, at 5717. [15] It is clear that plaintiffs are not HRD's employees, and HRD is therefore not their employer for Title VII purposes, based on these factors. The agreed stipulation of facts establishes as much. HRD has no control over plaintiffs' day-to-day job performance and no right to exercise such control. Municipal police officers do not work on HRD's premises and have no continuing relationship with HRD. Instead, HRD affects plaintiffs only indirectly, and only to the degree that plaintiffs' local employers decide to involve HRD in various processes. HRD has no right to assign plaintiffs any projects, nor does HRD set the hours of plaintiffs' employment. Plaintiffs' work is certainly not part of HRD's regular business; HRD is a state regulatory body concerned with the administration of the civil service system, whereas plaintiffs, as police officers, are concerned with maintaining public safety. HRD does not provide plaintiffs with any benefits, such as insurance or worker's compensation, nor does HRD consider plaintiffs its employees for tax purposes. HRD has no role in termination decisions. Finally, neither HRD nor plaintiffs could have reasonably believed that they ever established an employer-employee relationship. As a matter of state law, plaintiffs are clearly described as the employees of appointing authorities, whereas HRD is defined as the administrator. This definition reflects the Massachusetts legislature's decision that it is these local entities which are the employers of the local police. See Mass. Gen. Laws ch. 31, § 1. The Supreme Court has not recognized any other possible means of interpreting either the term employee or the term employer under Title VII and has rejected broader readings. This court, in turn, has applied common law principles of agency to define the term employee under Title VII. See De Jesús, 474 F.3d at 21-24 (holding that when defining whether shareholder-directors were employees for the purpose of determining whether a close corporation was a Title VII employer, we were bound by Clackamas ); Alberty-Vélez, 361 F.3d at 6-7 (applying the common law agency test identified in Darden and later precedents to address whether the plaintiff was an independent contractor or an employee as defined under Title VII). Most other circuits have also concluded that under Supreme Court precedent, the definition of an employee under Title VII-and therefore the definition of an employeris restricted to its meaning at common law. See, e.g., Gulino v. N.Y. State Educ. Dep't., 460 F.3d 361, 377-78 (2d Cir.2006) (applying the common law agency test to define an employee under Title VII because Supreme Court precedents require adherence to common law principles of agency in Title VII cases); Smith v. Castaways Family Diner, 453 F.3d 971, 975-76 (7th Cir.2006) (relying upon the common law factors the Supreme Court has outlined to determine whether individuals were employers or employees under Title VII); Shah v. Deaconess Hosp., 355 F.3d 496, 499-500 (6th Cir.2004) (applying the common law agency test and suggesting that other tests cannot be reconciled with Supreme Court decisions). Plaintiffs' claim that HRD is their de facto employer is likewise foreclosed. The plaintiffs incorrectly argue that there is a de facto test which is an exception and an addition to the common law test. That is not so. The de facto test is the same as the common law test and stresses the importance of actual circumstance of an entity's overall control over key aspects of an employment relationship with a particular set of putative employees. An employee's status under Title VII must be determined by the actual circumstances of the person's relationship with the defendant and not just the label. Serapion v. Martinez, 119 F.3d 982, 987 (1st Cir.1997). In Camacho v. P.R. Ports Auth., 369 F.3d 570 (1st Cir.2004), we applied this analysis and looked to the actual circumstances, and not the labels invoked, to determine when an entity was an employer under Title VII and related statutes. Camacho, which did not cite Clackamas but cited Darden and Reid, phrased the question as whether the defendant so extensively controls an aggrieved party's employment relationship as to become that party's de facto employer. Id. at 574. We stated that this inquiry was less an exception to the common law and more a restatement of the rule. Id. at 575 n. 3. And we held that the [state] agency does not become an employer of those individuals whom it neither hires, compensates, nor supervises day-to-day even though it licenses and regulates them. Id. at 578. On the facts of Camacho, we held that the Puerto Rico Ports Authority was not the actual or de facto employer of harbor pilots, even though it controlled the issuance and revocation of their licenses, set out standard procedures governing the boarding of ships, and participated in the creation and administration of a retirement plan for harbor pilots. Id. at 576-78. We found that notwithstanding these regulations, harbor pilots retained control over many of the relevant indicia of employment under the common law test. Harbor pilots, for instance, provided their own tools, training, and instruments for their work, controlled their own schedules and routes, and were paid by shipowners, not by the Ports Authority. Id. at 576. We also observed that the Authority did not behave as the pilots' employer in any practical sense, since it had no control over hiring or firing decisions, did not treat the pilots as employees for tax purposes, and did not provide the pilots with any benefits or insurance. Id. at 577. All of these factors, we concluded, militate strongly against a finding that the Authority functions as the de facto employer of the harbor pilots. Id. In a somewhat parallel case, the Second Circuit recently rejected the contention that the New York State Education Department was a Title VII employer of public school teachers because it devised and administered a test that was mandatory for teachers to receive or retain teaching licenses. Gulino, 460 F.3d at 363-64. The plaintiffs claimed that this test had a discriminatory impact. The Second Circuit found the state could not be considered teachers' Title VII employer because it lacked control over public schools' daily operations, including ultimate decisions about teacher employment. Id. at 366-70, 376-80. It also contrasted the state's administrative role with the role that the New York City Board of Education played as the plaintiffs' direct employer. Id. at 380-81. [16] The facts here weigh even more strongly against the state being the employer of the plaintiffs. HRD exercised no control, direct or indirect, over the factors relevant to the common law agency test, as we have discussed above. HRD therefore cannot be deemed plaintiffs' de facto employer. Even if we were to consider control over promotions as a factor relevant to the definition of an employment relationshipthough neither agency law nor the EEOC guidelines mention it plaintiffs' argument still fails. For Massachusetts municipal police departments, the use of HRD's state-prepared and administered promotions examination was not mandatory. Municipalities could opt to use their own system of evaluations for police promotions independent of HRD's examinations process. And HRD did not control promotions decisions even for municipalities that chose to use HRD-administered promotions examinations. While HRD provided municipalities with a ranked list of candidates and their corresponding scores on the promotions examination, state law dictated that veterans and other preferred candidates had to be ranked first, even above higher-scoring candidates. Municipalities could choose among numerous candidates on the eligibility list when filling a single vacancy, and HRD did not dictate which individuals the city defendants or the MBTA were to promote. The bypass process also gave them even greater control over the ultimate promotions decision and allowed the municipality to look to other factors beyond examination scores when making promotion decisions. Indeed, municipalities historically relied on the bypass process and their own flexibility in determining the number of promotions to award to serve the aim of promoting more African-Americans to police sergeant. See Cotter, 323 F.3d at 164-65. Plaintiffs present two alternate theories why HRD should be considered their employer under Title VII, even though HRD is not an employer under the common law tests. First, plaintiffs claim that under one of this court's precedents, Carparts Distrib. Ctr. v. Auto. Wholesaler's Ass'n of New England, Inc., 37 F.3d 12 (1st Cir. 1994), so long as HRD controls even one significant aspect of plaintiffs' employment, such as promotions, HRD can be considered an employer for purposes of Title VII liability. Second, they cite cases from other circuits that have articulated an interference theory of employment. Under the interference theory, a party that significantly participates in and interferes with an employment relationship may be subject to liability as an employer. We consider, and reject, each of these arguments in turn. Our decision in Carparts does not help plaintiffs. All that Carparts held was that based on the allegations in the complaint, it was inappropriate to grant dismissal under Rule 12(b)(6) in the absence of any factual development. 37 F.3d at 17. We hypothesized that an entity might be an employer under the ADA and related statutes like Title VII if, inter alia, it exercised control over an important aspect of [the plaintiff's] employment. Id. Carparts involved two private entities, an unusual set of facts, and a particular procedural posture. Carparts, an automotive parts wholesale distributor, brought suit under the ADA against an automotive wholesalers' trade association and the self-funded medical benefits plan the association offered to its members. Id. at 14. As a member of the medical benefits plan, Carparts had allegedly delegated all healthcare coverage decisions to the plan's trustees. Our opinion suggested that if the trade association and the medical benefits plan exist[ed] solely for the purpose of enabling entities such as Carparts to delegate their responsibility to provide health insurance for their employees, these entities might have been so intertwined with Carparts that they became an employer under the ADA. Id. at 17. Because the case came before this circuit as an appeal from the district court's grant of a motion to dismiss, we concluded that we lacked sufficient facts to determine whether this test even applied to the case at hand. Id. at 18. Carparts also did not rely on an interference theory, which is plaintiffs' last straw. Finally, plaintiffs argue that the term employer under Title VII is broader than the common law test and includes an entity that significantly impacts or interferes with an individual's employment opportunities. Plaintiffs assert that HRD's role in the promotions process interferes with municipalities' employment of the plaintiffs, making HRD liable as an employer under Title VII. The plaintiffs invoke the Ninth Circuit's opinion in Ass'n of Mexican-Am. Educators v. California, 231 F.3d 572 (9th Cir.2000) (en banc), in which a divided court held that California and its teacher credentialing commission were employers of public school teachers when the state administered a test that was a prerequisite for a variety of teaching positions. Id. at 579-83. The court so held despite the fact that plaintiffs and defendants did not have a direct employment relationship and the fact that the plaintiffs were directly employed by individual local school districts. Id. at 580. We reject the reasoning of that court in support of that holding, which not only rested on the interference theory but failed to cite or discuss the Supreme Court's decisions in Reid, Darden, and Clackamas. The interference theory has no basis in our circuit law, has never been adopted by this circuit, and contradicts Supreme Court case law. We flatly reject it now. This circuit never accepted the interference theory of employment even during its early heyday. [17] Indeed, in Camacho, we declined to adopt this theory and suggested that its validity as an exception to the common law test for employment was dubious. 369 F.3d at 574 n. 3. And in Carparts, a much earlier decision, we considered the interference theory but did not adopt it. 37 F.3d at 18. We reject the interference theory as inconsistent with the Supreme Court case law we have discussed. The interference theory is entirely inconsistent with the use of the common law criteria the Supreme Court has identified. Further, the conceptual underpinning for the doctrine, that a broad reading of the terms employee and employer are supposedly justified by the remedial purpose of the statute, has been expressly rejected by the Supreme Court in Clackamas, 538 U.S. at 446-47, 123 S.Ct. 1673. Most other circuits have also repudiated the interference theory as an impermissible deviation from the common law agency approach. See, e.g., Gulino, 460 F.3d at 373-76 (limiting Spirt and rejecting the interference theory generally on the grounds that they are at odds with the common law agency test and raise constitutional concerns); Shah, 355 F.3d at 500 (suggesting that the interference theory is not consistent with the common law agency test); Bender v. Suburban Hosp., Inc., 159 F.3d 186, 189-90 (4th Cir.1998) (narrowing Sibley to better comport with common law agency principles on the grounds that Title VII, Supreme Court, and circuit precedent so required). Our decision that the state defendants are not employers within the meaning of Title VII on these facts rests on the statutory interpretation of Title VII mandated by the Supreme Court and by our own precedent. [18] The district court's denial of the state defendants' motion to dismiss is reversed, and the case is remanded to the district court for entry of an order of dismissal under Title VII with prejudice with respect to the state defendants. So ordered.