Court Opinion

ID: 9479487
Source: CourtListenerOpinion
Date Created: 2023-08-05 07:19:53.535372+00
Date Added: 2024-06-11T17:47:04.174474
License: Public Domain

NELSON, Circuit Judge,
dissenting:
I dissent because I believe that an employer cannot escape the reach of Title VII by delegating its responsibility for the evenhanded provision of fringe benefits to a third party whom the employer knows will discriminate on the basis of pregnancy. I find this case particularly troubling in light of the substantial overlap in operations between Safeway and SAFCU.
Although I agree with the majority’s conclusion that the overlap between Safeway and SAFCU is insufficient to satisfy the “single employer” test set forth in Childs, that test does not govern Morgan’s action against Safeway. In Childs, the plaintiff attempted to hold the international union liable for an alleged discriminatory firing by the local union of the local’s own employee. Childs v. Local 18, International Brotherhood of Electrical Workers, 719 F.2d 1379 (9th Cir.1983). The court adopted the “single employer” test formulated by the NLRB to determine whether to hold the international responsible for the local’s labor policies on the ground that the local was the alter ego of the international. See id. at 1382; see also Baker v. Stuart Broadcasting Co., 560 F.2d 389 (8th Cir.1977) (adopting the single employer test to determine whether the radio station’s li-censeholder and the licenseholder’s provider of management services were liable for the station’s alleged discrimination in hiring).
In this case, in contrast, Morgan does not seek to hold Safeway liable for SAFCU’s employment policies vis a vis SAFCU’s own employees. Rather, Morgan argues that Safeway is liable for the manner in which SAFCU provides fringe benefits promised by Safeway to Safeway employees. When an employer delegates responsibility for the provision of a fringe benefit to a third party, liability does not turn on the alter ego or single employer analysis. See Norris, 463 U.S. 1073, 1089, 103 S.Ct. 3492, 3501, 77 L.Ed.2d 1236 (1983) (“Since employers are ultimately responsible for the ‘compensation, terms, conditions, [and] privileges of employment’ provided to employees, an employer that adopts a fringe-benefit scheme that discriminates among its employees on the basis of race, religion, sex, or national origin violates Title VII regardless of whether third parties are also involved in the discrimination.”); Norris v. Arizona Governing Committee for Tax Deferred Annuity and Deferred Compensation Plans, 671 F.2d 330, 334 (9th Cir.1982), aff'd in part, rev’d in part, 463 U.S. 1073, 103 S.Ct. 3492, 77 L.Ed.2d 1236 (1983) (holding that when an employer adopts a fringe benefit plan, “[t]he fact that the plan is operated by a private insurance company rather than Arizona does not render [relevant Title VII authority] less controlling.”); Spirt v. Teachers Insurance and Annuity Association, 475 F.Supp. 1298, 1308 (S.D.N.Y.1979) (“Educational institutions such as LIU have delegated their responsibility for and control over employee annuity plans to TIAA and CREF. To hold that discrimination in that aspect of employee compensation cannot be fully remedied under Title VII because of such delegation would impair the effectiveness of the Act.”), aff'd in part, rev’d in part on other grounds, 691 F.2d 1054 (2d Cir.1983), 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).
In the area of delegated fringe benefits, courts have evaluated the extent of the employer’s “participation” in the discriminatory program on a continuum in order to determine liability. At one end of the continuum lies the employer who merely acts as a broker or intermediary, enabling its employees to enter into third party arrangements. See EEOC v. Colby College, 589 F.2d 1139, 1141 (1st Cir.1978); see also City of Los Angeles v. Manhart, 435 U.S. *1217702, 717, 98 S.Ct. 1370, 1380, 55 L.Ed.2d 657 (“Nothing in our holding implies that it would be unlawful for an employer to set aside equal retirement contributions for each employee and let each retiree purchase the largest benefit which his or her accumulated contributions could command in the open market.”). At the other end of the continuum is the employer who actively participates in the provision of mandatory discriminatory benefits by knowingly contracting with a third party for the provision of benefits in a discriminatory manner. See, e.g., Arizona Governing Committee for Tax Deferred Annuity & Deferred Compensation Plans v. Norris, 463 U.S. 1073, 1088-89, 103 S.Ct. 3492, 3501-02, 77 L.Ed.2d 1236 (1983) (“Having created a plan whereby employees can obtain the advantages of using deferred compensation to purchase an annuity only if they invest in one of the companies specifically selected by the state, the state cannot disclaim responsibility for the discriminatory features of the insurers’ options”.)
Safeway’s sponsorship of SAFCU in providing fringe benefits for Safeway’s employees and its active promotion of membership in the credit union even after it became aware of SAFCU’s discriminatory credit disability program places Safeway’s participation in SAFCU’s program in the area of the continuum in which liability attaches.
Safeway acted as much more than a mere broker or intermediary between its employees and SAFCU. Safeway essentially caused SAFCU to come into being in order to provide financial services to Safeway’s employees. At the time of the discrimination, Safeway was SAFCU’s only sponsor and the membership of SAFCU consisted solely of current and former Safeway employees and their families. Without Safeway’s continued support, SAFCU probably would have ceased to exist. See Colby College, 589 F.2d at 1141 (citing as support for its finding that the university was more than a broker or intermediary the fact that “an educational institution’s adoption of [an insurance association] ‘constitutes affirmative active participation,’ without which ‘the challenged program could not operate,’ ” citing Spirt v. Teachers Insurance and Annuity Association of America, 416 F.Supp. 1019, 1021-22 (S.D.N.Y.1976)).
Safeway affirmatively and actively promoted the credit union. It encouraged membership in SAFCU by listing SAFCU membership as a benefit of Safeway employment, including SAFCU membership applications in its hiring handbook, allowing SAFCU to use its interoffice mail system, and arranging for presentations by SAFCU representatives to discuss the benefits of SAFCU membership. Safeway facilitated the discriminatory credit disability policy in particular by providing employees with the option of direct payroll deductions for their disability insurance payments and for their payments on the loans that the credit disability program insured. Cf. Norris, 463 U.S. at 1077, 103 S.Ct. at 3495 (“The State bears the cost of making the necessary payroll deductions and of giving employees time off to attend group meetings to learn about the plan....”)
Most importantly, Safeway continued to sponsor SAFCU and to provide its employees with benefits through SAFCU even after Safeway became aware of the credit disability policy’s discriminatory terms. Safeway’s sponsorship and promotion of SAFCU despite its knowledge of the discriminatory terms render Safeway as culpable for discrimination as an employer who contracts with a third party for the provision of benefits on a discriminatory basis. The majority opinion attempts to distinguish Safeway’s conduct from that of a “contracting employer” on the ground that Safeway lacks control over the terms of the discriminatory program. Yet Safeway has the same “control” over the discriminatory program as would a contracting employer; just as a dissatisfied contracting employer may select a different supplier of the benefit program, Safeway may refuse to do business with SAFCU unless the discriminatory terms are deleted. In fact, as SAFCU’s only sponsor, Safeway has even more control over SAF-CU than would an ordinary contracting employer because a revocation of sponsorship *1218would jeopardize SAFCU’s very existence. For this reason I cannot concur in an opinion holding that Title VII liability turns on an employer’s “actual” control over the fringe benefit program.
I also cannot join an opinion that hinges liability on whether the employer was a party to a contract that included discriminatory terms. This reasoning allows a delegating employer to hide behind intentionally broad contractual language. Unlike the use of gender specific actuarial tables, most types of discrimination will not be readily apparent from the terms of the contract.
The linchpin of liability should be the employer’s awareness that the third party is administering the program on a discriminatory basis. At that point, the employer’s continued promotion and sponsorship of the program constitutes ratification of the discriminatory conduct. This court should reverse and remand this case to the district court for further proceedings to determine the extent of Safeway’s knowledge of the discriminatory credit disability program.