Tag: staffing firm

TEMP WORKER QUALIFIES AS EMPLOYEE IN DISCRIMINATION SUIT

The Third Circuit recently ruled that a client of a temporary staffing agency could be considered an employer in race bias suit. In Faush v. Tuesday Morning, Inc., Labor Ready, a temporary staffing agency, assigned Faush to work at a home-goods retail store, Tuesday Morning. Faush’s duties included unloading merchandise, setting up display shelves and stocking merchandise. In his lawsuit, Faush claims that he and other African-American temporary employees were subjected to racial slurs, accused of stealing and was told by the store owner’s mother to work in back of the store with the garbage until it was time to leave. Faush was terminated. He sued Tuesday Morning under Title VII, the Pennsylvania Human Rights Act and other statutes alleging race discrimination.

The lower court granted Tuesday Morning’s motion for summary judgment, concluding that Tuesday Morning was not Faush’s employer and thus could not be held liable for discrimination under the statutes. Faush appealed the lower court’s decision, and the Third Circuit reversed. The Court found that the employment arrangement between Labor Ready and Tuesday Morning rendered the store liable for Faush’s discrimination claims. Although the Court found that the staffing agency paid Faush’s wages, payroll taxes, and maintained workers’ compensation insurance for him, the Court ruled that Tuesday Morning was, in fact, Faush’s employer under the Darden test because the store controlled his employment, pay and daily activities. The case was remanded and sent back to the lower court for further proceedings.

This decision is significant for both temporary employment firms and businesses that use temporary workers. The full decision can be read here.

STAFFING FIRM’S NON-COMPETE AGREEMENTS HELD UNENFORCEABLE

The Seventh Circuit affirmed that a Chicago-based information technology staffing firm’s non-compete agreements were unenforceable.  The Company, Instant Technology LLC, sued four former employees and its former Vice President for Sales and Operations, Elizabeth DeFazio, for joining a competitor firm, Connect Search LLC, which she was co-founding.  Connect Search also won business from Instant Technology’s recent clients.

  Instant Technology brought suit against these former employees for poaching employees, soliciting clients and divulging proprietary information to Connect Search.  The district court found that there was no evidence showing that defendants misused proprietary information.  Although the Defendants admitted breaching the covenants not to solicit and not to recruit, the district court held that those provisions in Instant Technology’s agreement were unreasonable and unenforceable under the Illinois Supreme Court case, Reliable Fire Equipment v. Arredondo, which held that a restrictive covenant is only valid if it serves a legitimate business interest.  The district court ruled that the covenants did not service a legitimate business interest because Instant Technology did not have permanent relationships with its customers and the former employees did not acquire confidential information during their employment.

Instant Technology argued before the Seventh Circuit that the district court used the wrong analysis, and that a “totality of circumstances” analysis should have been used to determine whether the covenants were unreasonable.  However, the Seventh Circuit rejected that argument.  The Court reasoned, “[Instant Technology] thinks “totality of the circumstances” means “all of the circumstances”…That’s an understandable reading given the slippery formulation, but it cannot be correct. ‘All’ circumstances is a lot of circumstances—indeed, infinitely many. Few matter to the question whether a restrictive covenant is reasonable, and even fewer matter enough that it would be a reversible error for the district court to omit them from its findings. The court didn’t discuss the price of eggs in Guatemala, but that does not require a remand.”

The Court further stated that if the validity of restrictive covenants, like non-compete agreements, depended on the “totality of the circumstances” then it would be hard to predict what covenants would be enforceable, which in turn, may cause both employers and employees to be worse off.

The full decision can be read here.