California Expands Coverage Of The Anti-Discrimination & Anti-Harassment Law

California’s Fair Employment and Housing Act (“FEHA”) prohibits employers from engaging in unlawful discrimination, harassment and retaliation. The law covers “employers,” which “includes any person regularly employing five or more persons, or any person acting as an agent of an employer, directly or indirectly […]”

The California Supreme Court has ruled that when third-party entities provide services to employers with California applicants and/or employees, they may risk being held liable under the FEHA.

On August 21, 2023, the California Court decided Raines v. U.S. Healthworks Medical Group, conforming that third-party entity agents may be held directly liable as the “employer” for employment discrimination when they carry out FEHA-regulated activities on behalf of the California employer. More simply, third-party businesses that provide employment-related services to California employers may be liable for FEHA violations.

This Raines decision will have a big impact on businesses that provide employment-related services to California employers. This is because many California employers outsource their employment obligations to third-party, including:

• applicant background check and new employee on-boarding providers;
• disability accommodation administrators;
• worker’s compensation providers;
• HR administrators advising on complaints, accommodations, terminations, etc.;
• medical clinics for workplace injuries and drug tests; and
• independent outside attorney investigators investigating allegations of workplace misconduct.

Now, it is clear that these third-parties may be held liable as the “employer.”