Yesterday, the Sixth Circuit revived the Equal Employment Opportunity Commission (EEOC)’s lawsuit against Skanska USA Building, Inc., holding that it was the de facto employer for subcontracted employees, a decision with potentially broad-reaching implications for employers with subcontracted employees and independent contractors, particularly in the construction industry.

Skanska was the general contractor for a hospital construction project. It subcontracted with C-1 Inc. Construction Company to provide operators for temporary elevators on the construction site. A C-1 employee, Maurice Knox, alleged that other workers at the work site engaged in racial slurs directed toward him and other black employees of C-1. Knox and other black C-1 employees complained about the slurs to both the owner of C-1 and Skanska management. At one point after the complaints, Skanska replaced all C-1 employees with Skanska employees, but the C-1 owner was able to petition to be reinstated as a subcontractor on the site. Eventually, Skanska directed that Knox be removed from the work site after he was caught using his cell phone while on the job. Other black workers who complained about harassment continued to work on the job until the elevator operation ceased; they alleged that the harassment continued until their work ended. The EEOC sued Skanska for hostile work environment and retaliation on behalf of the C-1 workers. (The Civil Rights Act permits the EEOC to file lawsuits directly against employers it believes violated the Act.) Knox joined the lawsuit as a plaintiff.

A Tennessee district court granted summary judgment to Skanska dismissing the case, holding that C-1, and not Skanska, was responsible for its employees under the subcontract. On appeal, a three-judge panel of the Sixth Circuit considered whether Skanska could be held liable under Title VII on a “joint employer” theory. Entities are joint employers if they “share or co-determine those matters governing essential terms and conditions of employment.” To determine whether an entity is the plaintiff’s joint employer, courts will look to an entity’s ability to hire, fire or discipline employees, affect their compensation and benefits, and direct and supervise their performance. The court did not express any opinion on whether the joint employer theory is valid in the Sixth Circuit because the issue was not briefed but noted that it is recognized in three other circuits. Here, the court held that, because Skanska set the C-1 employees’ hours, collected their time sheets, instructed them on equipment operation, provided safety training, carried workers’ compensation and liability insurance for C-1 employees, and assigned their direct supervisor from another subcontractor, Skanska was their de facto employer, and C-1 was a “nonentity” at the work site, despite what the contract between Skanska and C-1 stated. The case is now remanded for trial.

This case has potentially broad implications for companies that use temporary and contract workers, subcontracted workers, and independent contractors—particularly in the construction industry where this practice is common. Despite what the contract language states, if the reality of the arrangement looks and feels like an employer-employee relationship, the company could be liable as a joint employer for discrimination and other employment-related claims.