Appeals Court Finds No Joint Employer Relationship

​Although a company escaped joint employer liability under federal law for the sexual harassment of a contractor's employee by co-workers, it could still potentially find itself liable under New Mexico state law for failing to protect the plaintiff from harmful acts by third parties on its premises, the 10th U.S. Circuit Court of Appeals ruled.

The plaintiff worked as the only female member of a pipeline construction crew employed by a company that provided construction and maintenance services under a contract with an energy company operating a crude oil pipeline system in New Mexico and Texas.

The plaintiff sued her employer and the contracting firm's corporate successor, alleging that three of her co-workers had sexually harassed her and forced her to perform sexual acts with them as a condition of employment. The plaintiff alleged that she and other employees told members of management at both her employer and the contracting company about the sexually harassing conduct. Allegedly, none of the defendants investigated the complaints. Further, the plaintiff alleged that a representative of the contracting firm told her she should "get over it" and "suck it up." The plaintiff invoked the joint employer doctrine against the contracting firm and sued both her employer and the contracting firm in New Mexico state court.

In response, the contracting firm removed the lawsuit to federal court and moved for summary judgment on the grounds that it did not employ the plaintiff or the workers accused of harassment. The company attached a copy of the Master Service Agreement (MSA) governing the contractual relationship to its summary judgment motion. The MSA specified that the construction company was an independent contractor and that its employees were subject to its "sole and exclusive supervision, direction, and control" and that "under no circumstances" would an employee of the company be deemed an employee of the contracting firm.

The plaintiff opposed the summary judgment motion and requested additional discovery concerning her alleged employment relationship with the contracting firm, arguing for the first time that under New Mexico law the company was liable for breaching its duty to keep her safe on its premises. Under the state's premises liability law, businesses must exercise reasonable care to discover and prevent dangerous conditions caused by people on their premises.

To establish premises liability, a plaintiff must show 1) that the injury was proximately caused by the owner's failure to exercise its control in a reasonable manner; 2) that the owner knew or by the exercise of reasonable care should have discovered the dangerous condition; 3) that such hazard involved an unreasonable risk of harm to the plaintiff; and 4) that the owner should have expected that the plaintiff would not discover or realize the danger, or would fail to protect herself against it.

The federal district court granted partial summary judgment to the contracting firm and denied the plaintiff's motion for discovery. It also interpreted her premises liability argument as a motion to amend her complaint and denied it as futile because she failed to allege facts stating a plausible claim for relief. On the same day, the court ordered the plaintiff to serve a complaint on her employer.

Ten months later, the court entered a final default judgment against the plaintiff's employer, ordering it to pay her $20 million. Three weeks after the final judgment against her employer, the plaintiff appealed the district court's grant of summary judgment to the contracting firm.

The contracting firm moved to dismiss the appeal as untimely, arguing that the plaintiff needed to appeal within 30 days of the summary judgment order. The plaintiff responded that the order was not final because the claims against her employer had not yet been resolved at the time.

The appeals court denied the motion to dismiss the appeal, finding that the district court's order regarding the judgment against the plaintiff's employer was "the only final and appealable order."

Turning to the issues raised on appeal, the court found that the contracting company did not "employ" the construction firm's workers under Title VII of the Civil Rights Act of 1964, which "makes it unlawful for an 'employer' to 'discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment on account of sex.' "

No reasonable jury could have found the contracting firm exercised significant control over the construction firm's employees to be a "joint employer," the court held, because it did not have authority to fire employees; did not control payroll, tax documents or employee benefits; did not supervise the plaintiff or her co-workers; and had no authority to hire, retain, fire or discipline employees of the construction firm. The court affirmed summary judgment in favor of the contracting firm on the Title VII claim.

The court also affirmed summary judgment on the plaintiff's state law claims, finding that the workers were independent contractors under New Mexico law. The MSA clearly stated there was no intent to create an employment relationship. Further, the contracting firm did not pay the construction firm's workers, supply their tools or control the details of their work.

On the question of whether discovery had been properly denied, the court found the facts stated in the plaintiff's affidavit "would not overcome [the defendant's] evidence that they could not fire, could not discipline, and did not pay employees." The court affirmed the denial of her motion for discovery because she failed to demonstrate an abuse of discretion by the court.

Finally, the court held the district court had misread the plaintiff's affidavit arguing that the contracting firm breached its duty of care to keep its premises safe for her and prevent harm from third parties. The court misread this argument as a request to amend the complaint and did not consider allegations already appearing in the original complaint or in the memorandum opposing summary judgment in determining whether the plaintiff could state a premises liability claim, the appeals court held. The affidavit stated that the defendant controlled the premises on which at least some of the harassment occurred, thus sufficiently alleging a duty of reasonable care to protect her from unreasonably dangerous conditions, the court said. The plaintiff also alleged she had reported the sexual harassment to the contracting firm's representatives and that no one had investigated her complaints. For these reasons, the court had failed to adequately consider the plaintiff's duty-of-care argument, the appeals court found.

The court vacated the district court's denial of leave to amend and remanded the case. However, it noted the district court would not be obliged to revisit whether the premises-liability claim is futile because, in the absence of any federal claim, it may decline jurisdiction over any potential state law claim.

Adams v. C3 Pipeline Construction Inc., 10th Cir., No. 20-2055 (Nov. 2, 2021).

Professional Pointer: Even in situations where a contracting firm has implemented a well-crafted, airtight MSA specifying that under no circumstances will a contractor's employee be deemed its employee, state law must be taken into consideration. Contracting firms' representatives must be instructed to report unreasonably dangerous conditions that are brought to their attention or of which they should have been aware through the exercise of reasonable care.

Rosemarie Lally, J.D., is a freelance legal writer based in Washington, D.C.