According to the EEOC, a company told its staffing agencies not to send women for laborer jobs because women would “distract” male workers. When the EEOC sued, the company turned around and sued the staffing agencies too. A federal court just explained why that doesn’t work.
TL;DR: A federal court dismissed with prejudice a Title VII defendant’s third-party indemnification claim against its staffing agencies, holding that Title VII preempts any attempt by an accused employer to contractually shift its discrimination liability to vendors – particularly where the employer allegedly instructed those vendors to help it discriminate in the first place. The underlying sex discrimination claim against the employer remains pending.
What the EEOC Alleges
The employer disposes and recycles PCB-contaminated items at its Alabama plant and employs laborers to disassemble those items. According to the EEOC, the company has since 2020 relied exclusively on third-party staffing agencies to fill those laborer positions – and allegedly instructed those agencies not to refer women. The EEOC alleges the employer refused to hire qualified women in favor of equally or less qualified male applicants, in part because women would allegedly “distract” male workers and increase the risk of sexual harassment.
After an investigation, the EEOC issued a letter of determination finding reasonable cause to believe Title VII had been violated. When conciliation failed, the EEOC filed suit.
The Creative Defense the Employer Tried
The employer answered the EEOC’s complaint and then filed a third-party complaint for breach of contract against three staffing firms. The theory: if the employer violated Title VII by failing to hire women, the staffing firms violated Title VII too by complying with the alleged instruction not to refer women. The staffing contracts included indemnification provisions requiring the firms to cover claims arising from their own legal violations. So the employer argued the staffing firms should cover any damages and attorneys’ fees the EEOC extracts.
It was an inventive argument. The court dismissed it with prejudice.
Why Title VII Doesn’t Work That Way
Title VII creates a comprehensive remedial scheme to eradicate workplace discrimination. Courts have consistently held that a party accused of violating Title VII cannot use third-party indemnification claims to shift its own liability to someone else. The court relied on EEOC v. Blockbuster, where a similar maneuver was rejected on the same grounds: allowing it would let employers “contract around” their Title VII obligations.
The court found the public policy case even stronger here than in Blockbuster. The employer’s indemnification theory rested on its own alleged instruction to the staffing firms to help it violate federal law. As the court stated, “Federal public policy would be undermined if [the employer] had the ability to tell others to help [it] violate federal law and then pay [it] if [it] got caught.”
The court also noted in a footnote that the staffing firms are not necessarily off the hook. If they complied with an unlawful instruction not to refer women, they may face their own Title VII liability in a separate proceeding.
The employer’s underlying sex discrimination case remains live. But even at this early stage, the court has delivered a clear message about what happens when you try to pass the bill to your vendors.
What Employers and Their Staffing Partners Need to Know
- You cannot contractually shift your Title VII liability to a staffing firm. If your company sets discriminatory hiring criteria – even by instructing a vendor – you own that liability. An indemnification clause won’t save you.
- Review staffing contracts for compliance exposure, not just protection. An indemnification provision requiring a staffing firm to cover its own legal violations has limits. Courts will not enforce it to cover liability you created.
- Instructions to staffing agencies are subject to Title VII. If you tell a staffing firm not to refer candidates of a particular sex, race, or other protected class, that instruction is itself potentially actionable – for you, and possibly for the firm that complied.
When you instruct a vendor to help you discriminate, you don’t get to blame the vendor.