Can Employers’ Agents Be Liable For Discrimination? Yes, Says California Supreme Court, But We Won’t Tell You When.

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On August 21, 2023, just over three years ago, the California Supreme Court delivered one of its more inscrutable rulings. In Raines v. U.S. Healthworks Medical Group, 15 Cal.5th 268 (2023), the Court held that an employer's business-entity agent can be held directly liable under the FEHA for employment discrimination against the employer’s employees, “in appropriate circumstances” when the business-entity agent “carries out FEHA-regulated activities on behalf of an employer” -- provided the entity agent itself has enough employees to fall within the scope of FEHA (i.e., it must have at least five employees of its own).

In other words, if an employer hires an entity agent that violates the FEHA rights of the employer’s employees, the agent can be liable separately.

What are “appropriate circumstances”? Unclear.

The facts of Raines are singular enough to be of little help in determining the “appropriate circumstances.” Plaintiffs were job applicants who underwent medical screenings conducted by U.S. Healthworks Medical Group (USHW), which had been hired by the prospective employer to carry out the tests.  As part of its screening process, USHW required job applicants to complete a written health history questionnaire that included many intrusive medical questions. The Fair Employment and Housing Act (“FEHA”) makes it an unlawful employment practice for any employer “to make any medical or psychological inquiry of an applicant,” with limited exceptions. The plaintiffs, purporting to represent other similarly situated individuals, contended that USHW’s inquiries violated FEHA's prohibitions.

However, rather than merely suing the prospective employer, plaintiffs also sued USHW directly.

USHW argued that, as a mere agent of the employer, it could not be liable for violation of the FEHA as to the applicants. In so arguing, USHW cited prior Supreme Court rulings that had prohibited discrimination and retaliation claims against individual managers in FEHA lawsuits. The Court, distinguishing those rulings, held that “[i]f a business entity contracts with an employer to provide services that will affect that employer's employees, and if, in providing those services, the business-entity agent violates FEHA's antidiscrimination policies, causing injury to the employer's employees, it is consistent with sound public policy to treat the business entity as an employer of the injured employees for purposes of applying the FEHA.”

In making this ruling, however, the Supreme Court, while suggesting that there were limiting principles to this rule, declined to elucidate what those limitations were. Liability was possible “in appropriate circumstances,” it explained – and nothing more. Adding further ambiguity, the Court stated that “[w]e do not decide the significance, if any, of employer control over the act(s) of the agent that gave rise to the FEHA violation, and we also do not decide whether our conclusion extends to business-entity agents that have fewer than five employees.” Finally, the Supreme Court expressed “no view” “of the scope of a business entity agent's possible liability under the FEHA's aider and abettor provision.”

In short, we know that entity agents can be liable for FEHA violations, but not precisely when. For example, USHW evidently could be liable for imposing illegal medical questions on plaintiffs – but when else? Furthermore, what are we to do with the Court’s disinclination to decide “the significance, if any, of employer control over the act(s) of the agent that gave rise to the FEHA violation”?

In the three years since Raines, very little authority has developed to help delineate the reach of Raines.

One clue came from the Second Appellate District – albeit in an unpublished ruling. In Logan v. ADP, Inc., (No. B325259, Cal. Ct. App., Apr. 18, 2025, review denied July 23, 2025) plaintiffs alleged that ADP (the HR support company) advised the employer that it could terminate employees under circumstances, the plaintiffs alleged, that violated the FEHA. But, as the Court of Appeal held, such activity did not constitute “FEHA-regulated activity.” Plaintiffs’ claims thus failed because they could not “truthfully allege that ADP carried out (or had the authority to carry out) the acts on which their FEHA claims are premised—that is, plaintiffs do not suggest that they could allege ADP had the authority to engage in the interactive process with, reasonably accommodate, or hire and fire [the employer’s] employees, or that ADP terminated their employment.” Instead, the Court noted, plaintiffs appear to suggest that a third party carries out FEHA-regulated activities on behalf of an employer within the meaning of Raines if the third-party advises an employer on FEHA compliance, and the employer acts on that advice. But nothing in Raines so suggests. To the contrary, Raines explained that ‘a business-entity agent's obligation to comply with FEHA and its consequent liability for FEHA violations results from the entity's own engagement in FEHA-regulated activities on the employer's behalf.’” Id. In short, since advising an employer is not a FEHA-regulated activity (even where the advice relates to FEHA-related issues), and ADP was not alleged to have carried out any direct conduct that implicated FEHA, there can be no liability for the agent under Raines.

If Logan is a sign of how the Court of Appeal is likely to treat Raines, then we can expect the lower courts to take a narrower and more restrictive view of Raines.

Either way, companies that provide support for employers, in particular where such support intersects with FEHA-implicated rights of employees, should be mindful that their activities could put them on the firing line in FEHA litigation.

Such businesses should carefully watch the development of cases interpreting the reach of Raines.  Watch this space for any further developments.

If you wish to discuss the reach of Raines, or its applicability to specific facts, please contact the undersigned, or another Maynard Nexsen employment attorney.