Appeals Court in New Jersey Okays Hostile Work Environment Suit by Independent Contractor

An appeals court in New Jersey has revived a sexual and ethnic harassment lawsuit brought against the state by a social worker who counseled inmates in one of its correctional facilities even though she was employed by a private company. Because the New Jersey Department of Corrections ("DOC") exercised sufficient control over the plaintiff to give rise to an employment relationship, the court held she could pursue a hostile work environment claim against DOC under the New Jersey Law Against Discrimination ("LAD"). Hoag v. Brown, N.J. Super. Ct. App. Div., No. A-5537-05T2 (Nov. 27, 2007).

In late 2000, after DOC contracted with Correctional Medical Services, Inc. ("CMS") to privatize the medical services it must provide inmates, CMS hired plaintiff Angela Hoag and assigned her to Southern State Correctional Facility ("Southern State"). During her second week at Southern State, Ms. Hoag alleges, Mr. Sheppard, the correctional officer assigned to search each inmate before his or her counseling session, began mocking and insulting Ms. Hoag's ethnicity. Mr. Sheppard allegedly continued making inappropriate sexual gestures and became abusive, at one point hitting the plaintiff.

Ms. Hoag complained to several people about Mr. Sheppard's behavior, and, after taking short-term disability in March 2001, she reported Mr. Sheppard's "sexual and ethnically harassing and abusive treatment" in a formal complaint to the DOC. Mr. Sheppard was later suspended for thirty days. In the meantime, Ms. Hoag began treatment for psychological problems, including anxiety attacks and post-traumatic stress disorder ("PTSD"). She took a twelve-week medical leave, and, due to escalating depression, eventually left DOC.

Ms. Hoag brought a lawsuit against DOC claiming hostile work environment under the LAD and negligent retention and supervision under the New Jersey Tort Claims Act ("TCA") based on Mr. Sheppard's alleged abuse. The trial court dismissed both claims on summary judgment, ruling that Ms. Hoag did not have an employment relationship with DOC and did not meet the TCA's "pain and suffering" requirement.

The appeals court disagreed. "In the context of an individual like plaintiff, who provides professional or specialized services, 'we must look beyond the label attached to the [employer/employee] relationship' to determine whether an employer/employee relationship exists for purposes of bringing a hostile work environment claim," it said.

Judge Winkelstein, writing for the appeals court, looked toward "twelve factors" set forth in a 1998 decision analyzing "non-traditional employment relationships."

Although some of the twelve factors cut in different directions, explained Judge Winkelstein, the factors should be assessed qualitatively and not quantitatively.

Highlighting "three primary considerations"-employer control, economic dependence, and "functional integration of the employer's business with that of the person doing the work at issue"-Judge Winkelstein found that an employment relationship existed between Ms. Hoag and DOC. Critical to the court's decision were the following: DOC provides CMS with office space, facilities and equipment; DOC must approve all employees and subcontractors and has the "ultimate right" of dismissal; DOC holds personnel files for all CMS employees; and CMS employees must sign in and out at DOC. In addition, the court was persuaded by the fact that the plaintiff attended DOC orientation and training sessions and that Ms. Hoag's work was monitored by a DOC employee who had access to her computer and reviewed her reports and e-mails. In contrast, said Judge Winkelstein, the fact that CMS provided Ms. Hoag with salary and benefits was "not entitled to great weight."

Under the court's analysis, there was no dispute that Ms. Hoag was an independent contractor. However, according to the decision, "an employee may be considered an employee for one purpose and an independent contractor for another." Thus, Ms. Hoag's hostile environment claim was reinstated.

The appeals court also revived Ms. Hoag's negligent retention and supervision claims under the TCA. Unlike the trial court, which found that Ms. Hoag did not meet the TCA's pain and suffering requirement, the appeals court ruled that a "substantial, permanent psychological injury" such as PTSD meets the test. Whereas some courts have interpreted the TCA to require an "aggravated event," Judge Winkelstein reasoned that the court should look at the severity of the injury rather than its cause. Regardless, said Judge Winkelstein, the facts here "could support a conclusion that plaintiff's injuries were the result of aggravated circumstances as to qualify her for pain and suffering damages."

In light of Hoag, employers should be mindful that certain independent contractors may be successful in pursuing claims against a company even when they are technically employed by another entity.