Workers in Texas can sue companies that are not their employers.

The Texas Supreme Court has held that an employee may sue someone other than his or her employer under a state law prohibiting unlawful employment practices. (NME Hospitals, Inc. v. Rennels, No. 98-0487, 1999 WL 350405 (Tex. June 3, 1999).)

The plaintiff, Margaret Rennels, was a pathologist with Sierra Laboratory Associates, a company that contracted with NME Hospitals to perform the hospital's pathology work. Another agreement authorized NME to terminate the pathology agreement if Sierra transferred an ownership interest in it without NME's consent.

Sierra terminated Rennels, and she alleged the termination was motivated by sex discrimination.

She was eventually reinstated and informed she would be made a Sierra shareholder. Rennels was later told that she would not become a shareholder after she heard NME's chief executive officer say that he would not allow this to happen. She was then fired after refusing to sign a release of any sex discrimination claims against Sierra and NME.

Rennels sued NME for retaliatory discharge under the Texas Commission on Human Rights Act. The trial court granted the defendant summary judgment. An appellate court reversed, holding that Rennels could sue under the act even though she had no direct employment relationship with NME as long as she showed NME interfered with her employment opportunities with Sierra.

In a unanimous decision, the Texas Supreme Court affirmed the appellate court. Addressing an issue of first impression for the jurisdiction, the court noted that one purpose of the Texas law is to execute the policies of Title VII of the Civil Rights Act of 1964.

The court cited Sibley Memorial Hospital v. Wilson, which held that a plaintiff can sue under Title VII despite the absence of a direct employment relationship with the defendant if the plaintiff shows that the defendant, using its position of power and control, adversely and wrongfully interfered with the plaintiff's employment relationship with a third party. (488 F.2d 1338 (D.C. Cir. 1973).)

In the Texas case, the court noted that Rennels submitted evidence that NME Hospitals was in a position to exert control over Sierra's employment decisions. Specifically, the court said, the contracts between NME and Sierra enabled NME to influence whether Rennels became a Sierra shareholder, and she was told she would not be made a shareholder after direct interference from NME's chief executive officer. Therefore, the court held, the trial court's entry of summary judgment had been improper.

Rennels's lawyer, Dennis Richard of El Paso, Texas, said he thinks the court's holding strikes a note for fundamental fairness. "How can we allow a company subject to the act to do to the employees of another employer what they could not do to their own employees?" Richard said.