February 1, 2023


Earn Nicely, Spend Wisely

Just one down, a single to go: A joint employer nightmare | Constangy, Brooks, Smith & Prophete, LLP

3 min read

Can an worker provide a wage and hour course motion in opposition to an employer staffing company, settle, and then provide a second class motion against the staffing agency’s customer, premised on the exact same alleged violations?

The California Supreme Courtroom states of course, wherever the consumer enterprise was neither a celebration to the very first lawsuit nor a named released get together in the settlement.

Lawsuit No. 1

Staffing company FlexCare, LLC, used Plaintiff Lynn Grande as a nurse and assigned her to perform at Eisenhower Healthcare Heart for about one 7 days in 2012. Ms. Grande alleged that EMC and FlexCare violated specified wage and hour guidelines, and she sued FlexCare. Ms. Grande represented “all persons who . . . were being non-exempt nursing staff of [FlexCare] used in California.” 

The functions later settled, and FlexCare agreed to pay back no more than $750,000. The moment the settlement quantity was compensated, the courtroom “barred and enjoined” all class associates “from prosecuting” sure promises “against the Released Functions,” outlined as follows:

“FlexCare, LLC, . . . [several individuals], and all present and previous subsidiaries, affiliates, divisions, associated or affiliated companies, parent firms, franchisors, franchisees, shareholders, and attorneys, and their respective officers, administrators, workers, administrators, fiduciaries, trustees and brokers, and every of their earlier, current and foreseeable future officers, directors, shareholders, workforce, brokers, principals, heirs, representatives, accountants, auditors, consultants, insurers and reinsurers, and their counsel of document.

EMC was not a bash to the course motion lawsuit, nor was it explicitly named in the settlement agreement.

Lawsuit No. 2

The adhering to year, Ms. Grande sued EMC as an alleged joint employer with FlexCare, asserting the similar promises she had asserted towards the agency but defining the putative class as all nonexempt workers of the healthcare facility positioned by any staffing agency. FlexCare moved to intervene, and the two FlexCare and EMC argued that the judgment in the 1st lawsuit introduced EMC and barred Ms. Grande’s 2nd lawsuit.

The courts concur: EMC was not released

The trial courtroom dominated in favor of Ms. Grande on the pursuing grounds:

  • The settlement agreement did not explicitly refer to EMC in the checklist of launched events.
  • FlexCare was not “in privity” with EMC, thus preventing EMC from relying on the judgment in the initially lawsuit to preclude the next lawsuit.
  • There was no assist for spinoff legal responsibility to preclude Ms. Grande’s 2nd lawsuit.

The California Courtroom of Charm affirmed, and the make any difference went to the point out Supreme Courtroom. In affirming the Court docket of Attraction, the Supreme Court docket reported that FlexCare’s and EMC’s “divergent interests” intended that they were not “in privity,” which “requires the sharing of an id or group of desire, with suitable illustration of that fascination in the very first accommodate, and conditions such that the nonparty should fairly have predicted to be certain by the first match.”

In other words, the course action from EMC will proceed.

What now?

Companies in “joint employment” relationships must surely be conscious of Grande and do what they can to secure by themselves. But the circumstance is not hopeless.   

  • Grande may not utilize to everybody. Despite the fact that the Grande choice has important implications for joint businesses – and, especially, staffing organizations and their purchasers – it explicitly states that “our final decision on this challenge is actuality and circumstance particular,” suggesting that the Court’s holding will not necessarily utilize in all conditions.
  • There is an effortless fix, for joint companies who haven’t presently settled. In the launch language of their settlement agreements, employers ought to consider identifying as “released parties” all entities who may be viewed as joint companies, exactly where feasible and suitable, to be certain their settlement agreements go over and increase to all suitable and associated events.
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