California Supreme Court holds employee can sue recruiting agency client even after settling same claims against agency

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July 1, 2022

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Decided on June 30, 2022

Grande v. Eisenhower Medical CenterS261247

Yesterday, the California Supreme Court ruled that an employee who brings a class action lawsuit against a recruiting agency and executes a settlement agreement releasing the agency and its agents can bring a second class action lawsuit against the agency’s client to recruitment on the basis of the same violations.

Background: Lynn Grande was assigned to a nursing position at Eisenhower Medical Center by FlexCare, LLC, a temporary help agency. Grande filed a class action lawsuit against FlexCare, alleging it was underpaying its employees. The parties reached a settlement and signed a release of claims.

Eight months after the court approved the settlement and issued its judgment, Grande filed another wage and hour class action lawsuit, this time against Eisenhower. Grande’s claims against Eisenhower were based on the same violations for which she sued FlexCare.

FlexCare decided to intervene in this follow-up case, arguing that Grande was barred from suing Eisenhower because she had settled her claims against FlexCare in the earlier case. The trial court and the Fourth District Court of Appeals disagreed. The Court of Appeals ruled that Grande was not barred from suing Eisenhower because she was neither a released party in the first case nor related to FlexCare. The court expressly objected to the Second District’s decision in Castillo vs. Glenair, Inc. (2018) 23 Cal.App.5th 262, 266, which held that a class of workers could not “sue a staffing firm, settle that suit, and then bring identical suits against the company where they had been placed to work.”

Publish: Can an employee bring an employment class action lawsuit against an employment agency, settle the case and release the agency and its agents from liability, and then bring a second class action lawsuit based on the same alleged violations against the client of the placement agency?

Court attire:

Yes, on the facts of this case. The settlement agreement releasing FlexCare did not name Eisenhower or otherwise suggest it was meant to include Eisenhower. FlexCare was also unrelated to Eisenhower, not least because Eisenhower would not have been bound by an unfavorable judgment in the first case against FlexCare. As a result, Grande was not prevented from asserting the same claims against Eisenhower in a second case.

Although the release in the settlement agreement between a nurse and her staffing agency does not include the hospital where she worked, “future litigants may specify that their releases extend to clients of the staffing agency – if that result is desired.

Chief Justice Cantil-Sakauye, writing for the Court

What this means:

  • The Court said its decision on the scope of the settlement agreement was “fact and case specific,” but also cast doubt on “the broader notion that a client is an ‘agent.’ of an employment agency. »
  • When drafting settlement agreements, employment agencies and other employers should consider specifically naming any relevant clients, or at least including “clients” among those released, as the Court’s opinion preserves the employers’ ability to “clarify that their releases extend to employment agency clients – if that result is desired.

The Court’s opinion is available here.

Gibson Dunn attorneys are available to answer any questions you may have regarding developments at the Supreme Court of California. Please feel free to contact the following Practice Leaders:

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