California: Settlement Agreements with Staffing Agencies Don’t Necessarily Cover Staffing Clients

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February 6, 2020

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In Grande v. Eisenhower Medical Ctr., the California Court of Appeal stated that an employee’s settlement of a wage and hour claim with a staffing agency does not prevent the employee from later suing the staffing agency’s client on the same wage and hour claims, where the settlement agreement does not expressly release the staffing agency’s clients.

There, a settlement agreement with the staffing agency generally released the staffing agency’s subsidiaries, affiliates, divisions, parent companies, etc., but did not specifically name or reference the staffing agency’s clients. Then, the staffing employee joined a class action suing the staffing client for the same wage and hour claims. Because of the omission in the original settlement agreement, the court allowed the second case to proceed, even though both the staffing agency and staffing client were jointly and severally liable, were joint employers, and there was contractual indemnity. Specifically, the agreement did not include language identifying the staffing agency’s “clients, joint employers, joint obligors, or other similar language” in the list of the released parties.

This case is directly conflicts with a 2018 California Court of Appeal ruling in Castillo v. Glenair, Inc., which likely means that the California Supreme Court may have to address this split in authority.

Action Items

  1. Have indemnity provisions in staffing contracts reviewed by legal counsel for consistency with this ruling.
  2. Ensure that staffing agency settlement agreements contain appropriate language to cover staffing clients.
  3. Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

© 2020 ManagEase

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