California Supreme Court Allows Employee to Sue Staffing Agency Client After Settling With Staffing Agency

Our Los Angeles employment lawyers have been following the case of Grande v. Eisenhower Medical Center, which involves a dispute by a nurse against both a staffing agency (which hired her) and the staffing agency’s client (a medical center where she worked). The interesting thing about this case is that while the nurse had settled an employment class action lawsuit against the staffing agency, she continued pursuing a case against the medical center. Los Angeles employment lawyer

The medical center argued that this was not allowed because the prior class action settlement freed the staffing agency “and its agents” from future liability. However, the California Supreme Court has just ruled that the nurse may continue with her second class action lawsuit against the staffing agency’s client.

That ruling is noteworthy because it does not allow companies to sidle away from responsibility for labor law violations just by using a staffing agency.

According to court records, the plaintiff was employed by a nurse staffing agency who arranged for her to work at a hospital in Riverside. Wage and hour law violations at the hospital were what ultimately led to litigation.

Nurses for the agency were instructed to use the hospital’s time and attendance system. The hospital, in turn, agreed in a contract to indemnify the hospital for some of the obligations relating to this staffing arrangement.

In the first lawsuit, plaintiff was party to a class action filed by a different staffing agency employee. The allegations were wage and hour violations that included a broad group of employees at the agency – and not just the nurses who were assigned to work at this particular hospital. The hospital itself was not named a defendant in that case, nor did the hospital intervene in it. Ultimately, the parties reached a settlement, with the staffing agency agreeing to pay $750,000 for the entire class. Payment was contingent on the court’s barring and enjoining all class members from pursuing future claims against released parties – which were defined to include the staffing agency’s “agents,” but the hospital wasn’t named specifically.

After that settlement became final, this plaintiff nurse filed a class action employment lawsuit against the hospital, alleging numerous wage and hour violations while she worked there. The scope of this action was different than the first lawsuit. It involved nonexempt employees of the hospital who were placed by several staffing agencies – not just those for whom this nurse worked.

In response, the staffing agency filed a complaint in intervention, arguing the hospital was entitled to the benefit of the earlier release, with the first judgment precluding this claim. The trial court ruled in favor of the plaintiff, finding that the language in the release clause couldn’t legally be construed to extend to any claims the plaintiff might have against the hospital in this matter. This was not a joint employer situation, and in any case, both companies had a duty to comply with state labor laws.

Upon review, the appellate court affirmed the trial court’s judgement against the staffing agency and denying the hospital’s petition for writ of mandate, as the hospital was not in privity (relating to a legal relationship between two entities) with the staffing agency. The court also find no error with the trial court’s conclusion that the settlement with the staffing agency didn’t release claims against the hospital.

The state supreme court then granted review, and concluded neither the hospital nor the staffing agency provided adequate evidence that the appellate court erred.

The nurse’s California wage and hour lawsuit against the hospital may now proceed.

Contact the employment attorneys at Nassiri Law Group, practicing in Newport Beach, Riverside and Los Angeles. Call 714-937-2020.

Additional Resources:

Grande v. Eisenhower Medical Center, June 30, 2022, California Supreme Court

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