June 17, 2021

Volume XI, Number 168

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Ninth Circuit Upholds Arbitration for Non-Signatory Defendant

California law is not typically seen as amiable to compelling employees to arbitrate their claims. However, in Franklin v. Community Regional Medical Center, ___ F.3d___(9th Cir. 2021), the Ninth Circuit panel upheld a motion to compel arbitration by a non-signatory to an arbitration agreement based on California law.

Isabelle Franklin was employed by a staffing agency and assigned to Community Regional Medical Center’s hospital (CRMC). Franklin signed a mediation and arbitration policy and agreement that required Franklin and the staffing agency to arbitrate “all disputes that may arise out of or be related to [Franklin’s] employment, including but not limited to the termination of [Franklin’s] employment and compensation.” Franklin also signed an assignment contract with the staffing agency when she was assigned to CRMC. The assignment contract set forth the terms of her assignment including her hourly wage, overtime rate, length of shifts, and business expense reimbursement. The assignment agreement also included an arbitration clause. CRMC and Franklin had no contracts between them.

Franklin worked at CRMC for two months and then brought a class and collective action against CRMC only, alleging various state and federal wage and hour violations, including that CRMC required Franklin to work during meal breaks and off-the-clock.

The district court granted CRMC’s motion to compel arbitration despite being a non-signatory to the contracts between Franklin and the staffing agency. The district court stated that Franklin’s allegations were “intimately founded in and intertwined with” her contracts and employment with the staffing agency. The district court held that, under California law, Franklin was equitably estopped from avoiding the arbitration provisions in her employment agreements with the staffing agency.

The Ninth Circuit panel affirmed the district court decision, holding that California law allows a non-signatory to invoke arbitration under the doctrine of equitable estoppel even when the signatory attempts to avoid arbitration by suing non-signatory defendants. The Ninth Circuit stated that the doctrine of equitable estoppel prevents a party from “playing fast and loose with its commitment to arbitrate.”

This case is instructive for employers who utilize staffing agencies and highlights the importance of understanding the agencies’ agreements with their employees. Moreover, staffing agencies and similar entities should review their contracts with employees to ensure their clients are encompassed within arbitration agreements they enter into with employees.

Jackson Lewis P.C. © 2021National Law Review, Volume XI, Number 158
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Yvonne Arvanitis Fossati, Jackson Lewis, employment litigation lawyer, sexual harassment attorney
Principal and Office Litigation Manager

Yvonne Arvanitis Fossati is a Principal and Litigation Manager in the Los Angeles, California, office of Jackson Lewis P.C. She has extensive experience in all facets of employment litigation and has tried numerous cases.

Ms. Fossati has represented employers and individual defendants in all types of employment litigation, including sexual harassment, discrimination on the basis of sex, race, age, religion, disability, sexual orientation, retaliation and wrongful termination. Ms. Fossati also has significant experience in the area of wage and...

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Principal

Hazel U. Poei is a Principal in the Los Angeles, California, office of Jackson Lewis P.C. Her practice is focused on single-plaintiff, multi-plaintiff, and class action employment litigation in state and federal courts.

Ms. Poei has also handled arbitration proceedings and matters before administrative agencies such as the Equal Employment Opportunity Commission, the California Department of Fair Employment and Housing, and the California Division of Labor Standards Enforcement. Ms. Poei has also prepared briefing to the...

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Scott P. Jang, Jackson Lewis, wrongful termination lawyer, unfair competition attorney
Associate

Scott P. Jang is an Associate in the San Francisco, California, office of Jackson Lewis P.C. He represents management in all areas of employment law litigation.

Mr. Jang’s practice includes defending management in matters involving claims for breach of contract, discrimination, harassment, retaliation, wrongful termination, and unfair competition. He represents clients in both class action and single plaintiff cases.

Mr. Jang is particularly well-versed in federal litigation. Prior to...

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