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California Supreme Court Gives Employee Two Bites Of The Class Action Apple – Employee Benefits & Compensation



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On June 30, 2022, the Supreme Court of California issued a
decision in Grande v. Eisenhower Medical Center,
No. S261247, that could have a far-reaching impact on the
relationships between staffing companies and their clients.

Background

FlexCare, a staffing agency, assigned Lynn Grande to work as a
nurse at Eisenhower Medical Center for approximately one week.
FlexCare and Eisenhower Medical Center were parties to a written
contract that provided that FlexCare “‘retain[ed] …
exclusive and total legal responsibility as the employer of
Staff,’ including ‘the obligation to ensure full compliance
with and satisfaction of’ wage and hour requirements.” The
contract also provided that FlexCare would indemnify Eisenhower
Medical Center. Grande brought a class action alleging violations
of the California Labor Code against only FlexCare based solely on
her work assignment at Eisenhower Medical Center. Grande claimed,
among other things, that FlexCare had failed to provide the
putative class with compliant meal periods and rest breaks and
failed to pay overtime wages. Eisenhower Medical Center was not
named as a defendant in this first action.

FlexCare settled with the class. Grande executed a release of
claims against FlexCare and the trial court entered judgment
against FlexCare. Following final approval of the class settlement
with FlexCare, Grande filed a second class action against
Eisenhower Medical Center only. The action against Eisenhower
Medical Center contained the same claims as Grande’s lawsuit
against FlexCare.

FlexCare intervened in the action, arguing that Grande was
precluded from bringing a separate lawsuit against Eisenhower
Medical Center because she had settled her claims against the
hospital in the prior class action. The trial court ruled that
Eisenhower Medical Center was not a released party under the
settlement agreement and that res judicata did not bar the action
because Eisenhower Medical Center was neither a party to the prior
litigation nor in privity with the staffing agency. The court of
appeal agreed with the trial court.

The California Supreme Court’s Decision

The issue before the California Supreme Court was whether
“a class of workers [may] bring a wage and hour class action
against a staffing agency, settle that lawsuit with a stipulated
judgment that releases all of the staffing agency’s agents, and
then bring a second class action premised on the same alleged wage
and hour violations against the staffing agency’s
client.”

The California Supreme Court held that because Eisenhower
Medical Center was not named as a released party in the FlexCare
settlement with Grande, Eisenhower Medical Center could not use the
judgment against FlexCare as a shield (res judicata) against
Grande’s subsequent claims. The court held that FlexCare and
Eisenhower Medical Center did not have “‘an identity or
community of interest'” in the first lawsuit and that
Eisenhower Medical Center and FlexCare could not rely on the
indemnification provision in their contract or the agency
relationship between them.

Key Takeaways

While the court expressly stated that the Grande
decision was “fact- and case-specific,” the
plaintiffs’ bar will likely seek to adapt the logic and
reasoning of the decision to current and future litigation
involving staffing companies and/or their clients.

To minimize the risk of a similar result in class and California
Private Attorneys General Act (PAGA) actions, employers may want to
ensure that contracts between staffing companies and their clients
contain indemnity and other provisions that expressly detail the
roles and responsibilities of each party to the agreement in the
event that a current or former employee of the staffing company
initiates a class and/or PAGA action. Employers may also want to
review the release language in settlement agreements in these
actions to ensure that the release covers, if appropriate, both the
staffing company and the client.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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