It is a rare occasion that the phrase “joint employer” has positive implications for any business. However, a panel sitting on the California Court of Appeals recently gave one party in a joint employer arrangement cause to celebrate when it held in Castillo v. Glenair, Inc., 22 Cal. App. 5th 348 (2018) ^[1], that the settlement of an earlier wage and hour class action filed against the party’s retained staffing company barred the instant suit alleging the same claims on behalf of the same class.

1. The Working Arrangement at Issue

The plaintiffs in Castillo worked for GCA Services Group, Inc. (“GCA”), a temporary staffing company that placed them and other workers on assignment with its client, Glenair, Inc. (“Glenair”). It was undisputed that although Glenair oversaw the plaintiffs’ work and reviewed and submitted their hours to GCA for payment, GCA retained control over the workers’ hiring, firing, and payment.

According to the plaintiffs’ class complaint, Glenair neither paid them all due wages, nor provided compliant meal and rest breaks during the course of their work.

2. The Preceding Class Settlement in Gomez

A separate, parallel class action entitled Gomez v. GCA Production Services, Inc. was filed a year before the Castillo lawsuit commenced. The plaintiffs in Gomez, like the plaintiffs in Castillo, alleged unpaid wages, meal and rest break violations, and other derivative claims strictly against GCA.

Gomez eventually settled on behalf of a broadly defined class that included the Castillo plaintiffs, neither of whom opted out. Notably, the Gomez settlement also included a broad release that resolved all disputes against GCA, as well as its “current and former officers, directors, agents, attorneys, successors, and/or assigns.”

3. The Dismissal of Castillo on Summary Judgment

Following the Gomez action’s class settlement, Glenair moved for summary judgment in Castillo. Glenair argued that the plaintiffs’ participation in the Gomez settlement disposed of their standing to pursue the same claims arising from the same work during the same period in the instant case.

The plaintiffs opposed Glenair’s motion on the basis that Glenair was not named in Gomez and did not contribute to the Gomez settlement. Notably, the plaintiffs raised a procedural defense, urging that even if res judicata did apply, that Glenair’s moving papers had failed to satisfy its burden on summary judgment by not squarely showing that it was in privity with a party in Gomez.

After successive supplemental briefings and hearings, the trial court granted summary judgment in favor of Glenair.

4. The Court of Appeal’s Opinion

In affirming the entry of summary judgment, the court held that the plaintiffs’ action was barred under the doctrine of res judicata and, alternatively, Glenair’s coverage under the language of the Gomez settlement agreement.

The Court of Appeal found that the three elements of res judicata were satisfied: (1) the Gomez settlement was final and on the merits; (2) the causes of action alleged in the instant action were identical to those asserted and resolved in Gomez; and (3) Glenair was in privity with GCA, a party to the prior proceeding in Gomez.

As the court explained, the existence of privity is not focused on a person’s relationship to a particular party, but rather deals with a person’s relationship to the subject matter of the litigation and whether it has an identical interest as to the issue at hand. With that principle in mind, the court found it apparent that Glenair and GCA shared the same relationship to the plaintiffs’ claims in the present action. Both Glenair and GCA were involved and responsible for paying the plaintiffs’ wages and any errors made in the payment of their wages, as confirmed by the plaintiffs’ own participation in the Gomez settlement against GCA. Thus, Glenair and GCA were at least in privity for the purposes of the instant action.

Those same set of facts, the court held, also confirmed that Glenair was an agent of GCA, thereby entitling Glenair to the protection of the release of claims in the Gomez settlement agreement. Glenair’s undisputed authorization to collect, review, and transmit employee time records to GCA, the court reasoned, supported only one valid conclusion: that Glenair was, in fact, authorized to represent, and did represent, GCA in GCA’s payment of wages to those employees placed at Glenair.

5. Takeaways

Employers who find themselves facing suit—whether individual or representative actions—brought by employees retained through a staffing company should closely watch for the staffing company’s settlement of any related class actions. As the Castillo opinion confirms, the terms of those settlements may have significant implications that could aid the employer’s defense.

_{[1] Opinion modified on denial of reh’g sub nom. ANDREW CASTILLO et al., Plaintiffs & Appellants, v. GLENAIR, INC., Defendant & Respondent., No. B278239, 2018 WL 2213972 (Cal. Ct. App. Apr. 16, 2018).}