196 Litigating CA Wage & Hour Class and PAGA Actions (23rd Edition) Seyfarth Shaw LLP | www.seyfarth.com evincing hostility towards arbitration that the FAA was enacted to overcome. In short, AB 51 is preempted by the FAA because one of the FAA’s touchstones is to encourage arbitration, and AB 51 is contrary to this purpose. Not only does this decision reinforce the strong federal policy favoring arbitration, but it suggests that California will ultimately be required to respect the right of private enterprises to require employees to waive their right to go to court over most disputes arising out of employment. J. Enforcement of Arbitration Agreements By Non-Signatory Third Parties As more employers have implemented arbitration agreement programs for their employees, plaintiffs’ counsel have become more creative in pursuing representative employment claims. It is now not uncommon for employees to name as defendants companies who they were never employed by—particularly in the staffing agency context—as yet another tactic to circumvent arbitration agreements precluding class action claims. Recently, the Ninth Circuit held in Franklin v. Cmty. Reg’l Med. Ctr955 that the defendant hospital (represented by Seyfarth), a nonsignatory to the plaintiff’s arbitration agreement with the staffing company that employed her, could compel arbitration based on the concept of equitable estoppel because plaintiff’s claims against the hospital were intimately founded in and intertwined with her contracts with the staffing agency. In doing so the Ninth Circuit noted that the California Court of Appeals had also found that an employee's California Labor Code claims against the staffing agency's nonsignatory client were “intimately founded in and intertwined with” his employment contract with the staffing agency.956 957 K. Trial Court Proceedings Are Automatically Stayed Pending An Interlocutory Appeal Of An Order Denying A Motion To Compel Arbitration For years, California and federal courts were split as to whether to automatically stay trial court proceedings pending an interlocutory appeal of a denial of a motion to compel arbitration. Under California law, an interlocutory appeal of a denial order automatically stays trial court proceedings.958 However, the Ninth Circuit held to the contrary: that an appeal of a denial order does not automatically stay district court proceedings.959 That is no longer the case. 955 998 F.3d 867 (2021) 956 Garcia v. Pexco, LLC, 11 Cal.App.5th 782, 797 (2017) 957 However, see also Garcia v. Expert Staffing W., 73 Cal. App. 5th 408 (2021), review denied (Mar. 30, 2022) where a plaintiff who initially worked for Staffing Agency A and was placed at Company 1 with no arbitration agreement. During this time Staffing Agency A’s payroll services were provided by Staffing Agency B, Two years after her employment ended with Staffing Agency A, plaintiff was subsequently employed by Staffing Agency B and signed an arbitration agreement. Subsequently she filed a lawsuit against all three companies alleging wage and hour claims arising from her work with Staffing Agency A and Company 1. Staffing Agency B filed a motion to compel arbitration. The Court of Appeal affirmed the trial court’s denial of the motion to compel concluding that the arbitration clause between plaintiff and Staffing Agency B did not apply to disputes between the plaintiff and her Staffing Agency A and Company 1 based on the existence of a business relationship between the Staffing Agency B and Staffing Agency A and Company 1. 958 See Varian Med. Systems, Inc. v. Delfino, 35 Cal. 4th 180, 190 (2005) (holding that “trial court proceedings on the merits following an appeal from the denial of an anti-SLAPP motion are embraced in or affected by that appeal”). 959 See Britton v. Co-op Banking Group, 916 F.2d 1405, 1412 (1990), abrogated by Coinbase.
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