In Vasquez v. San Miguel Produce, Inc. et al. (B287696, 2019 Cal.App. LEXIS 79, publication order 1/3/19), the California Court of Appeal, Second Appellate District held that a non-signatory to an arbitration agreement had the power to compel arbitration under California Code of Civil Procedure section 1281.2 since its workers had a labor law claim against it that was deeply rooted in its employment relationship with a signatory to the agreement.
Plaintiffs Antonia Vasquez and Cecilia Zacarias (“Plaintiffs”) were hired by Employer’s Depot, Inc. (“EDI”), a staffing agency to work on assignment. Plaintiffs and EDI agreed in writing to arbitrate “all disputes that may arise within the employment context.” EDI assigned Plaintiffs to pack produce for San Miguel Produce, Inc. (“SMP”) for one to two months. Plaintiffs sued SMP for labor law violations but failed to name EDI as a party to the Complaint even though it indicated Plaintiffs “were employed jointly by [SMP] and a temporary services employer [EDI].” SMP filed a cross-complaint against EDI claiming them as an indispensable party and blaming them for Plaintiffs’ alleged damages. SMP and EDI jointly moved to compel arbitration pursuant to section 1281.2. The trial court denied the motion and agreed with Plaintiffs that SMP “cannot compel arbitration because it is not a signatory to the [arbitration] agreement.”
California’s Second Appellate District ultimately ruled that arbitration is mandated since SMP and EDI were “co-employers with an identity of interests and mutual responsibility for complying with state law governing employers.” It found that Plaintiffs had agreed to arbitrate “all disputes” arising from their employment, thus it was inconsequential that Plaintiff failed to name EDI as a defendant.
The Court reasoned that Plaintiff could not seek an end-run around the arbitration agreement by “suing non-signatory defendants for claims that are ‘based on the same facts and are inherently inseparable’ from arbitrable claims against signatory defendants.” Furthermore, the court concluded that SMP and EDI, as co-employers of Plaintiffs, had an “agency relationship” wherein SMP acted as EDI’s agent by “collecting and providing employee records so that [Plaintiffs] could be paid.” Therefore, SMP, as EDI’s agent, could compel Plaintiffs to arbitration since the entire suit arose from Plaintiffs initial employment with EDI.
The decision in Vasquez along with the recent holding in Cohen v. TNP 2008 Participating Notes Program, et al. (B266702, 2019 Cal.App. LEXIS 76, publication order 1/31/19), suggests California courts are taking an increasingly broad view of arbitration agreements, especially as it relates to their impact and enforceability against non-signatories that have a modest corporate or business agency relationship to a signatory.
