Seyfarth Synopsis: Based on the legal principle of res judicata, a prior class action settlement that released a staffing agency and its agents barred a subsequent class action against the staffing agency’s client.

The Facts

The Plaintiffs, Andrew and David Castillo, worked for GCA Services Group, Inc., a temporary staffing agency that places temporary employees with its clients. GCA placed the Castillos on a temporary assignment at Glenair, Inc. Although they worked under Glenair’s general oversight and direction, GCA hired, fired, and paid them, based on time records provided by Glenair (which Glenair reviewed for accuracy).

The Castillos, in 2013, sued Glenair (but not GCA), claiming—for themselves and a class of workers—unpaid minimum wages, unpaid overtime wages, meal and rest break violations, untimely termination wages, and inadequate wage statements. We will call this case “Castillo.”

Gomez Class Action Settlement Agreement

The year before Castillo was filed, Judith Gomez and Ernesto Briseno had sued GCA (but not Glenair) in connection with the work they had done for Glenair on behalf of GCA. This lawsuit, which we will call Gomez, alleged the same claims—on behalf of the same class—that were later brought in Castillo.

In 2014, while Castillo, which was solely against Glenair, was pending, the parties in Gomez entered into a settlement agreement. The Gomez agreement contained a broad release barring class members from asserting wage and hour claims, against GCA and its agents. The Castillos were members of the Gomez settlement class and did not opt out of the Gomez settlement.

Glenair’s Motion for Summary Judgment

Glenair, citing the Gomez class settlement agreement, moved for summary judgment in Castillo. Glenair argued that it qualified as an agent of GCA that was a released party under the Gomez settlement agreement. The Castillos opposed the motion on the basis that Glenair was not a named party in Gomez and did not contribute to the Gomez settlement. The trial court nonetheless granted summary judgment for Glenair.

The Court of Appeal’s Decision

On April 16, 2018, the Court of Appeal affirmed the summary judgment, holding that the Castillo case against Glenair was barred, both as a matter of res judicata and because Glenair was covered by the terms of the broad release contained in the Gomez settlement agreement. The Court of Appeal concluded that all three of the elements of res judicata were met: (1) the Gomez settlement was final and on the merits, (2) the causes of action in Castillo were the same as those at issue in Gomez, and (3) Glenair was in privity with GCA (a party in Gomez) with respect to the subject matter of Castillo. Glenair also was released as a party in Gomez, since it was an agent of GCA.

The Court of Appeal reasoned that GCA and Glenair were in privity because the subject matter of Castillo and Gomez were the same: both cases involve the same wage and hour claims arising from the same work performed by the same GCA employees (the Castillos) at GCA’s client company Glenair. In addition, by virtue of the settlement in Gomez, the Castillos were compensated for any errors made in the payment of their wages. Further, Glenair was an agent for GCA with respect to GCA’s payment of its employees, such as the Castillos, and thus was a released party under the Gomez settlement agreement.

What Castillo Means For Employers

The Castillo decision demonstrates that the settlement agreements entered into by temporary employment staffing agencies may have a downstream effect on their clients. Employers facing putative class actions brought by temporary employees would be wise to review any class settlement agreements entered by the plaintiff’s staffing agency to determine if any additional defenses exist.