In a favorable ruling for the staffing industry, a New York federal district court ruled that a temporary employee who brought claims against both a staffing agency and its client was compelled to arbitrate those claims against the client, notwithstanding that the staffing agency and its client had a separate agreement stating that neither party had authority to bind or hold itself out as an agent of the other.
During onboarding with the agency, the employee signed a mandatory arbitration agreement requiring arbitration of disputes between herself and the staffing agency. Notably, the arbitration agreement also included within its scope any claims the employee had against staffing agency clients. Notwithstanding, the staffing agency and the client to which the employee was assigned to entered into a separate contract with each other stating “neither [the staffing agency nor its client] shall have any authority to represent or bind the other and that neither party shall hold itself out or have any authority as an agent of the other for any purpose whatsoever.”
Upon termination, the employee filed suit against the staffing agency and its client for unpaid wages. The staffing agency and client both filed motions to compel arbitration. The employee conceded she was bound to arbitrate her dispute against the agency, but argued the client could not avail itself of mandatory arbitration due to the separate contract it had signed with the staffing agency disclaiming any agency relationship between the parties.
The court granted the client’s motion to compel arbitration, noting that the disclaimer of a “general agency relationship” between the staffing agency and client did not prevent the client from benefitting from the staffing agency’s agreements with its employees. Further, the court reasoned that the client might avoid mandatory arbitration if it had itself wanted to litigate the matter, but that the employee could not force the client into litigation.
To read the case, see Jia Deng v. Frequency Electronics Inc., 2022 WL 16923999 (E.D.N.Y. 2022).
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