414 | 2023 Cal-Peculiarities ©2023 Seyfarth Shaw LLP www.seyfarth.com defendant. And a third exception applies when the arbitration agreement identifies the nonsignatory defendant as a third-party beneficiary of the agreement. The Court of Appeal, in Garcia v. Pexco, LLC, addressed a case involving the first two exceptions. Narciso Garcia, who worked for Real Time Staffing Services, sued Real Time for Labor Code violations and also sued Pexco, the firm where Real Time had assigned Garcia to work. Although Garcia and Real Time had an arbitration agreement, which waived class claims, there was no arbitration agreement between Garcia and Pexco. Pexco nonetheless successfully compelled individual arbitration of Garcia’s Labor Code claims against Pexco. The Court of Appeal reasoned that “Garcia’s claims against Pexco are rooted in his employment relationship with Real Time, and the governing arbitration agreement expressly includes statutory wage and hour claims.”23 The Court of Appeal concluded: “Garcia agreed to arbitrate his wage and hour claims against his employer, and Garcia alleges Pexco and Real Time were his joint employers. Because the arbitration agreement controls Garcia’s employment, he is equitably estopped from refusing to arbitrate his claims with Pexco.”24 The Court of Appeal independently relied on the “agency” exception to the rule that only signatory parties can invoke an arbitration agreement. Pexco could invoke that exception because Garcia had alleged that each defendant was the agent of the other and because Garcia had alleged that “the two defendants were joint employers fulfilling the same role.”25 In 2019, the Court of Appeal addressed another Labor Code lawsuit by an employee who had an arbitration agreement with his staffing agency employer. The employee chose to sue only the worksite employer where he had worked. The worksite employer cross-complained against the staffing agency, and both companies moved to compel arbitration. The employee distinguished Garcia v. Pexco, LLC by arguing that his staffing agency could not compel arbitration because he had not sued the staffing agency, and that the worksite employer could not compel arbitration because the worksite employer had not signed the arbitration agreement. The Court of Appeal disagreed: the plaintiff’s decision not to sue the staffing agency presented “a distinction without a difference,” because the staffing agency (being a cross-defendant) was a party to the litigation, and because “this entire dispute arose” from the employee’s employment with the staffing agency.26 In 2021, the Court of Appeal again addressed an arbitration agreement between an employee and his staffing agency employer, and held that California law allows a non-signatory to invoke arbitration under the doctrine of equitable estoppel even when the signatory attempts to avoid arbitration by suing non-signatory defendants. This case is instructive for staffing agencies and similar entities who should review their contracts with employees to ensure that their clients are encompassed within arbitration agreements the staffing agencies enter into with their employees.27 21.9 Employers Doing Business Within Federal Enclaves Not all land inside California’s borders is actually within the legal jurisdiction of California. Rather, some areas are federal enclaves—territory California has ceded to the federal government, with the result that federal law largely applies. Some California employers operating within these enclaves are free of many peculiar California employment laws, and need only follow federal employment law.28 As an example, both Yosemite National Park (in 1920) and San Francisco’s Presidio (in 1987) became federal enclaves well before California created most of its peculiar employment law. Employers that operate within enclaves such as these may be shielded from many of the laws that afflict the common run of California employers.
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