Arbitration Agreements & Staffing Company Workers: Can They Take You Anywhere You Want to Go?

1956 chevy bel air Arbitration agreements staffing agency

1956 Chevy Bel Air. The Ides of March’s Vehicle was a ‘55.

I’m your vehicle baby. I can take you anywhere you want to go.

That may be true for Jim Peterik, vocalist and frontman for The Ides of March, who issued this bold proclamation in the band’s 1970 single, “Vehicle.” (It worked. See more below.)

It’s not true for arbitration agreements, though. They can’t take you anywhere you want to go unless you draft them very carefully. A recent decision by the First Circuit Court of Appeals reminds us of this lesson, although the opinion disappointingly fails to quote the Ides of March.

In Hogan v. SPAR Group Inc., we have an independent contractor named Paradise Hogan (which seems like would have been a cool name for a rock band); a staffing company called SBS; and a retail services provider called SPAR.  SPAR contracted with the staffing company to use the services of its independent contractors, including Hogan.

The staffing company and the independent contractor had an arbitration agreement in which they agreed to arbitrate any disputes “between the Parties.”

The contractor filed a lawsuit against both the staffing company and SPAR, alleging that he was misclassified and should have been a joint employee of both the staffing company and SPAR, and that they both failed to comply with various Massachusetts wage laws.

The staffing company and SPAR filed a motion to compel Hogan to arbitrate these claims. The district court (and then the Court of Appeals) ruled that the arbitration agreement required Hogan to arbitrate his claims against the staffing company but not against SPAR.

Why? Because (1) the arbitration agreement was only between the staffing company and Hogan, and (2) the agreement required arbitration only for disputes “between the Parties.”  SPAR was a customer of the staffing company but was not a party to the arbitration agreement with the contractor.

Suggestions for Improving the Arbitration Agreement

The arbitration agreement worked for the staffing company, but it didn’t take SPAR anywhere it wanted to go. A better constructed vehicle would have been needed before the court could compel Hogan to arbitrate his dispute with SPAR.

First, the section in the arbitration agreement describing the types of disputes subject to arbitration could have been written more broadly. It could have been written to cover all disputes not only “between the Parties,” but also all disputes related to the services being provided and all disputes with any customer of the staffing company.

Second, the agreement could have included a section declaring that all staffing agency customers are “intended third party beneficiaries” who can enforce the agreement.

Those steps might still not have been enough, since SPAR was not a party to the arbitration agreement, but those steps would have given SPAR a much better argument that Hogan would need to arbitrate his claims against SPAR. The Court of Appeals focused on each of these deficiencies when denying SPAR’s motion to compel arbitration.

What to Remember

Companies using staffing agency workers often have arbitration agreements with their staffing agencies, and staffing agencies often have arbitration agreemenst with their workers; but none of that means the worker must arbitrate claims against the company that retains the staffing agency.

If you retain a staffing agency and want to be sure its workers must arbitrate any claims against your company, be sure the arbitration agreement is written broadly enough to cover such claims.

Peterik wrote the song about a girl named Karen. He had a crush on Karen and she often asked him for rides. Peterik was hoping to spark a relationship, but nothing came of it. He thought of himself as her vehicle and later wrote a song about it. After the song became a hit, Karen reached out to Peterik. They reconnected and, as of a 2016 Wall Street Journal article, had been married 43 years. In the end, he took her where he wanted to go.

But that’s music for you. A hit song really can take you anywhere you want to go.

If you’re careful and maybe a little bit lucky, a well-drafted arbitration agreement might also take you anywhere you want to go — at least from a legal perspective. It still probably won’t get you a date.

For more information on joint employment, gig economy issues, and other labor and employment developments to watch in 2019, join me in Chicago on Mar. 21 for the 2019 BakerHostetler Master Class on Labor Relations and Employment Law: Meeting Today’s Challenges. Advance registration is required. Please email me if you plan to attend, tlebowitz@bakerlaw.com. If you list my name in your RSVP, I will have your registration fee waived.

© 2019 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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