The U.S. Supreme Court denied a certiorari petition filed by a staffing agency, thereby letting stand a Ninth Circuit ruling that has adverse consequences for the staffing industry. The Ninth Circuit held that a staffing agency and client could not compel arbitration of a temporary workers’ claims, ruling that that the worker was exempt from arbitration under the Federal Arbitration Act. The decision potentially opens a floodgate of claims for which staffing agencies will not be able to compel arbitration.

The temporary employee worked as a forklift driver and sued both the client and staffing agency for alleged violations of California labor law. The agency and client moved to compel arbitration, but the plaintiff argued that he was exempt from arbitration under Section 1 of the FAA because he was a “transportation worker.” The FAA exempts certain classes of workers who are actively engaged in the transportation of goods across borders by way of the channels of foreign or interstate commerce. However, in an expansive reading of the law, the Ninth Circuit held the employee to be exempt even though he simply handled goods in the interstate supply chain but never crossed state lines with the goods or directly engaged with a channel of interstate transportation.

The high court’s refusal to take up the case means the Ninth Circuit’s decision stands. Therefore, staffing agencies placing temporary warehouse and other workers in California and other jurisdictions should discuss the implications of the case, and its effect on arbitration agreements, with their legal counsel.

To read the case, see Ortiz v. XPO Logistics, Randstad Inhouse Services LLC, et al., Case No. 23-55149 (Ninth Cir. 2023).