Seattle, Wash. (May 23, 2024) - In a ruling favorable to employers, an appellate court in Washington issued an opinion holding that two healthcare facilities can compel an independent contractor working temporarily at their facilities to arbitrate her claims in Georgia, even though the parties seeking to compel arbitration are not signatories to the arbitration agreement. The decision is Norwood v. MultiCare Health System, Court of Appeals of the State of Washington, No. 57864-6-II.
The Case
A doctor signed a "Services Agreement" with a temporary staffing agency stating:
Any controversy or claim arising out of or relating to the interpretation, enforcement or breach of this Services Agreement or the relationship between the parties hereto shall be resolved by binding arbitration.
The doctor sued two Washington-based healthcare facilities
alleging that, after being placed with these facilities by the
staffing agency, she was terminated or forced to quit for reporting
safety violations. She also included claims of interference with
contractual relations.
The facilities moved to compel arbitration. Opposing the motion,
the doctor argued that the facilities were not signatories to the
arbitration agreement. The trial court granted the motion to
compel, reasoning:
but for that agreement, she would not be out here, would not have had any opportunity to be an independent contractor ... I am finding that the relationship between her and the clients, which are the defendants, are intertwined in that service agreement.
The Washington Court of Appeals affirmed the ruling.
The court concluded, first, that the language of the arbitration agreement did not limit arbitration to parties to the arbitration agreement because it applied to: "Any controversy or claim arising out of or relating to the interpretation, enforcement or breach of this Services Agreement ...." The court reasoned:
A claim "arising out of" or "relating to" the interpretation, enforcement, or breach of the Services Agreement does not necessarily involve only [the doctor and staffing agency].
The Court of Appeals also held that the "intertwined claims estoppel" doctrine applied. As the court explained:
Intertwined claims estoppel applies when the claims are "intimately founded in and intertwined with" the underlying agreement.
The court ruled that intertwined claims estoppel applied because:
- The doctor's relationship with the facilities "cannot be understood without reference to the Services Agreement. There would be no relationships but for [the staffing agency's] assignment of [the doctor] to those medical providers. [The doctor] cannot present her claims without explaining the role of the Services Agreement."
- The doctor's claim of interference with contractual relations required the doctor to explain the nature of the relationship between the doctor and the facilities which, in turn, required an explanation of the Services Agreement.
- The doctor had to prove that there was an employment relationship between the doctor and the facilities – but the Services Agreement stated that she was an independent contractor, and interpretation of that provision required interpretation of the Services Agreement.
Next, the court affirmed the lower court's holding that the provision in the Services Agreement requiring arbitration in Georgia was enforceable. The court construed this as a forum selection clause, and such clauses are generally enforceable.
Takeaways
Washington State employers should be able to cite to this decision to defend future efforts by employees to avoid arbitration agreements. Previously, Washington courts had held that non-signatories to arbitration agreements could be compelled to arbitrate, but they did so by utilizing a third-party-beneficiary analysis. That argument may not have been available to the facilities because there was no reference in the Services Agreements to any third-party beneficiaries, which is ordinarily a prerequisite to being a third-party beneficiary. The intertwined-estoppel analysis is much less commonly applied and it is anticipated that litigants will be better able to use the doctrine in future cases based on this holding.
Additionally, the Court of Appeals required that the Washington-based doctor arbitrate in Georgia. In so doing, the court relied upon a traditional forum-selection-clause analysis, which favors the choice of forum by the contracting parties. This is not how all Washington courts have viewed this issue. Others have addressed forum-selection clauses through the prism of substantive unconscionability, which favors employees because it places the onus on the employers to prove that the chosen forum is not too expensive or burdensome for the employee.
It remains to be seen whether this decision will come before the Washington Supreme Court for review. In the meantime, it is favorable to employers generally and in particular for out-of-state employers who would prefer to have arbitrations conducted in their chosen forums.
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