In corporate groups, who employs whom may not be entirely clear. For example, an employee may have an employment agreement with a subsidiary but think of herself as being employed by the corporate parent. The identity of the employer may be critically important. For example, it may determine whether the employee is entitled to indemnification. See Court of Appeal Holds That Employee Indemnification Statute Does Not Reach “First Party” Lawsuits.
In Kaselitz v. hiSoft Technology Int’l, Ltd., 2013 U.S. Dist. LEXIS 21669 (N.D. Cal. Feb. 15, 2013), the plaintiff employees entered into employment agreements with hiSoft Envisage, a wholly-owned subsidiary of the defendant, hiSoft Technology. The employment agreements were with the “Company” which was defined as “hiSoft Envisage, its subsidiaries, affiliates, successors or assigns.” Because the employment agreements provided for arbitration, hiSoft Technology moved to dismiss and compel arbitration. U.S. District Court Judge Maxine M. Chesney, citing the definitions of “parent” and “affiliate” in Sections 150 and 175 of the California Corporations Code, concluded that hiSoft Technology could enforce the arbitration agreement.
The plaintiffs argued that the definitions found in the Corporations Code should not govern the an arbitration agreement. However, they offered no other plausible definition of “affiliates”.