Elijahjuan v. Superior Court: Court of Appeal Holds That Narrow Arbitration Clause In Independent Contractor Agreement Does Not Cover Wage and Hour Claims

In Elijahjuan v. Superior Court (Mike Campbell & Associates, Ltd) (10/17/12), the plaintiffs filed a putative class action against the defendant (Campbell) for wage and hour violations, alleging that it misclassified them as independent contractors. The trial court granted Campbell's motion to compel arbitration, the plaintiffs appealed, and the Court of Appeal reversed.

First, the Court noted that the trial court's order, which compelled arbitration of all but the Unfair Competition Law claims (which the court severed and stayed), was not appealable. Slip op. at 4. The death knell doctrine did not apply because the trial court did not dismiss the class claims. Ibid. However, the Court exercised its discretion to treat the appeal as a petition for writ of mandate. Slip op. at 5.

Next, the Court considered whether the plaintiffs' allegations fell within the relatively narrow arbitration agreement:

The crucial issue is whether the arbitration provision – which applies to any dispute that "arises with regard to [the Agreements'] application or interpretation" – includes the alleged misclassification of petitioners as independent contractors. We conclude that the current dispute falls outside the ambit of the arbitration provision. 

Petitioners' lawsuit does not concern the application or interpretation of the Agreements, but instead seeks to enforce rights arising under the Labor Code benefitting employees but not independent contractors. No allegation in the FAC is based on rights afforded petitioners under the terms of the Agreements. The parties' dispute therefore cannot be characterized as regarding the application or interpretation of the Agreements. 

Slip op. at 6, citing Narayan v. EGL, Inc. (9th Cir. 2010) 616 F.3d 895, 899 (discussed here) and Hoover v. American Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, review denied 9/12/12 (discussed here). 

The Court noted that its conclusion was supported by the fact that the arbitration agreement gave the arbitrator no power to analyze the plaintiffs' Labor Code claims. Slip. op. at 8-9.

The opinion is available here.