Sakkab v. Luxottica: Ninth Circuit Holds that Federal Arbitration Act Does Not Preempt Iskanian Holding that PAGA Representative Action Waivers Are Unenforceable

In Sakkab v. Luxottica Retail North America, Inc. (9th Cir. 9/28/15) ___ F.3d ___, the Ninth Circuit has held that the Federal Arbitration Act (FAA) does not preempt the holding of Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal. 4th 348 (2014) that agreements to waive representative claims under the Labor Code Private Attorneys General Act of 2004 (PAGA) are not enforceable.

Plaintiff Shukri Sakkab filed a class and PAGA representative action against Luxottica, accusing it of misclassifying supervisors in its Lenscrafters stores as exempt employees. The district court granted Luxottica's motion to compel arbitration of all claims and dismissed Sakkab's complaint. Sakkab appealed, arguing that the waiver of his PAGA claims was not enforceable. The Ninth Circuit reversed, holding as follows:

The FAA provides that an agreement to arbitrate "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." The FAA preempts state law "to the extent that it 'stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.'" However, under its "savings clause," the FAA does not preempt "generally applicable contract defenses, such as fraud, duress, or unconscionability."

The FAA does not preempt Iskanian, which held that that pre-dispute agreements to waive PAGA claims are unenforceable. First, the Iskanian rule is a "generally applicable contract defense" that bars any waiver of PAGA claims, "regardless of whether the waiver appears in an arbitration agreement or a non-arbitration agreement."

Second, the rule does not conflict with the FAA's purposes: overcoming judicial hostility toward arbitration, and ensuring enforcement of the terms of arbitration agreements. 

Iskanian does not evidence judicial hostility toward arbitration. It does not prohibit arbitration of PAGA claims. "It provides only that representative PAGA claims may not be waived outright." 

Iskanian does not conflict with the FAA's goal of ensuring enforcement of the terms of arbitration agreements. In AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 321, the Supreme Court considered California's Discover Bank rule, which invalidated agreements to waive class claims in certain consumer cases. Concepcion held that the alternative to such a waiver, class arbitration, would sacrifice the principal advantages of arbitration: informality, speed, and efficiency. The Court thus held that the Discover Bank rule interfered with the parties' selection of the arbitral forum.

In contrast, because class actions and representative PAGA actions differ fundamentally, the Iskanian rule prohibiting waiver of representative PAGA claims "does not diminish parties’ freedom to select informal arbitration procedures."

Because a PAGA action is a statutory action for penalties brought as a proxy for the state, rather than a procedure for resolving the claims of other employees, there is no need to protect absent employees’ due process rights in PAGA arbitrations.... Because representative PAGA claims do not require any special procedures, prohibiting waiver of such claims does not diminish parties’ freedom to select the arbitration procedures that best suit their needs. Nothing prevents parties from agreeing to use informal procedures to arbitrate representative PAGA claims.

Finally, the Court's conclusion that the FAA does not preempt the Iskanian rule is bolstered by the fact that PAGA is part of California's legislative scheme for enforcing its labor laws, and such legislation falls within California's police powers. A PAGA action is a form of qui tam action, and the FAA was not intended to preclude states from authorizing qui tam actions. 

Given the Court's holding that the PAGA waiver is invalid, the Court remanded to the district court to determine whether the PAGA claims should be arbitrated or litigated in court. 

The opinion is available here.

Alcantar v. Hobart Service: Ninth Circuit Addresses Claims that Employer Must Pay Service Technicians for Time Spent Commuting in Company Vehicles

Alcantar v. Hobart Service, ___ F.3d ___ (9th Cir. 9/3/15), discusses class certification under Federal Rule of Civil Procedure (FRCP) section 23, issues of compensable commute time, and the notice requirement of the Labor Code Private Attorneys general Act (PAGA). The opinion gives a good summary of the facts, so let's start there:

ITW, [defendant] Hobart’s parent company, designs and manufactures commercial food equipment. Hobart provides after-sale maintenance and repair services to ITW’s customers. [Plaintiff] Alcantar works for Hobart as a service technician. 

Alcantar and other service technicians provide most services on-site. They drive to and from customer locations in vehicles Hobart provides, carrying the tools and replacement parts necessary to make repairs. Although they spend most of their time at customer locations, each technician is assigned to one of Hobart’s thirteen California branch offices.  

As hourly employees, the technicians are compensated for the time they spend fixing equipment and the time they spend driving to and from different assignments. If they commute in the service vehicles, they are also compensated for the time spent driving from their homes to their first assignments and from their last assignments back home, but only to the extent it falls outside their "normal commute" [the time employees normally spend commuting from their homes to their assigned branch offices].

Alcantar sued, alleging that employees commuting in Hobart vehicles were subject to Hobart's control and should be paid overtime compensation for all commute time. Alcantar also alleged that Hobart failed to provide the required meal and rest periods.

The district court denied Alcantar's motion for class certification of the overtime claim. It held that Alcantar had not shown that Hobart had a uniform policy requiring technicians to commute in its vehicles and that this precluded a finding of commonality under FRCP 23(a)(2). 

The district court also denied certification of the meal and rest period claims, holding that individual questions as to why employees missed their meal and rest periods would predominate, and that the plaintiff could not meet the predominance requirement of FRCP 23(b)(3).

On a separate motion for summary judgment, the court held that Hobart did not owe the plaintiff for the commute time, but held that Alcantar had raised triable issues of fact as to the meal and rest period claims.

On a second motion for summary judgment, the court held that Alcantar had not complied with PAGA's notice requirement.

The Ninth Circuit affirmed in part and reversed in part, holding as follows:

The district court erred in denying certification of the overtime claim. First, "there is a question of fact as to whether Hobart requires technicians to use its vehicles for their commute." Second, Alcantar raised a common issue as to whether Hobart exercised control over its employees while driving company vehicles, such that their commute time should be compensated. Third, the district court erred in considering the merits of this common question. Whether the plaintiff would prevail on the merits or not does not impact the commonality analysis under FRCP 23(a)(2).

The district court did not err in denying certification of the meal and rest period claims. Common questions did not predominate under FRCP 23(b)(3). Instead, individual questions as to why employees missed their meal and rest periods would predominate.

The district court erred in granting summary judgment for Hobart on the commuting time claim. Although Hobart argued that technicians could choose not to use Hobart's vehicles, Alcantar argued that the choice was illusory because the branch offices did not have secured parking available for the vehicles, and the technicians were responsible for the tools and parts inside the vehicles. Alcantar thus raised a question of fact as to whether Hobart required its technicians to use its vehicles for their commute.

The district court did not err in granting summary judgment for Hobart on Alcantar's PAGA claims. Alcantar's notice to the Labor and Workforce Development Agency contained only a series of legal conclusions, rather than the facts and theories supporting the claim. 

Plaintiff’s letter—a string of legal conclusions with no factual allegations or theories of liability to support them—is insufficient to allow the Labor and Workforce Development Agency to intelligently assess the seriousness of the alleged violations. Neither does it provide sufficient information to permit the employer to determine what policies or practices are being complained of so as to know whether to fold or fight. 

The opinion is available here. 

Barker v. Fox & Associates: In Defamation Action, Court Reverses Order Denying Defendants' Anti-SLAPP Motion, Holding that Plaintiff Failed to Show Reasonable Probability of Success on the Merits

In Barker v. Fox & Associates (9/10/15) --- Cal.App.4th ---, the plaintiff worked as a caregiver for an elderly woman, first as a volunteer, and then as a paid employee. His employer stated in an email to a number of people that he had failed to follow instructions and placed him on probation. The plaintiff quit and filed suit for defamation, intentional infliction of emotional distress, and negligent infliction of emotional distress. The defendants filed an anti-SLAPP motion (Cal. Code Civ. Proc. section 425.16), which the trial court denied. The defendants appealed, and the Court of Appeal reversed, holding as follows:

To prevail on an anti-SLAPP motion, the moving party first must show that the cause of action arises from protected activity, i.e., "an act in furtherance of the right of free speech or petition." If the moving party makes this prima facie showing, the opposing party must show that it has a reasonable probability of success on the merits.

The defendants argued on appeal that the communications at issue were protected, and the plaintiff did not contest the point. The Court considered the matter resolved in favor of the defendants.

Turning its attention to the second prong of the test, the Court held that the plaintiff failed to show a reasonable probability of success on the merits. The allegedly defamatory statements did not constitute libel or slander per se. They were not defamatory on their face -- without the necessity of explanatory matter -- because they did not "suggest a lack of honesty, incompetence, or any reprehensible trait" on the plaintiff's part.

Because the alleged statements were not defamatory on their face, the plaintiff would have to prove actual damages in order to prevail. He failed to do so.

In addition, the allegedly defamatory statements were subject to the "common interest" privilege. The privilege extends to statements made:

without malice, to a person interested therein, (1) by one who is also interested, or (2) by one who stands in such a relation to the person interested as to afford a reasonable ground for supposing the motive for the communication to be innocent, or (3) who is requested by the person interested to give the information. 

The plaintiff failed to show malice in that he failed to show that the statements were motivated by hatred or ill will toward him or that the defendant lacked grounds to believe that the statements were true.

The plaintiff's intentional infliction of emotional distress claim failed because he failed to show that the conduct at issue was "so extreme as to exceed all bounds of that usually tolerated in a civilized community" or "beyond mere insults, indignities, threats, hurt feelings or bad manners that a reasonable person is expected to endure." Further, the plaintiff failed to show that the conduct was "intended to inflict injury or engaged in with the realization that injury will result" or that he suffered severe emotional distress.

The plaintiff's negligent infliction of emotional distress claim failed because negligent infliction of emotional distress does not exist separate from the tort of negligence.

The opinion is available here.

Wabakken v. California Department of Corrections & Rehabilitation: State Personnel Board's Findings Do Not Bar Relitigation of Whistleblower Claims in Court

Just a quick word on Wabakken v. California Department of Corrections & Rehabilitation (9th Cir. 9/14/15). In Wabakken, the plaintiff was terminated after receiving three warnings for misconduct. He appealed the three adverse actions to the California State Personnel Board, which found that some of the accusations of misconduct were justified but overturned the termination decision. Wabakken then sued in district court for violations of 29 U.S.C. section 1983, California Government Code § 8547 ("California Whistleblower Protection Act") and intentional infliction of emotional distress. The district court granted the defendants’ motion for summary judgment, holding that the State Personnel Board findings collaterally estopped Wabakken from relitigating the whistleblower retaliation issue. The Ninth Circuit reversed, holding as follows:

Under State Board of Chiropractic Examiners v. Superior Court, 45 Cal. 4th 963 (2009), "the State Personnel Board’s decision does not have preclusive effect under theories of res judicata and collateral estoppel and thus does not prevent Wabakken from litigating his whistleblower retaliation damages claim in the district court."

The California Supreme Court held that § 8547.8(c) “means what it says: An employee complaining of whistleblower retaliation may bring an action for damages in superior court, but only after the employee files a complaint with the State Personnel Board and the board ‘has issued, or failed to issue, findings.’” Id.(quoting § 8547.8(c)) (emphasis omitted). Thus, once the State Personnel Board has issued findings, or failed to do so, “the employee may proceed with a damages action in superior court regardless of whether the [State Personnel Board’s] findings are favorable or unfavorable to the employee.”

The opinion is available here.

Park v. Board of Trustees: On Anti-SLAPP Motion in Discrimination Action, University's Decision to Deny Tenure Arose from Protected Communicative Activity; Court Remands for Determination of Plaintiff's Probability of Success on the Merits

Park v. Board of Trustees of the California State University (8/27/15) --- Cal.App.4th ---, is one of those all-too-rare examples of a clearly written appellate opinion. It begins: 

Plaintiff Sungho Park sued his former employer, defendant Board of Trustees of the California State University (CSU), alleging that CSU discriminated against him based on his national origin when it denied his application for a tenured faculty position and consequently terminated him. Park’s complaint sought damages and an injunction awarding him a tenured position. CSU moved to strike the complaint under Code of Civil Procedure section 425.16, the anti-SLAPP statute. The trial court denied the motion, concluding that Park’s claims did not arise from CSU’s communicative conduct related to the tenure review process, but rather from its allegedly discriminatory denial of tenure. Under the circumstances presented here, we conclude the gravamen of the complaint arises from protected activity and therefore reverse and remand with directions to the trial court to determine whether Park demonstrated a reasonable probability of prevailing on the merits of his claims.

The Court explained:

To prevail on an anti-SLAPP motion, the moving party first must show that the cause of action arises from protected activity, i.e., "an act in furtherance of the right of free speech or petition." If the moving party makes this prima facie showing, the opposing party must show that it has a reasonable probability of success on the merits.

CSU made a prima facie showing that its retention, tenure or promotion (RTP) policies qualified as protected activity in that they were "official proceeding authorized by law," and "the reviews and evaluations given to Park during the RTP process are therefore covered as statements or writings 'made in connection with an issue under consideration or review' in the RTP proceedings."

CSU also showed that Park's complaint arose from CSU's protected activity. The Court rejected Park's contention that his causes of action were based on “CSU’s conduct in denying Dr. Park’s tenure based on national origin,” rather then any communicative conduct by CSU. The gravamen of Park's complaint was CSU's refusal to grant him tenure, and was "entirely based on the evaluations of his performance and competency during the RTP proceedings."

Because the trial court found that CSU did not make the required prima facie showing, it did not determine whether Park had shown a reasonable probability of success on the merits. The Court remanded the case to the trial court to determine this issue.

The opinion is available here. 

Balestrieri v. Menlo Park Fire: Time Moving Gear to and from Temporary Assignments Is Not Compensable under the FLSA; Compensation for "Annual Leave Buyback" Need Not Be Included in Employees' Regular Rate of Pay for Overtime Purposes

Just a quick word on Balestrieri v. Menlo Park Fire Protection District, ___ F.3d ___ (9th Cir. 9/4/15), which includes two points of interest.

First, applying Integrity Staffing Solutions, Inc. v. Busk, ___U.S. ___, 135 S.Ct. 513 (12/9/14) (discussed here) the Court held that firefighters are not entitled to compensation for time spent moving their gear to and from temporary work assignments at fire stations other than their home stations. Under the Fair Labor Standards Act (FLSA), firefighters are "engaged in the prevention, control, and extinguishment of fires or response to emergency situations where life, property, or the environment is at risk." Time spent moving their gear from their permanent assignments to temporary assignments was not "integral and indispensable" to these principal activities and therefore was "preliminary" or "postliminary" under the FLSA, as amended by the Portal-to-Portal Act, and such "preliminary" and "postliminary" time is not compensable.

Second, the Court held that the District need not include amounts paid for "annual leave buyback" within its calculation of the employees' regular rates of pay for purposes of determining their overtime rates of pay. This is important because overtime compensation is 1 1/2 the regular rate of pay, so determining the regular rate of pay is critical to determining whether an employer is paying the proper overtime rate. I will not delve into the details of this part of the decision, but note it so that anyone interested can find the case.

The opinion is available here.

Universal Protection Service v. Superior Court (Parnow): Incorporation of AAA Rules into Arbitration Agreement Gives Arbitrator Power to Determine Whether Agreement Authorizes Class Arbitration

Universal Protection Service, LP v. Superior Court (Parnow) (8/18/15) --- Cal.App. 4th --- is another case addressing whether the court or arbitrator has authority to decide the arbitrability of claims.

Employees filed a class action and representative action under the Labor Code Private Attorneys General Act (PAGA) alleging wage claims against their former employer, Universal Protection Services (UPS). UPS cross-complained, seeking a declaration that (1) the trial court, not the arbitrator, should decide whether the parties' arbitration agreement barred class relief and (2) that the arbitration agreement barred class actions. UPS then moved to compel individual arbitration and stay the court proceedings. The trial court denied the petition, ruling that the arbitrator should decide the arbitrability issues. The Court of Appeal affirmed, holding as follows:

The American Arbitration Association (AAA) employment arbitration rules provide: "The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement." In addition, the AAA Supplementary Rules for Class Arbitrations give the arbitrator authority to decide "whether the applicable arbitration clause permits the arbitration to proceed on behalf of or against a class."

Because the arbitration agreement incorporated the AAA rules, the arbitration agreement "clearly and unmistakably" gave the arbitrator the power to decide whether the agreement authorizes class arbitration.

The opinion is available here.

Brennan v. Opus Bank: Arbitration Agreement Incorporating AAA Rules Gives Arbitrator the Power to Determine Arbitrability of Employment Claims Between Sophisticated Parties

In Brennan v. Opus Bank, ___ F.3d ___ (9th Cir. 8/11/15), an executive-level employee, Brennan, sued his former employer, Opus, alleging that Opus violated his employment agreement. Brennan filed in district court, alleging that his employment agreement's arbitration clause was unconscionable and unenforceable. Opus moved to compel arbitration, arguing that the arbitration clause incorporated the rules of the American Arbitration Association (AAA), which require the arbitrator to determine the arbitrability of Brennan's claims. The district court granted the motion to compel, and the Ninth Circuit affirmed, holding as follows: 

Federal law applied to the arbitrability question because the agreement was a contract "evidencing a transaction involving [interstate] commerce" and thus fell under the Federal Arbitration Act (FAA). Further, the Employment Agreement did not "clearly and unmistakably" indicate that California’s law of arbitrability controlled, even though it provided that the parties would "retain the rights of all discovery provided pursuant to the California Code of Civil Procedure” and that “[a]ll rights, causes of action, remedies and defenses available under California law and equity . . . as though in a court of law.”

While the Employment Agreement is clear that California’s procedural rules, rights, and remedies apply during arbitration, it says nothing about whether California’s law governs the question whether certain disputes are to be submitted to arbitration in the first place.

Under federal arbitrability law, the agreement "clearly and unmistakably" delegated the arbitrability question to the arbitrator by incorporating the AAA rules. Nontheless, the Court limited its holding to situations involving "sophisticated parties" such as Brennan and Opus.

The case involved three separate agreements: (1) the Employment Agreement; (2) the arbitration agreement within the Employment Agreement; and (3) the delegation clause within the arbitration agreement.

[Because] Brennan failed to “make any arguments specific to the delegation provision,” [Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (2010), 74], and instead argued “that the [Arbitration Clause] as a whole is unconscionable under state law,” id. at 75, “we need not consider that claim,” id. at 73, because it is for the arbitrator to decide in light of the parties’ “clear and unmistakable” delegation of that question, as we held above. Accordingly, the district court did not err in dismissing Brennan’s claims in favor of arbitration.

The opinion is available here.

Garcia v. Seacon Logix: Court Affirms Decision that Truck Drivers Were Employees, Not Independent Contractors

In Garcia v. Seacon Logix (7/16/15, pub. 7/30/15) --- Cal.App.4th ---, the plaintiffs were truck drivers who were classified as independent contractors, rather than employees. They filed a class action under Labor Code section 2802, alleging that they should have been classified as employees and that their putative employer, Seacon, should not have deducted truck lease payments or insurance premiums from their paychecks. The court found for the plaintiffs and entered judgment in their favor. Seacon appealed, arguing that the trial court's decision was not supported by substantial evidence and that the damage award was excessive. The Court of Appeal affirmed, holding as follows: 

Ayala v. Antelope Valley Newspapers, Inc. (2014) 59 Cal.4th 522, 531 (discussed here) states the test for whether one is an employee or independent contractor. [Note that this issue is before the California Supreme Court in Dynamex Operations West, Inc. v. Superior Court (Lee) (discussed here).]

The plaintiffs' testimony proved that Seacon controlled the manner and means of their work. Seacon told them when to be at work, approved or disapproved absences, determined their delivery assignments, and monitored their delivery progress. The plaintiffs could not decline assignments, work for any other delivery companies, or use their trucks for any other purpose. The agreements signed by the parties gave the plaintiffs control of their work as independent contractors, but the facts contradicted the agreements, and the agreements were not dispositive.

The secondary factors also demonstrated that the plaintiffs were employees. Seacon terminated two of the plaintiffs without notice. Seacon was in the business of transporting cargo, and the plaintiffs were an integral part of that business. The plaintiffs worked under Seacon's supervision. Seacon owned the trucks and controlled their use. Seacon paid the plaintiffs per delivery, which supported independent contractor status, but the court found this factor not dispositive.

Seacon forfeited its argument that the court awarded excessive damages.

The opinion is available here.

New Law: Civil Code sections 52.4 and 52.45 Now Protect Individuals from Violence Based on Gender, Gender Identity, Gender Expression, and Sexual Orientation

Just a quick note on AB 830, which expands the protections for people based on gender identity, gender expression, and sexual orientation. This is not an employment law, but many will find it of interest.

Civil Code section 52.4 allows a person who has been subjected to gender violence to bring a civil action for damages against any responsible party. The law defines gender violence as an act of violence committed "at least in part based on the gender of the victim," or a "physical intrusion or physical invasion of a sexual nature under coercive conditions."

AB 830 amends section 52.4 to provide that "gender" under that section has the same meaning as in the Unruh Civil Rights Act, Cal. Civ. Code 51. The Unruh Act protects people from discrimination in all business establishments on the basis of sex, race, color, religion, ancestry, national origin, disability, medical condition, genetic information, marital status, or sexual orientation." "Sex" includes gender, gender identity, and gender expression. Gender expression means a person’s "gender-related appearance and behavior whether or not stereotypically associated with the person’s assigned sex at birth."

In other words, section 52.4 now protects individuals from violence based on gender, gender identity, and gender expression.

AB 830 also adds Civil Code section 52.45, which allows a person who has been subjected to sexual orientation violence to bring a civil action for damages against any responsible party.

The text of AB 830 is available here.