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Tuesday, November 10, 2015

Performance Team Freight Systems v. Aleman: Truck Drivers Failed to Demonstrate that Their Independent Contractor Agreements Fell Outside Scope of FAA

Performance Team Freight Systems, Inc. v. Aleman (11/2/15) --- Cal.App.4th --- is another case dealing with the scope of the Federal Arbitration Act (FAA) and the exclusion for contracts of employment of transportation workers "engaged in foreign or interstate commerce." See Garrido v. Air Liquide Industrial U.S. LP (10/26/15) --- Cal.App.4th --- (discussed here); Garcia v. Superior Court (Southern Counties Express, Inc.) (5/15/15) --- Cal.App.4th --- (discussed here). 

In Performance Team, a number of truck drivers filed individual DLSE wage and hour claims against the respondent. The respondent then filed a superior court action to compel arbitration and stay the DLSE actions pursuant to an arbitration clause in the drivers' independent contractor agreements. The trial court denied the motions, holding that the drivers were transportation workers engaged in foreign or interstate commerce and therefore excluded from the scope of the FAA. The court further held that the drivers' claims fell outside the scope of their independent contractor agreements.

The Court of Appeal reversed, holding as follows:

Even if the drivers were transportation workers engaged in foreign or interstate commerce - an issue which the Court did not decide - the drivers failed to meet their burden to demonstrate that their independent contractor agreements were "contracts of employment."
The only evidence relevant to the issue of whether the individual respondents entered into contracts of employment was presented by Performance Team, which submitted the subject agreements and the declaration of its driver manager. Each agreement was labeled “Independent Contractor Agreement” and specifically described each individual respondent as an “independent contractor.” Each agreement further stated: “For all purposes, [individual respondent] shall be an independent contractor and not an employee of [Performance Team].”
Absent such evidence, the trial court erred in finding that the FAA did not apply.

The trial court also erred in finding that the drivers' claims fell outside of the scope of the arbitration agreement. The agreement provided: "Any dispute between the parties with respect to the interpretation or the performance of the terms of this Agreement may be submitted to arbitration...." The drivers contended that they performed the trucking services required by the agreements, and resolving the drivers' claims would require interpretation of the agreement's terms. The claims thus fell squarely within the scope of the arbitration agreement.

Finally, the Court erred in finding unconscionability. Although the agreement was substantively unconscionable because it required the parties to share the cost of arbitration and failed to provide a procedure similar to a Berman hearing, the drivers failed to introduce evidence that the agreement was procedurally unconscionable. 

The opinion is available here.

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