Arbitration, PAGA: Employer Cannot Compel Arbitration Of “Underlying” Labor Code Violations In Order To Stay PAGA Litigation
California Courts Have Repeatedly Held That PAGA Claims Are Between Employee Acting On Behalf of State, And Employer, And Therefore Arbitration Cannot Be Compelled By Employer.
Iskanian v. CLS Transportation Los Angeles LLC, 59 Cal.4th 348 (2014) held, “[A] PAGA claim lies outside the FAA’s coverage because it is not a dispute between an employer and an employee . . . It is a dispute between the employer and the state . . . “
Nevertheless, California employers continue to seek ways to avoid the ruling in Iskanian. In Bonillas v. DMSI Staffing, LLC, E064503 (4/2 10/19/16), an unpublished opinion authored by Justice Codrington, the employer sought to escape the clutches of PAGA by arguing that “underlying” Labor Code violations, upon which PAGA violations necessarily depend, must be arbitrated first, while PAGA claims are stayed.
Nope, said the Court. “Based on the cases of Iskanian and Williams [237 Cal.App.4th 642 (2015)], we hold the PAGA claim is not subject to arbitration in whole or part because the PAGA claim is not a discrete dispute between the employer and the employee. Instead, the PAGA claim is a dispute between DMSI and Bonillas – acting on behalf of the state, the real party in interest – about probably Labor Code violations.”
COMMENT: See also my article in California Litigation, Vol. 28, No. 2 (2015): “Can Private Attorney General Actions Be Forced Into Arbitration?”
Arbitration/Fees: Court Affirms Denial Of Attorney Fees In Arbitration Because Claimant Went To Wrong Decider And Waited To Long
Fees Request Treated As “Hot Potato” By Arbitrator And Judge.
A nice post dated October 20, 2016 in California Attorney’s Fees summarizes the convoluted procedure in Miceli v. Staples, Inc., Case No D070676 (4th Dist., Div. 1 Oct. 20, 2016) (unpublished), describing the case as one “where the arbitrator and court tossed an attorney’s fees request like a ‘hot potato.’” Unfortunately for the respondent who was claiming fees, the “hot potato” was dropped, and the respondent never recovered fees.
Arbitration, FAA: Ninth Circuit Holds That Uniformed Services Employment And Reemployment Rights Act Of 1994 Does Not Prohibit Compelled Arbitration Of Arbitration Of Claims Arising Under Its Provisions
Substantive Rights Created By USERRA Are Not Lost By Arbitrating.
On the one hand, on the other hand . . . On the one hand, there is a liberal federal policy favoring arbitration agreements. On the other hand, the Federal Arbitration Act’s arbitration mandate can be “overridden by a contrary congressional command.”
Does the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) prohibit the compelled arbitration of claims arising under its provisions? No, holds the Ninth Circuit in an opinion authored by Judge Murguia. Ziober v. BLB Resources, Inc., No. 14-56374 (9th Cir. 10/14/16).
USERRA establishes employment rights for returning servicemembers. Kevin Ziober told his employer that the Navy was recalling him to duty in Afghanistan, and on the last scheduled day of work, his employer told him that there would be no job upon his return.
Mr. Ziober sued, and the employer successfully enforced its arbitration agreement with him.
USERRA provides a right to sue in federal district court. Relying primarily on CompuCredit v. Greenwood, 132 S. Ct. 665 (2012), the Ninth Circuit explains that this right is a procedural right, not a substantive right, and absent a clear legislative mandate, the procedural right to arbitrate can be enforced, because it does not affect the substantive rights created by USERRA.
Concurring, Judge Watford is a skeptic. He explains that the statute appears to confer a right to sue in district court, and includes what can be interpreted as a non-waiver provision. Furthermore, legislation benefitting servicemembers is to be liberally construed in their favor. But because there is a muddled legislative history, Judge Watford writes, “I don’t think it’s prudent for us to create a circuit split by reversing the district court’s ruling, particularly given the ease with which congress can fix this problem.” And we all know how easily Congress fixes problems these days.
Arbitration, Employment, FAA, Class, Waiver: Petition For Certiorari To SCOTUS Filed In Morris v. Ernst & Young
On August 23, 2016, I blogged that the issue in Morris v. Ernst & Young was clearly framed by the majority and minority opinions, and almost certainly headed for Supreme Court Review. In that Ninth Circuit case, the majority held that an employer violates sections 7 and 8 of the National Labor Relations Act by requiring employees to sign an agreement precluding them from bringing, in any forum, a concerted legal claim regarding wages, hours, and terms of conditions of employment.
On October 10, 2016, Kate Howard reports for SCOTUSBlog that a petition for a writ of certiorari was in fact filed on September 8, 2016, and states the issue as follows: “Whether the collective-bargaining provisions of the National Labor Relations Act prohibit the enforcement under the Federal Arbitration Act of an agreement requiring an employee to arbitrate claims against an employer on an individual, rather than collective basis.”
Currently, the most important number relating to SCOTUS is eight. With the high court split 4-4 into liberal and conservative wings, arbitration issues, which also tend to break along political lines, could be affected by the appointment of a ninth justice to fill the empty chair.
News: Can Wells Fargo Require Customers To Arbitrate Issues Regarding Unauthorized Accounts?
Attorney General Of Minnesota Say No, Joining Other Political Figures.
On October 4, 2016, Adam Betz reported for the Star Tribune that Minnesota’s Attorney General Lori Swanson opposes Wells Fargo’s use of arbitration clauses to require its customers to arbitrate claims concerning unauthorized accounts opened by Wells Fargo. And the LAT reports that on October 3, Sen. Sherrod Brown (Dem. – Ohio) introduced legislation in Congress to prevent Wells Fargo from invoking arbitration in contracts with customers.
Arbitration, PAGA: Employer Cannot Force Employees To Individually Arbitrate Whether They Qualified As “Aggrieved Employees” Before Pursuing Representative PAGA Claims
Takeaway: California Law Precludes Employer From Requiring Employee To Individually Arbitrate “Aggrieved Employee” Status While Preserving Right To Judicial Forum For Other Aspects Of Claim.
Perez v. U-Haul Co. of California, B262029 (2/7 8/16/16) (Zelon, Segal, Garnett) shows the ingenuity of an employer who tried to escape the reach of Iskanian v. CLS Transportation Los Angeles, LLC, 59 Cal.4th 348 (2014) and avoid having to face employees’ representative claims brought under the Private Attorney General Act of 2004 (PAGA) – albeit, unsuccessfully.
PAGA authorizes an “aggrieved employee” to bring a civil action personally and in a representative capacity to recover civil penalties for Labor Code violations. As with a qui tam statute, PAGA allocates 75% of the recovery to go to a state agency, and the remaining amount to go to “aggrieved employees.” (My 2015 article in California Litigation, entitled “Can Private Attorney General Actions Be Forced Into Litigation?” can be read by clicking here.)
U-Haul argued that the employees, who had signed a broad arbitration clause, should first have to individually arbitrate whether they were “aggrieved employees” as a predicate for pursuing their PAGA claims – i.e., they should have to first arbitrate whether there were Labor Code violations.
Relying on Iskanian, the Court rejected the employer’s argument, because Iskanian underscores that the representative nature of PAGA claims cannot be destroyed by requiring individual arbitration, and that the PAGA representative claims are really brought on behalf of the state (which is not a party to the arbitration agreement).
COMMENT: Note that the Court limited its ruling by stating: “For the purposes of this case, we need not determine whether PAGA claims are categorically exempted from private arbitration agreements.” Though the Court does not explain this limitation, I understand it to mean that PAGA claims may be arbitrable, if they can be arbitrated in a representative capacity.
However, given a choice between arbitrating or litigating in Court, an employer could have reasons to choose the court option, because the risk of error in a representative proceeding, where the stakes can be very high, weighs in favor of “multilayered review” lacking in arbitration See footnote 3 of Perez, relying on dictum in AT & T Mobility LLC v. Concepcion, 563 U.S. 333 (2011).