Opinion
A158657
03-26-2021
ZERIUS COLLINS et al., Plaintiffs and Respondents, v. HASA, INC., Defendant and Appellant.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Contra Costa County Super. Ct. No. MSC18-02413)
The Labor Code Private Attorneys General Act of 2004 (PAGA; Lab. Code, § 2698 et seq.) "authorizes an employee to bring an action for civil penalties on behalf of the state against his or her employer for Labor Code violations committed against the employee and fellow employees, with most of the proceeds of that litigation going to the state." (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 360 (Iskanian); § 2699, subds. (a) and (c).)
Further undesignated statutory references are to the Labor Code.
A claim brought under PAGA is a type of qui tam claim, meaning "[t]he government entity on whose behalf the plaintiff files suit is always the real party in interest in the suit." (Iskanian, supra, 59 Cal.4th at p. 382.) As a result, "a PAGA claim lies outside the [Federal Arbitration Act]'s coverage because it is not a dispute between an employer and an employee arising out of their contractual relationship. It is a dispute between an employer and the state." (Id. at p. 386.)
Further, employers cannot rely on their private predispute arbitration agreements with their employees to compel arbitration of PAGA claims because, in bringing a PAGA claim, the plaintiff is acting as a proxy or agent of the state and the state is not a party to such private agreements. (Julian v. Glenair, Inc. (2017) 17 Cal.App.5th 853, 872 (Julian) ["a predispute agreement does not subject the PAGA claim to arbitration"]; (Betancourt v. Prudential Overall Supply (2017) 9 Cal.App.5th 439, 445-446 [the defendant's motion to compel arbitration was correctly denied because the state was not bound by the plaintiff's predispute agreement to arbitrate]; Tanguilig v. Bloomingdale's, Inc. (2016) 5 Cal.App.5th 665, 678 ["a PAGA claim . . . cannot be arbitrated pursuant to a predispute arbitration agreement without the state's consent"].)
"Predispute" in this context means before the employee has met "the statutory requirements [of section 2699.3] for commencing a PAGA action." (Julian, supra, 17 Cal.App.5th at p. 870.) "[B]efore that time, the employee has no authority or authorization to waive the state's rights to bring the state's claims in court." (Correia v. NB Baker Electric, Inc. (2019) 32 Cal.App.5th 602, 622 (Correia).)
Section 2699.3 requires a plaintiff to "notify the employer and the Labor and Workforce Development Agency (LWDA) of the specific labor violations alleged, along with the facts and theories supporting the claim." (Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, 81; § 2699.3, subd. (a).) The employee may commence a PAGA action only "[i]f the [LWDA] does not investigate, does not issue a citation, or fails to respond to the notice within 65 days." (Kim, at p.81; § 2699.3, subd. (a).)
In this appeal, an employer imposed a company-wide mandatory arbitration policy purporting to cover PAGA claims and then sought to compel arbitration of an employee's existing PAGA action, arguing the new policy qualified as an enforceable postdispute arbitration agreement. The employee, a night watchman at a chemical plant, was already subject to an arbitration policy as a condition of his employment when he brought a single PAGA claim against his employer. A month after the employee filed suit, the employer presented him a revised mandatory arbitration policy and had him sign another agreement to arbitrate all claims arising out of his employment. The revised policy applied to all employees, and the form agreement the employee signed did not mention his current PAGA action. The employer had revised its arbitration policy with the intent to cover PAGA claims generally and the employee's civil action specifically, and it knew the employee was represented by counsel in his PAGA action. Yet, when it presented the revised policy and form agreement to the employee, the employer did not explain that the intended effect of the new policy was to waive its employee's right to a judicial forum in his pending lawsuit, and it failed to inform the employee's counsel of the revised mandatory arbitration policy. The employer then moved to compel arbitration based on its revised policy and the employee's new agreement to arbitrate. The trial court denied the motion, finding under the circumstances of the case that the arbitration agreement was not enforceable as to the pending PAGA claim.
The employee previously signed agreements to arbitrate when he started working for Hasa in 2016 and again in 2018.
The employer, Hasa, Inc. (Hasa) appeals, contending California law permits enforcement of postdispute arbitration agreements and the trial court's decision conflicts with the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.). Finding no error, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Hasa manufactures, distributes, and sells bleach, muriatic acid, and other products to commercial customers in the Western and Southwestern United States. Plaintiff Alex Guerrero (Guerrero) worked as a night watchman at Hasa's facility in Pittsburg, California from June 2016 to July 2019. Zerius Collins worked as seasonal employee at Hasa's Pittsburg facility in 2017.
PAGA Lawsuit
In November 2018, Collins filed a complaint against Hasa asserting a single PAGA claim. He alleged Hasa failed to provide meal and rest breaks, failed to provide minimum and overtime wages, failed to timely pay wages during employment, failed to pay all wages due at the end of employment, failed to maintain required records, failed to provide accurate itemized wage statements, and failed to indemnify employees for necessary expenditures and losses incurred in discharging their duties. Collins sought civil penalties provided by various Labor Code statutes, interest, and attorney fees and costs.
In April 2019, Hasa filed a motion to compel arbitration and to stay the action. Hasa argued Collins's PAGA claim was subject to its mutual arbitration policy in effect in 2017.
On May 1, while the motion to compel Collins to arbitrate was pending, Guerrero joined Collins's lawsuit. Guerrero was named a second plaintiff in Collins's first amended complaint, which, like the original complaint, alleged only a PAGA claim. It was alleged that, in compliance with section 2699.3, Guerrero had given notice to the Labor and Workforce Development Agency (LWDA) and to Hasa of his claims, the LWDA did not respond, and Guerrero waited more than 65 days before filing the action. In other words, Guerrero was alleged to have met the requirements for commencing a PAGA action on behalf of the state.
Motion to Compel Arbitration
Initial Motion
On June 5, 2019, Hasa filed a motion to compel Guerrero to arbitrate his PAGA claim. Hasa relied on the 2018 version of its mutual arbitration policy (MAP), which Guerrero received on or before March 6, 2018.
On June 6, the trial court denied Hasa's motion to compel arbitration and to stay the action as to plaintiff Collins. The court determined that Collins's PAGA claim was not subject to arbitration, citing Correia, supra, 32 Cal.App.5th 602.
The order denying Hasa's motion to compel Collins to arbitrate his PAGA claim is not an issue in this appeal; we dismissed Hasa's appeal of that order as untimely.
Amended Motion
On June 28, Hasa filed an amended motion to compel arbitration based on the newest version of its MAP, which Hasa had revised in an effort to address the trial court's reasons for denying arbitration of Collins's PAGA claim under an earlier version of the MAP.
Hasa offered evidence that Guerrero received a copy of the MAP when he was hired in 2016 and received updated versions of the MAP in 2018 and 2019, and each time he was given a copy of the MAP, Guerrero signed a written agreement to be bound by it. Guerrero signed the most recent employee agreement to arbitrate on June 6, 2019.
The June 2019 version of the MAP provided in part: "The MAP applies to all Hasa employees . . . and covers all disputes relating to or arising out of employment with Hasa or the termination of that employment, whether those disputes already exist today or arise in the future. Examples of the type of disputes or claims covered by the MAP include, but are not limited to, claims against employees for fraud, conversion, misappropriation of trade secrets, or claims by employees for wrongful termination of employment, breach of contract, fraud, [claims under various antidiscrimination laws], . . . wage, overtime and penalty claims or other claims under the Labor Code (including claims for civil penalties under Labor Code sections 558 and 2699), or any other legal or equitable claims and causes or action recognized by local, state or federal law or regulations. . . . Because the MAP changes the forum in which you may pursue claims against Hasa and affects your legal rights, you may wish to review the MAP with an attorney or other advisor of your choice. Hasa encourage you to do so.
"Your decision to accept employment or to continue employment with Hasa constitutes your agreement to be bound by the MAP. Likewise, Hasa agrees to be bound by the MAP. . . . Because the arbitration proceeding will be a traditional, bilateral arbitration, it also means that both you and Hasa forego and waive any right to join or consolidate claims in arbitration with others or to make collective or class claims in arbitration, either as a class representative or as a member of a class, unless such procedures are agreed to by both you and the Company. No substantive remedies that otherwise would be available in a court of law, however, will be forfeited by virtue of this agreement to use and be bound by the MAP."
The agreement to arbitrate provided in part: "I acknowledge that I have received and reviewed a copy of the [MAP], and I understand that it is a condition of my employment. I agree that it is my obligation to use of the MAP and to submit to final and binding arbitration any and all claims and disputes that are related in any way to my employment or the termination of my employment with Hasa, whether those claims or disputes already exist today or arise in the future. . . . If in the future I am authorized to assert any claim against Hasa on behalf of any other person or entity, I agree that I will do so solely in arbitration in compliance with this agreement and I agree to inform such person or entity of this obligation in advance of seeking any authorization."
Hasa argued the June 6 agreement to arbitrate was enforceable because when Guerrero signed it, he was authorized to bring his current PAGA claim.
Opposition
Opposing the motion, Guerrero stated Hasa did not advise him, and he did not understand, that signing the agreement to arbitrate could waive his right to pursue his pending PAGA claim in court. Under the circumstances, Guerrero argued, "[a]ny waiver of the right to judicial forum was not knowing and voluntary" and was therefore unenforceable, citing Iskanian, supra, 59 Cal.4th 348, Julian, supra, 17 Cal.App.5th 853, and Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83 (Armendariz).
In his supporting declaration, Guerrero also stated that he signed the arbitration agreement on his last day at work, which he said was June 6, 2019. This was contradicted by Hasa employee Kristine Holton, who stated in a supplemental declaration that Guerrero's last day of work was July 17, 2019, when she conducted an exit interview with him. At a hearing on the motion to compel, Guerrero's counsel conceded that Guerrero was confused about the dates and what documents he signed at different times but, the attorney argued, even his confusion showed that Guerrero did not know the agreement to arbitrate Hasa asked him to sign could affect his ongoing lawsuit.
Hearings and Trial Court Ruling
The trial court held two hearings on the motion to compel arbitration and permitted supplemental briefing after the first hearing. Before each hearing, the court issued a tentative ruling indicating it would deny Hasa's motion.
In its first tentative ruling, the trial court noted its concern about the circumstances under which Guerrero signed the new agreement to arbitrate: "It is particularly troubling here that the new arbitration agreement was filed after the action was already pending and a motion to compel arbitration had been denied. Defendant would apply the agreement to send to arbitration not only any future claims, but a claim upon which Guerrero already had filed suit. He already was represented by counsel in that suit, yet it does not appear that counsel was advised of the 'new' agreement being provided to Guerrero. The Court has no evidence that Guerrero was advised that the purpose of the agreement he was given was to require arbitration for a pending case."
The court then considered the language of the June 6 agreement to arbitrate. It provided, "If in the future I am authorized to assert any claim against Hasa on behalf of any other person or entity, I agree that I will do so solely in arbitration in compliance with this agreement and I agree to inform such person or entity of this obligation in advance of seeking any authorization." (Italics added.) The court observed, "This language recognizes an important point: before Guerrero can agree to represent someone·else in arbitration, he needs to inform that party that he intends to waive their right to go to court. There is no evidence that Guerrero advised the LWDA that he had waived its right to go to court."
The court concluded, "[U]nder the particular circumstances of this case, i.e., that the new agreement was provided after a complaint already was pending, Guerrero was not advised of its intended effect, and he was represented by counsel in the pending action, who also was not advised of the new agreement, the agreement is not enforceable."
In its second tentative ruling after supplemental briefing, the court again noted the arbitration agreement expressly required employees to inform any party they intended to represent (such as the LWDA) about their obligation to arbitrate such claims "in advance of seeking any authorization," but that did not happen in this case. The court continued, "The fact that Guerrero had obtained authority to file a civil action pursuing the LWDA's claim is not authority to agree to submit the claim to binding arbitration. Accordingly, the language of the arbitration clause itself precludes its application to these facts."
In its second tentative ruling, the court also indicated it did not find the arbitration agreement to be both procedurally and substantively unconscionable. Because this finding is not challenged on appeal, we have no occasion to consider whether the arbitration agreement in this case meets conscionability standards.
At the second hearing, the trial court once more referred to the troubling circumstances under which Guerrero signed the agreement to arbitrate. ("[H]e was given this agreement even though the people who gave it to him knew he had a pending case and knew he had an attorney already engaged.")
At the end of the second hearing, the court denied Hasa's motion to compel arbitration and instructed Guerrero's counsel to prepare an order attaching both tentative rulings.
DISCUSSION
A. Standard of Review
In deciding a petition to compel arbitration, "the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court's discretion, to reach a final determination." (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972.) An "order denying a petition to compel arbitration, like any other judgment or order of a lower court, is presumed to be correct, and all intendments and presumptions are indulged to support the order on matters as to which the record is silent." (Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77, 88.)
"There is no uniform standard of review for evaluating an order denying a motion to compel arbitration." [Citation.] If the court's order is based on a decision of fact, then we adopt a substantial evidence standard. [Citations.] Alternatively, if the court's denial rests solely on a decision of law, then a de novo standard of review is employed." (Robertson v. Health Net of California, Inc. (2005) 132 Cal.App.4th 1419, 1425.) If material facts are in dispute, " 'we presume the court found every fact and drew every permissible inference necessary to support its judgment.' " (Carlson v. Home Team Pest Defense, Inc. (2015) 239 Cal.App.4th 619, 630.) B. Analysis
California courts have consistently held that predispute arbitration agreements are not enforceable as to PAGA claims. (Correia, supra, 32 Cal.App.5th at p. 621; Julian, supra, 17 Cal.App.5th at p. 872; Betancourt v. Prudential Overall Supply, supra, 9 Cal.App.5th at pp. 445-446; Tanguilig v. Bloomingdale's, Inc., supra, 5 Cal.App.5th at p. 678.)
Hasa argues California law permits enforcement of postdispute agreements to arbitrate PAGA claims and claims the trial court erred in this case because it failed to follow this California law. According to Hasa, the trial court denied its motion to compel solely on the ground that PAGA claims are categorically exempt from arbitration. We reject this argument because Hasa misunderstands the court's grounds for denying arbitration in this case.
In Julian, the court indicated that postdispute agreements to arbitrate PAGA claims are enforceable, observing, "[W]ith respect to waivers of the right to assert a PAGA claim in a judicial forum, the key issue concerns the boundary between an unenforceable predispute waiver and an enforceable postdispute waiver." (17 Cal.App.5th at p. 870, italics added.) For the purposes of this appeal, we assume without deciding that otherwise valid postdispute agreements to arbitrate PAGA claims are enforceable.
In its two tentative rulings (which were adopted by the court's final written order), the trial court relied on the "particular circumstances" under which Guerrero signed the agreement to arbitrate and the specific language of the agreement at issue. If the court believed PAGA claims were never subject to arbitration, the discussion of these case-specific facts would have been unnecessary. The court's comments at the two hearings show the court recognized that postdispute agreements to arbitrate PAGA claims may be enforceable. In the first hearing, after noting that Guerrero had a pending lawsuit and counsel when Hasa had him sign the most recent agreement to arbitrate, the court stated, "It seemed to me that the point they were making in Julian and in Correia and in all of these other cases is that somebody could consciously and in consultation with their attorney decide that they want to go ahead and agree to arbitration, and they would have the authority to do so at that point." (Italics added.) During the second hearing, the court observed it would be "a good argument that there's nothing that precludes somebody who has given a PAGA notice [and is therefore authorized to bring a PAGA claim] from agreeing to arbitration." The record is clear that the trial court's decision was not based on a belief that PAGA claims are categorically exempt from arbitration.
Hasa's position also fails because it presumes the trial court found the agreement to arbitrate Guerrero signed on June 6, 2019, was "otherwise enforceable" with respect to Guerrero's pending PAGA action, but the trial court did not so find. To the contrary, the court determined that "the language of the arbitration clause itself precludes its application to these facts." As we understand the order denying Hasa's motion to compel arbitration, the court found the agreement to arbitrate does not apply to Guerrero's current PAGA claim because Guerrero did not give advance notice to the LWDA of the obligation to arbitrate as required by the language of the agreement. On appeal, Hasa does not challenge the trial court's interpretation of the agreement to arbitrate.
Moreover, the court found, "under the particular circumstances of this case, i.e., that the new agreement was provided after a complaint already was pending, Guerrero was not advised of its intended effect, and he was represented by counsel in the pending action, who also was not advised of the new agreement, the agreement is not enforceable."
While this statement was made in the court's first tentative ruling, it was incorporated in the final written order, and we understand it to be part of the basis for the court's decision.
When a plaintiff brings a civil action, courts expect the plaintiff's subsequent agreement to arbitrate the matter (which amounts to a waiver of the right to a judicial forum) to be knowing and voluntary. Here, Guerrero stated he did not understand that signing the agreement to arbitrate meant he could waive his ability to pursue his current PAGA claim in court. The Hasa employee who gave Guerrero the most recent MAP and obtained his signature on the agreement to arbitrate conceded (in a declaration) that "on June 6 [she] did not tell [Guerrero] that agreeing to the Policy and the Agreement would waive a judicial forum for any employee claims or that he should consult with attorneys." The agreement to arbitrate Guerrero signed was a form document (apparently used for all Hasa employees), and it did not identify his current PAGA action specifically or explain the agreement's intended effect on pending civil actions generally. This is substantial evidence that the agreement to arbitrate is unenforceable as to Guerrero's pending PAGA claim because he was not fully informed of the intended effect of the agreement (waiver of his right to a jury trial in his pending PAGA action) presented to him. (Julian, supra, 17 Cal.App.5th at p. 870.)
In Julian, the court considered and demarcated "the predispute/postdispute boundary relating to agreements that require arbitration of PAGA claims in lieu of litigation in court." (17 Cal.App.5th at p. 869.) In this context, the court observed, "Generally, a waiver of a statutory right is not enforceable unless—at minimum—' "it appears that the party executing it ha[s] been fully informed of the existence of that right, its meaning, [and] the effect of the 'waiver' presented to him" ' [citations]. Only after employees have satisfied the statutory requirements for commencing a PAGA action are they in a position 'to determine what trade-offs between arbitral efficiency and formal procedural protections best safeguard their statutory rights.' " (Id. at p. 870, italics added.) In Armendariz, supra, 24 Cal.4th 83 (quoted in Julian), our high court distinguished mandatory predispute arbitration agreements from a voluntary agreement to arbitrate an existing dispute. In the latter case, the court contemplated "an employer and an employee knowingly and voluntarily enter into an arbitration agreement after a dispute has arisen. In those cases, employees are free to determine what trade-offs between arbitral efficiency and formal procedural protections best safeguard their statutory rights." (Id. at p. 103, fn. 8, italics added.)
In short, the trial court did not deny Hasa's motion to compel arbitration on the ground that PAGA claims are categorically exempt from arbitration, Hasa has failed to show the trial court erred in finding the agreement to arbitrate inapplicable to Guerrero's current PAGA claim, and, further, substantial evidence supports the court's finding that the agreement is unenforceable as to the claim under the circumstances of the case.
Finally, Hasa argues the FAA preempts any application of California law that requires a judicial forum for PAGA claims that the parties have agreed to submit to arbitration. The FAA, however, governs arbitration agreements aimed at resolving disputes between private parties. (Iskanian, supra, 59 Cal.4th at pp. 384-385.) It does not apply to the "rights of a public enforcement agency." (Id. at p. 385.) Thus, our Supreme Court has held, "a PAGA claim lies outside the FAA's coverage because it is not a dispute between an employer and an employee arising out of their contractual relationship. It is a dispute between an employer and the state which alleges directly or through its agents—either the Labor and Workforce Development Agency or aggrieved employees—that the employer has violated the Labor Code." (Id. at pp. 386-387.)
In any event, the point of Hasa's FAA argument is to establish that PAGA claims cannot be exempted from arbitration altogether, but, as we have seen, the trial court did not deny the motion to compel arbitration on that ground.
DISPOSITION
The order denying the motion to compel arbitration is affirmed.
/s/_________
Miller, J. WE CONCUR: /s/_________
Kline, P.J. /s/_________
Richman, J.