Opinion
A147553
08-14-2018
JESSICA GENTRY, Plaintiff and Respondent, v. ROBERT HALF INTERNATIONAL, 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (San Francisco City & County Super. Ct. No. CGC-15-544878)
Jessica Gentry filed the underlying putative class action against her former employer Robert Half International, Inc. (RHI), alleging that RHI's compensation policies violate state wage and hour laws and the unfair practices law. In addition to damages and equitable relief, Gentry seeks penalties for alleged Labor Code violations under the Private Attorneys General Act of 2004 (PAGA) (Lab. Code, § 2698 et seq.).
This appeal is from an order denying RHI's motion to compel arbitration. RHI concedes that its arbitration agreement with Gentry contains a provision waiving her right to bring a PAGA claim, which is unenforceable under Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348 (Iskanian). However, RHI contends the trial court erred by concluding that the entire arbitration agreement is void. We affirm the trial court's order.
I. Iskanian
A preliminary overview of Iskanian, supra, 59 Cal.4th 348 facilitates our analysis of the issues on appeal. Iskanian was a putative class action by a commercial driver against his former employer for failing to properly compensate employees for work, meals, and rest periods. (Id. at pp. 360-361.) The plaintiff "brought his claims as an individual and putative class representative seeking damages, and also in a representative capacity under the PAGA seeking civil penalties for Labor Code violations." (Id. at p. 361.) The employer moved to compel arbitration pursuant to an agreement that contained a class action waiver and a representation action waiver. (Id. at pp. 360-361.) Issues pertaining to the enforceability of each of these provisions culminated in a lengthy decision by our Supreme Court, pursuant to which it upheld the class action waiver but concluded that the waiver of an employee's right to bring a PAGA action was against public policy and unenforceable. (Id. at p. 360.) The aspect of Iskanian that is pertinent to the issues on appeal pertains to the plaintiff's PAGA claim.
Initially, the Iskanian court addressed the function and purpose of PAGA. (Iskanian, supra, 59 Cal.4th at p. 380.) This statute authorizes an aggrieved employee to " 'bring a civil action personally and on behalf of other current or former employees to recover civil penalties for Labor Code violations. [Citation.] Of the civil penalties recovered, 75 percent goes to the Labor and Workforce Development Agency, leaving the remaining 25 percent for the "aggrieved employees." [Citation.]' " (Ibid.) An employee suing under PAGA is " 'a proxy or agent of the state's labor law enforcement agencies,' " and a judgment in a PAGA action binds all those who would be bound by an action brought by the government. (Id. at pp. 380 & 381.)
The Iskanian court went on to find that an employment agreement that "compels the waiver of representative claims under the PAGA . . . is contrary to public policy and unenforceable as a matter of state law." (Iskanian, supra, 59 Cal.4th at p. 384.) The court reasoned that enforcing this type of waiver would violate public policy by validating agreements that exempt one party from its own violations of the law. Such a waiver could also be used to contravene laws that are established for a public purpose in order to protect and benefit the public. (Id. at pp. 382-383.)
Finally, the Iskanian court found that the "state law rule" that an employee's right to bring a PAGA claim is unwaivable is not preempted by the Federal Arbitration Act (FAA). (Iskanian, supra, 59 Cal.4th at p. 384.) The court explained that "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 Agency or aggrieved employees—that the employer has violated the Labor Code." (Id. at pp. 386-387, italics omitted.)
II. Factual and Procedural Background
A. Gentry's Claims
The operative pleading is an October 2015 First Amended Complaint (FAC), which alleges the following facts: RHI is a "specialized staffing services firm." Gentry worked in RHI's Accountemps division as a temporary employee for several businesses, completing her last assignment in November 2014. While Gentry was employed by RHI, she was not paid compensation for time she was required to spend preparing for potential job assignments. Because of this policy, RHI failed to provide Gentry and other employees with proper wage statements and to pay all wages owed to them.
Gentry filed her FAC against RHI on behalf of a putative class of terminated RHI employees, and alleged that her lawsuit was also "a representative/qui tam type action," brought under PAGA "on behalf of the State of California and all current or former [RHI] employees who worked in California within the maximum allowable period of this claim." Incorporating factual allegations summarized above, Gentry attempted to state cause of action for (1) failure to pay wages, (2) failure to provide proper wage statements, (3) failure to pay final wages, (4) unfair business practices, and (5) penalties under PAGA, for violating state labor laws.
B. RHI's Motion to Compel Arbitration
In November 2015, RHI filed a motion to compel "individual arbitration" of the first four causes of action in the FAC. The motion was supported by evidence that when Gentry was employed by RHI she did not expressly opt out of RHI's standard arbitration policy and thereby agreed to the terms of a "Mutual Agreement to Arbitrate Claims" (the RHI Agreement). The RHI Agreement is a two-page document divided into several sections. The first two sections address the scope of the parties' agreement to arbitrate their disputes. We repeat those sections here: "Claims Covered by the Agreement
"Robert Half International Inc. (the 'Company') and I mutually agree to resolve by arbitration, and only by individual arbitration, all claims, whether or not arising out of my employment (or its termination), that the Company may have against me or that I may have against the Company and any other related or affiliated entity or person, including but not limited to parent, subsidiary and affiliated companies and employees or agents of any of them. I agree that no court or arbitrator shall determine any of my rights or claims on a class, collective or representative basis under any federal, state or local law. I understand, however, that I retain the right to bring claims in arbitration for myself as an individual.
"Except as provided in the section titled 'Claims Not Covered by the Agreement', all claims that, in the absence of this Agreement, could have been brought in court are subject to arbitration, whether the claims derive from common law, statute, regulation, or otherwise, including but not limited to tort claims, contract claims, claims for wages, and claims for discrimination, retaliation and/or harassment. Except as otherwise provided in this Agreement, both the Company and I agree that neither of us shall initiate or prosecute any lawsuit in any way related to any claim covered by this Agreement, other than a lawsuit seeking temporary equitable relief in aid of arbitration.
"Except as provided in this Agreement, the Federal Arbitration Act shall govern the interpretation, enforcement and all proceedings pursuant to this Agreement. "Claims Not Covered by the Agreement
"The following claims are not covered by this Agreement: claims that as a matter of law cannot be subject to arbitration; claims under an employee benefit or pension plan that specifies a different arbitration procedure; and claims asserted in an existing dispute in which both: (i) I currently am represented by legal counsel, and (ii) counsel has asserted such claims on my behalf."
Another relevant section of the RHI Agreement addresses the impact of a determination that one or more provisions of the agreement are not enforceable. That section states: "Construction and Severability
"If any provision of the section entitled 'Claims Covered by the Agreement' is determined to be void or unenforceable, then this Agreement shall be of no force or effect, because the parties intended to create an agreement to arbitrate individual disputes only. If any other provision of this Agreement is determined to be void or unenforceable, in whole or in part, it shall not affect the validity of the remainder of the Agreement. All other provisions shall remain in full force and effect based on the parties' mutual intent to create a binding agreement to arbitrate their disputes individually."
In the present case, RHI limited its motion to compel arbitration to the first four causes of action in the FAC, arguing that those were Gentry's individual claims and that she "agreed to settle those controversies in individual arbitration through written agreement." Citing Iskanian, RHI argued that Gentry's agreement to "individually arbitrate" her claims against RHI was fully enforceable and precluded her "from pursing these claims on behalf of a putative class in any forum." RHI argued further that Gentry's PAGA claim in her fifth cause of action fell outside the scope of the arbitration agreement between these parties because it was not Gentry's individual claim, but rather a representative claim belonging to the state. Accordingly, RHI requested that the trial court bifurcate the PAGA claim, and allow Gentry to litigate only that cause of action in court.
C. The Trial Court's Ruling
On January 4, 2016, the trial court denied RHI's motion to compel arbitration The court concluded that the entire RHI Agreement was "rendered invalid by the combined operation of two provisions." The court reasoned as follows: The "Claims Covered" section states that "no court or arbitrator shall determine any of my rights or claims on a class, collective or representative basis under any federal, state or local law." This purported waiver of Gentry's right to bring a PAGA claim on a representative basis is void under Iskanian, supra, 59 Cal.4th 348. Furthermore, the "Construction and Severability" section states that if any provision in the "Claims Covered" section is "determined to be void or unenforceable, then this Agreement shall be of no force or effect . . . ." Therefore, the determination that the PAGA waiver provision is void compels the conclusion that "the entire arbitration agreement is void."
III. Discussion
When the denial of a motion to compel arbitration is based solely on issues of law, our review is de novo. (Hernandez v. Ross Stores, Inc. (2016) 7 Cal.App.5th 171, 176-177; Tanguilig v. Bloomingdale's, Inc. (2016) 5 Cal.App.5th 665, 673 (Tanguilig).) Applying this standard here, we affirm the trial court's ruling that the RHI Agreement is not enforceable.
First, the "Claims Covered by the Agreement" section of the RHI Agreement contains a provision waiving the employee's right to bring a representative PAGA action in any forum. Iskanian squarely holds that "representative action waivers are unenforceable under state law and that this rule is not preempted by the FAA." (Tanguilig, supra, 5 Cal.App.5th at p. 674 [collecting cases].) Thus, the representative action waiver provision in the "Claims Covered" section of the RHI Agreement is not enforceable.
Second, the "Construction and Severability" section of the RHI Agreement states: "If any provision of the section entitled 'Claims Covered by the Agreement' is determined to be void or unenforceable, then this Agreement shall be of no force or effect." This provision invalidates the entire arbitration agreement because the "Claims Covered" section of the RHI Agreement contains a void and unenforceable waiver of the employee's right to bring a representative PAGA action. (See Securitas Security Services USA, Inc. v. Superior Court (2015) 234 Cal.App.4th 1109, 1123-1127 [entire arbitration agreement was unenforceable when nonseverability clause precluded severing void PAGA waiver].)
RHI concedes that the RHI Agreement contains an invalid waiver of a PAGA claim. But, it contends this void provision has no bearing on whether the remainder of the arbitration agreement is enforceable because a PAGA claim was never subject to arbitration under the terms of the RHI Agreement, as it is not a "Claim[] Covered by the Agreement." According to this argument, a PAGA claim is not a "Claim[] Covered by the Agreement" because that section limits covered claims to individual claims belonging to the employee or to RHI, and Iskanian establishes that a PAGA claim belongs to the state, not to the individual employee. We reject this argument for at least three reasons.
First, and crucially, RHI addresses the wrong question by arguing about whether a PAGA claim is a covered claim. Under the "Construction and Severability" section of the RHI Agreement, the pertinent question for determining whether the entire arbitration agreement is invalid is whether the section of the RHI Agreement that is titled "Claims Covered by the Agreement" contains "any provision" that is determined to be invalid or unenforceable. This contract term does not state that the invalid provision must pertain to a covered claim but only that the provision must appear in the section titled "Claims Covered by the Agreement." That referenced section, which was drafted by RHI, includes provisions containing class action and representative action waivers. One of those provisions is invalid and unenforceable, as we have already discussed.
Second, even putting aside the provision containing the PAGA waiver, the "Claims Covered" section addressing the scope of the parties' agreement to arbitrate does not exclude PAGA claims as RHI contends. The contract language used to describe the scope of the agreement to arbitrate disputes is broad and malleable, covering all conceivable disputes between the employee and RHI that can be resolved by "individual arbitration," a term that is not defined. This part of the agreement does not expressly or implicitly exclude a PAGA claim. Indeed, the potentially very broad reach of the mutual agreement to arbitrate may explain why this section also contains the representative action waiver that is more directly relevant to our disposition of this appeal.
Third, RHI's reliance on Iskanian is misplaced. The Iskanian court held that the state law rule against PAGA waivers does not frustrate the objectives of the FAA because "the FAA aims to ensure an efficient forum for the resolution of private disputes, whereas a PAGA action is a dispute between an employer and the state Agency." (Iskanian, supra, 59 Cal.4th at p. 384, italics omitted.) RHI contends that this aspect of Iskanian establishes that a PAGA claim belongs only to the state and not to an individual employee and, therefore, a PAGA claim is not a covered claim as that term is defined in the RHI Agreement. Again, we disagree.
Iskanian, supra, 59 Cal.4th at page 387, confirms that an employee who pursues a PAGA claim is acting as a representative of the state in seeking penalties from an employer for violating the Labor Code. However, that employee is also personally aggrieved, and has an unwaivable right as an individual to bring a PAGA claim. (Id. at pp. 384, 387.) These principles are not inconsistent with our conclusion that the RHI Agreement contains a broad agreement to arbitrate disputes that includes the employee's right to bring a PAGA claim as an individual who is personally aggrieved and is acting in his or her representative capacity. Furthermore, and in any event, the section in the RHI Agreement that is titled "Claims Covered by the Agreement," contains an additional provision purporting to waive the employee's right to bring a PAGA claim in any forum, which is void and unenforceable under Iskanian. It is this later provision that compels the conclusion that the entire agreement is unenforceable under the "Construction and Severability" section.
Finally, RHI briefly repeats an argument it made below that the PAGA claim is not a "Claim Covered by the Agreement" because the "Claims Not Covered by the Agreement" section states that the RHI Agreement does not cover "claims that as a matter of law cannot be subject to arbitration." RHI argues that a PAGA claim is excluded from coverage by this provision because a PAGA claim is by nature a representative claim and the RHI Agreement explicitly only contemplated individual arbitration. This nonsequitur does not affect our analysis; even if the parties only contemplated individual arbitration, that would not mean that a PAGA claim cannot be arbitrated as a matter of law. Furthermore, as discussed, the dispositive issue is not whether the broad arbitration clause covered a PAGA claim in the first instance, but rather whether any provision in the "Claims Covered" section of the RHI Agreement was determined to be void or unenforceable.
IV. Disposition
The appealed order is affirmed. Costs are awarded to respondent.
/s/_________
SMITH, J. We concur: /s/_________
STREETER, Acting P. J. /s/_________
REARDON, J.
Judge of the Superior Court of California, County of Alameda, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution. --------