Judge Jill Feeney, Case Number: 23STCV09440, Date: 2024-01-05 Tentative Ruling

This is an action for violations of the Labor Code and unfair business practices. Plaintiff alleges that he was co-employed by Defendants as a location manager. Plaintiff was a salaried employee and thus exempt from overtime pay. Although Plaintiff was a licensed cemetery salesperson, he did not perform cemetery sales because his locations offered cremation services only. Plaintiff was incorrectly categorized as exempt and regularly worked seven days a week in excess of eight hours per day. Plaintiff was entitled to premium overtime pay. Defendants never provided meal and rest periods and never truly relieved him of all duty to allow him to avail himself of these breaks.

California law reflects a strong public policy in favor of arbitration as a relatively quick and inexpensive method for resolving disputes. To further that policy, California Code of Civil Procedure section 1281.2 requires a trial court to enforce a written arbitration agreement unless one of three limited exceptions applies. Those statutory exceptions arise where (1) a party waives the right to arbitration; (2) grounds exist for revoking the arbitration agreement; and (3) pending litigation with a third party creates the possibility of conflicting rulings on common factual or legal issues.” (Acquire II, Ltd. v. Colton Real Estate Group (2013) 213 Cal.App.4th 959, 967 [citations omitted]; Code Civ. Proc. § 1281.2.)

In deciding a petition to compel arbitration, trial courts must decide first whether an enforceable arbitration agreement exists between the parties, and then determine the second gateway issue whether the claims are covered within the scope of the agreement. (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961.) The party seeking arbitration has the “burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence, while a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.” (Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 842.) The trial court “sits as the trier of fact, weighing all the affidavits, declarations, and other documentary evidence, and any oral testimony the court may receive at its discretion, to reach a final determination.” (Id.) General principles of contract law govern whether parties have entered a binding agreement to arbitrate. (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236; see also Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.)

Whether there is a written agreement to arbitrate is a matter of contract, and courts must enforce arbitration contracts according to their terms. (Banc of California, National Association v. Superior Court of Los Angeles County (2021) 69 Cal.App.5th 357, 366.) A party cannot be required to submit to arbitrate any dispute to which he has not agreed to arbitrate. (Id.)

A contract is not formed without mutual assent. (Civ. Code, §§ 1550, 1565.) However, “[t]he existence of mutual assent is determined by objective criteria, not by one party’s subjective intent. The test is whether a reasonable person would, from the conduct of the parties, conclude that there was a mutual agreement.” (Marin Storage & Trucking, Inc. v. Benco Contracting and Engineering, Inc. (2001) 89 Cal.App.4th 1042, 1050)

A nonsignatory may also be compelled to arbitrate a dispute when the nonsignatory is a third-party beneficiary of the contract containing the arbitration agreement. (See Epitech, Inc. v. Kann (2012) 204 Cal.App.4th 1365, 1371.) A nonsignatory must be determined to be a third-party beneficiary in order to be bound by the arbitration agreement. (See id.) The contract must show an intent by the contracting parties to confer a benefit on the third party. (Id. at 1372.) “‘[I]t is not enough that the third party would incidentally have benefited from performance.’” (Id. (quoting Souza v. Westlands Water Dist. (2006) 135 Cal.App.4th 879, 891).)

“Associates, Entities and the Company (the “Parties”) agree to the terms of this Program. The Associate indicates his or her agreement to this Program and its terms and conditions by beginning or continuing employment with the Company after April 8, 2019 (the "Effective Date"). By submitting this Program to the Associate, the Company and the Entities agree to this Program and its terms and conditions.

Associate understands that nothing contained in this Program limits Associate’s ability to file a charge or complaint with the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (“Government Agencies”). This Program does not prevent Government Agencies from conducting an investigation. Associate further understands that this Program does not limit Associate’s ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company. This Agreement does not limit Associate’s right to receive an award for information provided to any Government Agencies. An Associate may not file a lawsuit based on a governmental report, charge, or complaint, but rather must file his or her Covered Dispute in arbitration under this Program.”

Defendants utilize a third-party human resources service called SCI Shared Resources. (Crawford Decl., ¶2.) An SCI employee, Jessica Crawford, testifies that she oversees the online onboarding platform Workday for Defendants. (Id., ¶4.) Employees use Workday to electronically sign documents during onboarding and during their employment. (Id.) Based on Crawford’s review of Plaintiff’s records, Plaintiff was employed by Defendants between December 27, 2008 and December 9, 2017 before being rehired on January 6, 2018 as a family service counselor. (Id., ¶7.) Plaintiff became a location manager on December 8, 2018 and returned to his position as a family service counselor on August 17, 2019. (Id.) In Spring 2019, Defendants replaced the then-existing arbitration agreement with the MRPA, and on April 22, 2019, each employee was sent the MRPA and was required to review and sign the MRPA and other documents on Workday. (Id., ¶¶11-14.) The MRPA was presented to Plaintiff as a standalone document within Workday and Plaintiff would have been directed to check a box stating “I Agree.” (Id., ¶16.) Before Plaintiff could electronically sign the document, a screen appeared informing Plaintiff: “By selecting the ‘I Agree’ button, you acknowledge that you understand and agree to the Mutual Resolution Process Agreement. You agree your electronic signature is the legal equivalent of your manual signature.” (Id.) Plaintiff electronically signed the MRPA on May 8, 2019. (Id., ¶17.)

SCI’s Assistant VP of Information Technology for Could Applications Support, Brian Pellegrin, testifies that Workday’s security settings do not permit any associate to change another’s username or password or to revise another user’s documents or profile activity. (Pellegrin Decl., ¶7.) Pellegrin reviewed Workday’s files and databases and determined the Plaintiff was assigned a unique work email and username. (Id., ¶9.) On May 8, 2019, Plaintiff logged into Workday for a 39-minute session and electronically signed the MRPA. (Id., ¶11.) Pellegrin generated reports from workday confirming that Plaintiff signed the MRPA on May 8, 2019 at 10:37 a.m. (Id., ¶¶12-13, Exhs. B-C.)

“An electronic record or electronic signature is attributable to a person if it was the act of the person. The act of the person may be shown in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable.” (Civ. Code, § 1633.9, subd. (a).) “The effect of an electronic record or electronic signature attributed to a person under subdivision (a) is determined from the context and surrounding circumstances at the time of its creation, execution, or adoption, including the parties' agreement, if any, and otherwise as provided by law.” (Id., subd. (b).)

“Contracts formed on the Internet come primarily in two flavors: ‘clickwrap’ (or ‘click-through’) agreements, in which website users are required to click on an “I agree” box after being presented with a list of terms and conditions of use; and ‘browsewrap’ agreements, where a website’s terms and conditions of use are generally posted on the website via a hyperlink at the bottom of the screen.” (Nguyen v. Barnes & Noble, Inc. (9th Cir. 2014) 763 F.3d 1171, 1176.) Browsewrap agreements are generally unenforceable where the hyperlinks to terms and conditions do not require the user to manifest assent. (Ibid.) Califonia courts have generally found that clickwrap agreements are enforceable. (Sellers v. JustAnswer LLC (2021) 73 Cal.App.5th 444, 466; Long v. Provide Commerce, Inc. (2016) 245 Cal.App.4th 855, 862; Swift v. Zynga Game Network, Inc. (N.D. Cal. 2011) 805 F.Supp.2d 904, 912United States v. Drew (C.D.Cal. 2009) 259 F.R.D. 449, 462 n.22.)

A signature is not required to demonstrate express acceptance of an arbitration agreement. (Pinnacle Museum Tower Ass’n v. Pinnacle Market Dev. (US), LLC (2012) 55 Cal.4th 223, 23.) A party’s acceptance of an agreement to arbitrate may also be implied in fact. (Id at p. 236.) For example, an employee’s continued employment constitutes acceptance of an arbitration agreement proposed by an employer. (Craig v. Brown & Root, Inc. (2000) 84 Cal.App.4th 416, 422.) Courts have also found express acceptance where an arbitration agreement states that an employee who commences or continues employment consents to an arbitration agreement. (Harris v. TAP Worldwide, LLC (2016) 248 Cal.App.4th 373, 381.)

Here, Defendants’ evidence shows that Plaintiff reviewed, signed, and agreed to the MRPA by clicking on a box that read “I Agree,” acknowledging another box which appeared alerting him to the fact that he was agreeing to the MRPA, and finally electronically signing the document. Because Plaintiff reviewed the MRPA prior to clicking the “I Agee” box and receiving a notice that he was agreeing to the MRPA, this is a clickwrap agreement, which is generally enforceable. The Court is satisfied that the electronic signature is attributable to Plaintiff because of the security protocols SCI and the Workday platform use to ensure each user has a unique username and password that can only be altered by that user.

Plaintiff argues that Defendants fail to lay a foundation for the MRPA because Crawford’s declaration incorrectly refers to Exhibit C as an earlier arbitration agreement which was replaced by the MRPA. This appears to be a typographical error because Exhibit C is clearly labeled as the MRPA. The reports generated by Workday and both SCI employees also all refer to the MRPA as a standalone document. Although Plaintiff’s counsel argues that the reports show there were other documents executed months after the MRPA was assigned, the SCI employees’ declarations state the MRPA was assigned as a standalone document not incorporated into any other document assigned at the same time. Additionally, Plaintiff argues that Defendants should have produced the Associate Handbook which was emailed to Plaintiff on April 22, 2019 because the handbook incorporated the MRPA. However, the operative agreement is the standalone document that Plaintiff electronically signed on Workday. There is no confusion over which document contained the arbitration agreement.

Defendants argue that the FAA applies to this proceeding and that the Court must therefore apply general rules of contract law to the arbitration agreement. Plaintiff argues that this dispute is not governed by the FAA because the Defendants have not shown that the arbitration agreement involves interstate commerce.

The Federal Arbitration Act (“FAA”) applies when an arbitration clause is present in an agreement involving transnational commerce. (Metalclad Corp. v. Ventana Environmental Organizational Partnership (2003) 109 Cal. App. 4th 1705, 1712; see also 9 U.S.C., section 1 (scope of FAA includes arbitration under any contract involving “commerce among the several states or with foreign nations”); Mitsubishi Motors Corp. v. Soler Chrysler Plymouth (1985) 473 U.S. 614, 631 (FAA’s presumption in favor of arbitration “applies with special force in the field of international commerce”).) When an arbitration agreement expressly provides that its enforcement shall be governed by the Federal Arbitration Act (FAA), the FAA governs a party’s motion to compel arbitration. (Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 347).

Under the FAA, arbitration agreements are “valid, irrevocable and enforceable.” 9 U.S.C., section 2. The overarching purpose of the FAA is to “ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings.” AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 344. A court must interpret arbitration provisions liberally, resolving doubts in favor of arbitration. (Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp. (1983) 460 U.S. 1, 24-25.)

Here, the arbitration agreement expressly provides that arbitration will be administered under the FAA. (MRPA, p. 32.) Thus, the FAA applies. It was not necessary for Defendants to show that the agreement involved interstate commerce. However, on reply, Defendants filed declarations establishing the involvement of interstate commerce.

Plaintiff also argues that the arbitration of Plaintiff’s wage and hour causes of action for overtime and meal and rest period premium pay are barred by Lab. Code, section 229. However, because the FAA applies here, the FAA preempts Labor Code, section 229. (Performance Team Freight Systems, Inc. v. Aleman (2015) 241 Cal.App.4th 1233, 1239) Additionally, Labor Code, section 229 does not appear to apply to Defendants’ alleged failure to pay overtime compensation cause of action because Plaintiff brings that cause of action under Lab. Code, section 1194. The “plain language of section 229 is limited to actions for the collection of due and unpaid wages brought under sections 200 through 244; section 229 does not apply to all statutory wage and hour claims.” (Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676, 686.) In any case, because the arbitration agreement expressly provides that it is governed by the FAA, section 229 is preempted.

The agreement contains a delegation clause stating that an arbitrator must decide if the agreement is unconscionable. (MRPA at pg. 6, pg 36 of the Declaration). This delegation clause is clear and unmistakable. (Smythe v. Uber Technologies, Inc. (2018) 24 Cal.App.5th 327, 332.) Here, there is no specific challenge to the to the enforceability of the delegation clause by Plaintiff. (Neilson Contracting, Inc. v. Applied Underwriters, Inc. (2018) 22 Cal.App.5th 1096, 1107-1108.) Therefore, the issue of unconscionability must be decided by the arbitrator.