Judge: Michael C. Kelley, Case: 20AVCV00254, Date: 2022-09-13 Tentative Ruling

Case Number: 20AVCV00254    Hearing Date: September 13, 2022    Dept: A15

Background

This Private Attorney General Act (PAGA) lawsuit was filed on April 15, 2022, by Plaintiff Paula Gonzalez (“Plaintiff”) against her former employer, Defendant Lancaster Hospital Corporation dba Palmdale Regional Medical Center (“Defendant”). Plaintiff alleges she worked for Defendant from March 2021 to December 2021 and that, during this period, Defendant denied Plaintiff and other aggrieved employees their meal breaks and rest periods, did not pay them for time spent on mandatory drug testing, and had a policy of rounding the amount of actual time they worked in a manner that always benefitted Defendant. (Compl. ¶¶ 6, 11, 14.) Plaintiff alleges that, as a result of these and many other labor violations, she and the aggrieved employees were not paid for the entire amounts of time they actually worked.

Defendant filed the instant Motion to Compel Arbitration on August 1, 2022. Its motion requests orders (1) compelling arbitration of this matter pursuant to an “Alternative Resolution for Conflicts (ARC) Agreement” between Plaintiff and Defendant, and (2) dismissing the non-individual PAGA claims.

Plaintiff filed a timely opposition and Defendant filed a timely reply.

Analysis

Viking River Cruises, Inc. v. Moriana—Prior to the United States Supreme Court’s ruling in Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906 (Viking), California prohibited the enforcement of employment agreements that waived an employee’s right to pursue representative PAGA claims; and, while following this rule, courts would invalidate severability clauses that had served to force employees to arbitrate their individual PAGA claims separately from the litigable representative claims. The effect was that an employee, by adding a representative PAGA claim to her individual claim, escaped an otherwise enforceable agreement to arbitrate the individual claim.

Under Viking, this precedent violated the Federal Arbitration Act (FAA). The Supreme Court held that, while California could outlaw contractual provisions which waived an employee’s right to pursue representative PAGA claims, those representative PAGA claims could still be severed from the individual claims. Therefore, even if a provision forcing an employee to waive her representative claims was ultimately invalidated, the remaining, valid portions of the agreement could be enforced as they pertained to individual claims. In Viking, the subject agreement had required the employee to arbitrate certain individual claims; the Supreme Court held that the invalidity of the agreement’s PAGA waiver did not prevent the arbitration of the individual PAGA claims, because the claims could indeed be divided.

Motion to Compel Arbitration--Under Code of Civil Procedure section 1281.2, “On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy . . . the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists,” unless the court finds that the right to compel arbitration has been “waived by the petitioner,” or that “grounds exist for recission” of the arbitration agreement. (Code Civ. Proc., § 1281.2, subds. (a) & (b).)

A written arbitration agreement is “valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” (Code Civ. Proc., § 1281.)

“The petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972.)

Whether an agreement to arbitrate is enforceable is governed by both the FAA and California state law. Of course, the FAA, as a federal statute, preempts state laws that limit the enforceability of arbitration agreements. But generally (and excepting the precedent overruled in Viking), “[t]he inquiry under the FAA is the same as under California law.” (Flores v. Transamerica HomeFirst, Inc. (2001) 93 Cal.App.4th 846, 856.)

Under both federal and state law, arbitration agreements are valid and enforceable, unless they are revocable for reasons under state law that would render any contract revocable. [Citation.] Reasons that would render any contract revocable under state law include fraud, duress, and unconscionability.

(Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 239.)

Here, Defendant argues there exists a valid arbitration agreement: the ARC Agreement, which Plaintiff signed on March 15, 2021 as part of her hiring paperwork. (Def. Decl. Fernandez Supp. Mot. Compel Arb. ¶ 6.) The ARC Agreement states that it applies to “disputes regarding the employment relationship, compensation, breaks and rest periods, seating, discrimination, termination, or harassment, and claims arising under . . . state statutes, if any, addressing the same or similar subject matters . . . .” (Id. at Ex. A [PDF p. 6].)

Plaintiff does not dispute that the ARC Agreement covers Plaintiff’s claims, and instead argues that the Agreement is “invalid and unenforceable because it violates California Labor Code § 432.6.” (Pl.’s Opp’n Mot. Compel Arb. at 1.)

Enforceability of ARC Agreement

Plaintiff does not attempt to argue that Viking is inapplicable, nor that her PAGA claims are not severable and therefore cannot be arbitrated, etc. Instead, Plaintiff argues that the ARC Agreement is unenforceable under Labor Code section 432.6, which prohibits employers from requiring employees to consent to arbitration agreements as a condition of employment or employment-related benefits. (Lab. Code, § 432.6, subd. (a).) But as Defendant points out, Section 432.6 specifically exempts “a written arbitration agreement that is otherwise enforceable under the Federal Arbitration Act . . . .” (Id., § 432.6, subd. (f).) Again, an arbitration agreement is not enforceable under the FAA only if it is unenforceable under contract law.

(The Court rejects Defendant’s alternative argument that it is enjoined from enforcing Section 432.6. Chamber of Commerce of United States v. Bonta (9th Cir. 2021) 13 F.4th 766, to the extent that its interpretation of whether the FAA preempts Section 423.6 is binding, nevertheless only enjoined the civil and criminal penalties of Section 432.6; it held that the provision prohibiting employers from forcing their employees to agree to arbitration as a condition of employment was not preempted, and therefore not enjoined. That—and not the issue of civil and criminal penalties—is the provision that is material to Plaintiff’s argument.)

Here, Plaintiff does not present an argument that the ARC Agreement is unenforceable under the FAA. She does not, for example, make an argument as to the Agreement’s procedural or substantive unconscionability. As Plaintiff bore the burden of proof in the face of Defendant’s presentation of a facially valid arbitration agreement, there is no justification for the Court to find the ARC Agreement is unenforceable under the FAA. Since the ARC Agreement is “otherwise enforceable” under the FAA, it is specifically exempted from section 432.6 of the Labor Code. This section, therefore, does not invalidate the ARC Agreement.

With no other argument as to the enforceability of the arbitration agreement, the Court finds Plaintiff must arbitrate her claim.

Dismissal of the Representative Claims

Defendant next argues that, under Viking, Plaintiff cannot maintain the representative claims in this Court without her individual claim. Indeed, the Supreme Court stated that the remaining representative claims, once severed from the individual PAGA claims, should be dismissed.

However, the Supreme Court’s reasoning for concluding that the representative claims in Viking should be dismissed was that:

as we see it, PAGA provides no mechanism to enable a court to adjudicate non-individual PAGA claims once an individual claim has been committed to a separate proceeding. Under PAGA's standing requirement, a plaintiff can maintain non-individual PAGA claims in an action only by virtue of also maintaining an individual claim in that action.

(Viking, supra, 142 S.Ct. at 1925.) While the Supreme Court’s holding that the FAA preempts California’s prohibition on severing PAGA claims is a binding expression of federal law, its opinion as to the disposition of the representative claims is its interpretation of PAGA, made with reference to our own Supreme Court’s interpretation of PAGA standing in Kim v. Reins International Cal., Inc. (2020) 9 Cal.5th 73. The United States Supreme Court’s interpretation of issues that solely implicate state law is not binding on this trial court. Therefore, the holding in Viking does not necessarily require this Court to dismiss Plaintiff’s representative claims.

Instead, our state’s Supreme Court noted that PAGA has “only two requirements for PAGA standing. The plaintiff must be an aggrieved employee, that is, someone ‘who was employed by the alleged violator’ and ‘against whom one or more of the alleged violations was committed.’” (Kim v. Reins International Cal., Inc., supra, 9 Cal.5th at 83-84.) It held that, even if a plaintiff has settled his individual claim, he is still an “aggrieved employee,” and therefore still has PAGA standing. (Id., 84.)

There is nothing to suggest Plaintiff is not an “aggrieved employee.” Therefore, this Court shall follow our Supreme Court’s holding and find that Plaintiff can maintain the representative PAGA claims, despite her individual claims being arbitrated.

“[T]rial courts have the power to sever arbitrable claims from inarbitrable ones and to stay either the arbitration or the judicial proceedings pending the outcome of the other.” (Doan v. State Farm General Ins. Co. (2011) 195 Cal.App.4th 1082, 1098–1099.) Therefore, the Court shall GRANT Defendant’s Motion to Compel Arbitration of Plaintiff’s individual claims, but DENY its request to dismiss the representative ones. The Court shall instead STAY the matter pending the outcome of the arbitration.

Conclusion