Judge: Peter Wilson, Case: 2022-01298813, Date: 2023-08-31 Tentative Ruling

Defendant Jeronimo Logistics LLC’S Motion to Compel Arbitration and Stay the Action is GRANTED IN PART AND DENIED IN PART.

The Fifth Cause of Action (failure to reimburse employees for required expenses) and Seventh Cause of Action (failure to provide accurate itemized statements) in Plaintiff's First Amended Class Action and Representative Action Complaint (FAC) are ordered to arbitration. The remaining claims are stayed pending completion of the arbitration. (Code Civ. Proc. § 1281.4.)

Agreement to Arbitrate

“The threshold question presented by every petition to compel arbitration is whether an agreement to arbitrate exists. The party seeking to compel arbitration bears the burden of proving by a preponderance of the evidence an agreement to arbitrate a dispute exists.” (Trinity v. Life Ins. Co. of N. Am. (2022) 78 Cal. App. 5th 1111, 1120, citations omitted; Code Civ. Proc. § 1281.2.)

While the burden of persuasion is always on the moving party, the burden of production may shift in a three-step process. First, the moving party must present “prima facie evidence of a written agreement to arbitrate the controversy”, which is satisfied by attaching a copy of the arbitration agreement purporting to bear the opposing party's signature. (Gamboa v. Ne. Cmty. Clinic (2021) 72 Cal. App. 5th 158, 164–67.)

If the moving party meets its initial prima facie burden, and the opposing party disputes the agreement, then the burden shifts to the opposing party to challenge the authenticity of the agreement. The opposing party may satisfy this burden by testifying that the party never saw or does not remember seeing the agreement, or that the party never signed or does not remember signing the agreement. (Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1054 [did not recall seeing or signing document]; Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 846 [did not recall signing agreement].)

Finally, in the third step, the moving party must present admissible evidence of a valid arbitration agreement between the parties by a preponderance of the evidence. (Gamboa, supra, 72 Cal. App. 5th at 164–67.)

In its moving papers, Defendant presents evidence that Plaintiff was employed as a delivery driver for Defendant from June 17, 2021 to January 21, 2022. ROA 48, Jacks Decl., ¶3. As part of the onboarding process, Plaintiff electronically signed a “Mutual Agreement to Individually Arbitrate Disputes” (Arbitration Agreement) on June 10, 2021. Id. at ¶¶4-5 and Ex. 1. Jeremiah Jacks, Defendant’s owner, describes the onboarding process, including the execution of the Agreement, in detail. ROA 48, Jacks Decl. ¶¶ 1, 4-18. Defendant met its initial burden of proof.

Specifically, Defendant explains that when it decides to hire an individual, Defendant creates a profile for the employee using his or her name and email address, which causes the onboarding system to send the individual an email inviting him or her to join and providing instructions for the onboarding process. ROA 48, Jacks Decl., ¶6. The individual must verify his or her email address with a unique one-time password, and then the individual can set their own private password. Id. at, ¶¶6-7. After the individual creates and securely accesses his or her account, he or she receives an invitation to join Defendant and continue onboarding by clicking on “Accept Invitation”. Id. at ¶8.

Once “Accept Invitation” is clicked, the link takes the individual to another page instructing them to download the application by clicking the box “Download app”. Once the application is downloaded, the individual must enter his or her email address and private password, click “Sign In” and then “Continue” to get to the page that displays a list of links needed for onboarding, including the “Arbitration Agreement”. Id. ¶¶9-12.

Once the individual clicks the link to the Arbitration Agreement, the application displays the Arbitration Agreement which the employee may scroll through. ROA 48, Jacks Decl., ¶13. The individual can then click the box next to “I Agree and Accept” to show agreement to the Arbitration Agreement and then the box “Continue”. Id. ¶¶14, 16 and Ex. 1. The application will display the next screen, which is a list of things that must be completed for onboarding, including the Arbitration Agreement. The individual’s profile will show a green checkmark next to “Arbitration Agreement” so Defendant can see the individual has agreed to the Arbitration Agreement. Id. at ¶¶14, 17. 

Defendant presents a copy of its on-line record showing the company name, employee name, unique transporter identification number and date and time Plaintiff accepted the Arbitration Agreement and explains that given its onboarding process and unique and private usernames and passwords, Plaintiff accepted the Arbitration Agreement. ROA 48, Jacks Decl., ¶18 and Exs. 1 and 2.

In his Opposition, Plaintiff disputes the authenticity of Arbitration Agreement. Plaintiff does not recall reviewing the Arbitration Agreement and contends that Defendant updated its onboarding process and added the Arbitration Agreement after he was hired since he does not recall the Arbitration Agreement. ROA 58, Plaintiff’s Decl., ¶¶6-7. Other than not remembering signing the Arbitration Agreement, Plaintiff presents no evidence to support his speculation that Defendant’s onboarding process changed after he was hired.

Plaintiff also alleges he was not informed of the Arbitration Agreement before or during his employment. ROA 58, Plaintiff’s Decl., ¶¶8-9.

In Reply, Defendant contends that it had the same onboarding process in place at the time of Plaintiff’s hire. ROA 64, Jacks Decl., ¶2.

The Court finds that Defendant met its burden of showing by the authenticity of the Arbitration Agreement.

Defendant also presents additional evidence that it also sent the Arbitration Agreement to Plaintiff through DocuSign, that DocuSign sent Plaintiff an email at his personal email address with a link to the Arbitration Agreement, that Plaintiff electronically signed the Arbitration Agreement again, and that DocuSign electronically stamps each page of the Arbitration Agreement with a unique DocuSign Envelope ID and also electronically stamps the date, time and name of the candidate on the document, keeps track of each document and notifies Defendant when the document is signed. ROA 64, Jacks Decl., ¶¶4-12 and Exs. 5-6. Thus, Plaintiff was provided the same Arbitration Agreement twice and agreed to arbitration twice.

The Arbitration Agreement applies to the claims alleged here. The Arbitration Agreement states in relevant part that Plaintiff and Defendant “agree that any covered claim … shall be submitted to individual binding arbitration.” “Covered Claims” are defined as “all past, current, and future grievances, disputes, claims, issues, or causes of action … under applicable federal, state or local laws, arising out of or relating to” Plaintiff’s “application, hiring, hours worked, services provided, and/or employment with [Defendant] or the termination thereof,” including “issues regarding benefits, bonuses, [and] wages.” ROA 48, Ex. 1, p. 1. The Arbitration Agreement further provides: “Employee and the Company each specifically acknowledges and agrees that all claims involving minimum wages, overtime, unpaid wages, expense reimbursement, wage statements, and claims involving meal and rest breaks shall be subject to arbitration under this Agreement.” Id. The Arbitration Agreement confirms that all such claims “brought by the Employee against any of the Covered Parties, whether brought jointly or severally with claims against the Company, shall be subject to arbitration under this Agreement.” ROA 48, Ex. 1, p. 1.

The Arbitration Agreement includes a class action waiver. ROA 48, Ex. 1 at p. 2. Plaintiff and Defendant agreed, “class action, collective action, or consolidated action procedures are hereby waived and shall not be asserted in arbitration or in

court, nor will they apply in any arbitration pursuant to this Agreement.” Id. The Parties “shall only submit their own, individual claims in arbitration and will not seek to represent the interests of any other person.” Id. “No arbitrator selected to arbitrate any claim covered by this Agreement is authorized to arbitrate any claim on a class, collective, consolidated, or representative basis.” Id. The Arbitration Agreement also provides that “a court of law must resolve any dispute concerning the validity and enforceability of the Agreement, and the validity … of the provisions pertaining to class, collective, and representative action waivers.” (Id.)

In summary, Defendant has established the existence of an arbitration agreement between Plaintiff and Defendant which encompasses the claims in this action.

FAA

Defendant contends the Federal Arbitration Act applies because it is involved in interstate commerce and the Arbitration Agreement provides for the application of the FAA. ROA 43, Mem. Supp., p.3; ROA 48, Jacks Decl., ¶2 and Ex. 1, p. 3.

Plaintiff also attests that some of the packages he picked up originated from out of state. ROA 58, Plaintiff’s Decl., ¶4.

Plaintiff also argues, however, that the “transportation worker” exemption to the FAA applies. ROA 56, Opp., p. 4. Section 1 of the FAA exempts FAA coverage to “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” (9 U.S.C. § 1, emphasis added.)

Plaintiff contends that he qualifies for an exemption under the FAA as a “transportation” worker, which would mean he can pursue his class claims in court notwithstanding the class action waiver in the arbitration agreement. (Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105, 109; Betancourt v. Transportation Brokerage Specialists, Inc. (2021) 62 Cal. App. 5th 552.)

Plaintiff was employed by Defendant as a delivery driver, who “picked up packages from an Amazon warehouse and delivered them to customers in California.” ROA 58, Fevery Decl., ¶4. Plaintiff essentially completed the “last leg” delivery of Amazon packages.

In arguing Plaintiff is not exempt from the FAA as a transportation worker engaged in interstate transport, Defendant’s owner declares: “[Plaintiff] provided delivery services for JLL and did so at JLL’s direction, which included picking up packages from an Amazon warehouse in Newport Beach, California, and delivering them locally. Like the rest of JLL’s delivery employees, Plaintiff only picked up and delivered packages within the State of California; he never left California to make any deliveries.” ROA 48, Jacks Decl. ¶ 3.

Plaintiff responds that even though he himself was not crossing state lines, he classifies as a transportation worker engaged in interstate commerce because his deliveries were the final portion of interstate deliveries.

Several courts have looked at the issue of what constitutes a transportation worker for purposes of the FAA exemption. The U.S. Supreme Court recently found that a Southwest Airlines cargo loader whose job required “her to load and unload baggage, airmail, and commercial cargo on and off airplanes that travel across the country,” belonged to a “class of workers engaged in foreign or interstate commerce” that is exempted from the FAA. (Southwest Airlines Co. v. Saxon (2022) 142 S. Ct. 1783, 1787.) The U.S. Supreme Court stated that a transportation worker “must at least play a direct and ‘necessary role in the free flow of goods’ across borders,” or “[p]ut another way. . . must be actively ‘engaged in transportation’ of those goods across borders via the channels of foreign or interstate commerce.” (Id. at 1790.) The high court concluded that “any class of workers directly involved in transporting goods across state or international borders falls within [9 U.S.C.] § 1’s exemption.” (Id. at 1789.)

Other courts have specifically found that local delivery drivers such as Plaintiff that only drive within state lines may still be within the exemption if they are the final part of the distribution line of goods that have been transported across state lines. (Rittmann v. Amazon.com, Inc. (9th Cir. 2020) 971 F.3d 904, 915 [“AmFlex delivery providers are a class of workers that transport packages through to the conclusion of their journeys in interstate and foreign commerce.”].) Significantly, the employee must still be involved in the “transportation” aspect of the work, and not simply have a job that is related to goods that at some point have crossed state lines. (See, e.g., Muller v. Roy Miller Freight Lines, LLC (2019) 34 Cal. App. 5th 1056, 1069 [truck driver fits under exemption because “over 99 percent — of the goods Muller transported originated across state lines,” so “even though Muller was not personally transporting goods from state to state, he played an integral role in transporting those goods through interstate commerce” and because he was subject to federal regulations].)

Here, as a delivery driver directly involved in the chain of interstate transport of goods, Plaintiff has shown the exemption to the FAA applies. In these circumstances, it does not matter that Plaintiff never himself crossed state lines. (Betancourt v. Transportation Brokerage Specialists, Inc., supra, 62 Cal. App. 5th 552 [no matter if deliveries were purely intrastate as delivery to customers was the final portion of the packages’ interstate journeys]; Nieto v. Fresno Beverage Co. (2019) 33 Cal. App. 5th 274, 284 [deliveries were last phase of a “journey of the interstate commerce” for the out-of-state beverages to reach customers]; Rittmann v. Amazon.com, Inc., supra, 971 F.3d at 907 [drivers delivering packages from California Amazon warehouses to California Amazon customers are exempt from the FAA, even if they do not cross state lines]; Romero v. Watkins & Shepard Trucking, Inc. (9th Cir. 2021) 9 F.4th 1097 [delivery driver who did not personally cross state lines, but delivered furniture and carpet that originated from out of state to retail stores in California was exempt from the FAA].)

Defendant attempts to distinguish Rittmann by arguing the facts are istinguishable since the Rittman court focused on the activities of the employer, i.e., since the drivers there directly contracted with Amazon, the exemption applied. ROA 60, Reply at p. 8. The Court is not persuaded.

Saxon instructs the exemption applies if there is active engagement in transport, which is not difficult to find here. (Southwest Airlines Co. v. Saxon (2022) 142 S. Ct. 1783, 1790 [the critical question is whether the workers are actively “engaged in transportation” of goods in interstate commerce and play a “direct and necessary role in the free flow of goods across borders”].) Arguably, the plaintiff’s connection to interstate commerce in Saxon was more attenuated than Plaintiff’s here.

Defendant also appears to offer new argument in the Reply that because the arbitration agreement was not part of an “employment contract”, the exemption does not apply. (Reply at 3 [citing Magana v. DoorDash, Inc. (N.D. Cal. 2018) 343 F.Supp. 3d 891, 899.) However, even if this new argument is entertained, Defendant has already argued the Agreement is a binding contract to arbitrate disputes between the parties, and the Arbitration Agreement expressly covers claims “arising out of or relating to [Plaintiff’s] application, hiring, hours worked, services provided, and/or employment with [Defendant] or the termination thereof…” ROA 48, Ex. 1 at p. 1. The Arbitration Agreement also provides, “I further agree and acknowledge that my acceptance of or continuing employment with the Company provides further evidence of my agreement to accept and be bound by the terms of this [arbitration] Agreement.” Id. at p. 3. Thus, the argument the arbitration agreement must be integrated into a formal “employment contract” fails.

California Law

Since the FAA does not apply, California’s state law determines whether the Arbitration Agreement is enforceable. California law favors enforcement of arbitration agreements, save upon grounds that exist at law or in equity for the revocation of any contract, such as unconscionability. (Code Civ. Proc. § 1281; Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 113–114.)

Labor Code § 229

Under Labor Code § 229, “[a]ctions to enforce the provisions of this article [i.e., §§ 200-244] for the collection of due and unpaid wages claimed by an individual may be maintained without regard to the existence of any private agreement to arbitrate.”

Relying principally on Lane v. Francis Capital Mgmt. LLC (2014) 224 Cal.App.4th 676, Defendant argues that Plaintiff's first, second, fifth, sixth, seventh and eight causes of action fail to properly constitute claims for the collection of due and unpaid wages. However, Lane has effectively been overruled in so far as it held that a claim for the one hour premium payment for a missed meal or rest break pursuant to Labor Code § 226.7 was not a claim for unpaid wages.

In Naranjo v. Spectrum Security Services, Inc. (2022) 13 Cal.5th 93, the California Supreme Court squarely addressed the question whether a claim pursuant to Labor Code § 226.7 was a claim for unpaid wages, and after a detailed analysis concluded as follows: “In short, missed-break premium pay constitutes wages for purposes of Labor Code section 203, and so waiting time penalties are available under that statute if the premium pay is not timely paid." (Id. at 117.) In reaching this conclusion, the California Supreme Court further confirmed that “overtime premium pay has always also been understood as wages for purposes of Labor Code section 200 and related statutes.” (Id., at 107.)

Defendant suggests that Naranjo should be narrowly read and in particular should not be read as overruling Lane in the context of Labor Code § 229. The Court disagrees that Naranjo can be so limited. The California Supreme Court there stressed the broad definition of wages: “As noted, the Labor Code defines the term [wages] broadly, to encompass ‘amounts for labor performed . . . of every description.’ (Lab. Code § 200, subd. (a)).” And in interpreting the Labor Code, the California Supreme Court rejected the argument that terms therein should be differently defined for different purposes. (Naranjo, 13 Cal. 5^th at 110 [“Spectrum also seeks to limit Murphy on the ground that it was a case about the statute of limitations, not any provision of the Labor Code governing the payment or reporting of wages. On this point, at least, Spectrum is correct. But nothing in Murphy's conclusion that premium pay constitutes wages was specific to the statute of limitations context; the conclusion instead rested on consideration of the text of Labor Code sections 200 and 226.7, as well as the legislative history underlying section 226.7. Those are the very same provisions at issue here, and they are equally susceptible to the interpretation that Murphy gave them, for the reasons Murphy gave, when we consider how those provisions interact with the Labor Code's prompt wage payment requirements.”].)

Applying the holding in Naranjo to this case, the Court concludes as follows:

The First Cause of Action (failure to pay minimum wages) relies on Labor Code sections 204, and 1194 et seq. The FAC alleges that Defendant "knowingly failed to pay to Plaintiff and the Class compensation for all hours they worked" and seeks the recovery of “all unpaid minimum wages." (¶¶ 33, 40 and Prayer ¶¶4, 5.) Accordingly, the Court finds that the First Cause of Action seeks to collect due and unpaid wages and is subject to the provisions of Labor Code section 229.

The Second Cause of Action (failure to pay overtime compensation) relies on Labor Code §§ 204, 510, 1194, 1198. The FAC alleges that Defendant failed to pay employees for all overtime worked and seeks “recovery of overtime wages,” among other things. ROA 24, FAC, ¶¶ 45, 46, 49 and Prayer ¶¶10-11. Accordingly, the Court finds that the Second Cause of Action seeks to collect due and unpaid wages and is subject to the provisions of Labor Code section 229.

The Third Cause of Action (failure to provide required meal periods) and the Fourth Cause of Action (failure to provide required rest periods) rely on Labor Code sections 226.7 and 512. The FAC alleges the missed breaks and claims the one additional hour of compensation for each missed break. ROA 24, FAC, ¶¶53 and 57, and Prayer, ¶¶16, 21. For the reasons noted above, this compensation constitutes wages. Accordingly, the Court finds that the Third and Fourth Causes of Action seek to collect due and unpaid wages and are subject to the provisions of Labor Code section 229.

The Sixth Cause of Action (failure to pay wages of discharged employees) relies on Labor Code §§ 201, 202, and 203, and the FAC alleges that Defendant failed to pay terminated Class Members “their wages earned and unpaid at the time of discharge or within seventy-two (72) .” ROA 24, FAC, ¶65. The FAC seeks payment of all compensation owed at the time of termination of the employment. ROA 24, FAC ¶66 and Prayer ¶30.) Accordingly, the Court finds that the Sixth Cause of Action seeks to collect due and unpaid wages and is subject to the provisions of Labor Code § 229.

The Eighth Cause of Action under California Business and Professions Code §§ 17200 et seq. (UCL) alleges failure to pay minimum and overtime wages, failure to provide meal and rest periods (among others), specifically alleges violations of Labor Code § 226.7, among others, and seeks, among other things, "restitution of the wages withheld and retained by Defendant." ROA 24, FAC, ¶¶82, 83, 85, 86, 95 and Prayer ¶¶40 and 41.

The California Supreme Court has determined that wages can be recovered as restitution under the UCL. (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1149 [“ In Cortez, we determined that “earned wages that are due and payable pursuant to section 200 et seq. of the Labor Code are as much the property of the employee who has given his or her labor to the employer in exchange for that property as is property a person surrenders through an unfair business practice.” (Ibid.) Therefore, we concluded that such wages could be recovered as restitution under the UCL.”]. Accordingly, the Court finds that the Eighth Cause of Action seeks to collect due and unpaid wages and is subject to the provisions of Labor Code section 229.

The Fifth Cause of Action (failure to reimburse employees for required expenses) and Seventh Cause of Action (failure to provide accurate itemized statements) do not constitute claims for due and unpaid wages, and are not otherwise subject to the provisions of Labor Code § 229.

Class Waiver

The Arbitration Agreement contains a class waiver. Under Gentry v. Superior Court (2007) 42 Cal.4th 443, a court may refuse “to enforce [a class] waiver [in an arbitration agreement] on grounds of public policy or unconscionability.” (Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 360.) Under subsequent decisions of the United States Supreme Court, Gentry’s rule is preempted in cases where the FAA applies. (See id., at pp. 362-366.)

Here, the FAA is inapplicable, so Gentry governs. Gentry identifies four factors that inform whether courts should decline to enforce a class waiver as contrary to public policy. The factors are: “the modest size of the potential individual recovery, the potential for retaliation against members of the class, the fact that absent members of the class may be ill informed about their rights, and other real world obstacles to the vindication of class members’ right to overtime pay through individual arbitration.” (Gentry, supra, 42 Cal.4th at 463.)

As to the first factor, “individual awards in wage-and-hour cases tend to be modest.” (Id. at 457.) The first factor favors declining enforcement.

As to the second factor, the operative FAC alleges that Plaintiffs are current or former employees of Defendant. ROA 24, FAC ¶¶ 2, 23-26. “A current employee who individually sues his or her employer is at greater risk of retaliation.” (Gentry, supra, 42 Cal.4th at 459.) The second factor favors declining enforcement.

As to the third factor, “it may often be the case that the illegal employer conduct escapes the attention of employees. Some workers, particularly immigrants with limited English language skills, may be unfamiliar with the overtime laws. [Citation.] Even English-speaking or better educated employees may not be aware of the nuances of overtime laws with their sometimes complex classifications of exempt and nonexempt employees. [Citation.]” (Gentry, supra, 42 Cal.4th at 461.) This case, of course, concerns Defendant’s alleged violation of wage and hour laws. The third factor favors declining enforcement.

As to the fourth factor, requiring class members to individually arbitrate their wage and hour claims would present real world obstacles to vindication of their rights. For example, to the extent the policies in Defendant’s employee handbook are at issue, which Defendant argues (ROA 60, Reply at p. 8), individual employees would have to prove those policies repeatedly in separate arbitrations that have no precedential or preclusive effect, even though the policies could not be meaningfully disputed by Defendants. This is a waste of resources that presents an obstacle to vindication of class members’ rights. The fourth factor therefore favors declining enforcement.

Taking the foregoing into account, the Court finds the class waiver is unenforceable.

PAGA Waiver

Because the FAA is inapplicable, Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906 has no application here. Instead, the Court applies the holding of Iskanian that pre-dispute PAGA waivers are unenforceable. (Iskanian, supra, 59 Cal.4th at 387.) Nor may PAGA claims be compelled to arbitration based on a pre-dispute agreement when the FAA is inapplicable. (See Betancourt v. Prudential Overall Supply, supra, 9 Cal.App.5th at 446 [“Therefore, while a PAGA action might be subject to arbitration, relying on a predispute agreement with a private party will not suffice to compel arbitration of a PAGA claim.”].) As a result, the PAGA waiver is unenforceable and Plaintiff’s PAGA claims cannot be ordered to arbitration.

The Court sets an arbitration review hearing on February 23, 2024 at 9 AM. The parties are ordered to file a joint status report not later than February 16, 2024.

The status conference is off calendar.

Defendant is ordered to give notice.