Al Mohajerian

Here is how an arbitration contract can be found procedurally and substantively unconscionable.

May 8, 2019


Court of Appeals of California, First District, Division Two.

Filed April 10, 2019.  (2019 DJDAR 3080)

Here, subcontracting Concepts CT, LLC (“SCI”); Jesus Fernando Gonzalez; and Pedro Luesch (Appellants”) appeal from the trial court’s order denying their petition to compel arbitration and stay proceedings, brought against Chafie Gabriel Pereira Moreira De Melo (“Respondent”) in this matter arising from Respondent’s administrative wage claim, filed with the California Labor Commissioner, against appellants challenge the trial court’s findings that the arbitration agreement between SCI and Respondent was (1) procedurally and substantively unconscionable, and (2) so permeated with unconscionability that severance of the unconscionable terms was not possible.

Respondent was hired by Express Messenger Systems, Inc., doing business as OnTrac and SCI in June 2014, at which time he signed SCI’s “Owner/Operator Agreement” (Agreement). The Agreement is five pages long, typed in small font, and made up of 27 numbered clauses, including the arbitration clause at issue here, which is the 26th clause in the agreement. The arbitration clause provides that if the parties are unable to negotiate and settle a dispute, then the dispute “within the jurisdictional maximum for small claims will be settled in the small claims court where the Owner/Operator resides. All other disputes, claims, questions, or differences beyond the jurisdictional maximum for small claims courts within the locality of the Owner/Operator’s residence shall be finally settled by arbitration in accordance with the Federal Arbitration Act.” The arbitration agreement prohibited Respondent to join or consolidate claims in arbitration by or against other individuals or entities, or arbitrate any claim as a representative member of a class or in a private attorney general capacity. The agreement stated that the arbitrators will have authority to award actual monetary damages only. No punitive or equitable relief is authorized.

All parties shall bear their own costs for arbitration and no attorney’s fees or other costs shall be granted to either party, a panel of 3 Arbitrators and the parties shall have the discretion to examine up to three (3) witnesses per party. Each deposition shall be limited to a maximum of two (2) hours. Any objections based on privilege and/or confidential information will be reserved for arbitration.

Evidence surrounding the hiring established that Respondent answered an ad and went to an OnTrac/SCI warehouse, where he was told he had to sign employment documents “on the spot” to get a job and be matched with a supervisor. Respondent needed a job and felt he had to sign the documents. Respondent’s native language is Portuguese, and he is not fluent enough in English to fully understand documents written in English. No one asked if he wanted the documents translated into Portuguese and no one explained the documents to him in detail in either English or Portuguese.

Respondent was not given time to carefully review the employment documents at the warehouse and no one told him he could have an attorney review the documents or that he could negotiate their terms before he signed them. Nor did anyone tell him about any rights he might be giving up by signing the documents. He did not know and was not told that New York law applied to the documents or that he would be forced to go to arbitration in case of an employment-related dispute. He did not know or understand the meaning or purpose of arbitration, the rules and procedures related to arbitration, that [he] would have to pay the cost of arbitration, or that [he] was giving up payments of attorneys’ fee[s] and penalties by going to arbitration. When he signed the employment documents, he was not given rules for the American Arbitration Association or any other arbitration association. In other words and effect, the employer said here’s the agreement, take it and be happy, live with it and eat or leave it and head on over to the bread line. These cumulative restrictions on Respondent’s rights caused the trial court to throw out the arbitration agreement on both procedurally and substantively unconscionable grounds.   On appeal, appellants challenge the trial court’s findings that the arbitration agreement between SCI and respondent was (1) procedurally and substantively unconscionable, and (2) permeated with unconscionability and that that severance of the unconscionable terms was impossible. The Court affirmed the trial court’s order.

The Appellants spent a lot of time challenging the right of Respondent to seek LC relief, arguing that he was an independent contractor and the rules relating to procedural and substantive unconscionability did not apply. However, this argument was shot down long ago in Wherry v. Award, Inc. (2011) 192 Cal.App.4th 1242 where it was specifically stated, “[T]hat plaintiffs are independent contractors and not employees makes no difference in this context. The contract by which they were to work for defendants contained a mandatory arbitration provision.” Id. at 1249.  The Court of Appeals affirmed the trial court’s findings that the agreement was both procedurally & substantively unconscious.

Also Armendariz v. Foundation Health Psychcare Services, Inc  (2000) 24 Cal.4th 83  provides excellent discussion of the law and both procedural and substantive unconscionability.   See

Filed Under: Class Action (Employment)Labor & Employment

Employers can impose an arbitration agreement on employees without their consent.

May 8, 2019

DIAZ v. SOHNEN ENTERPRISES, et al., Court of Appeals of California, Second District, Division Seven.

Filed April 10, 2019. (2019 DJDAR 3032

Sohnen Enterprises appeals from the denial of its motion to compel arbitration of claims brought by its employee, Erika Diaz (“Diaz”). Diaz, an employee of Sohnen Enterprises, filed a complaint alleging workplace discrimination on December 22, 2016. Twenty days earlier, on December 2, 2016, she and her co-workers received notice at an in-person meeting that the company was adopting a new dispute resolution policy requiring arbitration of all claims. At that meeting, the COO of Sohnen informed all employees present, including Diaz, about the new dispute resolution agreement. She included in her explanation that continued employment by an employee who refuses to sign the agreement would itself constitute acceptance of the dispute resolution agreement. According to the COO, the explanation was provided in both English and in Spanish. All employees received a copy of the agreement to review at home.

On December 19, 2016, representatives of the company met privately with Diaz, who had indicated on December 14 that she did not wish to sign the agreement. Diaz was again advised, in Spanish and English, that continuing to work constituted acceptance of the agreement. On December 23, 2016, Diaz and her lawyer presented to Sohnen a letter dated December 20, 2016 rejecting the agreement but indicating that Diaz intended to continue her employment. On the same date, Diaz also served the complaint on Sohnen, who then sent a demand for arbitration to Diaz’s counsel, based on the fact of Diaz’s continued employment at the company. Counsel for Diaz did not reply. Sohnen filed its motion to compel arbitration in April. Diaz filed opposition in May. The trial court heard argument, and denied the motion, holding that the agreement was a contract of adhesion, e.g., a “take it or leave it contract.” The trial court conducted no factual findings to address whether the arbitration agreement was a either procedurally or substantively unconscionable.   Under the facts of this case, is the arbitration agreement a contract of adhesion? The Court reversed, hold that continued employment demonstrated implied acceptance of change in job security rules.

It has been settled law now for some time that when an employee continues her employment after notification that an agreement to arbitration is a condition of continued employment, that employee impliedly consents to the arbitration agreement, see, Pinnacle Museum Tower Assn. v. Pinnacle Market Development(US), LLC (2012) 55 Cal.4th 223, 236; Harris v. TAP Worldwide, LLC (2016) 248Cal.App.4th 373, 383; Craig v. Brown & Root, Inc.(2000) 84 Cal.App.4th 416, 420.

Plaintiff relied on two cases where the employees were given employer/employee handbooks and told that they needed to sign the agreement contained in the handbook or the handbook and if they did not sign the agreement, it would not be effective until they did so! That was not the case here. Diaz was told twice, in both Spanish and English, that her employment was now contingent upon her agreeing to arbitrate.

Filed Under: Class Action (Employment)Labor & Employment

A hirer of an independent contractor is not liable for the negligence of the independent contractor.

May 8, 2019

JOHNSON, v. THE RAYTHEON COMPANY, INC. Court of Appeals of California, Second District, Division Eight.

Filed March 8, 2019. (2019 DJDAR 2627)

A hirer of an independent contractor is not liable for the negligence of the independent contractor.  In the case of  Privette v. Superior Court (1993) 5 Cal.4th 689, stands for the general principal that “a hirer of an independent contractor is not liable for the negligence of the independent contractor.” There are two exceptions to the Privette rule and practitioners should know them.

(1) The Hooker exception, Hooker v. Department of Transportation (2002) 27 Cal.4th 198, 202. Hooker provides for hirer liability only when facts are adduced to show that the hirer retains control and when retained control is negligently exercised in a manner that affirmatively contributes to the accident. Specifically, the Privette doctrine allows for liability when the hirer of the independent contractor retains control over safety conditions at the worksite, and negligently exercise that retained control in a manner which affirmatively contributes to the employee’s injuries. The second exception is the Kinsman exception.

(2) In Kinsman v. Unocal Corp. (2005) 37 Cal.4th 659, the Court put forth a second Privette exception and set forth the limited circumstances in which the hirer of an independent contractor can be liable to an employee of that contractor for hazardous conditions of its property, stating that “[A] landowner that hires an independent contractor may be liable to the contractor’s employee if the following conditions are present: the landowner knew, or should have known, of a latent or concealed preexisting hazardous condition on its property, the contractor did not know and could not have reasonably discovered this hazardous condition, and the landowner failed to warn the contractor about this condition.” Id. at 664).

Filed Under: Labor & Employment

Collective Bargaining Agreement does not trump LC §201 when there is no dispute as to any terms in the agreement.

May 8, 2019


April 25, 2019 (2019 DJDAR 3432)

The Supreme Court held that Section 301(a) does not preempt this lawsuit. The decision was unanimous:  George Melendez, (“Plaintiffs”) a security guard at the park, was the lead plaintiff in this putative class action against the Francisco Baseball Associates LLC (“Giants”). He contended that he and other security guards were employed intermittingly for specific job assignments (baseball games or other events) and were discharged at the end of a homestand, at the end of a baseball season, at the end of an inter-season event like a fan fest, college football game, a concert, a series of shows, or other events, and that under California Labor Code (“LC”), they were entitled to but did not receive immediate payment of their final wages upon each such discharge. Plaintiffs seek to recover penalties under LC, §203 for the Giants failure to pay them immediately after each such discharge.  The Giants seek to invoke Section 301(a) of the Labor Management Relations Act of 1947. (“Section 301(a),” claiming that the Collective Bargaining Agreement (“CBA”) controls. California’s LC, §201(a) states, “[I]f an employer discharges an employee, the wages earned and unpaid at the time of discharge are due and payable immediately.” §201(a) Plaintiffs are suing the Giants for allegedly violating §201(a). They claim they are discharged after every Giants homestand, at the end of the baseball season, and after other events at the park, and they are entitled under LC, §201)a) to receive their unpaid wages immediately after each such discharge. The Giants deny that the security guards are discharged on those occasions. They contend that LC, §204, which generally requires semimonthly payment of employees’ wages, applies to the guards.

The issue before the Supreme Court is when is a discharge not a discharge under LC, §201?Plaintiffs contend that “discharge” means discharge and that the interpretation of their CBA does not come into play in this case. Defendants contend that this lawsuit requires interpretation of the CBA that the guards union has entered into with the Giants. This is significant because if the Giants win, the case would be referred to federal court under Section 301(a). That section provides:  “[S]units for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce as defined in this chapter, or between any such labor organizations, may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties,” [under the broad meaning] of 301(a).  The Giants contend that the security guards are not intermittent employees but are year-round employees who remain employed with the Giants until they resign or are terminated pursuant to the CBA. To support this contention, they cite provisions of the agreement entered into between the Giants and the union that represents the security guards, the Service Employees International Union, United Services Workers West of San Francisco. Under the CBA, the classification of employees is based on the number of hours worked in a year, itself suggesting that employment is considered to continue beyond the conclusion of each event. Continued classification as a regular employee requires at least 1,700 hours of work in a year. All employees shall be probationary employees for their first five hundred (500) hours of work with the Giants. Employees rise to senior and super senior status by working a minimum of 300 hours each year for the last five or 10 years, hardly possible if each event is deemed a separate employment, the Giants claim.

The merit of the Plaintiffs’ case is not at issue here, only whether the CBA trumps LC §201, when there is no dispute as to any terms in the CBA, e.g., whether its language preempts LC §201.The trial court denied the Giant’s motion to compel arbitration. The Court of Appeals reversed and ruled that Plaintiffs had to submit to arbitration. The Supreme Court reversed the Court of Appeals and held that the meaning of “discharge” turned on its meaning under LC, §201, e.g., state law, and therefore not preempted by Section 301(a).

Filed Under: Labor & Employment

Reporting Time Pay

April 11, 2019

Ward v. Tilly’s, Inc.

Court of Appeal of California, Second Appellate District, Division Three

February 4, 2019, Opinion Filed

Case No B280151

31 Cal. App. 5th 1167 *; 243 Cal. Rptr. 3d 461 **; 2019 Cal. App. LEXIS 95 ***; 2019 WL 421743

HN7 Overtime & Work Periods

Industrial Welfare Commission Wage Order No. 7-2001 (Cal. Code Regs., tit. 8, § 11070) requires reporting time pay if an employee is required to report for work and does report, but is not put to work or is furnished less than half said employee’s usual or scheduled day’s work. § 11070, subd. 5(A). In other words, an employee is owed reporting time pay only if upon reporting for work, she is denied the opportunity to work.

Business & Corporate Compliance > … > Wage & Hour Laws > Scope & Definitions > Overtime & Work Periods

HN8 Overtime & Work Periods

Employers do not trigger reporting time pay requirements merely by expecting employees to apprise themselves of their schedules. It goes without saying that an employee cannot arrive at work on time without knowing when his or her shift begins.

Filed Under: Class Action (Employment)Labor & EmploymentLitigation

Sexual Harassment Prevention Training

April 8, 2019

California law requires two (2) hours of sexual harassment prevention training for all supervisors and one (1) hour of training for non-supervisory employees to be completed before January 1, 2020. Training is required within six (6) months of hire or promotion every two (2) years. Any supervisor or non-supervisor who took the training prior to 2019, will have to retake the training before January 1, 2020 to comply with the SB 1343 requirements. Contact our office to schedule training sessions for your staff. (310) 556-3800 or email us at [email protected]

Filed Under: Labor & Employment

Healthcare Related: No Attorney Fee for Prevailing Defendant in FEGA Case unless Show Plaintiff’s case Was Frivolous.

February 7, 2019

In Huerta (2018 case) The Court of Appeal affirmed the judgment for defendant in an action alleging several violations of Fair Employment and Housing Act (FEHA; Government Code, section 12900 et seq.), but it reversed the trial court’s post judgment order awarding defendant $50,000 in costs and expert witness fees under Code of Civil Procedure section 998 because the trial court found that plaintiff’s action was not frivolous and denied defendant’s request for attorney fees, expert fees and costs under Government Code section 12965(b). For litigation that predates the application of the amended version of section 12965(b) (effective on January 1, 2019), the Court of Appeal ruled that section 998 does not apply to nonfrivolous FEHA actions and therefore reversed the order awarding defendant costs and expert witness fees under section 998.

Filed Under: Healthcare

Employer Law-Published Labor and Employment Cases in December 2018

January 13, 2019

Fresno Superior Court v. PERB (CA5 F075363 12/14/18)
PERB Authority/Court Personnel Rules.
Upholding broad restrictions on employee clothing, ban on solicitation during working hours and ban on displaying images in areas visible to the public, but finding regulations prohibiting distribution of literature in working areas were ambiguous.

Gerard v. Orange Coast Mem. Med. Ctr. (SC S241655A 12/10/18)
Meal Periods/Health Care Employees.
IWC wage order permitting health care employees to waive second meal period for shifts greater than 12 hours does not violate the Labor Code.

Moreno v. Visser Ranch, Inc. (CA5 F075822 12/20/18)
Respondeat Superior/Use of Company Vehicle.
Driver’s use of company truck for personal travel after work, where he was on call 24 hours a day and may have been required to use the truck at all times, can give rise to respondeat superior liability.


Filed Under: Labor & Employment

Employer Update

January 9, 2019

The new law affecting employers’ policies and practices is Senate Bill 1343, which changes the requirements around sexual harassment prevention training as of January 1, 2019. All employers with five or more employees are now required to provide 2 hours of sexual harassment prevention training to supervisors and 1 hour to administrative employees within 6 months of hire or promotion, and every 2 years thereafter. In addition, all employees must complete their training before January 1, 2020. The Department of Fair Employment and Housing determined that the training must be done during the 2019 calendar year. Even supervisors trained in 2018 must be retained. Temporary and seasonal employees must be trained within 30 days of hire or within the first 100 hours of their work, whichever is earlier. Temporary service employers will be responsible for training their employees who are placed with client-employers.

Filed Under: Labor & Employment

Pharmaceuticals: CURES

September 27, 2018

The Controlled Substance Utilization Review and Evaluation System (CURES) was certified for statewide use by the Department of Justice (DOJ) on April 2, 2018. Therefore, the mandate to consult CURES prior to prescribing, ordering, administering, or furnishing a Schedule II–IV controlled substance becomes effective on October 2, 2018. Here is everything you need to know to prepare for October.

Filed Under: Pharmaceuticals