In May 2019, the 9th Circuit issued a ruling in Vazquez v. Jan-Pro Franchising International, Inc. No. 17-16096 (9th Cir. 2019). In Vazquez, the 9th Circuit analyzed whether Jan-Pro’s franchisees were in fact employees, as opposed to independent contractors. The 9th Circuit held that the California Supreme Court’s intervening decision in Dynamex Ops. W. Inc. v. Superior Court of Los Angeles, 4 Cal.5th 903 (2018) is controlling and applies retroactively.
SUBCONTRACTING CONCEPTS (CT), LLC, et al. v. DE MELO, Defendant and Respondent; DEPARTMENT OF INDUSTRIAL RELATIONS, DIVISION OF LABOR STANDARDS ENFORCEMENT, Intervener and Respondent.
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
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.
VAIULA SAVEA, v. YRC INC.
Court of Appeals of California, First District, Division Three.
Filed April 10, 2019 (2019 DJDAR 3087).
The trial court ruled that YRC did not violate section 226(a)(8) by providing its fictitious business name as the employer name on its wage statements or by providing an employer address that did not contain a mail stop code or ZIP+4 Code. The Court decided in favor of YRC’s position, but refused to rule on whether strict compliance, rather than substantial compliance, is required by LC §226(a)(8).
Vaiula Savea (“Savea”) has been an employee of YRC since 1998. During his employment, he and other employees received wage statements from YRC that listed the employer’s name as YRC Freight and the employer address as 10990 Roe Avenue, Overland Park, KS. Savea filed a complaint against YRC alleging YRC failed to provide the correct employer name and address on its wage statements as required by LC, § 226(a)(8). The trial court sustained YRC’s demurrer to the complaint without leave to amend; Savea appealed. He contended the court erred by: (1) determining that the wage statements—which listed YRC’s fictitious business name as the employer name and listed an employer address that did not contain a mail stop code or ZIP+4 Code—a plain violation of section 226, subdivision (a)(8); and (2) the trail court should not have considered supplemental evidence that YRC presented in a request for judicial notice.
Section 226, subdivision (a) requires an employer to provide employees with “an accurate itemized statement” that includes nine specific categories of information: (1) gross wages earned; (2) total hours worked; (3) certain information for employees paid on a piece-rate basis; (4) all deductions; (5) net wages earned; (6) the pay period; (7) the employee’s name and identifying information; (8) the name and address of the legal entity that is the employer; and (9) all applicable hourly rates.
An employee suffering injury as a result of a knowing and intentional failure by an employer to comply with subdivision (a) is entitled to recover the greater of all actual damages or fifty dollars ($50) for the initial pay period in which a violation occurs and one hundred dollars ($100) per employee for each violation in a subsequent pay period, not to exceed an aggregate penalty of four thousand dollars ($4,000); further the employee is entitled to an award of costs and reasonable attorney’s fees. (§ 226(e)(1).) Injunctive relief and civil penalties are also available. (§§ 226 (h), 226.3).YRC demurred to Savea’s complaint on the ground that the complaint failed to state a claim because the employer name and address on its wage statements were accurate.
MAUREEN SALGADO, v. CARROWS RESTAURANTS, INC., et al.,
Court of Appeals of California, Second District, Division Six. Filed February 26, 2019.(2019 DJDAR 2459)
It is difficult for an employee to rescind an arbitration agreement. Courts have ruled that the party opposing arbitration must prove both procedural unconscionability and substantive unconscionability. Procedural unconscionability involves the circumstances of contract negotiation and formation. Substantive unconscionability relates to the fairness of the agreement’s terms, e.g., if the agreement is going to take away the right of trial and then, in addition, impose the same or similar cost of litigation on the party opposing arbitration as it would cost the party to go to trial; that would be just one example of substantive unconscionability.
Here, Maureen Salgado (“Salgado”) began working at Carrows Restaurant in 1984. (“Carrows”) On November 22, 2016, she filed a lawsuit in the Ventura County Superior Court alleging employment discrimination and violation of civil rights against Food Management Partners, dba Carrows Restaurant. In April 2017, she amended her complaint to add Carrows Restaurant and other defendants. In September 2017, Carrows filed a motion to compel arbitration. In that motion Carrows said Salgado “entered into a binding and enforceable agreement to arbitrate all claims arising out of her employment with Defendants, and all causes of action alleged in her Complaint arise out of such employment.” The arbitration agreement was attached to the motion indicate that Salgado signed the agreement on December 7, 2016. Carrows did not request that Salgado consult with her attorney before signing the agreement. The trial court ruled that “Defendants …failed to demonstrate that the arbitration agreement applies to a suit that was filed prior to its signature.” The Court of Appeals (“Court”) had no problem with the enforceability of the arbitration agreement, but questioned whether Carrows knew that Salgado was represented by an attorney when it asked her to sign the agreement. So, the Court had only one question: “Did Carrows know that at the time Salgado signed the arbitration agreement that she was represented by counsel?”
The Court sent the case back to the trial court to determine whether Carrows knew (or should have known) that Salgado was represented by an attorney when Carrows asked her to sign the arbitration agreement. In doing so, the Court noted that otherwise doubts about the enforceability of an arbitration agreement should be resolved “in favor of sending the parties to arbitration,” citing, Cione v. Foresters Equity Services, Inc.(1997) 58 Cal.App.4th 625, 642. The Court further noted that the issue of the extent of coverage of an arbitration agreement should be decided by the trial court and “arbitration should be upheld unless it can be said with assurance that an arbitration clause is not susceptible to an interpretation covering the asserted dispute, citing Cruise v. Kroger Co.(2015)233 Cal.App.4th 390, 397, where the trial court ruled that “… language of the agreement suggest[s] that it applies to future disputes not ones that have already resulted in a formal lawsuit. The Supreme Court has stated that a petition to compel arbitration is not to be granted when there are grounds for rescinding the agreement.” Engalla v. Permanente Medical Group, Inc. (1997)15 Cal.4th 951, 973.