Arbitration Denied. Mendez v. Mid-Wilshire Health

Defendant Mid-Wilshire Health Care Center appealed from an order denying its motion to compel arbitration and to stay a wrongful termination action by plaintiff Maribel Mendez. The Court of Appeal holds hold that the arbitration provision in the collective bargaining agreement governing Mendez’s employment does not apply to Mendez’s statutory discrimination claims. Affirmed.

The trial court denied Mid-Wilshire‟s motion to compel arbitration of all of Mendez‟s claims, statutory and common law. Because the collective bargaining agreement did not clearly and unmistakably refer Mendez‟s statutory discrimination claims to arbitration, the trial court properly denied Mid-Wilshire‟s motion to compel arbitration of those claims. With respect to Mendez‟s common law claims, Mid-Wilshire has not presented any legal argument that the trial court‟s denial of Mid-Wilshire‟s motion to compel arbitration of those claims was erroneous. We therefore deem any claim of error forfeited.

The full opinion can be read here in Word or PDF.

© Walsh & Walsh, P.C., arbitration, published opinions

California Supreme Court Narrowly Applies AT&T

In Sonic-Calabasas A, Inc. v. Moreno (2011) 51 Cal.4th 659 (Sonic I), the California Supreme Court held as a categorical rule that it is contrary to public policy and unconscionable for an employer to require an employee, as a condition of employment, to waive the right to a Berman hearing, a dispute resolution forum established by the Legislature to assist employees in recovering wages owed. It further held that the rule prohibiting waiver of a Berman hearing does not discriminate against arbitration agreements and is therefore not preempted by the Federal Arbitration Act, and that, if one of the parties is dissatisfied with the result of the Berman hearing, it can move to arbitrate the wage dispute consistent with the arbitration agreement, just as a dissatisfied party can obtain a trial in court without such an agreement.

The United States Supreme Court granted certiorari, vacated the judgment, and remanded the case for consideration in light of AT&T Mobility LLC v. Concepcion (2011) 563 U.S. __,  131 S.Ct. 1740. In Concepcion, the court clarified the limitations that the FAA imposes on a state’s capacity to enforce its rules of unconscionability on parties to arbitration agreements. In light of Concepcion, the Californa Supreme Court concludes that because compelling the parties to undergo a Berman hearing would impose significant delays in the commencement of arbitration, the approach in Sonic I is inconsistent with the FAA. Accordingly, the FAA preempts any state law categorically prohibiting waiver of a Berman hearing in a predispute arbitration agreement imposed on an employee as a condition of employment.

Nonetheless, state courts may continue to enforce unconscionability rules that do not “interfere[] with fundamental attributes of arbitration.” (Concepcion, supra, 563 U.S. at p. __ [131 S.Ct. at p. 1748].

Although a court may not refuse to enforce an arbitration agreement imposed on an employee as a condition of employment simply because it requires the employee to bypass a Berman hearing, such an agreement may be unconscionable if it is otherwise unreasonably one-sided in favor of the employer.

Furthermore, the Berman statutes confer important benefits on wage claimants by lowering the costs of pursuing their claims and by ensuring that they are able to enforce judgments in their favor. There is no reason why an arbitral forum cannot provide these benefits, and an employee’s surrender of such benefits does not necessarily make the agreement unconscionable. The fundamental fairness of the bargain, as with all contracts, will depend on what benefits the employee received under the agreement’s substantive terms and the totality of circumstances surrounding the formation of the agreement.

The employee in Sonic II contends that the particular arbitration scheme at issue is unconscionable, while the employer contends that its arbitration agreement offers adequate protections and advantages to facilitate the employee’s claim and is not unreasonably one-sided. Because evidence relevant to the unconscionability claim was not developed below, the Supreme Court remands the matter to the trial court to determine whether the present arbitration agreement is unconscionable under the principles set forth in Sonic II.

The full opinion in Sonic II can be downloaded here in Word or PDF.

© Walsh & Walsh, P.C., arbitration, published opinions

Ninth Circuit Affirms Denial of Motion to Compel Arbitration

The Ninth Circuit has affirmed a district court’s denial of defendant grocery company’s motion to compel arbitration in an action asserting claims under California labor law on behalf of the plaintiff and a proposed class of other grocery employees. Chavarria v. Ralphs Grocery Store (9th Cir. 11-56673 10/28/13)

Ralph sought to compel arbitration of an individual claim pursuant to its arbitration policy, to which all employees acceded upon submitting applications for employment. The 9th Circuit affirmed the district court’s holding that the arbitration policy was unconscionable under California contract law and therefore unenforceable. It  was procedurally unconscionable because it was a condition of applying for employment and was presented on a “take it or leave it” basis.In addition, its terms were not provided to the plaintiff until three weeks after she had agreed to be bound by it. It was  substantively unconscionable because it was unjustifiably one-sided to such an extent that it “shocked the conscience.” Specifically, the arbitrator selection process would always produce an arbitrator proposed by the defendant in employee-initiated arbitration proceedings; the policy precluded institutional arbitration administrators, which have established rules and procedures to select a neutral arbitrator; and the policy’s arbitrator-fee-apportionment provision would have the effect of pricing employees out of the dispute resolution process.

The decision distinguishes Kilgore v. Key Bank National Ass’n (9th Cir. 2013) 718 F.3d 1052 (the mere risk that plaintiff will face prohibitive costs is too speculative to justify invalidating arbitration agreement), on the ground that the fee provision was not speculative and there were other unconscionable terms.

State law supporting the unconsionability holding was not preempted by the FAA because it applies to contracts generally and did not in practice impact arbitration agreements disproportionately. The Supreme Court’s decision in American Express Corp. v. Italian Colors Restaurant (2013) __ U.S.__, 133 S. Ct. 2304 did not preclude the court from considering the cost that the defendant’s arbitration agreement imposed on employees in order for them to bring a claim.

The matter is remanded for further proceedings.

© Walsh & Walsh, P.C., federal appeals, arbitration

Review Granted - Mendiola v. CPS Security Solutions

The California Supreme Court has granted review in Mendiola v. CPS Security Solutions (2013) 159 Cal.Rptr.3d 159 on the following issues:

Petition for review after the Court of Appeal affirmed in part and reversed in part an order granting a preliminary injunction in a civil action. This case presents the following issue: Are the guards that defendants provide for construction site security entitled to compensation for all nighttime "on call" hours, or may defendants deduct sleep time depending on the structure of the guards' work shifts?

The original opinion can be read here. The Court of Appeal held that

CPS must compensate the trailer guards for the nighttime hours spent on the jobsites during the week, as the trial court ruled. However, in accordance with settled principles of California law, we conclude that CPS is permitted to deduct eight hours for sleep time on those weekend days when the trailer guards are on duty for 24 hours.

The docket can be followed here.

© Walsh & Walsh, P.C., wage & hour, California Supreme Court published opinions, on call hours, off-the-clock claims

SCOTUS Strictly Enforces 9 U.S.C. § 2 - American Express Co. v. Italian Colors Restaurant

In another 5-4 decision, the Supreme Court has again declared its passion the Federal Arbitration Act, and specifically for 9 USC § 2 - Validity, irrevocability, and enforcement of agreements to arbitrate. Section 2 provides:

A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

In American Express Co. v. Italian Colors Restaurant (2013) __ U.S. __ [No. 12-133) the Supreme Court extended its recent trend of rejecting challenges to the FAA, and arbitration agreements containing class action waivers, holding that a contractual waiver of class arbitration is enforceable under the FAA even where the cost of pursuing individual arbitration claims exceeds the amount in controversy. Although this is not an employment case and the plaintiff was a business entity and not an individual, the holding in American Express Co. v. Italian Colors Restaurant will likely have a substantial impact on employment class action litigation.

Barring a change in the FAA or a change in the majority bloc of justices on the Supreme Court, there may be only three ways left to avoid class action waivers in employee/employer arbitration agreements: disproving the existence of the agreement; invalidating the agreement under state unconscionability law or some other state law that is generally applicable to all contracts, and not just arbitration agreements; or suing under a federal statute that guarantees the plaintiff's right to bring a class action.

You can read the entire opinion in American Express Co. v. Italian Colors Restaurant here in PDF.

Heyen v Safeway - A Primary Purpose Test for Overtime Exemption

The Court of Appeal has applied a primary purpose test to the case of a store manager classified as exempt by her employer, and found that the employee was misclassfied. In Heyen v. Safeway (2013) ___ Cal.App.4th ___, the court was called upon to decide how to characterize time spent on nonexempt tasks when the manager is also simultaneously responsible for management and supervision.

Plaintiff/respondent Linda Heyen is a former assistant manager for defendant/appellant Safeway Inc. (Safeway).  After Safeway terminated her employment, Heyen brought this action to recover unpaid overtime pay, contending Safeway should have classified her as a “nonexempt” employee because she regularly spent more than 50 percent of her work hours doing “nonexempt” tasks such as bagging groceries and stocking shelves.  An advisory jury and the trial court agreed with Heyen and awarded her overtime pay of $26,184.60, plus interest. 

Safeway appeals, contending that the trial court failed to properly account for hours Heyen spent simultaneously performing exempt and nonexempt tasks—i.e., “actively . . . manag[ing] the store while also concurrently performing some checking and bagging of customer grocery purchases.”  Safeway urges that, consistent with federal law, the trial court should have classified as “exempt” all hours during which Heyen simultaneously performed exempt and nonexempt tasks.  Because the court failed to do so, Safeway claims it prejudicially erred, requiring a reversal of the judgment.  

We disagree with Safeway’s analysis as inconsistent with California law.  Hence, we affirm the judgment for Heyen.

Essentially, the argument presented by employers in this sort of situation is to claim that while a manager might be bagging groceries, or sweeping floors or ringing up sales, they also are observing their subordinates, overseeing the general operations of the store and other tasks that fall upon exempt managers, therefore, the time spent sweeping floors should count as time spent on exempt tasks for the purpose of meeting the 50% time test required to prove that the manager is "primarily engaged in duties which meet the test of the exemption" from overtime pay.

In this case, the trial court instructed the jury as follows:

“If a party claims that an employee is engaged in concurrent performance of  an exempt and non-exempt work, you must consider that time to be either an exempt or a non-exempt activity depending on the primary purpose for which the employee undertook the activity at that time.  The nature of the activity can change from time to time.”

So time spent for each task, or each period of multitasking, had to be evaluated either as primarily exempt work, or primarily nonexempt work. If it was primarily nonexempt work, it was nonexempt work even if the manager was simultaneously making sure that nothing was happening that needed a manager's intervention at the time. Applying that standard, the managers were found to be nonexempt.

The opinion contains a very good discussion of the federal regulations on this subject, as well as a discussion of the employer's "reasonable expectations" defense that was found lacking in this particular case. You can download the entire opinion in Heyen v. Safeway here in PDF or Word.