Key California Employment Law Case Summaries: February 2023
Helix Energy Solutions Group Inc. v. Hewitt, 143 S.Ct. 677 (2023)
Employee was eligible for overtime pay under the Fair Labor Standards Act (“FLSA”) because his “daily-rate” plan did not satisfy the FLSA’s salary basis test.
Chamber of Commerce v. Bonta, No. 20-15291, 2023 WL 2013326 (9th Cir. Feb. 14, 2023)
California Assembly Bill 51 (“AB 51”), a California law that prohibits employers from requiring employees to sign arbitration agreements as a condition of employment, is preempted by the Federal Arbitration Act (“FAA”) and unenforceable.
Galarsa v. Dolgen California LLC, No. F082404, 2023 WL 2212196 (Cal. Ct. App. Feb. 2, 2023)
A plaintiff who has been ordered to arbitrate her individual claims for civil penalties pursuant to PAGA can maintain a court action to pursue non-individual PAGA claims seeking civil penalties for alleged Labor Code violations suffered by other employees.
Hill v. Xerox Business Services LLC, 59 F.4th 457 (9th Cir. 2023)
Employer waived right to compel arbitration of individual claims and enforce class waiver where employer engaged in discovery, opposed a motion for class certification on the merits, filed motion for partial summary judgment, pursued an interlocutory appeal, and participated in multiple status conferences during litigation.
Plaintiff Tiffany Hill filed a class action lawsuit against Defendant Xerox Business Services LLC for underpaying wages under the Washington Minimum Wage Act and the Washington Consumer Protection Act. Defendant moved for partial summary judgment on a discrete issue, which the district court denied. The case went to the Court of Appeals for the Ninth Circuit on an interlocutory appeal and was stayed while the court of appeals certified a question to the Washington Supreme Court. While the case was stayed, the several remaining issues in the lawsuit were resolved. When the stay was lifted, the parties argued about the scope of the potential class, at which time Defendant raised the notion of arbitration in earnest because it allegedly needed the scope of the potential class to determine which individual employees signed dispute resolution plans and would be included in the class. In opposing arbitration, Plaintiff argued that Defendant waived its right to arbitrate, given the state of litigation and Defendant’s dispositive motion practice. The district court agreed and denied the motion. Defendant appealed, arguing that seeking arbitration any sooner, without knowing the scope of the class, would have been futile.
The Court of Appeal for the Ninth Circuit affirmed, holding that an employer acts inconsistently with the right to compel arbitration where it continues through litigation, filing a motion for summary judgment and serving discovery (in an attempt to resolve legal issues), before attempting to compel arbitration. The court explained that preserving a defense of arbitration in an answer is not enough to overcome waiver, and the doctrine of futility does not protect an employer waiting on class certification before seeking arbitration.
This case is an important reminder to employers to check early and often for arbitration agreements that may be applicable in a pending lawsuit, and to be diligent in moving to compel arbitration.
Rocha v. U-Haul Co. of California 88 Cal. App. 5th 65 (2023)
Plaintiffs lack standing to maintain a PAGA claim when an arbitration award finds that there was no underlying Labor Code violations.
Plaintiffs Thomas and Jimmy Rocha sought damages for claims under the California Fair Employment and Housing Act (“FEHA”) and Labor Code section 1102.5 against their former employer, U-Haul, and former supervisor, Don Sandusky (“Defendants”). Defendants moved to compel the matter to arbitration. A day after Defendants moved to compel arbitration, Plaintiffs sought leave, on an ex parte basis, to amend their complaint to include Private Attorneys General Act (“PAGA”)-related claims. The superior court granted the motion to compel arbitration and denied the ex parte application to amend the complaint, finding that Plaintiffs were required to make such a request on a regularly noticed motion. Defendants ultimately prevailed in arbitration. The arbitrator found that no violations of the Labor Code had occurred as to U-Haul, but made no similar finding as to Sandusky. Plaintiffs unsuccessfully moved to vacate the award. Plaintiffs then appealed the superior court’s orders confirming the arbitration award, compelling the matter to arbitration, and denying Plaintiffs’ request for leave to amend their complaint to include PAGA-related claims.
The California Court of Appeal reversed the order denying leave to amend as to Sandusky, reversed the judgment as to Sandusky, and affirmed in all other respects. The court of appeal held that there is no standing to bring a PAGA action when an arbitration award finds that there was no underlying violation of the Labor Code. The court noted that the arbitral award had found that there was no Labor Code violation as to Defendant U-Haul, which precluded a PAGA action against the employer, but made no such similar determination as to Sandusky. Accordingly, judgment was reversed as to Sandusky. Notably, the court expressly disagreed with a prior court of appeal decision, Gavriiloglou v. Prime Healthcare Management Inc., 83 Cal. App. 5th 595 (2022), which held that an arbitration award against an employee was not entitled to preclusive effect in the employee’s later PAGA action.
The PAGA landscape in California has been changing dramatically since the United States Supreme Court’s decision in Viking River Cruises. Now that individual PAGA claims can be compelled to arbitration, a slew of related questions have arisen, including those regarding the preclusive effect of arbitration decisions on the non-individual PAGA claims that remain pending in court. With the split in the Court of Appeal now between Gavriiloglou and Rocha, there is a good chance that the California Supreme Court will step in to provide clarity on this important subject.