June 14, 2022

Key California Employment Law Case Summaries: May 2022

Naranjo v. Spectrum Security Services. Inc., No. S258966, 2022 WL 1613499 (Cal. May 23, 2022)

Summary: Unpaid meal- and rest-break premiums may serve as the basis for waiting-time penalties and inaccurate wage statement claims. Read our in-depth analysis of this case here.

Morgan v. Sundance Inc., 142 S.Ct. 1708 (May 23, 2022)

Summary: The FAA does not require a party resisting arbitration on the grounds of waiver to show they suffered prejudice from a failure to compel arbitration sooner.

Facts: Plaintiff Robyn Morgan worked at a Taco Bell franchise owned by Defendant Sundance Inc. Plaintiff signed an agreement to arbitrate any employment dispute with Defendant. Despite that agreement, Plaintiff filed a nationwide collective action asserting that Defendant violated federal law regarding overtime pay. Defendant initially defended against the lawsuit, filing a motion to dismiss and engaging in mediation. Nearly eight months after Plaintiff filed the lawsuit, Defendant moved to stay the litigation and compel arbitration under the Federal Arbitration Act (“FAA”). Plaintiff opposed, arguing that Defendant had waived its right to arbitrate by litigating for so long. The district court denied Defendant’s motion. The Court of Appeals for the Eighth Circuit reversed, finding that because Plaintiff had failed to show prejudice, it could not find that Defendant had waived its right to compel arbitration. The United States Supreme Court granted certiorari to resolve a circuit split over whether federal courts may adopt an arbitration-specific waiver rule demanding a showing of prejudice, as the Eighth Circuit, and several other circuits, had done.

Court’s Decision: The United States Supreme Court vacated and remanded. The Court noted that outside the arbitration context, federal courts assessing waiver generally do not consider prejudice. The rule applied by the Eighth Circuit requiring a showing of prejudice was an arbitration-specific rule, designed to further the overall federal policy favoring arbitration. The Court held, however, that the FAA’s policy favoring arbitration does not go so far as to permit federal courts to create arbitration-specific variants of federal procedural rules, like those concerning waiver. Rather, “[t]he federal policy is about treating arbitration contracts like all others, not about fostering arbitration.” The Court did not reach the ultimate issue of whether Defendant had waived its right to seek arbitration, instead remanding the case for further proceedings consistent with its decision.

Practical Implications: This case makes it all the more important for employers to move quickly to compel arbitration. Employers facing claims by current or former employees should be diligent in searching their files for any arbitration agreements the plaintiff may have signed, and they should discuss any such agreements with their counsel at the earliest possible moment. Undue delay can result in a waiver of the right to compel the case to arbitration.   

Shaw v. Superior Court, 78 Cal. App. 5th 245 (2022)

Summary: A trial court has discretion to apply the doctrine of exclusive concurrent jurisdiction to stay a later-filed PAGA action involving claims that overlap with an earlier-filed PAGA action.

Facts: Plaintiffs brought a representative suit under the California Labor Code Private Attorneys General Act (“PAGA”) against Defendant Beverages & More! Inc. Plaintiffs conceded that their suit arose from the same facts and theories as another earlier-filed PAGA action pending in Los Angeles County. The trial court granted Defendant’s motion to stay the action pending a decision on a petition for judicial coordination with the Los Angeles PAGA suit. After the petition for judicial coordination was denied, the trial court denied Plaintiffs’ motion to lift the stay, concluding that the stay was warranted under the doctrine of exclusive concurrent jurisdiction. Under this doctrine, when two or more courts have subject matter jurisdiction over a dispute, the court that first asserts jurisdiction assumes it to the exclusion of the others. Plaintiffs sought a peremptory writ of mandate to lift the stay.

Court’s Decision: The California Court of Appeal denied the petition. The court held that the doctrine of exclusive concurrent jurisdiction warranted a stay of the action, and that the trial court did not err in applying the doctrine. Looking to the statutory language and purpose of PAGA, the court disagreed with Plaintiffs’ arguments that PAGA abrogated the judge-made exclusive concurrent jurisdiction doctrine. The court also rejected Plaintiffs’ argument that applying the exclusive concurrent jurisdiction doctrine to PAGA claims would promote reverse auctions, explaining that the doctrine stays subsequent suits and does not permit defendants to pick and choose between plaintiffs. Additionally, because the possibility of a reverse auction necessarily exists any time multiple plaintiffs are authorized to bring a PAGA claim, applying the exclusive concurrent jurisdiction doctrine does not increase the likelihood of a reverse auction. The court also found that Plaintiffs did not present a convincing argument that staying duplicative PAGA suits would lead to frivolous filings. The court concluded that Plaintiffs failed to show that the trial court exceeded the bounds of reason when it determined that the countervailing policies raised by Plaintiffs did not outweigh the policies supporting application of the doctrine in this case. 

Practical Implications: More and more, employers find themselves defending against overlapping and competing PAGA claims. Over the years, employers have tried various procedural mechanisms to avoid the burdens of parallel PAGA suits, with mixed results. This case is welcome news for employers, adding another arrow to their quiver against duplicative PAGA actions.