Hernandez v. Ross Stores , 7 Cal. App. 5th 171 ( 2017 )

Filed 12/7/16; pub. order 1/3/17 (see end of opn.)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION TWO
MARTINA HERNANDEZ,
Plaintiff and Respondent, E064026
v. (Super.Ct.No. RIC1404962)
ROSS STORES, INC., OPINION
Defendant and Appellant.
APPEAL from the Superior Court of Riverside County. Sharon J. Waters and
Craig G. Riemer, Judges. Affirmed.
Wolflick & Simpson, David B. Simpson and Gregory D. Wolflick for Defendant
and Appellant.
Law Offices of Neal J. Fialkow, Neal J. Fialkow and James S. Cahill for Plaintiff
and Respondent.
Defendant and appellant Ross Stores, Inc. (Ross) appeals the denial of its motion
to compel arbitration. Plaintiff and respondent Martina Hernandez was employed at a
Ross warehouse in Moreno Valley. She filed a single-count representative action under
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the California Private Attorney General Act, Labor Code section 2698 et. seq. (PAGA)
alleging Ross had violated numerous Labor Code laws, and sought to recover PAGA civil
penalties for the violations.
Ross insisted that Hernandez must first arbitrate her individual disputes showing
she was an “aggrieved party” under PAGA and then the PAGA action could proceed in
court. The trial court found, relying on Iskanian v. CLS Transportation Los Angeles LLC
(2014) 59 Cal.4th 348, 387 (Iskanian) that the PAGA claim was a representative action
brought on behalf of the state and did not include individual claims. As such, it denied
the motion to compel arbitration because there were no individual claims or disputes
between Ross and Hernandez that could be separately arbitrated.
On appeal, Ross raises the issue of whether under the Federal Arbitration Act
(FAA) an employer and employee have the preemptive right to agree to individually
arbitrate discreet disputes underlying a PAGA claim while leaving the PAGA claim and
PAGA remedies to be collectively litigated under Iskanian. We uphold the trial court’s
denial of the motion to compel arbitration.
FACTUAL AND PROCEDURAL HISTORY
A. HERNANDEZ’S COMPLAINT
Hernandez filed her Complaint for Violations Under the California Private
Attorney General Act against Ross on May 13, 2014. Hernandez was hired on September
12, 2012, as a nonexempt, hourly-paid warehouse employee at a distribution center in
Moreno Valley and worked there until she was terminated on September 4, 2014.
Hernandez brought the action on behalf of all aggrieved employees, which was defined as
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all former and current nonexempt hourly employees who worked at any of Ross’s
warehouses from December 2, 2012, to present, and their time was tracked by one or
more electronic time management systems. Hernandez alleged that Ross violated Labor
Code sections 201, 202, 203, 204, 510, 1194, 226, subdivision (a), and 1197, by failing to
pay all appropriate wages, failing to properly itemize hours worked and paid, and failing
to pay for overtime. Hernandez sought penalties under Labor Code sections 2698 and
2699 along with attorneys’ fees and costs.
Ross sent a demand to Hernandez to arbitrate the claims as required under her
employment agreement, which was rejected by Hernandez.
B. ROSS’S MOTION TO COMPEL ARBITRATION
On April 28, 2015, Ross filed its Motion to Compel Arbitration of Covered
“Disputes” and to Stay Further Proceedings (Motion). Ross moved pursuant to the FAA
and the California Arbitration Act (CAA) to enforce the arbitration agreement as to all of
Hernandez’s pleaded and covered “disputes” and stay her PAGA action pending the
outcome of binding arbitration on these “disputes.”
Ross contended when Hernandez was hired, she agreed to resolve “any disputes”
relating to her employment through binding arbitration and solely as an individual, not on
a “collective” basis. The arbitration clause provided in pertinent part, “This Arbitration
Policy . . . applies to any disputes, arising out of or relating to the employment
relationship between an associate and Ross or between an associate and any of Ross’
agents or employees, whether initiated by an associate or Ross. This Policy requires all
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such disputes to be resolved only by an Arbitrator through final and binding arbitration.”
This included Labor Code violations.
Ross contended that Hernandez, in order to bring a PAGA action, had to show she
was an aggrieved party. The determination of whether she was an aggrieved party
necessarily involved the resolution of whether she was subject to a Labor Code violation.
This was a “dispute” that must be arbitrated as it involved whether as an individual she
was subject to the violation. Ross relied upon the language of the arbitration agreement
which referred to “disputes” rather than entire “claims.” The determination of the Labor
Code violations was a “smaller unit of adjudication” that should be resolved by
arbitration and the “claim” under PAGA could be resolved thereafter.
Ross distinguished Iskanian by insisting it did not foreclose arbitrating the
disputes over the Labor Code violations and leaving the PAGA claims intact to be
litigated in court. Ross contended that Iskanian allows for arbitration of private disputes
between employers and employees over their respective rights and obligations toward
each other.
C. HERNANDEZ’S OPPOSITION TO THE MOTION TO COMPEL
ARBITRATION
Hernandez filed opposition to the Motion. Hernandez argued that Iskanian was
dispositive. Hernandez noted that Iskanian held an employer cannot use an arbitration
agreement that forced an employee to waive his or her rights to pursue a PAGA action.
A PAGA action was not a dispute between the employer and the employee but rather
between the state and employer. Arbitration of the Labor Code violations was not
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appropriate. The PAGA claim was fundamentally different from an employee’s private
claims.
D. ROSS’S REPLY TO THE OPPOSITION
Ross replied to the opposition arguing that the employment contract Hernandez
signed included an agreement to arbitrate all labor disputes. Ross argued that the
arbitration agreement was unique in using the language “disputes” rather than “claims.”
Ross insisted Iskanian supported that private disputes between employers and employees
could be arbitrated even though there was a PAGA claim.
E. TRIAL COURT’S ORDER DENYING THE MOTION
The trial court denied the motion on May 20, 2015. It held as follows: “Plaintiff
alleges a single, representative PAGA claim in the Complaint and requests relief in the
form of PAGA penalties. She does not allege separate causes of action seeking damages
for Labor Code violations. Iskanian made clear that ‘every PAGA action, whether
seeking penalties for Labor Code violations as to only one aggrieved employee—the
plaintiff bringing the action—or as to other employees as well, is a representative action
on behalf of the state.’ As such, ‘an action to recover civil penalties “is fundamentally a
law enforcement action designed to protect the public and not to benefit private parties.”’
The ‘employee plaintiff represents the same legal right and interest as a state labor law
enforcement agencies’ and ‘an aggrieved employee’s action under the PAGA functions
as a substitute for an action brought by the government itself.’ (Iskanian, 59 Cal.4th at
397. . . .) Therefore, there are no individual claims or ‘disputes’ between Plaintiff and
Defendant that can be separately arbitrated. Motion is denied.”
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Notice of the ruling was given by Hernandez. A timely notice of appeal was failed
by Ross. The parties stipulated to staying the proceedings pending the outcome of this
appeal.
DISCUSSION
Ross contends on appeal that the disputes regarding whether Hernandez was an
“aggrieved party” under PAGA based on Labor Code violations committed against her,
must be the subject of arbitration based on the employment contract signed by
Hernandez. The PAGA claim is appropriately stayed and determined after the individual
disputes are resolved in arbitration.
Both the CAA and the FAA recognize “‘“arbitration as a speedy and relatively
inexpensive means of dispute resolution”’” (Saint Agnes Medical Center v. PacifiCare of
California (2003) 31 Cal.4th 1187, 1204) and require that agreements to arbitrate be
rigorously enforced (Shearson/American Express, Inc. v. McMahon (1987) 482 U.S. 220,
226).
“Code of Civil Procedure section 1281.2 requires a trial court to grant a petition to
compel arbitration ‘if [the court] determines that an agreement to arbitrate the
controversy exists.’ (Code Civ. Proc., § 1281.2.) Accordingly, ‘“when presented with a
petition to compel arbitration the trial court’s first task is to determine whether the parties
have in fact agreed to arbitrate the dispute. [¶] . . .” [Citation.]’ [Citations.] ‘A party
seeking to compel arbitration has the burden of proving the existence of a valid
agreement to arbitrate. [Citations.] Once that burden is satisfied, the party opposing
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arbitration must prove by a preponderance of the evidence any defense to the petition.’”
(Avery v. Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4th 50, 59.)
The denial of a motion to compel arbitration is an appealable order. (See
Valentine Capital Asset Management, Inc. v. Agahi (2009) 174 Cal.App.4th 606, 613.) If
the trial court’s decision to deny a motion to compel arbitration is based solely on a
decision of law, a de novo standard of review is employed. (Robertson v. Health Net of
California, Inc. (2005) 132 Cal.App.4th 1419, 1425; see also Laswell v. AG Seal Beach,
LLC (2010) 189 Cal.App.4th 1399, 1406.)
Here, the contract signed by Hernandez included an arbitration clause. It required
that all disputes “arising out of or relating to the employment relationship” including
violations of the “Fair Labor Standards Act” must be resolved only through arbitration. It
further provided “there will be no right or authority for any dispute to be brought, heard
or arbitrated as a class action, private attorney general, or in a representative capacity on
behalf of any person.” Such waiver is unenforceable, as stated in Iskanian.
In Iskanian, supra, 59 Cal.4th 348, an employee sought to bring a PAGA action
for the employer’s failure to properly compensate its employees for overtime, meals and
rest periods. (Id. at p. 359.) The employment agreement included a clause, similar to the
one above, that the employee as a condition of his employment must waive his right to
bring representative PAGA actions. (Id. at pp. 360-361, 378.)
The Iskanian court first noted under PAGA, “’an “aggrieved employee” may bring
a civil action personally and on behalf of other current or former employees to recover
civil penalties for Labor Code violations. [Citation.] Of the civil penalties recovered, 75
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percent goes to the Labor and Workforce Development Agency, leaving the remaining 25
percent for the “aggrieved employees.”’” (Iskanian, supra, 59 Cal.4th at p. 380.) The
court then noted that an employee suing under PAGA does so as the “‘proxy or agent of
the state’s labor law enforcement agencies . . . .’” (Id. at p. 380.) The court concluded
that “an employee’s right to bring a PAGA action is unwaivable” and “a PAGA claim
lies outside the FAA’s coverage because it is not a dispute between an employer and an
employee arising out of their contractual relationship. It is a dispute between and
employer and the state . . . .” (Id. at pp. 383, 386.)
After Iskanian, Williams v. Superior Court (2015) 237 Cal.App.4th 642 (Williams)
was decided. In that case, the employee brought a single representative action against his
employer under PAGA for alleged rest period violations under the Labor Code. The
employer moved to enforce the employee’s waiver of his right to assert a representative
PAGA claim, “or alternatively, for an order staying the PAGA claim, but sending the
‘individual claim’” that the employee had been subjected to Labor Code violations to
arbitration pursuant to the written employment agreement. (Id. at pp. 644-645.) The trial
court found the PAGA waiver unenforceable, relying on Iskanian. (Williams, at pp. 645-
646.) However, the trial court found “that [the employee] must submit the ‘underlying
controversy’ to arbitration for a determination whether he is an ‘aggrieved employee’
under the Labor Code with standing to bring a representative PAGA claim.” (Id. at p.
649.)
On appeal, the Williams court concluded that “case law suggests that a single
representative PAGA claim cannot be split into an arbitrable individual claim and a
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nonarbitrable representative claim.” (Williams, supra, 237 Cal.App.4th at p. 649.) It
concluded that the employee, “cannot be compelled to submit any portion of his
representative PAGA claim to arbitration, including whether he was an ‘aggrieved
employee.’” (Ibid.)
Based on the above cases, the dispute between Ross and Hernandez is not a
dispute between the employer and employee. Rather, this is a representative action and
Hernandez is acting on behalf of the state. This dispute does not involve an individual
claim by Hernandez regarding the Labor Code violations but rather an action brought for
civil penalties under PAGA for violating the Labor Code. There are no “disputes”
between the employer and employee as stated in the arbitration policy. The trial court
properly determined it had no authority to order arbitration of the PAGA claim.
Moreover, we find Williams persuasive that determination of whether the party
bringing the PAGA action is an aggrieved party should not be decided separately by
arbitration. Ross attempts to distinguish Williams by arguing it is not binding precedent,
the arbitration clause in this case uses the words “dispute” rather than “claim,” and that
Ross is not trying to move the entire PAGA claim to arbitration. However, the use of
“dispute” rather than “claim” in the arbitration agreement is really a distinction without a
difference. The term “dispute” is clearly intended in the agreement to refer to all claims,
disputes, and actions brought by the employee against the employer for personal Labor
Code violations. Again, this case involves a dispute, claim or action brought on behalf of
the state by Hernandez. Hernandez did not allege any individual claims or disputes.
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There is no authority supporting Ross’s argument that an employer may legally
compel an employee to arbitrate the individual aspects of his PAGA claim while
maintaining the representative claim in court. Moreover, requiring an employee to
litigate a PAGA claim in multiple forums would thwart the public policy of PAGA to
“empower employees to enforce the Labor Code” on behalf of the state. (Securitas
Security Services USA, Inc. v. Superior Court (2015) 234 Cal.App.4th 1109, 1122.) The
trial court properly denied the Motion.
DISPOSITION
The trial court’s order denying the motion to compel arbitration is affirmed. Costs
of the appeal are awarded to Hernandez as the prevailing party.
MILLER
J.
We concur:
HOLLENHORST
Acting P. J.
SLOUGH
J.
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Filed 1/3/17
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION TWO
MARTINA HERNANDEZ,
Plaintiff and Respondent, E064026
v. (Super.Ct.No. RIC1404962)
ROSS STORES, INC., The County of Riverside
Defendant and Appellant.
THE COURT
A request having been made to this court pursuant to California Rules of Court, rule
8.1105, for publication of a nonpublished opinion filed in the above entitled matter on December
7, 2016, and it appearing that the opinion meets the standard for publication as specified in
California Rules of Court, rule 8.1105(c),
IT IS ORDERED that said opinion be certified for publication pursuant to California
Rules of Court, rule 8.1105(b).
CERTIFIED FOR PUBLICATION
MILLER
J.
We concur:
HOLLENHORST
Acting P. J.
SLOUGH
J.
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