Wing v. Chico Healthcare & Wellness Centre ( 2022 )

Filed 4/28/22
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
JILL WING, B310232
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. BC719077)
v.
CHICO HEALTHCARE &
WELLNESS CENTRE, LP,
Defendant and Appellant.
APPEAL from an order of the Superior Court of Los
Angeles County, Elihu M. Berle, Judge. Affirmed.
Fisher & Phillips, Grace Y. Horoupian, Shaun J. Voight,
Rebecca S. King and Raymond W. Duer for Defendant and
Appellant.
Mara Law Firm, David Mara and Matthew Crawford for
Plaintiff and Respondent.
__________________________
In this appeal, Chico Healthcare & Wellness Centre, LP
asks us to reconsider the California Supreme Court’s decision in
Iskanian v. CLS Transportation Los Angeles, LLC (2014)
59 Cal.4th 348 (Iskanian) in light of subsequent United States
Supreme Court authority. The trial court relied on Iskanian to
deny Chico’s motion to compel arbitration of Jill Wing’s Private
Attorneys General Act (PAGA) claims. PAGA allows an
aggrieved employee to sue for civil penalties under the Labor
Code as a representative of the state. (Lab. Code, § 2699 et seq.)1
Chico contends two United States Supreme Court cases —
Epic Systems Corp. v. Lewis (2018) __ U.S. __ [138 S.Ct. 1612]
(Epic Systems) and Kindred Nursing Centers Ltd. Partnership v.
Clark (2017) __ U.S. __ [137 S.Ct. 1421] (Kindred Nursing) —
impliedly overruled Iskanian, but Chico itself acknowledges these
cases do “not [address] PAGA directly . . . .” As we set out below,
Epic Systems and Kindred Nursing did not decide the same
question Iskanian decided. We affirm the order denying the
motion to compel arbitration.
PROCEDURAL BACKGROUND
On October 17, 2017, Wing was hired to work for Chico as a
receptionist at a skilled nursing facility. As a condition of her
employment, Wing agreed to be bound by Chico’s Alternative
Dispute Resolution Policy (ADR Policy), which provided that
“final and binding arbitration” would be the exclusive means for
resolving “covered disputes” between the employee and employer.
The ADR Policy defined “covered disputes” as including
“any dispute arising out of or related to my employment, the
terms and conditions of my employment and/or the termination of
1 All further undesignated statutory references are to the
Labor Code.
2
your employment [sic], including, but not limited to, the
following: [¶] Alleged violations of federal, state and/or local
constitutions, statutes or regulations; [¶] . . . [¶] Claims alleging
failure to compensate for all hours worked, failure to pay
overtime, failure to pay minimum wage, failure to reimburse
expenses, failure to pay wages upon termination, failure to
provide accurate, itemized wage statements, failure to provide
meal and/or rest breaks, entitlement to waiting time penalties
and/or other claims involving employee wages, including, but not
limited to, claims brought under the Fair Labor Standards Act
and any other statutory scheme related to wages or working
hours . . . .”
The ADR Policy included a waiver of class or representative
actions: “I understand and agree this ADR Program prohibits me
from joining or participating in a class action or representative
action, acting as a private attorney general or representative of
others, or otherwise consolidating a covered claim with the claim
of others.”
On June 11, 2018, Wing provided statutorily required
notice to the Labor and Workforce Development Agency of alleged
Labor Code violations by her employer.2 (§ 2699.3.) The agency
did not respond to her notice within the time provided by statute,
allowing Wing to file PAGA representative claims for wage,
2 Wing initially believed her employer was Rockport
Administrative Services, LLC. She amended the notice to the
agency and her subsequent complaint when she learned Chico
Healthcare was her employer.
3
overtime, meal break, and other Labor Code violations.3 She filed
her complaint on August 22, 2018. Wing’s lawsuit also alleged
class claims. Relying on the ADR Policy, Chico requested Wing
stipulate to arbitrate her individual claims, strike her class
claims, and stay her PAGA claims pending the outcome of
arbitration. Wing refused; she instead amended her complaint to
drop the class claims, leaving only the PAGA claims that were
asserted on behalf of herself and all other similarly aggrieved
employees. After an unsuccessful mediation, Chico moved to
compel arbitration of Wing’s PAGA claims.
The trial court denied the motion. In its statement of
decision, the court found it was bound to follow “the Supreme
Court precedent of Iskanian and the subsequent overwhelming
authority reaffirming its holding.” Chico timely appealed.
DISCUSSION
On appeal, Chico argues the trial court erred when it relied
on Iskanian to deny the motion to compel arbitration. Where, as
here, the trial court’s order denying a motion to compel
arbitration “rests solely on a decision of law,” we review that
decision de novo. (Robertson v. Health Net of California, Inc.
(2005) 132 Cal.App.4th 1419, 1425.)
3 PAGA requires that an employee give written notice both to
the agency and the employer of an alleged Labor Code violation.
(§ 2699.3, subd. (a)(1); Kim v. Reins International California, Inc.
(2020) 9 Cal.5th 73, 81 (Kim).) If the agency does not investigate,
does not issue a citation, or fails to respond within a specified
time, the employee may assert PAGA claims as a representative
of the state. (§ 2699.3, subd. (a)(2); LaFace v. Ralphs Grocery Co.
75 Cal.App.5th 388, 394.)
4
1. Relevant Law
The Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.) was
enacted to address perceived judicial hostility to arbitration
agreements. (AT&T Mobility LLC v. Concepcion (2011) 563 U.S.
333, 339.) “The ‘principal purpose’ of the FAA is to ‘ensur[e] that
private arbitration agreements are enforced according to their
terms.’ ” (Id. at p. 344.) “When state law prohibits outright the
arbitration of a particular type of claim, the analysis is
straightforward: The conflicting rule is displaced by the FAA.”
(Id. at p. 341.) Thus, a contract defense based on state law is
preempted if it applies only to arbitration contracts or interferes
with the fundamental attributes of arbitration. (Id. at pp. 341–
344.) State laws relating to arbitration contracts are enforceable
to the extent they do not conflict with the FAA. (Id. at pp. 339,
343.)
PAGA “authorizes an employee to bring an action for civil
penalties on behalf of the state against his or her employer for
Labor Code violations committed against the employee and fellow
employees, with most of the proceeds of that litigation going to
the state.” (Iskanian, supra, 59 Cal.4th at p. 360.) Before PAGA
was enacted, only the state could sue employers for civil penalties
under the Labor Code. (Kim, supra, 9 Cal.5th at p. 80.) “A PAGA
claim is legally and conceptually different from an employee’s
own suit for damages and statutory penalties. An employee
suing under PAGA ‘does so as the proxy or agent of the state’s
labor law enforcement agencies.’ Every PAGA claim is ‘a dispute
between an employer and the state.’ Moreover, the civil penalties
a PAGA plaintiff may recover on the state’s behalf are distinct
from the statutory damages or penalties that may be available to
employees suing for individual violations. Relief under PAGA is
5
designed primarily to benefit the general public, not the party
bringing the action. ‘A PAGA representative action is therefore a
type of qui tam action,’ conforming to all ‘traditional criteria,
except that a portion of the penalty goes not only to the citizen
bringing the suit but to all employees affected by the Labor Code
violation.’ The ‘government entity on whose behalf the plaintiff
files suit is always the real party in interest.’ ” (Ibid., internal
citations omitted.)
In Iskanian, our Supreme Court examined an arbitration
agreement that, like Chico’s ADR Policy, contained a waiver of
representative actions, including PAGA claims. (Iskanian, supra,
59 Cal.4th at p. 377.) Iskanian held “an employee’s right to bring
a PAGA action is unwaivable” and that such a rule was not
preempted by the FAA to the extent the rule barred “predispute
waiver[s] of an employee’s right to bring an action that can only
be brought by the state or its representatives.” (Id. at pp. 383,
388.) The court reasoned, “the rule against PAGA waivers does
not frustrate the FAA’s objectives because . . . the FAA aims to
ensure an efficient forum for the resolution of private disputes,
whereas a PAGA action is a dispute between an employer and the
state [Labor and Workforce Development] Agency.” (Iskanian,
supra, 59 Cal.4th at p. 384.)
The Ninth Circuit is in accord: “[T]he Iskanian rule does
not stand as an obstacle to the accomplishment of the FAA’s
objectives, and [Iskanian] is not preempted.” (Sakkab v.
Luxottica Retail N. Am., Inc. (9th Cir. 2015) 803 F.3d 425, 427
(Sakkab).)4
4 In Valdez v. Terminix Int’l Co. Ltd. Partnership (9th Cir.
2017) 681 F.Appx. 592, 593, the Ninth Circuit affirmed its
6
In Kindred Nursing and Epic Systems, issued three and
four years, respectively, after Iskanian, the United States
Supreme Court reaffirmed the broad reach of the FAA. In
Kindred Nursing, the high court considered the Kentucky
Supreme Court’s “clear-statement rule,” which held a power of
attorney could not authorize a legal representative to enter into
an arbitration agreement unless the representative had specific
authority to “ ‘waive his principal’s constitutional right to access
the courts and to trial by jury.’ ” (Kindred Nursing, supra,
137 S.Ct. at pp. 1425–1426.) Kindred Nursing held the clear-
statement rule was “too tailor-made to arbitration agreements —
subjecting them, by virtue of their defining trait, to uncommon
barriers — to survive the FAA’s edict against singling out those
contracts for disfavored treatment.” (Id. at p. 1427.)
Epic Systems held the FAA requires courts to enforce class
or collective action waivers in employment agreements that
mandate individualized arbitration. (Epic Systems, supra,
holding in Sakkab that the Iskanian rule is not preempted by the
FAA. Valdez held “an individual employee, acting as an agent for
the government, can agree to pursue a PAGA claim in
arbitration. Iskanian does not require that a PAGA claim be
pursued in the judicial forum; it holds only that a complete
waiver of the right to bring a PAGA claim is invalid. [Citation.]
[¶] Sakkab likewise recognized that individual employees may
pursue PAGA claims in arbitration.” (Id. at p. 594.) Chico does
not cite to or examine Valdez. To the extent Chico relies on the
same reasoning as Valdez to argue Wing had authority to bind
the state to the ADR Policy prior to her PAGA claims, we reject
this argument and agree with Correia v. NB Baker Electric, Inc.
(2019) 32 Cal.App.5th 602, 623–624 (Correia) that an employee
does not become a proxy of the state under PAGA until he or she
is an “aggrieved employee.”
7
138 S.Ct. at p. 1619.) Following Epic Systems, California
appellate courts uniformly concluded it did not overrule Iskanian.
(See, e.g., Williams v. RGIS, LLC (2021) 70 Cal.App.5th 445,
451–454 (Williams); Herrera v. Doctors Medical Center of
Modesto, Inc. (2021) 67 Cal.App.5th 538 (Herrera); Winns v.
Postmates Inc. (2021) 66 Cal.App.5th 803, 812–813; Olson v. Lyft,
Inc. (2020) 56 Cal.App.5th 862, 872; Collie v. The Icee Co. (2020)
52 Cal.App.5th 477 (Collie); Correia, supra, 32 Cal.App.5th at
p. 620.)
2. Iskanian Remains the Law
Recognizing that “overwhelming authorities” have
concluded Epic Systems did not invalidate Iskanian, Chico relies
on Kindred Nursing to do so. Kindred Nursing was published
one year before Epic Systems but is not cited in any California
published case involving PAGA claims. According to Chico, there
is no distinction between the agent binding the principal to
arbitration under a power of attorney in Kindred Nursing and an
employee binding the State of California in a PAGA action.
Combined with Epic Systems’s holding that the FAA requires
courts to enforce arbitration agreements that waive class or
collective actions in favor of individualized proceedings, Chico
contends these cases require us to conclude the Iskanian rule is
preempted by the FAA. We disagree. Chico asks us to resolve
“the tension between Iskanian and the recent United States
Supreme Court opinions” that Chico has cited. We frame the
issue differently: does the reasoning of Kindred Nursing and
8
Epic Systems undermine the force of our Supreme Court’s holding
in Iskanian?5
We answer in the negative. Chico does not dispute the
“same question” standard articulated by Correia to determine
when an intervening United States Supreme Court decision
overrules a California Supreme Court decision. (Correia, supra,
32 Cal.App.5th at p. 619.) Chico asserts the United States
Supreme Court need not specifically cite to Iskanian or PAGA for
its decisions to resolve the “same question.” We agree with this
general proposition but, as we explain below, Epic Systems and
Kindred Nursing are distinguishable and do not conflict with
Iskanian. These cases do not suggest that we should disregard
our Supreme Court’s controlling authority. (Cf. In re Harris
(1971) 20 Cal.App.3d 632, 634 [U.S. Supreme Court decision
holding Ohio Criminal Syndicalism Act unconstitutional was
conclusive on unconstitutionality of California’s similar statute];
County of Santa Clara v. Superior Court (1992) 2 Cal.App.4th
1686, 1691, fn. 3 [“The constraints of the common law method
and of our position in the judicial hierarchy require that we
consider only the case before us, and that we do so in light of the
decisions of other courts to the extent those decisions control ours
either directly or by compelling analogy”].)
Starting with Epic Systems, we need not repeat the
reasoned analysis by the courts that have rejected the argument
that Epic Systems disapproved Iskanian. (Williams, supra,
5 Our Supreme Court affirmed Iskanian after Epic Systems
and Kindred Nursing by applying it to determine whether the
recovery of civil penalties under section 558 is immunized from
predispute waivers of arbitration. (ZB, N.A. v. Superior Court
(2019) 8 Cal.5th 175, 187.)
9
70 Cal.App.5th at pp. 451–454; Herrera, supra, 67 Cal.App.5th at
p. 542; Winns v. Postmates Inc., supra, 66 Cal.App.5th at p. 812;
Olson v. Lyft, Inc., supra, 56 Cal.App.5th at p. 872; Collie, supra,
52 Cal.App.5th at p. 482; Correia, supra, 32 Cal.App.5th at
p. 620.) We agree with them.
Adding Kindred Nursing to the equation does not change
the legal sum. As in Epic Systems, Kindred Nursing involved
private actions between private parties asserting private rights.
It did not involve an action between an employer and a
representative of the state to recover civil penalties on the state’s
behalf to benefit the general public. To put it directly, Kindred
Nursing did not address whether a worker may waive the right to
bring a representative action on behalf of a state government.6
6 Kindred Nursing is also distinguishable on its facts. There,
the representatives signed the arbitration agreements on behalf
of their principals under a power of attorney. That is, the
principals had already agreed to be bound by their
representative’s actions at the time the agreements were
executed. (Kindred Nursing, supra, 137 S.Ct. at pp. 1425–1426.)
Here, Wing agreed to be bound by the ADR Policy one year before
her PAGA claims arose. As we have observed, an employee does
not become a proxy of the state under PAGA until he or she is an
“aggrieved employee.” (Correia, supra, 32 Cal.App.5th at
pp. 623–624.) Wing “executed the agreement in [her] individual
capacity. The state had not deputized [her] to act at the time,
and [she] therefore could not agree to arbitrate on behalf of the
state.” (Collie, supra, 52 Cal.App.5th at p. 482.) “Without the
state’s consent, a predispute agreement between an employee
and an employer cannot be the basis for compelling arbitration of
a representative PAGA claim because the state is the owner of
the claim and the real party in interest, and the state was not a
10
Nor does Kindred Nursing even mention PAGA, qui tam or other
similar representative actions, or suggest that its holding might
extend to such claims. In short, Kindred Nursing did not
consider the same question that Iskanian put to rest.
DISPOSITION
The order denying the motion to compel arbitration is
affirmed. Wing is to recover her costs on appeal.
RUBIN, P. J.
WE CONCUR:
BAKER, J.
KIM, J.
party to the arbitration agreement.” (Correia, supra,
32 Cal.App.5th at p. 622.)
11