And Employer Failed To Sustain Burden Of Proving That California Statutory Right Of Employee To Avoid Arbitration Of Unpaid Wages Claim Was Preempted By Federal Arbitration Act
Francis Capital Management LLC (FCM) appealed from an order denying its motion to compel Lane, a former employee, to arbitrate all his employment claims against FCM. Lane v. Francis Capital Management LLC, B245661 (2nd Dist. Div. 4 March 11, 2014) (Manella, Epstein, Willhite). The trial court had determined that Labor Code section 229 allowed Lane to maintain his claims in court, and further, that the agreement was unconscionable.
The Court of Appeal easily found that the broad arbitration provision, which encompassed all “wage, hour and benefit claims,” “contract claims,” and “claims for wrongful termination,” was intended to cover all eight claims brought by Lane: (1) wrongful termination; (2) breach of oral contract; (3) failure to pay wages; (4) unpaid overtime; (5) unpaid meal period wages; (7) waiting time penalties; (7) itemized wage statement violations; and (8) unfair competition. Furthermore, the Court of Appeal found that there was no unconscionability.
The hard issue was whether Labor Code section 229, which provides a statutory right to arbitrate labor claims in California, applied. Yes, it did apply, said the Court of Appeal, but on its face, it only applied to the third cause of action to collect unpaid wages. All the other claims had to be arbitrated.
The Court distinguished the “broad presumption against the arbitration of statutory claims” set forth in Hoover v. American Income Life Insurance Company, 206 Cal.App.4th 1193 (2012), as being “overly broad”: “[T]he plain language of section 229 is limited to actions for the collection of due and unpaid wages brought under sections 200 through 244; section 229 does not apply to all statutory wage and hour claims.” See my June 14, 2012 post on Hoover.
What about preemption by the Federal Arbitration Act of Labor Code section 229? It was FCM’s burden of proof to demonstrate FAA preemption of section 229 – meaning that FCM had to show that interstate commerce was involved. But Lane was a California resident, and FCM was a California entity, doing business in California. FCM’s “bare assertion” that “Mr. Lane was a security analyst at a firm which manages capital investments” was insufficient to support a finding that his employment involved interstate commerce.
Affirmed in part (as to the cause of action for unpaid wages) and reversed in part.
Comment: Depending on the particular California court, we are still in a somewhat fuzzy area regarding FAA preemption of California statutory rights to file a court action – especially in those instances where the beneficiary of the statutory right may include the public, and not just the individual who is a party to the arbitration agreement. Example: Private Attorney General Act (PAGA) employment claims.