2017-00219311-CU-OE

Jimeka Clark vs. San Leandro Car Stop, LLC

Nature of Proceeding: Petition to Compel Arbitration and Stay Proceedings

Filed By: Zhuk, Roman

Defendant San Leandro Car Stop, LLC’s petition to compel arbitration is ruled upon as follows.

Plaintiff Jimeka Clark filed the instant complaint “for violations of the California Labor Code, under the Labor Code Private Attorney General Act of 2004 (PAGA).” (Comp. 1:23-23.) Plaintiff asserts four separate causes of action for Labor Code violations: (1) Violation of Labor Code § 226.7-Failure to Provide Rest Breaks; (2) Violation of Labor Code § 204-Failure to Pay Wages in a Timely Manner; (3) Violation of Labor Code § 226(a)-Failure to Furnish Complete and Accurate Wage Statements; and (4) Violation of Labor Code §§ 201, 202-Failure to Pay Timely Wages. In connection with all four causes of action, Plaintiff seeks PAGA civil penalties pursuant to Labor Code § 2699(f) on behalf of herself and other aggrieved employees. However, she also seeks penalties under Labor Code § 558 in connection with the First Cause of Action.

Defendant moves to compel arbitration pursuant to an arbitration provision executed by Plaintiff in connection with her employment. The provision requires Plaintiff to arbitrate any claims related to her employment. (Petition Exh. A.) The provision also states that “[i]n order to provide for the efficient and timely adjudication of claims, the arbitrator is prohibited from consolidating the claims of others into one proceeding.

This means that an arbitrator will hear only my individual claims and does not have authority to fashion a proceeding as a class or collective action or to award any relief to a group of employees in one proceeding.” (Id.)

Defendant argues that while PAGA claims for civil penalties pursuant to Labor Code § 2699(f) are not subject to arbitration, the individual claims for recovery of unpaid wages and statutory damages must be compelled to arbitration. While Plaintiff’s opposition spends significant time discussing the nonarbitrability of PAGA claims, the parties are in agreement and there is no dispute that a representative PAGA action seeking only civil penalties is not subject to arbitration. (Iskanian v. CLS Transportation (2014) 59 Cal.4th 348, 378-389.) Plaintiff’s claims seeking PAGA penalties pursuant to Labor Code § 2699(f) are not subject to arbitration and Defendant is not seeking to compel them to arbitration.

Defendant points out, however, that the complaint not only seeks civil penalties under PAGA, but also purports to seek individual recovery of statutory damages under Labor Code § 558. Indeed, in connection with the First Cause of Action, Plaintiff alleges that Defendant is subject to a civil penalty pursuant to Labor Code § 558 in the amount of $50 for a first violation, $100 for each subsequent violation, in addition to “an amount sufficient to recover underpaid wages.” (Comp. ¶ 37.) Case law has held that claims seeking recovery under Labor Code § 558 are subject to arbitration. (Esparza v. KS Industries, L.P. (2017) 13 Cal.App.5th 1228, 1246.) Esparza analyzed Labor Code § 558, which although referring to civil penalties, also makes clear that the penalty includes an amount sufficient to recover unpaid wages and that “[w]ages recovered pursuant to this section shall be paid to the affected employee.” (Labor Code § 558.) Esparza emphasized that Labor Code § 558 claims, unlike claims for civil penalties under PAGA, are private disputes arising out of the employee’s employment contract with the employer and can be pursued by the employee in their own right. These “claims retain their private nature and continue to be covered by the Federal Arbitration Act.” (Esparza, supra, 13 Cal.App.5th at 1246.) Iskanian’s rule of nonarbitrability was limited to claims “that can only be brought by the state or its representatives, where any resulting judgment is binding on the state and any monetary penalties largely go to state coffers.” (Iskanian, supra, 59 Cal.4th at 388.) The fact that the employee seeks to recover the wages on behalf of other aggrieved employees does not change the result. “These limitations are not met by claims for unpaid wages owed to other aggrieved employees because (1) those employees could pursue recovery of the unpaid wages in their own right and (2) the unpaid wages recovered would not go to the state coffers.” ((Esparza, supra, 13 Cal.App.5th at 1246.)

Here, there is no question that despite Plaintiff’s argument in opposition that she only seeks civil penalties under PAGA, that she also seeks civil penalties under Labor Code

§ 558 in “an amount sufficient to recover underpaid wages.” As set forth above in the preceding paragraph, Plaintiff clearly alleges that Defendant is subject to a civil penalty pursuant to Labor Code § 558 in the amount of $50 for a first violation, $100 for each subsequent violation, in addition to “an amount sufficient to recover underpaid wages.” (Comp. ¶ 37.) In addition, the prayer seeks the same relief. (Comp., prayer ¶ 1.) Claims for penalties under § 558 are subject to arbitration. Plaintiff’s opposition entirely fails to address any of the above analysis regarding the arbitrability of § 558 claims.

As a result, Plaintiff’s individual claims seeking penalties under Labor Code § 558 are subject to arbitration. As pointed out by Defendant, however, the subject arbitration

provision prevents the claims seeking civil penalties under § 558 on behalf of other employees from being ordered to arbitration. The subject provision expressly prohibits arbitration of class/representative actions. Only Plaintiff’s individual claim for civil penalties under § 558 may be ordered to arbitration.

The Court notes that in opposition, Plaintiff cites to Betancourt v. Prudential Overall Supply (2017) 9 Cal.App.5th 439 to support her argument that the complaint only seeks civil penalties under PAGA. But Betancourt did not involve a complaint seeking remedies under Labor Code § 558 as the complaint does here. Betancourt also involved an argument by the defendant that the subject complaint in reality asserted non-PAGA claims despite labeling them as PAGA claims. Betancourt made clear that these were pleading challenges to alleged defects in the complaint and if the defendant believed that there were defects in the complaint, the defendant needed to bring an appropriate motion to challenge the complaint, and that a motion to compel arbitration was not the proper method to challenge pleading defects. (Id. at 446.) Here, however, Defendant is not raising a pleading defect and the complaint is quite clear that Plaintiff has alleged claims for Labor Code § 558 which are subject to arbitration.

Defendant also asserts that the complaint seeks individual recovery of unpaid rest premiums under Labor Code § 226.7(c) which provides that “the employer shall pay the employee one additional hour of pay at the employee’s regular rate of compensation for each workday that the meal or rest or recovery period is not provided.” However, a review of the complaint shows that while Plaintiff alleges that Defendant violated Labor Code § 226.7 requiring employees to work during rest periods and failed to compensate them, there are no allegations or requests for payment of the employee’s regular rate as compensation. Instead, the allegations regarding Labor Code § 226.7 are utilized as the underlying predicate for the PAGA claims. (Comp. ¶¶ 29-38.) There do not appear to be any claims in the complaint seeking recovery for nonpayment of wages pursuant to Labor Code § 226.7 that would be subject to arbitration. “[A] section 226.7 claim is not an action for nonpayment or wages: it is an action brought for non-provision of meal or rest breaks.” (Kirby v. Immos Fire Protection, Inc. (2012) 53 Cal.4th 1244, 1257.) “Because section 226.7 does not specifically provide for a civil penalty, the civil penalty for a violation of section 226.7 would be the default penalty established by section 2699, subdivision(f).” ( Thurman v. Bayshore Transit Management, Inc. (2012) 203 Cal.App.4th 112, 1134.)

In short, the Court finds Plaintiff’s individual claim pursuant to Labor Code § 558 is subject to arbitration. However, none of the PAGA claims or the representative claims pursuant to Labor Code § 558 may be ordered to arbitration.

Given Plaintiff’s insistence that she is only seeking civil penalties under PAGA, and her failure to directly address the Labor Code § 558 allegations, it appears that she has either abandoned those allegations or rather, failed to notice that her complaint contains those allegations. A similar situation was addressed in Esparza, supra, 13 Cal.App.5th 1228, 1246. There, the Plaintiff contended that he only sought civil penalties. The trial court had issued an order denying the motion to compel arbitration including language that the plaintiff “only seeks PAGA civil penalties and no individual damages.” As discussed above, the appellate court concluded that the Labor Code § 558 claims were not claims for civil penalties under PAGA and thus found that the statement in the trial court’s order that the Plaintiff only sought PAGA civil penalties was premised on a misunderstanding of the law. As a result, Esparza remanded to

the trial court to allow the Plaintiff to clarify whether he intended to limit his claims to PAGA representative claims seeking civil penalties and waive the Labor Code § 558 claims. (Id. at 1247.) Esparza noted that if this was the case then there was no need for an order referring any claims to arbitration.

As a result, if Plaintiff truly intends to limit the claims in this action to PAGA representative claims for civil penalties and waive the Labor Code § 558 claims, then no order compelling the matter to arbitration is necessary. However, in the absence of such clear waiver, and given the allegations in the complaint regarding Labor Code § 558, the Court cannot infer waiver and must presume that Plaintiff intends to pursue those claims. Therefore, absent that waiver, the motion to compel arbitration must be granted. Plaintiff’s individual claim for Labor Code § 558 penalties is ordered to arbitration.

In addition, the Court grants Defendant’s request to stay this action pending arbitration given the overlapping nature of the claims subject to arbitration and the claims that are not subject to arbitration. (CCP § 1281.4.)

Again, if Plaintiff intends to waive the individual Labor Code § 558 claims, she may inform the Court of such waiver and no order compelling arbitration would be appropriate as the complaint would then only contain PAGA claims and/or representative claims pursuant to Labor Code § 558 which also cannot be ordered to arbitration.