Case Name: Alivia Stricklin v. Security Industry Specialists, Inc., et al.
Case No.: 18-CV-323870

This is a putative class action alleging wage and hour violations by defendant Security Industry Specialists, Inc. (“SIS”). Before the Court is defendant’s motion to compel arbitration, which plaintiff opposes.

I. Factual and Procedural Background

Plaintiff worked for defendant as an hourly, non-exempt security guard from May to July of 2017. (Complaint, ¶ 8.) She alleges that SIS failed to compensate her and other putative class members for time spent cleaning and maintaining their uniforms and associated expenses, and issued their final wages in the form of an ATM card that triggered fees upon use, was not fully cashable, and could not be used at all financial institutions. (Id. at ¶ 18.)

Based on these allegations, plaintiff asserts claims for (1) violation of Labor Code section 226 by failing to provide accurate itemized wage statements; (2) violation of Labor Code sections 558, 1194, 1197, and 1197.1 by failing to pay minimum wages; (3) violation of Labor Code sections 510, 558, 1194, and 1197.1 by failing to pay overtime wages; (4) violation of Labor Code section 2802 by failing to reimburse business expenses; (5) violation of Labor Code sections 201-203 by failing to pay wages due at termination; and (6) violations of Business & Professions code section 17200 et seq.

Defendant filed this motion to compel arbitration on June 18, 2018. On July 2, plaintiff filed a second action against SIS, asserting a single claim under the Private Attorneys General Act (“PAGA”) based on the same facts set forth above. That case, Stricklin v. Security Industry Specialists, Inc. (Super. Ct. Santa Clara County, No. 18-CV-330523) is also pending in this Department, but is beyond the scope of the present motion.

II. Legal Standard

Code of Civil Procedure section 1281.2 provides that a court must grant a petition to compel arbitration “if it determines that an agreement to arbitrate … exists, unless it determines that: (a) The right to compel arbitration has been waived by the petitioner; or (b) Grounds exist for the revocation of the agreement,” among other exceptions. (Code Civ. Proc., § 1281.2; see also 9 U.S.C. § 3 [the court must grant a motion to compel arbitration if any suit is brought upon “any issue referable to arbitration under an agreement for such arbitration”].)

The moving party must prove by a preponderance of evidence the existence of the arbitration agreement and that the dispute is covered by the agreement. (See Cruise v. Kroger Co. (2015) 233 Cal.App.4th 390, 396 [under both federal and state law, “the threshold question presented by a petition to compel arbitration is whether there is an agreement to arbitrate”]; Rosenthal v. Great Western Fin’l Securities Corp. (1996) 14 Cal.4th 394, 413 [moving party’s burden is a preponderance of the evidence].) The burden then shifts to the resisting party to prove a ground for denial. (Rosenthal v. Great Western Fin’l Securities Corp., supra, 14 Cal.4th at p. 413.)

If the court orders arbitration “of a controversy which is an issue involved in [the] action or proceeding pending before [it], the court … shall, upon motion of a party …, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.” (Code Civ. Proc., § 1281.4.) “If the issue which is the controversy subject to arbitration is severable, the stay may be with respect to that issue only.” (Ibid.)

III. Existence and Validity of Arbitration Agreement

Here, plaintiff contends that there is no agreement to arbitrate because the contract at issue was never executed by the defendant and the agreement is otherwise illusory. Plaintiff further argues that the agreement is procedurally and substantively unconscionable.

A. Existence and Scope of Agreement to Arbitrate

Because arbitration is a contractual matter, a party who has not agreed to arbitrate a controversy cannot be compelled to do so. (Harris v. Tap Worldwide, LLC (2016) 248 Cal.App.4th 373, 380.) While there is a strong public policy favoring contractual arbitration, that policy does not extend to parties who have not agreed to arbitrate; absent “a clear agreement” to do so, courts will not infer that the right to a jury trial has been waived. (Esparza v. Sand & Sea, Inc. (2016) 2 Cal.App.5th 781, 787, 790.) An agreement to arbitrate may be express or implied so long as it is written. (Harris v. Tap Worldwide, LLC, supra, 248 Cal.App.4th at p. 383.)

Here, SIS submits a declaration by its Director of Human Resources, Jeff Venturini, who oversees its employee recruiting, hiring, and onboarding processes, as well as the maintenance of its personnel files. Mr. Venturini declares that since April of 2016, SIS has used a customized Salesforce platform for all new employee hiring/on-boarding. This platform is used to provide new hires with documentation including the SIS “Employment Arbitration Agreement and Procedure” and “Agreement on Alternative Dispute Resolution” (together, the “Agreement”). On April 21, 2017, plaintiff electronically signed the Agreement, as well as a “Handbook Acknowledgement” indicating her agreement to submit “any employment-related dispute” to binding arbitration.

Plaintiff does not dispute that the Agreement was signed by her, but correctly notes that its signature line for an “Authorized Company Representative” of SIS is blank. On reply, Mr. Venturini declares that an SIS representative would typically sign new hire documents electronically, but at the time plaintiff was hired, a technical issue prevented representatives from doing so. Mr. Venturini declares that SIS has intended to be bound by the Agreement at all times.

Plaintiff contends that SIS’s failure to execute the Agreement renders it invalid. However, courts have rejected this argument in circumstances indistinguishable from those present here. (See Serafin v. Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 176-177 [lack of employer signature did not invalidate arbitration agreement signed by employee where agreement was authored by employer on its affiliate’s letterhead and employer performed under the agreement]; Cruise v. Kroger Co. (2015) 233 Cal.App.4th 390, 397-399 [enforcing arbitration agreement despite lack of employer signature where agreement was printed on employer’s letterhead and declared employer’s intent to be bound], citing Lara v. Onsite Health, Inc. (N.D. Cal. 2012) 896 F.Supp.2d 831, 844.) The mutual and mandatory wording of the Agreement, its presentation to plaintiff on defendant’s letterhead as a condition of employment, and defendant’s employment of plaintiff in accordance with the agreement show SIS’s intent to be bound by the Agreement, although it did not formally execute it because of a technical issue.

Plaintiff further argues that the Agreement is illusory because its language “disaffirms that [the Agreement is of a] binding nature.” In support of this argument, plaintiff cites authority addressing provisions contained in employee handbooks subject to revision by the employer. Here, the arbitration provisions were presented in a standalone contract, not within a revisable handbook. The language plaintiff cites to show the Agreement is not binding merely cautions that the Agreement does not alter plaintiff’s “at-will” employment status. There is no indication that the Agreement itself is not binding or is subject to revision. Plaintiff’s argument that the Agreement is illusory consequently lacks merit.

Finally, the Agreement covers this dispute. It expressly covers all claims relating to or arising out of plaintiff’s employment, including those related to “[c]ompensation or other terms or conditions of employment,” “wage and hour laws, fair labor or employment standards laws, … wage and salary payment laws,” and “[a]ny other dispute arising out of or related to an Employee’s employment or its termination.”

In light of the above, SIS has satisfied its initial burden in connection with this motion.

B. Unconscionability

In Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, the California Supreme Court summarized the rules applicable to the unconscionability defense in a case involving an automobile sales contract. The Court described the general principles of the doctrine as follows:

One common formulation of unconscionability is that it refers to an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party. As that formulation implicitly recognizes, the doctrine of unconscionability has both a procedural and a substantive element, the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh and one-sided results. The prevailing view is that procedural and substantive unconscionability must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability. But they need not be present in the same degree. Essentially a sliding scale is invoked [where] the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable and vice versa.

(Sanchez, supra, 61 Cal.4th at p. 910, internal citations and quotations omitted, italics original.)

Plaintiff contends that the Agreement is both substantively and procedurally unconscionable. With respect to substantive unconscionability, she argues that the Agreement unlawfully exposes her to liability for sanctions in the form of attorney fees and costs. Article 20 of the Agreement provides that the arbitrator may award fees and costs “upon a finding that any claim or counterclaim was frivolous or brought to harass” the other party. Fees and costs may also be awarded where a party “(a) engaged in unreasonable delay, (b) failed to cooperate in discovery, or (c) failed to comply with requirements of confidentiality.” Identical language was held to raise no issue of substantive unconscionability in Poublon v. C.H. Robinson Company (9th Cir. 2017) 846 F.3d 1251, which noted that “sections 128.7 and 2023.030(a) of the California Code of Civil Procedure … authorize courts to impose similar sanctions in judicial proceedings.” (At pp. 1267-1268.) The Court agrees that this language does not “impose on the employee costs he or she would not normally have to pay if the case were litigated in a court,” and therefore raises no issue of substantive unconscionability. (Wherry v. Award, Inc. (2011) 192 Cal.App.4th 1242, 1248, citing Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83.) With respect to confidentiality, as discussed in Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, an arbitration provision “can provide a margin of safety that provides the party with superior bargaining strength a type of extra protection for which it has a legitimate commercial need without being unconscionable.” (At p. 1250, internal citation and quotations omitted.)

Plaintiff also urges that the Agreement exempts claims for injunctive relief “to enforce the provisions of” the Agreement or “to maintain the status quo or in aid of or pending [its] application or enforcement.” As discussed in Lara v. Onsite Health, Inc., supra, 896 F.Supp.2d at pp. 843-844, Trivedi v. Curexo Technology Corp. (2010) 189 Cal.App.4th 387 held that such a provision favors employers, who are more likely to seek injunctive relief than employees. However, Trivedi was disapproved by Baltazar v. Forever 21, Inc., supra, 62 Cal.4th 1237, which held that a provision allowing parties to arbitration to seek provisional relief to effectuate arbitration, which is also authorized by Code of Civil Procedure section 1281.8, was not unconscionable. (At pp. 1246-1248.) The provision here is indistinguishable from the one approved by Baltazar.

Plaintiff contends that, following the logic of Trivedi as adopted by Lara, the arbitration provision’s class action waiver is also unfairly one-sided. Again, however, Trivedi was disapproved by Baltazar. More fundamentally, the argument that a class action waiver is unconscionable as such must be rejected in compliance with the Federal Arbitration Act (“FAA”), as held by AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333 and Epic Systems Corp. v. Lewis (2018) 138 S.Ct. 1612.

Finally, plaintiff argues that the Agreement does not provide for adequate discovery. Article Eleven of the Agreement expressly provides that the employee is entitled to a copy of his or her personnel file and one deposition of an employer representative. However, contrary to plaintiff’s argument, discovery is not limited to these two items. Rather, each party is entitled to information and documents “that meet the criteria for discovery” upon request. Moreover, the arbitrator “may grant, upon good cause shown, either Party’s request for discovery in addition to … that for which this Article Eleven expressly provides.” The Agreement thus adopts the same standard applied by the California courts with regard to motions to compel further responses to document requests and other discovery disputes. (See Code Civ. Proc., § 2031.310, subd. (b)(1).) The arbitrator may also direct that additional depositions be taken “upon a showing of good cause.”

As urged by SIS, similar discovery provisions were held not to be unconscionable in Mercuro v. Superior Court (Countrywide Securities Corp.) (2002) 96 Cal.App.4th 167, 182-184. As stated in that case, “adequate discovery does not mean unfettered discovery and Armendariz itself recognizes an arbitration agreement may require something less than the full panoply of discovery provided” under the Code of Civil Procedure. (Id. at p. 184, internal quotations omitted, italics original.) Quoting Armendariz, Mercado emphasized that “employees ‘are at least entitled to discovery sufficient to adequately arbitrate their statutory claim, including access to essential documents and witnesses, as determined by the arbitrator(s) and subject to limited judicial review pursuant to Code of Civil Procedure section 1286.2.’ ” (Id. at p. 182.)

Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702, cited by plaintiff, is distinguishable. There, any discovery beyond the default two deposition statements (plus any expert statements) and exchange of arbitration hearing exhibits was not permitted unless the arbitrator found a “compelling need to allow it,” meaning “a fair hearing would be impossible without additional discovery.” (Id. at p. 716, italics original.) Also distinguishable is Ontiveros v. DHL Express (USA), Inc. (2008) 164 Cal.App.4th 494, 511-513, which followed Fitz to hold that an agreement to limit discovery to a default one deposition plus document requests absent a showing of “substantial need” was unconscionable. Here, the arbitrator will apply the same “good cause” standard generally employed by the courts. Although discovery procedures will be different and more limited than in a court action, such limitations “on discovery [are] one important component of the simplicity, informality, and expedition of arbitration.” (Armendariz v. Foundation Health Psychcare Services, Inc., supra, 24 Cal.4th at p.106, fn. 11, internal citation and quotations omitted.)

As plaintiff fails to identify any element of substantive unconscionability in connection with the arbitration agreement, her opposition must fail, even assuming some amount of procedural unconscionability existed because her employment contract was not negotiated. (See Baltazar v. Forever 21, Inc., supra, 62 Cal.4th at p. 1244 [a finding of procedural unconscionability does not mean that a contract will not be enforced, but rather that courts will scrutinize the substantive terms of the contract to ensure they are not manifestly unfair or one-sided; adhesive employment contracts are scrutinized carefully, but to a lesser degree than contracts of adhesion that involve surprise or other sharp practices].)

The Court consequently finds that there is an enforceable agreement to arbitrate plaintiff’s claims.

IV. Defendant’s Request for Dismissal of the Class Claims

Defendant contends that the Court should dismiss plaintiff’s class claims without leave to amend to enforce the Agreement’s waiver of her right to participate in a class or collective action. In support of this request, it cites only unpublished California opinions, which the Court may not consider. (Cal. Rules of Court, rule 8.1115(a) [unpublished California opinions “must not be cited or relied on by a court or a party in any other action”].)

In the absence of any authority providing for a different outcome—as well as a properly noticed motion to strike the class claims—the Court will simply “stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate” as provided by the Code of Civil Procedure. (Code Civ. Proc., § 1281.4.)

V. Conclusion and Order

Defendant’s petition to compel arbitration is GRANTED. The action is stayed pending completion of arbitration.

The Court will prepare the order.