Court Opinion

ID: 4682887
Source: CourtListenerOpinion
Date Created: 2021-04-30 18:02:21.352128+00
Date Added: 2024-06-11T08:04:11.668575
License: Public Domain

Filed 4/30/21
                CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                SECOND APPELLATE DISTRICT

                        DIVISION EIGHT

DAMARIS ROSALES,                       B305546

   Plaintiff and Respondent,           (Los Angeles County
                                       Super. Ct. No. BC685555)
       v.

UBER TECHNOLOGIES, INC.,

   Defendant and Appellant.

     APPEAL from an order of the Superior Court of Los
Angeles County. Amy D. Hogue, Judge. Affirmed.

     Littler Mendelson, Sophia Behnia and Andrew M.
Spurchise for Defendant and Appellant.

       Gold and Michael A. Gold for Plaintiff and Respondent.

                   __________________________
                            SUMMARY
       Defendant Uber Technologies, Inc. moved to compel
arbitration in a case where the plaintiff, Damaris Rosales,
alleged a single cause of action for wage violations under the
Private Attorneys General Act (PAGA, Lab. Code, § 2698 et seq.).
Plaintiff was an Uber driver under a written agreement stating
she was an independent contractor and all disputes would be
resolved by arbitration under the Federal Arbitration Act (FAA,
9 U.S.C. § 1 et seq.). The agreement delegated to the arbitrator
decisions on the enforceability or validity of the arbitration
provision. The trial court denied defendant’s motion to compel
arbitration.
       Defendant contends plaintiff cannot bring a PAGA claim in
court unless or until an arbitrator first decides whether she has
standing to bring a PAGA claim—that is, whether she is an
employee who can seek penalties under PAGA on behalf of the
state, or an independent contractor who cannot. We conclude, as
has every other California court presented with this or similar
issues, that the threshold question whether plaintiff is an
employee or an independent contractor cannot be delegated to an
arbitrator. Accordingly, we affirm the trial court’s order.
                                FACTS
       In April 2018, plaintiff filed the operative first amended
complaint. The complaint stated a representative action against
defendant for penalties under PAGA, alleging defendant violated
section 216 of the Labor Code (refusal to pay wages due).
       In January 2020, after successive demurrers were
overruled, defendant brought its motion to compel arbitration.
Defendant sought an order compelling plaintiff “to arbitrate the
issue of her independent contractor status (i.e., whether she was
properly classified as an independent contractor) under the

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parties’ arbitration agreement and/or questions of enforceability
or arbitrability (i.e., enforcing the arbitration agreement’s
delegation clause).” Alternatively, defendant sought to enforce
the waiver of representative claims in the arbitration agreement,
and to compel plaintiff to arbitrate her individual claim.
      The arbitration agreement was a part of defendant’s then-
standard technology services agreement, which plaintiff executed
on-line when she became a driver for defendant in March 2016.
Defendant refers to this as the 2015 TSA. The parties agreed,
with irrelevant exceptions, to arbitrate all disputes between them
arising out of or related to the agreement and plaintiff’s
relationship with defendant, including disputes regarding wage
and hour laws. The agreement delegated to the arbitrator the
power to decide whether a dispute is arbitrable. It stated the
arbitrator and not a court or judge would decide all disputes
“arising out of or relating to interpretation or application of this
Arbitration Provision, including the enforceability, revocability or
validity of the Arbitration Provision or any portion of the
Arbitration Provision.”
      Plaintiff also agreed, to the extent permitted by law, not to
bring a representative action on behalf of others under PAGA in
any court or in arbitration. She agreed that any claim brought as
a private attorney general would be resolved in arbitration on an
individual basis only, and not to resolve the claims of others.
      The trial court denied defendant’s motion. The court held
that “no part of the TSA, including the delegation provision,
binds the State of California, on whose behalf [plaintiff] brings
the PAGA claim.”
      Defendant filed a timely notice of appeal.

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                          DISCUSSION
1.     The Background
       Before PAGA was enacted, only the state could sue
employers for civil penalties under the Labor Code. (Kim v. Reins
International California, Inc. (2020) 9 Cal.5th 73, 80 (Kim).)
“Government enforcement proved problematic,” for reasons
including inadequate funding and staffing constraints. (Id. at
p. 81.) “To facilitate broader enforcement, the Legislature
enacted PAGA, authorizing ‘aggrieved employee[s]’ to pursue civil
penalties on the state’s behalf. [Citations.] ‘Of the civil penalties
recovered, 75 percent goes to the Labor and Workforce
Development Agency, leaving the remaining 25 percent for the
“aggrieved employees.” ’ ” (Ibid.)
       Kim explains that 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.’ [Citation.] Every PAGA claim is ‘a dispute between an
employer and the state.’ [Citations.] 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. [Citation.] Relief
under PAGA is designed primarily to benefit the general public,
not the party bringing the action. [Citations.] ‘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.’ [Citation.] The
‘government entity on whose behalf the plaintiff files suit is
always the real party in interest.’ ” (Kim, supra, 9 Cal.5th at

                                 4
p. 81.)
2.     The Authorities
       The issue presented for our review has been resolved
adversely to defendant in two cases decided during and after
briefing in this case: Provost v. YourMechanic, Inc. (2020)
55 Cal.App.5th 982 (Provost) and Contreras v. Superior Court
(2021) 61 Cal.App.5th 461 (Contreras).1
       In Provost, as here, the defendant contended an arbitrator
must first decide the threshold issue whether the plaintiff was an
independent contractor or an employee. Until that issue is
resolved in arbitration, the defendant argued, the plaintiff had no
standing to pursue a representative PAGA action, because he
could not show he was an “aggrieved employee.” (Provost, supra,
55 Cal.App.5th at p. 996.) The court rejected those assertions,
following cases that “consistently, and, in our view, properly hold
that threshold issues involving whether a plaintiff is an
‘aggrieved employee’ for purposes of a representative PAGA-only
action cannot be split into individual arbitrable and
representative nonarbitrable components.” (Ibid.)
       Contreras similarly held that a PAGA plaintiff “may not be
compelled to arbitrate whether he or she is an aggrieved
employee.” (Contreras, supra, 61 Cal.App.5th at p. 477; id. at
p. 472 [“PAGA claims cannot be arbitrated without state consent”
(italics omitted)]; id. at p. 473 [the preliminary question whether
the petitioners were “aggrieved employees” under PAGA “may
not be decided in private party arbitration” (capitalization
omitted)].)

1     Before the opinion in Contreras was published, defendant
asked us to take judicial notice of the trial court’s order in that
case. The request for judicial notice is now moot.

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       We are not persuaded to depart from the analyses in
Provost and Contreras and all the authorities they cite. As we
shall see, these authorities cogently answer each of defendant’s
arguments.
3.     Defendant’s Contentions
       Defendant contends the FAA governs the arbitration
provision, and under the FAA, the parties’ agreement to delegate
the issue of arbitrability to the arbitrator is enforceable. But our
Supreme Court has held the FAA does not govern a PAGA claim.
(Iskanian v. CLS Transportation Los Angeles, LLC (2014)
59 Cal.4th 348, 360 (Iskanian).)
       As relevant here, Iskanian held that “an arbitration
agreement requiring an employee as a condition of
employment to give up the right to bring representative PAGA
actions in any forum is contrary to public policy.” (Iskanian,
supra, 59 Cal.4th at p. 360.) This is referred to as the Iskanian
rule. The court further concluded “that the FAA’s goal of
promoting arbitration as a means of private dispute resolution
does not preclude our Legislature from deputizing employees to
prosecute Labor Code violations on the state’s behalf. Therefore,
the FAA does not preempt a state law that prohibits waiver of
PAGA representative actions in an employment contract.” (Ibid.)
       Iskanian explained that “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 an employer and the state, which alleges
directly or through its agents—either the Agency or aggrieved
employees—that the employer has violated the Labor Code.”
(Iskanian, supra, 59 Cal.4th at pp. 386–387.)

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       Defendant contends Iskanian has been effectively overruled
by the high court in Epic Systems Corp. v. Lewis (2018) ___ U.S.
___ [138 S.Ct. 1612] (Epic Systems), a case that reiterated the
FAA’s broad preemptive scope. Epic Systems held the FAA
requires courts to enforce arbitration agreements according to
their terms, including terms in an employment agreement
requiring individualized arbitration proceedings rather than
class or collective action procedures. (Epic Systems, at p. ___
[138 S.Ct. at p. 1619]; id. at p. 1621 [“this much the Arbitration
Act seems to protect pretty absolutely”].) The court held that,
contrary to the plaintiff’s contention, the National Labor
Relations Act does not “offer[] a conflicting command.” (Epic
Systems, at p. ___ [138 S.Ct. at p. 1619]; ibid. [“This Court has
never read a right to class actions into the NLRA.”].)
       Defendant’s argument that Epic Systems rendered the
Iskanian rule invalid has been made and rejected several times.
For example, in Correia v. NB Baker Electric, Inc. (2019)
32 Cal.App.5th 602 (Correia), the court explained that on federal
questions, “intermediate appellate courts in California must
follow the decisions of the California Supreme Court, unless the
United States Supreme Court has decided the same question
differently.” (Id. at p. 619.) Epic Systems addressed an issue
“pertaining to the enforceability of an individualized arbitration
requirement against challenges that such enforcement violated
the NLRA.” (Correia, at p. 619.) Iskanian, on the other hand,
“held that a ban on bringing PAGA actions in any forum violates
public policy and that this rule is not preempted by the FAA
because the claim is a governmental claim.” (Correia, at p. 619.)
Epic Systems did not consider that issue and so “did not decide
the same question differently.” (Correia, at p. 619.)

                                7
      Correia describes in detail how the cause of action at issue
in Epic Systems “differs fundamentally from a PAGA claim.”
(Correia, supra, 32 Cal.App.5th at p. 619; id. at pp. 619–620.)
The court concluded: “Epic did not reach the issue regarding
whether a governmental claim of this nature is governed by the
FAA, or consider the implications of a complete ban on a state
law enforcement action. Because Epic did not overrule Iskanian’s
holding, we remain bound by the California Supreme Court’s
decision.” (Correia, at p. 620; see, e.g., Provost, supra,
55 Cal.App.5th at pp. 997–998 [reaffirming the Correia analysis
that Epic Systems did not overrule Iskanian and observing our
Supreme Court reaffirmed Iskanian in ZB, N.A. v. Superior Court
(2019) 8 Cal.5th 175, 185, 197]; Contreras, supra, 61 Cal.App.5th
at p. 471 [agreeing that, “even after Epic Systems, PAGA claims,
which seek to vindicate state interests, not private party
agreements, are not covered by the FAA”].) We too are bound by
the Iskanian rule.
       Contreras points out that while Iskanian held a PAGA
claim cannot be waived by an employment agreement, Iskanian
“did not directly address whether an employer may contractually
require a PAGA claim to be arbitrated.” (Contreras, supra,
61 Cal.App.5th at p. 472.) But that issue, too, has been resolved
in several Court of Appeal cases holding that “an individual
PAGA plaintiff may not be required to arbitrate his or her PAGA
claim.” (Contreras, at p. 472, citing cases; ibid. [“PAGA claims
cannot be arbitrated without state consent” (italics omitted)].)
       Defendant relies on federal district court cases that have
concluded, in other contexts, that a threshold worker
classification issue must be determined by an arbitrator where
the arbitration agreement contains a delegation clause. Those

                                 8
cases do not apply here because none involves a PAGA claim
where the plaintiff is the proxy or agent of the state.2
       Next, defendant tells us that even if plaintiff’s
representative claim is not subject to arbitration, the threshold
classification issue is subject to the FAA because “it is not a
PAGA claim at all” but rather “a private dispute between
[plaintiff and defendant] regarding the nature of their business
relationship.” Contreras disposed of the same claim in a detailed
discussion, concluding the question whether a plaintiff is an
“aggrieved employee” under PAGA may not be decided in private
party arbitration. (Contreras, supra, 61 Cal.App.5th at pp. 473–
477.) The court characterized the argument as “fallacious
wordsmithing,” and explained: “If an arbitrator rules that
petitioners are not ‘aggrieved employees,’ there will be no
remaining PAGA claim anywhere. By virtue of an arbitration to
which it did not consent, the state will have lost one of its
weapons in the enforcement of California’s labor laws. This
result would be at odds with . . . several appellate opinions . . . ,
e.g., Correia: ‘Without the state’s consent, a predispute

2     See Lamour v. Uber Technologies, Inc. (S.D.Fla. Mar. 1,
2017, No. 1:16-CIV-21449-MARTINEZ/GOODMAN)
2017 U.S.Dist.Lexis 29706, at pages *29–31; Ali v. Vehi-
Ship (N.D.Ill. Nov. 27, 2017, No. 17 CV 02688)
2017 U.S.Dist.Lexis 194456, at pages *14–15; Richemond v. Uber
Technologies, Inc. (S.D.Fla. 2017) 263 F.Supp.3d 1312, 1317;
Olivares v. Uber Technologies, Inc. (N.D.Ill. July 14, 2017,
No. 16 C 6062) 2017 U.S.Dist.Lexis 109348, at page *9; Sakyi v.
Estee Lauder Companies, Inc. (D.D.C. 2018) 308 F.Supp.3d 366,
381; Johnston v. Uber Technologies, Inc. (N.D.Cal. Sept. 16, 2019,
No. 16-cv-03134-EMC) 2019 U.S.Dist.Lexis 161256, at pages *16–
17.

                                  9
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 party to the arbitration
agreement.’ (Correia, supra, 32 Cal.App.5th at p. 622.) [¶]
Characterizing the process as resolving only an ‘arbitrability,’
‘delegatable’ or ‘gateway’ issue, or the adjudication of an
‘antecedent’ fact, does not extinguish the risk to the state that it
is an arbitrator, not a court, who nullifies the state’s PAGA
claim.” (Contreras, at p. 474.)
       Finally, defendant contends its case is different from
authorities holding that a “single cause of action under PAGA
cannot be split into an arbitrable ‘individual claim’ and a
nonarbitrable representative claim.” (Williams v. Superior Court
(2015) 237 Cal.App.4th 642, 645; see, e.g., Hernandez v. Ross
Stores, Inc. (2016) 7 Cal.App.5th 171, 178 [“determination of
whether the party bringing the PAGA action is an aggrieved
party should not be decided separately by arbitration”].) The
difference, defendant says, is that in Williams and Hernandez,
the threshold question was whether the plaintiff was “aggrieved”
(that is, subjected to a Labor Code violation), not whether the
plaintiff was an “employee.” But, as we have just seen, the
Contreras case presented the identical threshold issue of
employee status, and so did Provost. And both resolved the issue
adversely to defendant’s position. (Contreras, supra,
61 Cal.App.5th at p. 474; id. at p. 477 [“a PAGA plaintiff may not
be compelled to arbitrate whether he or she is an aggrieved
employee”]; Provost, supra, 55 Cal.App.5th at p. 988 [the
employer “cannot require [the plaintiff] to submit by contract any
part of his representative PAGA action to arbitration”; “a PAGA-

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only representative action is not an individual action at all, but
instead is one that is indivisible and belongs solely to the state”].)
                          DISPOSITION
      The order is affirmed. Plaintiff shall recover costs of
appeal.

                         GRIMES, Acting P. J.

      WE CONCUR:

                         STRATTON, J.

                         OHTA, J.*

*     Judge of the Los Angeles Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.

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