Cal-Peculiarities: How California Employment Law is Different 2022 Edition

©2022 Seyfarth Shaw LLP  www.seyfarth.com 2022 Cal-Peculiarities | 81 the California Legislature to authorize predispute waivers of jury trial, to permit trials by the court . 3 No such statutory development has been forthcoming or appears likely in the near future.) 5.1.2 Employers sometimes can be deprived of a jury trial While juries often sympathize with individuals who sue corporations, those plaintiffs are less sympathetic in certain cases, such as when they have signed contracts saying they were independent contractors and now claim employee benefits on a claim that they were really employees, or when they have earned large dollars as a salaried employee and now seek overtime pay on a claim that their employer misclassified them as exempt. Although California employers should be entitled to a jury trial in these cases, plaintiffs have circumvented that right by asserting their claims under the Unfair Competition Law, which enables them to recover unpaid monies as a matter of equitable relief decided by the court sitting without a jur y. 4 And even when plaintiffs also sue under the Labor Code (on which a jury trial is available), some courts have tried the UCL claim first, without a jury, to reach a result that makes a jury trial unnecessary . 5 5.2 California’s Hostility to Arbitration of Employment Disputes The Federal Arbitration Act. The FAA promotes the enforceability of written arbitration agreements, including those made in the employment context. The FAA declares that courts can invalidate contractual agreements to arbitrate only on the same grounds that would invalidate contractual promises generally, such as unconscionability or duress. This declaration reflects a “liberal federal policy favoring arbitration, ” 6 w hich preempts special state rules that disfavor arbitration agreements. Accordingly, courts throughout America generally enforce agreements by which parties agree to arbitrate rather than litigate in court. The California Arbitration Act. The CAA itself authorizes enforcement of arbitration agreements , 7 and California courts give lip service to the existence of a “strong public policy favoring arbitration as a relatively speedy, cheap way to resolve disputes. ” 8 B ut the reality of the employment context has been different, as California has both legislatively and judicially repeatedly evinced hostility toward employer-mandated arbitration agreements. Limited preemptive effect of the FAA. The FAA has inherent limits. First , the FAA, for historical reasons, excludes a certain class of transportation workers. Section 1 of the FAA exempts employment contracts for “seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce. ” 9 T he U.S. Supreme Court has explained that this exemption is for “transportation workers. ” 10 The Court of Appeal has construed the Section 1 exemption broadly, against companies trying to enforce arbitration agreements, thus holding that the exemption encompasses truck and delivery drivers even though they never personally crossed state lines, on the rationale that they still work in the stream of goods moving through interstate commerce . 11 In 2020 a split Ninth Circuit panel held that “last mile” delivery drivers were exempt from the FAA under the transportation worker exemption, even if their work never took them across state lines, in that packages are not held at warehouses for later sales but rather are simply part of a process by which a delivery provider transfers the packages to a different vehicle for the last mile of the interstate journey . 12 Second , courts have held that the FAA does not apply to PAGA actions, where the arbitration agreement—having been signed by the PAGA plaintiff in her individual capacity, before she exhausted administrative requirements to become an agent of the LWDA—was not an agreement to which the LWDA was a party. (See § 5.2.4) The NLRA does not defeat arbitration agreements. Both the California and U.S. Supreme Court have rejected plaintiffs’ arguments that arbitration agreements with class-action waivers run afoul of the National Labor Relations Act and its protection of concerted activity by employees for their mutual aid and protection. (See § 5.2.4)