Ybarra v. Aimco: Following Iskanian, CA Ct. of Appeal Revives PAGA Action

RSS Feed

In Ybarra, the California Court of Appeal reconsidered its previous pre-Iskanian decision to compel arbitration of an apartment complex manager’s Private Attorney General Act (“PAGA”) claims against her employer, Apartment Investment and Management Company (“Aimco”). Ybarra v. Apartment Investment and Management Co., No. B245901 (2nd Dist. Div. 2 Oct. 7, 2014) (slip op. available here). Ultimately, the court of appeal reversed its prior holding and held that the state high court’s ruling in Iskanian meant the plaintiff’s PAGA claims could stay in court.

The plaintiff alleged three claims against her former employer, Aimco: (1) a class claim under Labor Code section 1194 for unpaid overtime and minimum wages; (2) a PAGA claim for various violations of the Labor Code, including, but not limited to, unpaid overtime (sections 510 and 1198), late final pay (201 and 202), and improper wage statements (226(a)); and (3) a claim under Bus. & Prof. Code 17200 for the same alleged violations of the Labor Code. The parties had signed an arbitration agreement that provided that the parties agreed to arbitrate all disputes between them and prohibited either party from bringing class or representative actions. Aimco unsuccessfully tried to remove the case to federal court, while the plaintiff voluntarily dismissed all claims except the PAGA claim. Then, Aimco filed a motion to compel arbitration, but the trial court denied it, finding that Ybarra had demonstrated some procedural unconscionability due to the arbitration agreement’s having been presented as a condition of employment, and had shown substantive unconscionability because the PAGA waiver was unenforceable.

Aimco appealed the trial court’s ruling and the court of appeal reversed. Following the court of appeal’s decision, the plaintiffs filed a petition for review to the California Supreme Court. The high court granted the petition and held the case pending its decision in Iskanian. Following the Iskanian decision, the high court sent the case back to the court of appeal to decide in light of Iskanian.

Citing the holding in Iskanian, the panel stated that it was bound to find that the PAGA waiver in the parties’ arbitration agreement is “unenforceable as a matter of law.” Slip op. at 4. Because she was not bringing the PAGA claims on an individual basis, the court applied the Iskanian exception for PAGA claims, noting, “The dispute here involves the legal question of whether the parties’ arbitration agreement—specifically, its prohibition of representative claims—is enforceable. Iskanian has now answered this question, and the answer is no.” Slip op. at 4 (emphasis added).

Port Drivers Misclassified as Independent Contractors in Taylor v. Shippers Transport Express

RSS Feed

At the end of September, U.S. District Court Judge Beverly Reid O’Connell held that truck drivers who move cargo containers to and from California port facilities for STE, a trucking and logistics company, are “employees” who can pursue wage-and-hour claims under state law, and are not independent contractors. Taylor v. Shippers Transp. Express, Inc., No. 2:13-cv-02092 (C.D. Cal. Sept. 30, 2014) (slip op. available here).

The defendants initially contended that the plaintiffs’ claims under the Labor Code were preempted by the Federal Aviation Administration Authorization Act (“FAAAA”), but the Ninth Circuit recently rejected this argument in Dilts v. Penske Logistics, LLC, No. 12-55705 (9th Cir. Sept. 8, 2014) and the Taylor court denied the defendant’s motion for summary judgment accordingly. The court granted plaintiffs’ motion for partial summary judgment, finding that STE’s ability to terminate drivers on short notice and its control over their daily work strongly indicated that the drivers were employees rather than independent contractors. A certified class of 300 former and current drivers alleged that drivers who leased trucks from STE were misclassified as independent contractors, and were thus denied minimum wage, business expense reimbursements, and itemized wage statements. The principal test of an employment relationship developed by the California Supreme Court turns on “[w]hether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.” Slip op. at 23 (citing S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341, 350 (1989)). Citing Borello’s secondary indicia of employment, the court also found that “strong evidence in support of an employment relationship is the right to discharge at will, without cause,” a factor which was present here. Id.

For example, under the leases, STE “effectively retains the right to terminate any Driver’s agreement without cause provided it gives the Driver thirty days’ notice,” which showed STE had a right to control and is thus indicative of an employer-employee relationship. Slip op. at 18. Although STE maintained that it did not control drivers (i.e. they could work when they wanted and could choose which loads to accept), the court found that the evidence in the record undermined these claims, citing company policy statements that drivers were required to contact dispatchers daily, that drivers needed to be there “on time when required,” and that STE had the capacity to track driver’s speed via GPS and occasionally sent employees to monitor drivers and verify they were driving safely. Stating that it is the “right to control, and not the actual exercise of control, which drives this analysis,” the court said the drivers had satisfied their burden of establishing they were employees of STE. Slip op. at 22.

Castaneda v. The Ensign Group: Parent Co. May Be Liable for Unlawful Labor Policies at Subsidiaries

RSS Feed

A California Court of Appeal issued a published decision holding that a corporate parent could be found liable for its subsidiary’s nonpayment of overtime and minimum wages, where the parent not only wholly owned the subsidiary, but also exercised control over the subsidiary’s operations and employees. Castaneda v. Ensign Group, Inc., No. B249119 (2nd Dist. Div. 6 Sept. 15, 2014) (slip op. available here).

A putative class of certified nursing assistants filed suit against The Ensign Group, a parent company that owns a cluster or portfolio of rehabilitation and nursing care facilities like Cabrillo (where the plaintiff had worked). Ensign contended that because Cabrillo was an independent entity (albeit 100% owned by Ensign) that hired and paid the plaintiff and set his daily work schedule, Ensign could not be considered the plaintiff’s employee, as a matter of law. The trial court agreed, and granting Ensign’s motion for summary judgment and dismissing them from the wage-and-hour action.

The Court of Appeal reversed, ruling that there were triable issues of fact as to whether Ensign was the plaintiff’s employer. Citing the California Supreme Court’s decision in Martinez v. Combs, 49 Cal.4th 35 (2010), and the Court of Appeal decision’s in Guerrero v. Superior Court, 213 Cal.App.4th 912 (2013), the Court explained that an “entity that controls the business enterprise may be an employer even if it did not ‘directly hire, fire or supervise’ the employees.” Slip op. at 3 (citing Guerrero). Holding that “[t]he basis of liability is the owner’s failure to perform the duty of seeing to it that the prohibited condition does not exist,” the court found enough evidence that Ensign exercised structural and managerial control over Cabrillo, and thus could have ensured that its subsidiaries’ practices were in compliance with California labor laws. Slip op. at 4 (citing Martinez, italics added). Among other factors, evidence noted by the court included the fact that Ensign was involved in the recruitment and interviewing of Cabrillo employees, Ensign offered and performed essential, centralized services to its affiliates; there was a seamless flow of corporate officers between Ensign and its subsidiaries; Cabrillo employees were required to use Ensign forms and templates; and Ensign controlled the manner in which employees clocked in and out for shifts.

Although a written agreement stated that “the members of the facility staff are Cabrillo’s ‘own’ employees,” the court chose to ignore such labels when evidence of the entities’ actual conduct establishes a different relationship. Slip op. at 5 (internal citations omitted). The court also considered the facts that Ensign’s logo and signs were posted at the Cabrillo facility, employees at the facility believed they were Ensign employees, employees were assigned “@ensigngroup.net” email addresses, and Ensign controlled their employee benefits. The plaintiff had presented facts that the parent had the ability to correct the allegedly unlawful policy in effect at its wholly-owned subsidiary, and thus the Second Appellate District reversed.

J.C. Penney Denied Arb in Seating Action Following Iskanian

RSS Feed

In one of the first appellate decisions to apply the California Supreme Court’s landmark Iskanian decision, the California Court of Appeal affirmed the trial court’s decision to deny J.C. Penney’s motion to compel an ex-employee’s suitable seating action to arbitration. Jones v. J.C. Penney Corp., Inc., No. B246674 (2nd Dist. Div. 4 Sept. 5, 2014) (slip op. available here). 

The plaintiff in Jones was a sales associate/cashier at J.C. Penney from November 2007 to January 2008, and then again from November 2009 to December 2009.  Jones’ complaint alleged failure to provide suitable seating, in violation of Labor Code section 1198 and California Code of Regulations, title 8, section 11070, because J.C. Penny did not allow cashiers to sit in chairs while working.  Jones also sought civil penalties under PAGA for the seating violations.  As a condition of her employment, Jones signed an arbitration agreement that covered disputes “arising from, relating to, or asserted after the termination of . . . employment.”  Slip op. at 2 (quoting the arbitration agreement). The agreement contained a class and representative actions waiver.

In a unanimous, unpublished decision authored by Justice Lee Ann Edmon, the Second Appellate District denied the defendant’s petition to compel arbitration of the plaintiff’s seating claims under PAGA. Applying Iskanian, the court held that agreements such as J.C. Penney’s that waive an employee’s right to bring a representative PAGA action are unenforceable. The court also rejected J.C. Penney’s request to stay the appeal until after the U.S. Supreme Court decides on the Iskanian defendant’s petition for a writ of certiorari. J.C. Penney argued that Iskanian conflicts with U.S. Supreme Court precedent, but the court found that the defendant had already conceded in its brief that “[u]nless employers were to ask the LWDA [Labor and Workforce Development Agency] to sign arbitration agreements, and the LWDA was to sign them, there can be no circumstances under which an aggrieved employee could arbitrate any action for PAGA penalties.” Slip op. at 12 (internal citations omitted). “Without considering whether an arbitration agreement could ever be crafted that would permit arbitration of PAGA claims, we conclude that no such arbitration agreement was crafted here.” Id. at 12-13.