Muro v. Cornerstone Staffing, DCA4/1, 2/23/18
Muro entered an employment contract with Cornerstone to work as an interstate truck driver for Team Campbell, which ships products from California to places throughout the country. The contract had an arbitration clause and language that the clause was governed solely by the Federal Arbitration Act (FAA). Muro sued Team Campbell and Cornerstone (think joint employer liability) for various wage and hour violations. The trial court denied Campbell’s motion to compel arbitration. Held: Affirmed.
The FAA exempts contracts of employment of seamen, railroad employees and any other class of worker engaged in foreign or interstate commerce. The last clause would swallow the rule, so courts have interpreted it as applying to transportation workers. Muro drove trucks across state lines, making him a transportation worker and subject to the exemption. Some courts have applied the exemption only when the employer itself is in the transportation industry. The Muro court rightly rejected that line of cases because those courts have read a requirement into the FAA that doesn’t appear in the statutory language.
When FAA doesn’t apply (by contract or because the special employment situation is outside of Congress’s reach), that leaves California law. Cal. Labor Code 229 provides, “Actions to enforce the provisions of this article for the collection of due and unpaid wages claimed by an individual may be maintained without regard to the existence of any private agreement to arbitrate.”
Muro’s employment contract also includes a class action waiver, which the trial court refused to enforce. This court agreed with another California appellate court that the test announced in Gentry v Superior Court, 42 Cal.4th 443 (overruled on other grounds buy Iskanian) remains valid when the FAA does not apply. In Gentry, the test of whether to enforce a class action waiver turned on the likelihood absent class members would enforce their rights, which depended on the size of potential recovery, potential for retaliation, etc. Note that Muro calculated his potential recovery at $26,000–an amount which the trial court felt was modest and would not incentivize others to come forward. While there is case authority supporting that analysis, it doesn’t seem right to me: People file thousands of cases (small claims, limited jurisdiction, etc.) all the time, and often do so when there is no statutory basis for an attorney’s fees award, as there is in wage/hour litigation.