Hunton Employment & Labor Perspectives

Over the past six months, the California Supreme Court as well as the State’s appellate courts have published a number of important decisions in the area of California labor and employment law. The California Supreme Court’s decisions published earlier this year in Donohue v. AMN Services, LLC (2021) 11 Cal.5th 58 and Vazquez v. Jan-Pro Franchising International, Inc. (2021) 10 Cal.5th 944 were previously covered in Hunton Labor & Employment perspectives. (See Link 1 & Link 2 [discussing the Ninth Circuit’s earlier 2019 decision].)

However, a number of other impactful and interesting decisions have been published so far this year that are worthy of highlighting as they provide clarification of employers’ obligations in labor and employment lawsuits pending in California courts. Notably, two of the decisions, Crestwood and Contreras, reaffirm the courts’ generally plaintiff-friendly approach when determining PAGA-related issues, as PAGA venue is given an expansive definition while PAGA arbitrability is given a decidedly narrow one. The third decision, Alvarez, confirms that an employee arbitration provision may still be valid and enforceable without the employers’ signature. The fourth decision, Kaanaana, shows that employers performing under government contracts should be aware that prevailing wage laws may apply when undertaking work for local government services even though the work may be seemingly unrelated to traditional construction-type projects.

Contreras v. Superior Court

On March 1, 2021, the Second District Court of Appeal published its opinion in Contreras v. Superior Court (2021) 61 Cal.App.5th 461, which involved an unsuccessful attempt to compel a PAGA claim to arbitration based on the theory that the parties were entitled to arbitrate the preliminary question of whether the plaintiffs were aggrieved employees under PAGA. In that case, the defendant was a transportation service app that required drivers to sign a terms of service agreement when logging in for the first time. The agreement contained a mutual dispute resolution provision requiring drivers to resolve all disputes through final and binding arbitration and to waive their rights to either a jury trial or bringing a class action. The plaintiffs, who were former drivers through the app, filed a PAGA suit against the defendant alleging that it misclassified them as independent contractors. The defendant filed a motion to compel arbitration based on the aforementioned agreement, which the trial court granted, ordering arbitration on the issue of arbitrability and whether the plaintiffs were aggrieved employees under PAGA. The appellate court reversed the trial court’s granting of the motion to compel arbitration, affirming that the Federal Arbitration Act does not apply to PAGA claims and that state consent is required to arbitrate PAGA claims. The court concluded that even the preliminary question of whether the plaintiffs are aggrieved employees under PAGA may not be decided in arbitration, rejecting the argument by the defendant that the trial court did not compel arbitration of a PAGA claim because whether or not the employees are independent contractors is an “antecedent” fact to be arbitrated in order to determine if PAGA applies. The court ultimately held: “We agree with the chorus that in California, a PAGA plaintiff may not be compelled to arbitrate whether he or she is an aggrieved employee.”

Crestwood Behavioral Health, Inc. v. Superior Court

On February 17, 2021, the First District Court of Appeal published its opinion in Crestwood Behavioral Health, Inc. v. Superior Court (2021) 60 Cal.App.5th 1069, where the court adopted a decidedly expansive view of venue in PAGA matters. In that case, the plaintiff filed a PAGA action against her former employer in Alameda County. The plaintiff worked at a facility located in Solano County, although her complaint alleged wage and hour violations throughout the state. The defendant filed a motion to have the action transferred to Sacramento County (its principal place of business), which the trial court denied. The defendant argued that venue in Alameda County was improper because the plaintiff worked in Solano County. The appellate court affirmed the trial court’s denial of the motion to transfer, finding that Alameda County was a proper venue for the case since the defendant operated at a location there. The court reasoned that venue in a PAGA action is not restricted solely to the representative plaintiff’s location and rejected the defendant’s argument that her personal claims must have risen in the county venue in which the complaint was filed.

Alvarez v. Altamed Health Services Corp

In another case coming from the Second Appellate District, the Court of Appeal filed its published decision on February 4, 2021 in the case Alvarez v. Altamed Health Services Corp. (2021) 60 Cal.App.5th 572, which involved an argument that an arbitration agreement was not valid because an employer did not sign it. At issue in that case was an arbitration signed by a newly-hired employee. The employee later sued her employer for claims related to her employment. The trial court denied a motion to compel arbitration filed by the defendant employer because the arbitration agreement was not signed by the employer. The employer appealed. The plaintiff argued that the CEO’s signature was required on the arbitration agreement because it acted as a modification of her employment offer letter. Where the offer letter stated: “To avoid costly and time consuming litigation, we have adopted an arbitration process that applies as a condition of employment. Please review and then sign the enclosed Arbitration Agreement and return with your signed offer,” the court interpreted this language as “manifesting an intent on the part of the parties to treat the arbitration agreement as part of (or one of the terms of) the employment offer, not a separate and contemporaneous agreement.” Accordingly, the court found that the arbitration agreement was not invalid due to the employer not signing it, and remanded the matter to the trial court to enter an order granting the motion to compel arbitration.

Kaanaana v. Barrett Business Services, Inc.

On March 29, 2021, the California Supreme Court filed its opinion in Kaanaana v. Barrett Business Services, Inc. (2021) 11 Cal.5th 158 where the court found the prevailing wage law applied to a contract for sorting services at a local recycling facility. In that case, the Los Angeles County Sanitation District No. 2, which maintains and operates two facilities for receiving and sorting recyclable materials, contracted with the defendant to provide staff to operate the facilities and manually sort refuse deposited onto a conveyor. The plaintiffs in the case filed a class action against the defendant on behalf of all belt sorters employed at the two locations alleging, inter alia, failure to pay the prevailing wage pursuant to Labor Code section 1720, subdivision (a)(2). The defendant moved to strike the plaintiffs’ prevailing wage allegations, arguing that the type of work performed was not covered under the relevant Labor Code section, which the trial court granted. The Court of Appeal reversed the trial court’s ruling, and the Supreme Court ultimately affirmed the Court of Appeal’s reversal, holding that “[t]he belt sorters' labor qualifies as ‘public works’ under section 1720(a)(2)” after rejecting the defendants’ arguments that the prevailing wage statute should apply only to construction and installation projects. The Court explained that, unlike the construction and installation provision pointed to by the defendant in section 1720(a)(1), the “covered district” provision in section 1720(a)(2) was intended by the legislature to apply broadly rather than to just construction-type labor.

We at Hunton Employment & Labor Perspectives look forward to providing future updates on major developments in California case law.