Callahan v. Paychex N. Am.
| Decision Date | 20 October 2022 |
| Docket Number | 21-cv-05670-CRB |
| Parties | STANLEY CALLAHAN, et al., Plaintiffs, v. PAYCHEX NORTH AMERICA INC., Defendant. |
| Court | U.S. District Court — Northern District of California |
ORDER COMPELLING ARBITRATION
Defendant Paychex North America Inc. (“PNA”) moves to compel arbitration in accordance with an arbitration agreement signed by Plaintiffs Stanley Callahan and Faisal Gailani while employed at PNA. As explained below, the Court finds this matter suitable for resolution without oral argument, pursuant to Local Civil Rule 7-1(b), and GRANTS PNA's motion to compel.
Plaintiffs Stanley Callahan and Faisal Gailani, who worked as Sales Representatives at Defendant Paychex North America, Inc. (PNA) from 2019 to 2020, allege that PNA violated various provisions of the California Labor Code. See SAC (dkt. 19). They claim that PNA misclassified them as outside sales representatives, failed to issue accurate itemized statements, failed to pay overtime, and failed to reimburse for business expenses. See id. ¶¶ 12-37. Plaintiffs bring this claim under California's Private Attorneys General Act (PAGA) “on behalf of [themselves] and other individuals currently and formerly employed by [PNA] as Sales Representatives or in a similar capacity.” See id. ¶ 1.
PNA moves to compel arbitration of the individual PAGA claims and dismiss the representative claims. Mot. (dkt. 26). Callahan and Gailani entered into arbitration agreements with PNA on June 3, 2020, and December 19, 2019, respectively. McHugh Decl. (dkt. 26-1) ¶¶ 7-8; Ex. B & C. The arbitration agreements were contained in PNA's HRS Sales Representative Plan Agreement and Sales Representative Level II Incentive Plan Agreement (together, the “Incentive Plans”) that were sent to Callahan and Gailani via email. Id. ¶¶ 7-8. To review and sign the Incentive Plans, employees were sent a link, which took them to a document review platform, EchoSign, that would allow them to review and sign the agreement electronically. Id. ¶¶ 10-11. Employees were permitted to exit and re-enter the document as many times as they wished prior to signing, and once ready, clicked a “Start Tab” that allowed the employee to sign the agreement. Id. ¶¶ 1415.[1] Callahan understood that by receiving the agreement via email, he was “required to sign” it, and that there was “no option to negotiate” its terms. Callahan Decl. (dkt. 27-2) ¶ 6. Gailani understood “as a matter of practice” that when his employer asked him to sign a document, the agreement “is not optional.” Gailani Decl. (dkt. 27-3) ¶ 6.
The agreement requires them to resolve “any dispute” between them and PNA by binding arbitration, “including, but not limited to, a dispute arising out of or relating to [their] employment.” McHugh Decl. ¶ 6. The agreement also provides:
To the extent permitted by law without impairing the enforceability of this Agreement, each party shall only submit his, her, or its own, individual claims to arbitration and will not seek to represent the interests of any other person or entity and neither party will assert class or representative claims against the other in arbitration. To the extent permitted by law without impairing the enforceability of this Agreement, the parties further agree that class action, collective action, and representative action procedures shall not be asserted or permitted in arbitration.
McHugh Decl. Ex. B & C (Dispute Resolution Agreement) ¶ 12(e). It also includes a severability clause:
If any provision of the Plan or any Award becomes, or is deemed to be, invalid, illegal, or unenforceable in any jurisdiction, or would disqualify the Plan or any Award under any law deemed applicable by the Plan Administrator, then such provision shall be construed or deemed amended to conform to applicable laws. If such provision(s) cannot be so construed or deemed amended without, in the determination of the Plan Administrator, materially altering the purpose or intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction for such Award, and the remainder of the Plan or Award shall remain in full force and effect.
The Federal Arbitration Act (FAA) provides that contractual arbitration agreements are “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2; Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 67-68 (2010). Private agreements to arbitrate under the FAA are enforced according to their terms. 9 U.S.C. § 4. Therefore, a party may petition a United States District Court “for an order directing that such arbitration proceed in the manner provided for in such agreement.” Id.
Generally, a party “cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” AT&T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 648 (1986) (internal quotation marks omitted). However, courts have developed a “liberal federal policy favoring arbitration agreements,” Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983), such that courts should not refuse to enforce them unless the agreement is “not susceptible of an interpretation that covers the asserted dispute.” AT&T Techs., 475 U.S. at 650. Under the FAA, in assessing the enforceability of a contractual arbitration provision, a district court's role is “limited to determining (1) whether a valid agreement to arbitrate exists, and if it does, (2) whether the agreement encompasses the dispute at issue.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). If the answer to both inquiries is affirmative, then the FAA requires the court to enforce the agreement in accordance with its terms. Id. “[T]he party resisting arbitration bears the burden of proving that the claims at issue are unsuitable for arbitration.” Green Tree Fin. Corp.- Ala. v. Randolph, 531 U.S. 79, 91 (2000).
Plaintiffs argue that they did not agree to arbitrate the claims at issue in this action, because they allege a violation of California Labor Code §§ 925 and 432.5 from the inclusion of forum selection and choice of law provisions in PNA's Confidentiality Non-Solicitation and Non-Compete Agreement (the “CNN”). Opp'n (dkt. 27) at 4. They argue that because ¶ 12(b) of the arbitration agreement excludes “[d]isputes related to violation of the confidentiality, non-solicitation and non-compete provisions,” that the parties did not agree to arbitrate the Plaintiffs' claims in this action.
This argument clearly fails. As PNA argues, ¶ 12(b) excludes “[d]isputes related to the violation of” such provisions, not all disputes related to them. Reply (dkt. 28) at 1-2. In this case, Plaintiffs bring claims that specific provisions contained in the CNN are unlawful; they do not dispute any violation of those provisions. As a result, those claims are not excluded and the parties agreed to arbitrate the claims at issue here.
Plaintiffs further argue that the Supreme Court's most recent decision regarding preemption of arbitral waivers of PAGA actions, Viking River Cruises, Inc. v. Moriana, 142 S.Ct. 1906 (2022), requires the Court to find that the PAGA waiver in this agreement is invalid. This argument also fails.
Section 2 of the FAA makes arbitration agreements “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. In Moriana, the Court held that the FAA did not preempt a generally applicable California rule disallowing “wholesale waiver[s] of PAGA claims.” 142 S.Ct. at 1924-25. But the FAA did preempt a California rule that prevented parties from agreeing to “divi[de] PAGA actions into individual and non-individual claims” and send the individual claims to arbitration. Id. at 1924. Although the agreement in Moriana broadly waived all PAGA claims, it also included a severability clause providing that “any portion of the waiver that remains valid must still be enforced in arbitration.” Id. at 1925 (internal quotation marks omitted). That waiver was enforceable to the extent that it simply required the individual claim (alone) to proceed in arbitration. Id. The Court went on to hold that, “as [the Court] see[s] it, PAGA provides no mechanism to enable a court to adjudicate non-individual PAGA claims once an individual claim has been committed to a separate proceeding.” Id. at 1925 (citing Cal. Lab. Code § 2699(a), (c)). Thus, after a plaintiff's individual PAGA claim is compelled to arbitration, he “is no different from a member of the general public,” lacks statutory standing to maintain non-individual claims, and “the correct course is to dismiss [the] remaining claims.” Id.
Plaintiffs and PNA entered into valid, binding arbitration agreements that require Plaintiffs to arbitrate all individual claims. Paragraph 12(e) of the agreement explicitly states that “each party shall only submit his, her, or its own, individual claims to arbitration.” Dispute Resolution Agreement ¶ 12(e). The clear intent of Paragraph 12(e) is to send the individual claims to arbitration-exactly the sort of provision that the FAA does not permit California to invalidate. See Moriana, 142 S.Ct. at 1925 (“Viking was entitled to enforce the agreement insofar as it mandated arbitration of Moriana's individual PAGA claim.”).
Plaintiffs emphasize that Paragraph 12(e) goes on to forbid “represent[ing] the interests” of others and then states that “class action, collective action, and representative action procedures shall not be asserted or permitted in arbitration.”...
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