Herrera v. Doctors Med. Ctr. of Modesto, Inc., F080963

• Court: California Court of Appeals
• Writing for the Court: FRANSON, Acting P.J.
• Citation: 67 Cal.App.5th 538,282 Cal.Rptr.3d 262
• Parties: Christine HERRERA et al., Plaintiffs and Respondents, v. DOCTORS MEDICAL CENTER OF MODESTO, INC., Defendant and Appellant.
• Docket Number: F080963
• Decision Date: 05 August 2021

67 Cal.App.5th 538
282 Cal.Rptr.3d 262

Christine HERRERA et al., Plaintiffs and Respondents,
v.
DOCTORS MEDICAL CENTER OF MODESTO, INC., Defendant and Appellant.

F080963

Court of Appeal, Fifth District, California.

Filed August 5, 2021
As Modified September 1, 2021

Hill, Farrer & Burrill, Michael S. Turner and E. Sean McLoughlin, Los Angeles, for Defendant and Appellant.

Cohelan Khoury & Singer, Michael D. Singer, San Diego, Rosemary C. Khoury; United Employees Law Group and Walter L. Haines, Los Angeles, for Plaintiffs and Respondents.

FRANSON, Acting P.J.

282 Cal.Rptr.3d 265

67 Cal.App.5th 541

Defendant Doctors Medical Center of Modesto, Inc., appeals from an order denying its petition to compel arbitration of Labor Code claims pursued by former employees. The former employees contend their lawsuit is limited to recovering civil penalties under the Private Attorneys General Act of 2004 (PAGA; Lab. Code, § 2698 et seq. )¹

67 Cal.App.5th 542

and their arbitration agreements cannot be enforced to compel arbitration of the PAGA representative claims.

We again interpret the California Supreme Court's decision in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 173 Cal.Rptr.3d 289, 327 P.3d 129 ( Iskanian ) to mean "that PAGA representative claims for civil penalties are not subject to arbitration" under a predispute arbitration agreement. ( Esparza v. KS Industries, L.P. (2017) 13 Cal.App.5th 1228, 1234, 221 Cal.Rptr.3d 594 ( Esparza ).) The PAGA claims alleged in the former employees' complaint are owned by the state and are being pursued by the former employees as the state's agent or proxy. ( ZB, N.A. v. Superior Court (2019) 8 Cal.5th 175, 185, 252 Cal.Rptr.3d 228, 448 P.3d 239 ( ZB, N.A. ).) The arbitration agreements in question are not enforceable as to the PAGA claims because the state was not a party to, and did not ratify, any of those agreements. Also, after the former employees became representatives of the state, they did not agree to arbitrate the PAGA claims. Consequently, under the rule of California law recognized in Esparza and many other decisions of the Court of Appeal, the PAGA claims cannot be forced into arbitration based on agreements made by the former employees before they became authorized representatives of the state. The trial court correctly applied this rule of law.

Defendant's argument that arbitration is compelled by the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq. ) and federal preemption fails for similar reasons. In Iskanian , our Supreme Court addressed the scope of the FAA and concluded that "a PAGA claim lies outside the FAA's coverage because it is not a dispute between an employer and an employee arising out of their contractual relationship." ( Iskanian, supra , 59 Cal.4th at p. 386, 173 Cal.Rptr.3d 289, 327 P.3d 129.) Based on this precedent, we conclude the FAA does not reach the PAGA claims alleged in this case and, therefore, federal law does not preempt the rule of California law stating PAGA claims are subject to arbitration only if the state, or the state's authorized representative, consents to arbitration.

We therefore affirm the order denying the petition to compel arbitration.

FACTS

Doctors Medical Center of Modesto, Inc., (defendant) is a California corporation that owns and operates Doctors Medical Center in Modesto, an acute care hospital. Defendant is a subsidiary of Tenet Healthcare Corporation, which owns and operates health care facilities in California, Texas, Louisiana and other states. Defendant is engaged in interstate commerce because, among other things, it purchases equipment, materials and supplies from out-of-state manufacturers and suppliers.

67 Cal.App.5th 543

Plaintiff Christine Herrera was employed by defendant in 1986 and worked there until 2008. In 2010, she returned and worked on defendant's staff as a registered nurse and a member of a union, the California Nurses Association. In 2011, Herrera became a shift manager, which is a

282 Cal.Rptr.3d 266

nonunion position. She remained in that position until her resignation in June 2018.

Plaintiff Geri Rothstein worked for defendant from 1998 to 2006. In 2010, she returned and worked on defendant's staff as a registered nurse. Rothstein also was a member of the California Nurses Association. In July 2014, Rothstein was promoted to shift manager, a nonunion position. As a result, she stopped paying union dues and was no longer a member of any union. Rothstein served as a shift manager until her resignation in July 2018.

Collective Bargaining Agreement

Since 2006, registered nurses employed by defendant have been represented by the California Nurses Association, which negotiated a series of collective bargaining agreements (CBA) with defendant. As a result, defendant's registered nurses were not "at will" employees, but were protected by CBA provisions that limited defendant's right to discipline or discharge registered nurses.

In 2010, when plaintiffs returned to work for defendant, a three-year CBA covering January 1, 2007, through December 31, 2010, was in place. Article 9 of that CBA included a mandatory grievance and arbitration procedure for any dispute involving the interpretation, meaning or application of any of the CBA's provisions. Paragraph E of article 9 of the CBA allowed individual registered nurses to voluntarily agree to arbitrate "any dispute not otherwise arbitrable under the" CBA using "the Tenet Fair Treatment Process (‘FTP’)." It also stated: "No retaliation or adverse action may be taken against anyone who exercises the option not to sign the FTP." The grievance and arbitration provisions were also included in article 9 of the CBA covering January 1, 2015, through December 31, 2018.

Individual Agreements

In 2010, when plaintiffs returned to work for defendant, they signed a one-page "ACKNOWLEDGEMENT" stating they (1) had received information about how to access an electronic copy of the defendant's employee handbook; (2) had received a hard copy of the FTP; (3) voluntarily agreed to use the FTP by submitting to final and binding arbitration "any and all claims and disputes that are related in any way to my employment or the termination of my employment"; (4) agreed the arbitration would be conducted under the Federal Arbitration Act and the procedural rules of the American Arbitration

67 Cal.App.5th 544

Association; and (5) acknowledged the agreement to arbitrate "may not be modified or rescinded except in writing by both me and the Company."

A document named "Open Door Policy and Fair Treatment Process" states "[t]he FTP applies to all employees, regardless of length of service or status, and covers all disputes relating to or arising out of an employee's employment with the Company or the termination of employment. The only disputes or claims not covered by the FTP are those listed in the ‘Exclusions and Restrictions’ section below." It also advises employees that the "mutual agreement to arbitrate claims means that both the employee and the Company are bound to use the FTP process as the only means of resolving employment-related disputes, and thereby agree to forego any right they each may have had to a jury trial on issues covered by the FTP." The document also describes the five steps that comprise the FTP. The description of the fifth step—final and binding arbitration—addresses class, representative or group action, stating:

"The employee understands and agrees that to the extent permitted by law, his or her claim will not be joined with any

282 Cal.Rptr.3d 267

claim or dispute of another employee in a class, collective, representative or group action. Arbitration under the Fair Treatment Process is limited to individual disputes, claims or controversies that a court of law would be authorized or have jurisdiction over to grant relief." (Italics added.)

Whether the PAGA representative claims alleged by plaintiffs are subject to this limitation on arbitration was not addressed in the appellate briefing. We did not seek supplemental briefing of the issue (Gov. Code, § 68061) because there are other grounds for affirming the trial court's denial of arbitration.

PAGA Notice

On May 17, 2019, counsel for plaintiffs mailed a written notice to the Labor and Workforce Development Agency and defendant pursuant to section 2699.3. The notice stated plaintiffs were former employees of defendant aggrieved by defendant's Labor Code violations. The notice alleged defendant "failed to pay all wages, including premium wages for overtime hours worked; failed to provide legally compliant meal and rest breaks; failed to adequately inform Claimants of their right to off-duty meal and rest periods; failed to reimburse Claimants and other aggrieved employees for business expenses incurred in the discharge of their duties for [defendant]; failed to provide accurate itemized wage statements; and failed to pay all wages due during...