Williams v. Rgis, LLC

• Citation: 70 Cal.App.5th 445,285 Cal.Rptr.3d 435
• Decision Date: 18 October 2021
• Docket Number: C091253
• Parties: Carllie WILLIAMS, Plaintiff and Respondent, v. RGIS, LLC, Defendant and Appellant.
• Court: California Court of Appeals

70 Cal.App.5th 445

285 Cal.Rptr.3d 435

Carllie WILLIAMS, Plaintiff and Respondent,

v.RGIS, LLC, Defendant and Appellant.

C091253

Court of Appeal, Third District, California.

Filed October 18, 2021

Gibson, Dunn & Crutcher, Jesse A. Cripps, Los Angeles, and Matthew T. Sessions, Irvine, for Defendant and Appellant.

Capstone Law, Ryan H. Wu and Liana Carter, Los Angeles, for Plaintiff and Respondent.

Duarte, J. Defendant RGIS, LLC (RGIS) appeals the trial court's order denying its petition to compel arbitration of representative claims under the Private Attorney General Act of 2004 (PAGA) ( Lab. Code, § 2699 et seq. ).¹ In denying the petition, the trial court followed our 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 ), which held that individual employees cannot contractually waive their right to bring a representative action under the PAGA, and this state law rule is not preempted by the Federal Arbitration Act (FAA) ( 9 U.S.C. § 1 et seq. ).

RGIS argues that our Supreme Court's holding in Iskanian was subsequently abrogated by the United States Supreme Court's decision in Epic Systems Corporation v. Lewis (2018) ––– U.S. ––––, 138 S.Ct. 1612, 200 L.Ed.2d 889 ( Epic Systems ). Epic Systems , however, did not consider the same issue concerning the nonwaivable nature of PAGA claims decided by Iskanian . Accordingly, and along with every published Court of Appeal decision that has decided this issue, we reject the argument and follow Iskanian . Although we agree with the multitude of reported cases addressing this issue, we publish this opinion because this is an issue of first impression for this district.

FACTS AND PROCEEDINGS

RGIS's Dispute Resolution Program

Carllie Williams worked as a non-exempt, hourly paid retail employee for RGIS from May 31, 2018, to December 2018. On her first day of work, RGIS provided Williams with an electronic copy of its dispute resolution booklet, and Williams signed an acknowledgement of receipt of that booklet.

The 22-page booklet sets out the details of RGIS's five-step dispute resolution program (the program), which includes three voluntary internal steps, voluntary mediation, and, finally, mandatory and binding arbitration. Employees who do not opt out of the program within 60 days of hire "mutually agree" with RGIS "to be bound by its terms and to resolve all claims covered by the Program through mandatory, final and binding arbitration, instead of through litigation in court." With exceptions not applicable here, the program applies to all employment-related claims, including "any claims, demands and actions related to wages and compensation, reimbursement, breaks and rest periods" "and any other cause or action arising out of or relating to employment or the termination of employment." Williams did not opt out of the program.

The arbitration agreement in the booklet contains an express class and PAGA representative action waiver requiring that "any dispute in arbitration" be brought "on an individual basis only, and not on a class or collective basis." (Capitalization and boldface omitted.) It provides in part: "[F]or any claim brought on a private Attorney General basis – i.e. where you are seeking to pursue a claim on behalf of a government entity – both you and RGIS agree that any such dispute shall be resolved in arbitration on an individual basis only (i.e., to resolve whether you have personally been aggrieved or subject to any violations of law), and that such an action may not be used to resolve the claims or rights of other employees or individuals in a single or collective proceeding (i.e., to resolve whether other employees or individuals have been aggrieved or subject to any violations of law)." (Uppercase, boldface, & underlining omitted.)

Williams Brings a PAGA-Only Action Against RGIS

In September 2018, Williams filed a complaint asserting one cause of action for civil penalties owed under PAGA for violations of the Labor Code. She filed her first amended complaint in October 2019. She alleged multiple violations of the Labor Code, and she sought assessment of civil penalties for the underlying Labor Code violations under PAGA, attorney fees and costs, interest, and such relief as the court may deem equitable.

RGIS's Motion to Compel Arbitration and Trial Court Decision

RGIS moved to compel arbitration seeking to have Williams submit her claims to arbitration on an individual basis. It argued that the dispute must be compelled to arbitration because the high court's decision in Epic Systems , supra , ––– U.S. ––––, 138 S.Ct. 1612 effectively overruled Iskanian , supra , 59 Cal.4th 348, 173 Cal.Rptr.3d 289, 327 P.3d 129. RGIS also argued that all civil court proceedings should be stayed pending completion of arbitration.

The trial court denied the motion to compel arbitration. The court ruled that it was "not persuaded" that Epic Systems overruled Iskanian . The court observed that Iskanian "held that PAGA representative waivers are unenforceable," and it recognized that Epic Systems did not address the PAGA, but instead "considered the relationship between the FAA and a provision of the National Labor Relations Act guaranteeing workers the right to engage in ‘concerted activit[y].’ " Thus, Epic Systems "focused on the NLRA not the PAGA, did not abrogate Iskanian ’s bar on PAGA waivers or its conclusion that such bar was not preempted by the FAA." The court rejected RGIS's further arguments to distinguish Iskanian and to claim the PAGA is not a true qui tam.

RGIS timely appealed. The case was fully briefed in April 2021, and submitted after oral argument was heard on September 21, 2021.

DISCUSSION

I

Motion to Compel Arbitration

RGIS contends that the trial court erred in refusing to enforce the arbitration agreement provision barring Williams from bringing representative claims. It argues that the FAA requires courts to enforce agreements for individual arbitration, that Iskanian was wrongly decided, and the high court's decision in Epic Systems abrogated Iskanian ’s holding that the FAA does not apply to PAGA actions. RGIS then contends that the California Court of Appeal decisions uniformly rejecting these arguments are wrongly decided or inapposite because Williams had the ability to opt out of the program. Finally, RGIS contends the "trend" in federal court is moving in the direction of the FAA preempting Iskanian . We, too, reject RGIS's arguments.

A. Standard of Review

We review de novo the trial court's denial of the motion to compel arbitration, as it rests on a determination of law. ( Julian v. Glenair, Inc. (2017) 17 Cal.App.5th 853, 864, 225 Cal.Rptr.3d 798 ["to the extent the denial relies on a determination of law, we review the trial court's resolution of that determination de novo"].) "[W]e are not bound by the trial court's rationale, and thus may affirm the denial on any correct legal theory supported by the record, even if the theory was not invoked by the trial court." ( Ibid . )

B. PAGA

"Under PAGA, ‘ "an ‘aggrieved employee’ may bring a civil action personally and on behalf of other current or former employees to recover civil penalties for Labor Code violations." ’ [Citation.] Before bringing the PAGA action, the employee must give notice of the alleged Labor Code violations to the employer and the Labor and Workforce Development Agency (LWDA). [Citations.] The employee may bring the PAGA action only after the LWDA refuses to investigate or the agency's investigation results in no citation. [Citations.] Most of the recovered civil penalties (75 percent) go to the LWDA, with the remainder going to the aggrieved employees. [Citations.] ‘All PAGA claims are "representative" actions in the sense that they are brought on the state's behalf. The employee acts as " ‘the proxy or agent of the state's labor law enforcement agencies" ’ and " ‘represents the same legal right and interest as’ " those agencies.’ [Citation.] Thus, a PAGA action to ‘ "recover civil penalties ‘is fundamentally a law enforcement action designed to protect the public and not to benefit private parties.’ " ’ " ( Collie v. The Icee Company (2020) 52 Cal.App.5th 477, 481, 266 Cal.Rptr.3d 145 ( Collie ).)

C. Iskanian and Epic Systems

In Iskanian , our Supreme Court concluded that "an arbitration agreement requiring an employee as a condition of employment to give up the right to bring representative PAGA actions in any forum is contrary to public policy." ( Iskanian , supra , 59 Cal.4th at p. 360, 173 Cal.Rptr.3d 289, 327 P.3d 129.) The court further concluded "that the FAA's goal of promoting arbitration as a means of private dispute resolution does not preclude our Legislature from deputizing employees to prosecute Labor Code violations on the state's behalf. Therefore, the FAA does not preempt a state law that prohibits waiver of PAGA representative actions in an employment contract." ( Ibid . ) The Iskanian court explained that a PAGA representative action is "a type of qui tam action." ( Id. at p. 382, 173 Cal.Rptr.3d 289, 327 P.3d 129.) Accordingly, "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. It is a dispute between an employer and the state , which alleges directly or through its agents—either the [LWDA] or aggrieved employees—that the employer has violated the Labor Code." ( Id. at pp. 386-387, 173 Cal.Rptr.3d 289, 327 P.3d 129.)

RGIS, like other employers who have had similar arguments rejected by appellate courts, first contends that Iskanian was wrongly decided, an argument we are compelled to reject. "Arguing that a California Supreme Court case was ‘wrongly decided’ is not productive in a trial court. Or here." ( Olson v. Lyft, Inc. (2020) 56 Cal.App.5th 862, 866, fn. 1, 270 Cal.Rptr.3d 739, citing Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 456, ...