Daily Blast March 11, 2014

In Lane v. Francis Capital Management, LLC (Mar. 11, 2014, B245661) ___ Cal.App.4th ___, plaintiff Martin Lane (“Lane”) sued his employer, Francis Capital Management LLC (“FCM”), for: (1) wrongful termination in violation of public policy; (2) breach of oral contract; (3) failure to pay wages; (4) unpaid overtime wages; (5) unpaid meal period wages; (6) waiting time penalties; (7) itemized wage statement violations; and (8) unfair competition. (Slip opn., p. 2.) FCM moved for an order compelling arbitration because the parties entered into a written arbitration agreement. (Id. at p. 3.) The trial court denied the motion, finding that statutory wage-and-hour claims were not subject to arbitration. The court relied upon Labor Code section 229, which states that an action that seeks to collect due and unpaid wages pursuant to Labor Code sections 200 through 244 can be maintained in court despite an agreement to arbitrate. The court also found that the agreement was unconscionable.(Id. at p. 5.)

The Court of Appeal, Second Appellate District, Division Four (Los Angeles) reversed. The court held that only Lane’s third cause of action for failure to pay wages was subject to Labor Code section 229. The court distinguished Hoover v. American Income Life Insurance Company (2012) 206 Cal.App.4th 1193, and rejected Hoover’s broad presumption against the arbitration of statutory labor claims. (Slip opn., pp. 10-11.) The court held that “the plain language of section 229 is limited to actions for the collection of due and unpaid wages brought under sections 200 through 244; section 229 does not apply to all statutory wage and hour claims.” (Id. at p. 12, italics in original.) Further, FCM did not demonstrate Federal Arbitration Act preemption of section 229 because Lane never admitted to being engaged in interstate commerce, and FCM did not produce a declaration describing the nature of its business or the scope of Lane’s employment. (Id. at pp. 12-13.)

The court then held that the arbitration agreement was not unconscionable. (Slip opn., p. 14.) The agreement was just two pages and contained no terms “hidden” in the form. (Id. at p. 16.) Further, although the agreement did not attach the rules of the American Arbitration Association (“AAA”), there was no procedural unconscionability. The court agreed that “the failure to attach the arbitration rules could be a factor in support of a finding of procedural unconscionability, but [disagreed] that the failure, by itself, is sufficient to sustain a finding of procedural unconscionability.” (Ibid.) Indeed, “[there] could be no surprise, as the arbitration rules referenced in the agreement were easily accessible to the parties -- the AAA rules are available on the Internet.” (Id. at p. 18.) In addition, the court held that the lack of an express provision for discovery did not render the agreement substantively unconscionable. (Id. at p. 20.) The court ordered the remaining causes of action to be arbitrated and the third cause of action to be stayed pending the arbitration. (Id. at p. 21.)

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