Crestwood Behavioral Health v. Lacy ( 2021 )

Filed 10/19/21
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION THREE
CRESTWOOD BEHAVIORAL
HEALTH, INC., A158830
Plaintiff and Respondent, (City and County of San
v. Francisco Super. Ct. No. CPF-
DEEVERIA LACY, 19-516552)
Defendant and Respondent;
LILIA GARCÍA-BROWER, as Labor
Commissioner, etc.,
Movant and Appellant.
Deeveria Lacy, a former employee of respondent Crestwood Behavioral
Health, Inc. (Crestwood), filed a retaliation complaint against Crestwood
with appellant Lilia Garcia-Brower, in her official capacity as the California
Labor Commissioner (Labor Commissioner or Commissioner), pursuant to
Labor Code section 98.7, subdivision (a).1 After the Commissioner notified
Crestwood of its investigation of Lacy’s complaint, Crestwood filed a petition
to compel arbitration against Lacy but did not include the Commissioner as a
1The Division of Labor Standards Enforcement (DLSE), headed by the
Labor Commissioner, “is the state agency empowered to enforce California’s
labor laws.” (Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th
557, 561–562.) Throughout the opinion, we use the terms Labor
Commissioner, Commissioner, and DLSE interchangeably.
In addition, all further statutory references are to the Labor Code
unless otherwise indicated.
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party. In granting the petition, the trial court not only compelled Lacy to
arbitrate her retaliation complaint, it also stayed the Commissioner’s
investigation pending the completion of that arbitration.
Approximately 100 days after Crestwood alerted her to the trial court’s
ruling, the Labor Commissioner moved ex parte to intervene so she could
vacate the order. After requiring the Commissioner to file a noticed motion,
the trial court denied her motion to intervene because it was untimely and
because the order staying the Commissioner’s investigation did not impair or
impede her ability to protect her interest in Lacy’s retaliation complaint. As
a result, the court denied the Commissioner’s motion to vacate that order as
moot. We conclude that the motion to intervene was timely and that the
order staying the Commissioner’s investigation impaired her ability to
vindicate the public interest. We therefore reverse.
BACKGROUND
Crestwood is a provider of mental health services. Lacy worked in
Crestwood’s San Francisco facility as a recovery coach. When Lacy joined
Crestwood, she signed and agreed to Crestwood’s “Dispute Resolution &
Arbitration” policy (arbitration policy). Under that policy, “Crestwood, as
well as every employee of Crestwood, agree to submit unresolved
employment-related legal disputes to an impartial, objective individual called
an arbitrator. . . . [¶] Arbitration is agreed to in lieu of a civil action before a
judge or jury, and the arbitrator’s decision is final and binding.” (Some
underlining omitted.)
Crestwood terminated Lacy after she allegedly complained to a co-
worker about being assaulted on the job. On January 7, 2019, Lacy filed a
retaliation complaint against Crestwood with the Labor Commissioner. The
Commissioner accepted the complaint and began an investigation pursuant
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to section 98.7, subdivision (a). On January 22, 2019, the Commissioner sent
a letter, notifying Crestwood of Lacy’s complaint and the Commissioner’s
investigation of that complaint.
After contacting Lacy and her attorney to inform them of its intent to
arbitrate, Crestwood also informed the Labor Commissioner about the
arbitration policy. The Commissioner responded that it was not bound by the
policy and that it would continue to investigate Lacy’s complaint.
Crestwood then filed a “Petition to Compel Arbitration and for a Stay of
DLSE Proceedings” (petition). On February 25, 2019, Crestwood’s attorney
notified the Labor Commissioner of this petition “to compel Ms. Lacy to
arbitrate issues she asserted in” her retaliation complaint. The
Commissioner agreed to suspend her investigation of Lacy’s complaint
pending a ruling on the petition by the trial court. Crestwood did not,
however, provide the Commissioner with a copy of the petition itself or
inform the Commissioner that it was moving for a stay of all DLSE
proceedings, including the investigation.
Lacy opposed the petition, arguing that: (1) Crestwood failed to provide
Lacy with notice of its intent to arbitrate; (2) the Labor Commissioner had
jurisdiction over her retaliation claims under sections 6307 and 6312; and
(3) the cases cited by Crestwood only applied to collective bargaining
agreements. The trial court granted the petition and “stayed” “the DLSE
proceedings . . . pending the arbitration of” Lacy’s claims (arbitration order).
On April 22, 2019, Crestwood sent a copy of the arbitration order to the
Commissioner by email and regular mail.
On July 31, 2019, the Labor Commissioner filed an ex parte application
for leave to intervene so it could move to vacate the arbitration order. The
trial court denied the application because there were no grounds for ex parte
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relief and “advised the Commissioner to file a noticed motion” to intervene.
The Commissioner then filed a motion for leave to intervene (intervention
motion) and a motion to vacate or, in the alternative, for reconsideration
(motion to vacate) on August 12, 2019.
The trial court denied the intervention motion. First, the court found
the motion untimely. According to the court, the Labor Commissioner “was
placed on notice on February 25, 2019 that Crestwood had filed a petition to
compel arbitration of” Lacy’s claims, “which were then pending solely before
the Commission . . . . In response, the Commissioner voluntarily suspended
her investigation pending the Court’s resolution of that petition. The Court
granted the petition on April 17, 2019, fully resolving the entire matter
before it. Although the Commissioner evidently had a later change of heart,
her motion, filed on August 12, comes several months too late.”
Second, the court found that the arbitration order did not impair or
impede the Labor Commissioner’s ability to protect her interest in Lacy’s
retaliation complaint. (Code Civ. Proc., § 387, subd. (d)(1)(B).) According to
the court, “nothing in” its “order granting Crestwood’s petition to compel
arbitration precludes the Commissioner from exercising” its statutory powers
under section 98.7. “Rather, it is a question of timing and priority” because
the order only stays the Commissioner’s “investigation . . . pending the
conclusion of the contractually agreed-upon arbitration.”
Finally, the court held that, under Sonic-Calabasas A, Inc. v. Moreno
(2013) 57 Cal.4th 1109 (Sonic II), the arbitration policy supplanted the Labor
Commissioner’s authority to investigate and act on Lacy’s retaliation
complaint under sections 98.7 and 98.74. Otherwise, “employees who are
parties to binding arbitration agreements could routinely circumvent those
agreements, or at the very least ‘impose significant delays in the
4
commencement of arbitration,’ by filing complaints with the Labor
Commissioner.” In reaching this conclusion, the court found that Preston v.
Ferrer (2008) 552 U.S. 346 (Preston), rather than Equal Employment
Opportunity Com. v. Waffle House (2002) 534 U.S. 279 (Waffle House),
controlled.
Because it denied the intervention motion, the trial court took the
motion to vacate “off calendar as moot.” The Labor Commissioner timely
appealed. (See Noya v. A.W. Coulter Trucking (2006) 143 Cal.App.4th 838,
841 [“An order denying a motion to intervene is appealable when it finally
and adversely determines the right of the moving party to proceed in the
action”].)
DISCUSSION
I.
The Intervention Motion
Mandatory intervention is governed by Code of Civil Procedure section
387, subdivision (d)(1)—which “should be liberally construed in favor of
intervention.” (Simpson Redwood Co. v. State of California (1987) 196
Cal.App.3d 1192, 1200.). Under that section, “a party’s proposed intervention
must be timely.” (Lofton v. Wells Fargo Home Mortgage (2018) 27
Cal.App.5th 1001, 1012 (Lofton).) If timely, then the proposed intervenor, to
establish mandatory intervention under subdivision (d)(1)(B),2 must show (1)
2 Code of Civil Procedure section 387, subdivision (d)(1)(B) states in
relevant part that “[t]he court shall, upon timely application, permit a
nonparty to intervene in the action or proceeding if . . . [¶] . . . [¶] (B) The
person seeking intervention claims an interest relating to the property or
transaction that is the subject of that action and that person is so situated
that the disposition of the action may impair or impede the person’s ability to
protect the interest, unless that person’s interest is adequately represented
by one or more of the existing parties.”
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“ ‘an interest relating to the property or transaction which is the subject of
the action’ ” (Siena Court Homeowners Assn. v. Green Valley Corp. (2008) 164
Cal.App.4th 1416, 1423 (Siena Court); italics omitted); (2) “he or she ‘is so
situated that the disposition of the action may as a practical matter impair or
impede’ ” his or her “ ‘ability to protect that interest’ ” (id. at p. 1424); and (3)
he or she is not “ ‘adequately represented by the existing parties’ ” (ibid.).
Code of Civil Procedure “[s]ection 387 was modeled after and is
‘virtually identical’ to rule 24 of the Federal Rules of Civil Procedure.” (Ziani
Homeowners Assn. v. Brookfield Ziani LLC (2015) 243 Cal.App.4th 274, 280–
281 (Ziani); see Siena Court, supra, 164 Cal.App.4th at p. 1423 [Code of Civil
Procedure section 387, subdivision (d)(1) “ ‘is in substance the exact
counterpart to rule 24(a) of the Federal Rules of Civil Procedure’ ”].) Thus,
“[i]n assessing [the] requirements” for mandatory intervention, “we may take
guidance from federal law.” (Edwards v. Heartland Payment Systems, Inc.
(2018) 29 Cal.App.5th 725, 732 (Edwards).)
The Labor Commissioner moved for mandatory intervention under
Code of Civil Procedure section 387, subdivision (d)(1)(B). Crestwood does
not appear to dispute that the Commissioner has an interest relating to the
transaction which is the subject of this action. Nor could it. The arbitration
order, by staying all DLSE proceedings relating to Lacy’s retaliation
complaint, bars the Commissioner from taking any further action under
section 98.7 pending the arbitration. Crestwood also does not claim the
Commissioner is adequately represented by itself or Lacy. Instead,
Crestwood contends the intervention motion was not timely and the
arbitration order did not impair or impede the ability of the Commissioner to
protect her interest in the complaint. Because both contentions lack merit,
we reverse the denial of the intervention motion.
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A.
Standard of Review
Under California and federal cases, a “determination of the timeliness
of intervention” is reviewed “for an abuse of discretion.” (Lofton, supra, 27
Cal.App.5th at p. 1012; see Smith v. Los Angeles Unified School Dist. (9th
Cir. 2016) 830 F.3d 843, 853 (Smith) [“timeliness determination is reviewed
for abuse of discretion”].) But “California cases are not settled on whether we
review the denial of a request for mandatory intervention pursuant to [Code
of Civil Procedure] section 387 de novo or for abuse of discretion.” (Edwards,
supra, 29 Cal.App.5th at p. 732; see Siena Court, supra, 164 Cal.App.4th at
p. 1425 [citing cases].) Nor are federal cases. (Compare Smith, at p. 853 [“A
lower court’s denial of a motion to intervene is reviewed de novo”] with
Benjamin v. Dept. of Public Welfare of the Commonwealth of Pa. (3d Cir.
2012) 701 F.3d 938, 947 (Benjamin) [“This Court reviews ‘a district court’s
denial of . . . intervention of right for abuse of discretion”].) We, however,
need not decide which standard to apply here, because reversal is warranted
under either.
B.
Timeliness
The trial court found that the Labor Commissioner’s intervention
motion, “filed on August 12,” 2019, came “several months too late” because
she had notice of the petition “on February 25, 2019.” Crestwood contends
the court did not abuse its discretion in so finding because the Commissioner
provided no explanation for the delay and because Crestwood and Lacy have
suffered prejudice. We disagree.
“Timeliness is determined by the totality of the circumstances facing
would-be intervenors, with a focus on three primary factors: ‘(1) the stage of
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the proceeding at which an applicant seeks to intervene; (2) the prejudice to
other parties; and (3) the reason for the delay.’ ” (Smith, supra, 830 F.3d at
p. 854.) “ ‘[D]elay in itself does not make a request for intervention
untimely. ’ ” (Kane County, Utah v. United States (10th Cir. 2019) 928 F.3d
877, 891.) When mandatory intervention “is sought, because ‘the would-be
intervenor may be seriously harmed if intervention is denied, courts should
be reluctant to dismiss such a request for intervention as untimely, even
though they might deny the request if the intervention were merely
permissive.’ ” (Lopez-Aguilar v. Marion County Sheriff’s Dept. (7th Cir. 2019)
924 F.3d 375, 388–389; see Benjamin, supra, 701 F.3d at p. 948 [“There is a
general reluctance to dispose of a motion to intervene as of right on
untimeliness grounds because the would-be intervenor may be seriously
harmed if not allowed to intervene”].)
Although the totality of the circumstances should be considered,
“prejudice to existing parties is ‘the most important consideration in deciding
whether a motion for intervention is timely.’ ” (Smith, supra, 830 F.3d at
p. 857.) This does not, however, include prejudice that would result from
allowing intervention. (Ibid.) Rather, only the “ ‘prejudice caused by the
movant’s delay’ ” should be considered. (Kane County, supra, 928 F.3d at
p. 891.) Indeed, California courts have found intervention to be timely based
solely on the absence of such prejudice. (See Truck Ins. Exchange v. Superior
Court (Transco Syndicate) (1997) 60 Cal.App.4th 342, 351 (Truck Ins.
Exchange) [“timeliness is hardly a reason to bar intervention when a direct
interest is demonstrated and the real parties in interest have not shown any
prejudice other than being required to prove their case”]; see also Kane
County, at p. 891 [motion to intervene filed three months after intervenor
discovered its interest in the case was timely because there was no prejudice
8
or unusual circumstances]; United States v. State of Oregon (9th Cir. 1984)
745 F.2d 550, 552 [delay of at least eight months did not render motion to
intervene untimely based on the stage of the proceedings and the lack of
prejudice].)
In this case, the Labor Commissioner’s delay in moving to intervene
should be measured from April 22, 2019—the date Crestwood sent the
arbitration order to the Commissioner—rather than February 25, 2019—the
date Crestwood informed the Commissioner about its petition. In
determining whether intervention is timely, courts “focus ‘ “on the date the
person attempting to intervene should have been aware his interest[s] would
no longer be protected adequately by the parties, rather than the date the
person learned of the litigation.” ’ ” (Ziani, supra, 243 Cal.App.4th at p. 281.)
According to its own correspondence, Crestwood only informed the
Commissioner on February 25 of its petition “to compel Ms. Lacy to arbitrate
issues she asserted in” her retaliation complaint. (Italics added.) Crestwood
did not tell the Commissioner that it was also seeking to stay all DLSE
proceedings, including the investigation, and did not provide the
Commissioner with a copy of its petition. Thus, the Commissioner had no
reason to believe that the petition would affect her authority to investigate
and act on the complaint under section 98.7 until she received the arbitration
order from Crestwood on April 22.
Meanwhile, the other relevant date for measuring the delay should be
July 31, 2019—the date the Labor Commissioner filed her ex parte
application to intervene—rather than August 12, 2019—the date the
Commissioner filed her intervention motion. Thus, the relevant delay for
determining timeliness is 100 days—from April 22, 2019 to July 31, 2019.
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Based on this delay, the factors heavily favor, if not compel,
intervention. First, the stage of the proceedings strongly supports
intervention. Indeed, there is no evidence in the record that an arbitration
has even been initiated.
Second, neither Crestwood nor Lacy have suffered any prejudice from
the delay. Crestwood identified no prejudice in its papers before the trial
court, and the trial court cited none in its order denying the intervention
motion. On appeal, Crestwood contends, for the first time, that it and Lacy
would suffer prejudice because they would have to “relitigate the court’s order
granting Crestwood’s petition.” But this prejudice results from the fact of
intervention—and not from the Commissioner’s delay in seeking
intervention. (See Truck Ins. Exchange, supra, 60 Cal.App.4th at p. 351;
Kane County, supra, 928 F.3d at p. 891; Smith, supra, 830 F.3d at p. 857.)
Finally, contrary to Crestwood’s assertion, the Labor Commissioner did
provide an excuse for the delay—the large volume of complaints that she
must investigate. (Cf. Lloyd v. County of Los Angeles (2009) 172 Cal.App.4th
320, 332 (Lloyd) [Legislature adopted Private Attorneys General Act of 2004
(PAGA) to allow employees to collect “ ‘civil penalties for violations of the
Labor Code’ ” as “ ‘private attorneys general’ ” due to inadequate staffing of
“ ‘state labor law enforcement agencies’ ”].) Even if this excuse is not
satisfactory, the first two factors—particularly, the absence of prejudice—
coupled with the relatively short length of the delay establish that the trial
court abused its discretion in finding the intervention motion untimely. (See
Truck Ins. Exchange, supra, 60 Cal.App.4th at pp. 350–351 [finding
intervention timely in the absence of any prejudice]; Kane County, supra, 928
F.3d at p. 891 [reversing denial of motion to intervene for untimeliness due to
lack of prejudice from three-month delay]; Smith, supra, 830 F.3d at pp. 859,
10
861 [observing that courts have found intervention motions timely based
solely on the first two factors in the face of an eight-month delay].)
C.
Impairment of Ability to Protect the Public Interest
Crestwood contends the arbitration order did not impair or impede the
Labor Commissioner’s ability to protect the public interest because: (1) the
order only delayed, but did not prevent, the Commissioner’s investigation;
(2) the Commissioner had already agreed to suspend her investigation; and
(3) the arbitration policy superseded any DLSE proceedings on Lacy’s
retaliation complaint, including the Commissioner’s investigation, under the
Federal Arbitration Act (FAA). We disagree and find that the arbitration
order impaired the Commissioner’s ability to protect the public interest.
1.
Anti-Retaliation Provisions of the Labor Code
“Section 98.6 prohibits retaliation, by discharge or other discrimination,
against any employee for exercising rights protected by the Labor Code.”
(American Corporate Security, Inc. v. Su (2013) 220 Cal.App.4th 38, 43
(American Corporate Security).) Under section 98.7, subdivision (a)(1), “[a]ny
person who believes that they have been discharged or otherwise
discriminated against in violation of any law under the jurisdiction of the
Labor Commissioner may file a complaint with the” DLSE “within one year
after the occurrence of the violation.” “A discrimination complaint
investigator then investigates.” (American Corporate Security, at p. 43; see
§ 98.7, subd (a)(1) [“The complaint shall be investigated by a discrimination
complaint investigator in accordance with this section”].)
The Labor Commissioner, however, need not wait for an employee
complaint. Instead, the DLSE “may, with or without receiving a complaint,
11
commence investigating an employer, in accordance with” section 98.7, “that
it suspects to have discharged or otherwise discriminated against an
individual in violation of any law under the jurisdiction of the Labor
Commissioner.” (§ 98.7, subd. (a)(2).)
An investigation of suspected retaliation has priority. (American
Corporate Security, supra, 220 Cal.App.4th at p. 43.) “The investigation shall
include, where appropriate, interviews with the complainant, respondent,
and any witnesses who may have information concerning the alleged
violation, and a review of any documents that may be relevant to the
disposition of the complaint.” (§ 98.7, subd. (b)(1).) “The Labor
Commissioner may hold an investigative hearing whenever the Labor
Commissioner determines that a hearing is necessary to fully establish the
facts.” (§ 98.7, subd. (b)(1).) At the hearing, both the complainant and
respondent may present evidence. (Ibid.) Such hearings, however, are not
required and are rarely held. (See American Corporate Security, at p. 45
[“Under section 98.7 . . . there is usually no hearing”]; see also id., at p. 45,
fn. 4 [“The Labor Commissioner’s summary of procedures for retaliation and
discrimination complaints indicates that only rarely will a hearing be held
before the determination is made”].)
During its investigation, the Labor Commissioner may petition a court
“for appropriate temporary or injunctive relief, or both temporary and
preliminary injunctive relief” if she finds “reasonable cause to believe that
any person has engaged in or is engaging in” retaliation in violation of the
Labor Code. (§ 98.7, subd. (b)(2)(A).) This is independent of the
complainant’s right to petition for “temporary or preliminary injunctive
relief.” (§ 1102.61; see also § 1102.62.) In determining whether “temporary
injunctive relief” is “just and proper,” the court must consider not only the
12
“harm resulting directly to an individual from” the alleged retaliation, but
also “the chilling effect on other employees asserting their rights” under the
Labor Code. (§ 98.7, subd. (b)(2)(C); see also § 1102.61, subd. (b) [employee
petition].) Any “temporary injunctive relief” ordered by the court remains “in
effect” until the Commissioner has completed her investigation and decided
on a course of action (§ 98.7, subd. (b)(2)(E); § 1102.62, subd. (d) [employee
petition]), and is not “stayed pending appeal” (§ 98.7, subd. (b)(2)(F); see
§ 1102.62, subd. (f) [employee petition]).
Upon completing her investigation, the Labor Commissioner has three
options. First, the Commissioner may determine that “no violation has
occurred.” (§ 98.7, subd. (d)(1).) After reaching this determination, the
Commissioner must “notify the complainant and respondent” and “dismiss
the complaint.” (Ibid.) If the complainant disagrees with the Commissioner,
she may still “bring an action in an appropriate court.” (Ibid.)
Second, the Labor Commissioner may issue a determination that “a
violation has occurred.” (§ 98.7, subd. (c)(1).) If the Commissioner issues
such a determination, she “shall notify the complainant and respondent and
direct respondent to cease and desist from any violation and take any action
deemed necessary to remedy the violation, including, where appropriate,
rehiring or reinstatement, reimbursement of lost wages and interest thereon,
payment of penalties, payment of reasonable attorney’s fees associated with
any hearing held by the Labor Commissioner in investigating the complaint,
and the posting of notices to employees.” (Ibid.) If the respondent does not
comply within 30 days, the “Commissioner shall bring an action promptly in
an appropriate court against the respondent.” (Ibid.) If the “Commissioner
fails to bring an action in court promptly, the complainant may bring an
action against the Labor Commissioner in any appropriate court for a writ of
13
mandate to compel the Labor Commissioner to bring an action in court
against the respondent.” (Ibid.) The complainant may also “intervene as a
party plaintiff” in any such action filed by the Commissioner. (Ibid.) If the
Commissioner prevails in the action, it may recover her “attorney’s fees.”
(§ 98.7, subd. (c)(2).)
Third, the Labor Commissioner may issue a citation if she “determines
. . . that a violation has occurred.” (§ 98.74, subd. (a); see § 98.7, subd. (c)(1).)
The citation must “be in writing” and “describe the nature of the violation
and the amount of wages and penalties due,” as well as all other “appropriate
relief.” (§ 98.74, subd. (a).) “Appropriate relief includes directing the person
cited to cease and desist from the violation and take any action necessary to
remedy the violation, including, where appropriate, rehiring or
reinstatement, reimbursement of lost wages and interest thereon, and
posting notices to employees.” (Ibid.)
If the person cited does not challenge the citation, then it becomes
“final.” (§ 98.74, subd. (b)(1).) The Commissioner must then file the citation
with a court. (§ 98.74, subd. (b)(2).) The Commissioner may also petition the
court for “an order to show cause why any injunctive or nonmonetary relief”
described in the citation “should not be ordered.” (Ibid.) Any judgment
pursuant to the citation or the order to show cause must be entered “in favor
of” or “for the state” and against the person cited. (Ibid.)
If the person cited wishes to challenge the citation, that person may
request an “informal hearing” with the Labor Commissioner. (§ 98.74,
subd. (b)(1).) The hearing officer must “issue a written decision” that
includes “a statement of findings, conclusions of law, and an order.” (§ 98.74,
subd. (c).) The person cited may petition for review of that written decision
by filing “a petition for writ of mandate . . . pursuant to Section 1094.5 of the
14
Code of Civil Procedure.” (§ 98.74, subd. (d)(1).) “As a condition to filing”
such a petition, however, the person must “first post a bond with the Labor
Commissioner equal to the total amount of any penalties, lost wages and
interest thereon, liquidated damages, and any other monetary relief that are
due and owing as determined” by the hearing officer. (§ 98.74, subd. (d)(2).)
If the person does not post a bond or file a petition or if the petition “is
dismissed or withdrawn without entry of judgment,” the Commissioner may
submit the written decision and order to a court. (§ 98.74, subd. (d)(4).) That
court must then “enter judgment for the state against” the person cited “in
the total monetary amount shown on the” order. (Ibid.)
Finally, “the rights and remedies provided by” section 98.7 “do not
preclude an employee from pursuing any other rights and remedies under
any other law.” (§ 98.7, subd. (f).) Thus, an employee need not file a
retaliation complaint with the Labor Commissioner before “filing suit for
Labor Code violations.” (Lloyd, supra, 172 Cal.App.4th at p. 332.)
2.
Impairment from Delay of the Investigation
As a threshold matter, the arbitration order, by delaying the Labor
Commissioner’s investigation, impaired her ability to vindicate the public
interest “in protecting the rights of individual employees and job applicants
who could not otherwise afford to protect themselves.” (Stats. 2001, ch. 820,
§ 1.) For example, the order prevents the Commissioner from obtaining
“temporary or preliminary injunctive relief” before Lacy’s retaliation
complaint is resolved by the arbitration. (§ 98.7, subd. (b)(2)(A).) This alone
is sufficient to establish impairment.
In any event, delaying the Commissioner’s investigation contravenes
the very purpose behind the anti-retaliation provisions of the Labor Code.
15
The Legislature adopted these provisions “to bring about a more timely
resolution” of retaliation complaints by the Commissioner because “[t]his
timeliness will not only bring justice to the aggrieved worker, it will also
counter the chilling effect that justice delayed has on other workers’
willingness to exercise their legal rights.” (Off. of Sen. Floor Analyses, 3d
reading analysis of Sen. Bill No. 306 (2017-2018 Reg. Sess.) as amended Sept.
8, 2017, p. 3; see Assem. Com. on Jud., Analysis of Sen. Bill No. 229 (2019-
2020 Reg. Sess.) as amended Mar. 18, 2019, p. 3 [“the bill seeks to realize the
intent of the author’s SB 306, which sought to ensure that workers subject to
retaliation obtain any appropriate remedy in a timely manner, since ‘justice
delayed is justice denied’ ”].) By staying the Commissioner’s investigation
pending the arbitration, the arbitration order prevents the Commissioner
from taking action indefinitely. Indeed, the order may, as a practical matter,
bar the Commissioner from ever acting on Lacy’s complaint because Lacy has
not initiated and may never initiate an arbitration. As a result, the
arbitration order necessarily impairs the ability of the Commissioner to
protect the public interest.
That the Labor Commissioner may have agreed to suspend its
investigation temporarily in this case does not alter this conclusion. The
Commissioner only agreed to suspend her investigation pending the
resolution of the petition by the trial court. Thus, when the Commissioner
moved to intervene, she had no longer agreed to suspend her investigation.
In any event, even if that agreement had remained in effect, the arbitration
order still impaired the Commissioner’s ability to protect the public interest
because it prevented her from changing her mind and exercising her
independent statutory authority under section 98.7.
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3.
FAA Preemption of the Commissioner’s Investigation
Crestwood also contends the arbitration order did not impair or impede
the Labor Commissioner’s ability to protect the public interest because the
FAA supersedes any proceedings established by sections 98.7 and 98.74 for
resolving Lacy’s retaliation complaint. The Commissioner counters that the
arbitration policy did not displace her independent statutory authority to
investigate and prosecute violations of the Labor Code. We agree with the
Commissioner and find that the FAA does not prevent the Commissioner
from investigating the retaliation complaint, seeking interim relief, or issuing
a determination under section 98.7.
The FAA—which covers all “[e]mployment contracts, except for those
covering workers engaged in transportation” (Waffle House, supra, 534 U.S.
at p. 289)—“ ‘declare[s] a national policy favoring arbitration’ of claims that
parties contract to settle in that manner” (Preston, supra, 552 U.S. at p. 353).
To effectuate this policy, the FAA “provides for stays of proceedings in . . .
courts when an issue in the proceeding is referable to arbitration, and for
orders compelling arbitration when one party has failed or refused to comply
with an arbitration agreement.” (Waffle House, at p. 289.) Nothing in the
FAA, however, “authorizes a court to compel arbitration . . . by any parties[]
that are not already covered in the agreement.” (Waffle House, at p. 289.)
Nor does the FAA “mention enforcement by public agencies.” (Waffle House,
at p. 289.)
Applying these principles, the United States Supreme Court in Waffle
House held that the FAA did not prevent the federal Equal Employment
Opportunity Commission (EEOC) “from pursuing victim-specific judicial
relief, such as backpay, reinstatement, and damages, in an enforcement
17
action” even though the victim entered into an arbitration agreement with
his employer. (Waffle House, supra, 534 U.S. at p. 282.) Under Title VII of
the Civil Rights Act of 1964, the EEOC has “the authority to investigate and,
if possible, to conciliate charges of discrimination” filed by employees against
their employers. (Waffle House, at p. 286.) The EEOC may also file suit “on
its own.” (Id. at p. 291.) “[A]lthough the employee may intervene in the
EEOC’s suit,” the EEOC may bring that suit “even after the employee has
disavowed any desire to seek relief.” (Ibid.) Thus, the EEOC has
independent statutory authority “to pursue victim-specific relief regardless of
the forum that the employer and employee have chosen to resolve their
disputes.” (Id. at p. 295.) Because the EEOC was not a party to the
arbitration agreement, the high court concluded that the FAA did “not
require the agency to relinquish its statutory authority if it has not agreed to
do so.” (Waffle House, at p. 294.)
Six years later, the United States Supreme Court distinguished Waffle
House. In Preston, the petitioner sought to arbitrate a contract dispute with
the respondent. In response, the respondent invoked an administrative
remedy, asking the Labor Commissioner to invalidate the contract under the
California Talent Agencies Act (TAA). (Preston, supra, 552 U.S. at p. 350.)
In holding that the FAA preempted that administrative proceeding under the
TAA, the high court found Waffle House inapplicable. (Preston, at p. 359.)
According to the court, the Commissioner in the TAA proceeding “functions
not as an advocate advancing a cause before a tribunal authorized to find the
facts and apply the law; instead, the Commissioner serves as impartial
arbiter.” (Preston, at p. 359.) By contrast, the EEOC in Waffle House acted
“not as adjudicator but as prosecutor, pursuing an enforcement action in its
own name or reviewing a discrimination charge to determine whether to
18
initiate judicial proceedings.” (Preston, at p. 359.) Consistent with this
distinction, the high court made clear that “[e]nforcement of the parties’
arbitration agreement in this case does not displace any independent
authority the Labor Commissioner may have to investigate and rectify
violations of the TAA.” (Preston, at p. 359, fn. 7.)
Since Waffle House and Preston, the California Supreme Court has
applied this distinction when determining whether the FAA supersedes a
proceeding authorized by the Labor Code. For example, in Pearson Dental
Supplies, Inc. v. Superior Court (2010) 48 Cal.4th 665, 682, our state high
court held that an arbitration agreement restricting the contracting parties
“from submitting their claims for adjudication to an administrative entity
such as the Labor Commissioner” did not render the agreement
“unconscionable or unenforceable.”
More recently, the California Supreme Court applied this distinction in
holding that “the FAA preempts our state-law rule categorically prohibiting
waiver of a Berman hearing in a predispute arbitration agreement imposed
on an employee as a condition of employment.” (Sonic II, supra, 57 Cal.4th at
p. 1124.) A Berman hearing is “a dispute resolution forum established by the
Legislature to assist employees in recovering wages owed.” (Ibid.) It is
codified in sections 98 to 98.2 and is named “after its legislative sponsor.”
(American Corporate Security, supra, 220 Cal.App.4th at p. 45.)
To obtain relief through a Berman hearing, an employee must file a
written “complaint or claim for wages, penalties or other demand for
compensation” with the Labor Commissioner. (Cal. Code Regs., tit. 8,
§§ 13501 & 13501.5.) The Commissioner “may either accept the matter and
conduct a Berman hearing (§ 98, subd. (a)); prosecute a civil action on the
19
employee’s behalf (§ 98.3); or take ‘no further action . . . on the complaint.’ ”
(OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 121 (OTO).)
If the Commissioner opts to conduct a Berman hearing, then she must
hold that hearing within 90 days from the date she decides to do so. (§ 98,
subd. (a).) “ ‘[T]he pleadings are limited to a complaint and an answer; . . .
and there is no discovery process.’ ” (American Corporate Security, supra, 220
Cal.App.4th at p. 45.) The hearing is “presided over by a Deputy Labor
Commissioner” (Cal. Code Regs., tit. 8, § 13502), who has subpoena power
(id., § 13506). During the hearing, “[e]ach party shall have the right to call
and examine witnesses; to introduce exhibits; to cross-examine opposing
witnesses[,] . . . to impeach any witness . . .; and to rebut the evidence against
him (her).” (Id., § 13505). The Commissioner must decide the employee’s
claim within 15 days after the hearing (§ 98.1), and either the employee or
employer may seek review of the Commissioner’s decision “by filing an appeal
to the superior court, where the appeal shall be heard de novo” (§ 98.2,
subd. (a)). The employer must, however, “post an undertaking” “[a]s a
condition to filing [such] an appeal.” (§ 98.2, subd. (b).) If the appealing
party loses, then that party must pay the other party’s “costs and reasonable
attorney’s fees.” (§ 98.2, subd. (c).) “An employee is successful if the court
awards an amount greater than zero.” (Ibid.) Finally, the “Commissioner
shall make every reasonable effort to ensure that judgments are satisfied,
including taking all appropriate legal action and requiring the employer to
deposit a bond as provided in Section 240.” (§ 98.2, subd. (j).)
Thus, under the Berman hearing process, the Labor Commissioner acts
as the adjudicator—and not as a prosecutor. As our high court explained,
“the Berman hearing itself provides an accessible, informal, and affordable
mechanism for laypersons to seek resolution of” their wage claims. (Sonic II,
20
supra, 57 Cal.4th at p. 1129, italics added.) Indeed, the Commissioner is not
a party in any de novo appeal from the hearing decision and has no authority
to appeal that decision. Instead, the Commissioner only has the authority to
represent the employee “claimant” in the appeal.3 (§ 98.4, subd. (a).)
Because the Commissioner acts primarily as an adjudicator in the Berman
hearing process, the California Supreme Court concluded in Sonic II that the
FAA preempts that administrative process. (See Sonic II, at p. 1142 [holding
that the FAA does not permit “additional delay that results from . . . an
administrative scheme [like the Berman hearing process] to effectuate state
policies unrelated to the agreement’s enforceability”].)
By contrast, the California Supreme Court refused to enforce an
arbitration agreement under the FAA when the employee is “enforcing our
labor laws on behalf of state law enforcement agencies.” (Iskanian v. CLS
Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 388 (Iskanian).) In
Iskanian, our state high court considered whether the FAA restricts the
ability of an employee to pursue a representative PAGA claim. (See
Iskanian, at pp. 359, 360.) Under PAGA, an “aggrieved employee” may bring
an action personally and on behalf of current or former employees to recover
civil penalties against his or her employer for Labor Code violations. (§ 2699,
subd. (a).) Such an action “functions as a substitute for an action by the
government itself” and “ ‘is fundamentally a law enforcement action designed
to protect the public and not to benefit private parties.’ ” (Arias v. Superior
Court (2009) 46 Cal.4th 969, 986.) Because an employee asserting a PAGA
claim is a “statutorily designated proxy for the agency as when the claim is
3 Section 98.4, subdivisions (b) and (c) also allow the Labor
Commissioner to represent the employee “claimant” in the arbitration of her
wage claim.
21
brought by the agency itself,” our state high court concluded that the FAA
does not prevent the employee from pursuing the PAGA claim even though he
entered into an arbitration agreement with his employer. (Iskanian, at
pp. 388–389.) “Simply put, 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 . . . that the employer has
violated the Labor Code.” (Iskanian, at pp. 386–387.)
Thus, whether the FAA displaces our Labor Code in this case depends
on whether the Labor Commissioner acts as a prosecutor or an adjudicator
when she investigates and acts on a retaliation complaint pursuant to
sections 98.7 and 98.74. If the Commissioner is acting as a prosecutor on
behalf of the state, then the FAA is inapplicable and does not prevent the
Commissioner from investigating and acting on the retaliation complaint. If
the Commissioner is acting as an adjudicator, then the FAA applies and
supersedes any Labor Code proceeding on the complaint. Applying this
distinction, we conclude that the Commissioner, at a minimum, acts as a
prosecutor when she investigates a retaliation complaint, seeks temporary or
preliminary injunctive relief (interim relief process), or issues a
determination (determination process) under section 98.7. As a result, the
FAA does not prevent the Commissioner from taking any of those actions on
Lacy’s retaliation complaint. (Preston, supra, 552 U.S. at p. 359, fn. 7.)
In reaching this conclusion, we initially note that the authority of the
Labor Commissioner to investigate suspected retaliation and seek interim
relief does not depend on the actions of the employee. The Commissioner
may “commence investigating an employer” for retaliation “with or without”
an employee complaint. (§ 98.7, subd. (a)(2).) The Commissioner may also
22
“petition the superior court” for “temporary or preliminary injunctive relief”
(§ 98.7, subd. (b)(2)), regardless of whether the employee seeks such relief
(§ 1102.61). Together, these provisions establish that the Commissioner “is
in command of the process” for investigating suspected retaliation and
seeking interim relief (Waffle House, supra, 534 U.S. at p. 291), and has the
exclusive authority “to determine whether public resources should be
committed to” investigating or obtaining that relief (id. at pp. 280, 291–292).
The same is true when the Labor Commissioner issues a
determination. If the Commissioner determines that no violation has
occurred, then the employee may file a lawsuit but has no right to challenge
that determination. (§ 98.7, subd. (d)(1).) If the Commissioner determines
that a violation has occurred and if the employer refuses to abide by that
determination, then “the burden is on the Labor Commissioner to enforce” it
“by bringing an action” in court. (American Corporate Security, supra, 220
Cal.App.4th at p. 46; see § 98.7, subd. (c)(1).) That the action is brought by
the Commissioner as a prosecutor on behalf of the state is apparent from the
Labor Code—which makes it clear that the employee has no independent
right to enforce the determination. Instead, the employee may only
“intervene as a party plaintiff” or seek a “writ of mandate to compel the”
Commissioner “to bring an action” to enforce the determination. (§ 98.7,
subd. (c)(1).) Section 98.7, subdivision (c)(2) further provides that the
Commissioner may recover “the reasonable attorney’s fees incurred by” her in
“prosecuting the enforcement action.” (Italics added.)
Thus, the determination process “confers on the” Commissioner “the
authority to evaluate the strength of the public interest at stake” and
authorizes the Commissioner “to proceed in a judicial forum” if she
determines that it is justified by the public interest. (Waffle House, supra,
23
534 U.S. at pp. 291–292.) In this respect, the determination process is no
different than the EEOC process in Waffle House. (See id. at p. 286.)
Consequently, “the proarbitration policy goals of the FAA do not require the”
Commissioner “to relinquish [her] statutory authority” to issue and enforce
the determination if she “has not agreed to do so.” (Waffle House, at p. 294;
see Preston, supra, 552 U.S. at p. 359 & fn. 7 [FAA does not supersede an
agency’s authority to act “as a prosecutor, pursuing an enforcement action in
its own name or reviewing a discrimination charge to determine whether to
initiate judicial proceedings”].)
Whether the same is true when the Labor Commissioner issues a
citation is not as clear. Unlike the determination process, the citation
process does not require the Commissioner to decide whether to proceed in an
administrative or judicial forum. Instead, the employer has the burden of
challenging the citation by seeking an “informal hearing” before the
Commissioner (§ 98.74, subd. (b)) or by petitioning the superior court for a
writ of mandate under Code of Civil Procedure section 1094.5 (§ 98.74,
subd. (d).) When the Commissioner issues and enforces the citation, she is
arguably acting as a prosecutor. (See Alternate Fuels, Inc. v. Cabanas
(W.D.Mo. Nov. 10, 2004, Civ. A. No. 02-01182-cv-w-JTM) 2004 U.S.Dist.
LEXIS 33454, *13 [“in many regulatory settings,” the “decision to issue a
citation, in fact, is a decision to prosecute”], affirmed and remanded on other
grounds by (2006) 435 F.3d 855; § 98.74, subd. (b)(2) [judgment entered
pursuant to citation is “in favor of” or “for the state”].) But when the
Commissioner makes a decision after the “informal hearing,” she is
undoubtedly acting as an impartial adjudicator. Moreover, the
Commissioner, unlike the “person issued a citation,” has no authority to seek
review of the hearing decision. (§ 98.74, subd. (d)(1).) Thus, the
24
Commissioner appears to perform both prosecutorial and adjudicative
functions during the citation process. We need not, however, decide whether
this process is more like the processes in Waffle House or Preston. This is
because the FAA does not prevent the Commissioner from exercising her
independent statutory authority to investigate a retaliation complaint, seek
interim relief, or issue a determination. (See ante, at pp. 23–24.) Thus, the
arbitration order, by preventing the Commissioner from taking those actions
indefinitely, impairs her ability to vindicate the public interest regardless of
whether the FAA supersedes the citation process.
This conclusion is bolstered by decisions from other state and federal
courts. Those courts have concluded that the FAA does not displace the
authority of a state or local agency to investigate and obtain victim-specific
relief under a state or local statutory scheme analogous to section 98.7.
For example, in Joulé, Inc. v. Simmons (2011) 459 Mass. 88, 93 (Joulé),
the Massachusetts Supreme Court held that the FAA did not preempt a state
law authorizing a state agency to investigate and resolve an employee’s
discrimination complaint. Under that state law, the Massachusetts
Commission Against Discrimination (MCAD) must investigate an employee’s
complaint of discrimination and either dismiss the complaint or attempt
conciliation to “ ‘eliminate the unlawful practice.’ ” (Joulé, at p. 93.) If
conciliation is unsuccessful, then the MCAD may issue a complaint in its own
name that is heard by “an MCAD commissioner other than the investigating
commissioner, or by a designated hearing officer, or by the full commission.”
(Id. at p. 94.) That complaint may be prosecuted by the MCAD or the
employee’s “attorney whom the MCAD has designated its agent for the
purpose.” (Ibid.) The employee may also “intervene as a party.” (Ibid.)
25
Following the hearing, the MCAD may require the employer to “ ‘cease and
desist from’ ” any unlawful practices and order victim-specific relief. (Ibid.)
Comparing this process to the EEOC process in Waffle House, the
Massachusetts Supreme Court held that the FAA did not preempt the MCAD
process “notwithstanding” the arbitration agreement between the employee
and employer. (Joulé, supra, 459 Mass. at p. 99.) According to the court, the
MCAD, like the EEOC, has “the power to investigate” and “pursue
complaints filed by individuals . . . in its own name.” (Id., at p. 93.) Because
the MCAD “has not agreed to arbitration of” the employee’s “MCAD
complaint,” the court concluded that the FAA does not preclude “the MCAD
from proceeding with its investigation and resolution of” that complaint—
“including . . . granting relief specific to” the employee. (Joulé, at p. 95.)
Similarly, the Iowa Supreme Court held that the FAA did not bar the
Iowa Civil Rights Commission (ICRC) from pursuing an administrative
enforcement action based on an employee’s discrimination complaint. (Rent-
A-Center, Inc. v. Iowa Civil Rights Com. (Iowa 2014) 843 N.W.2d 727, 728
(Rent-A-Center).) Under Iowa law, both an employee and the ICRC may
initiate a discrimination complaint that the ICRC staff must investigate.
(Id. at p. 731.) If the ICRC staff, with the concurrence of an administrative
law judge, finds “probable cause to believe a discriminatory practice has
occurred,” then the ICRC engages in a conciliation process with the employer.
(Ibid.) If that process does not resolve the complaint, then the ICRC may file
charges in its own name that the employer must answer “at an
administrative hearing.” (Ibid.) Following that hearing, the ICRC may order
victim-specific relief. (Id. at pp. 731–732.)
Applying the reasoning of Joulé, the Iowa Supreme Court held that the
arbitration agreement between the employee and employer did not “ ‘displace
26
any independent authority’ the ICRC has ‘to investigate and rectify
violations’ of the” Iowa Civil Rights Act. (Rent-A-Center, supra, 843 N.W.2d
at p. 741.) In so holding, the court concluded that Waffle House, and not
Preston, controlled (Rent-A-Center, at pp. 735–736, 737), because of the
“considerable similarities” between the EEOC process in Waffle House and
the ICRC enforcement process (Rent-A-Center, at p. 734). According to the
court, Preston was inapposite because the ICRC “is not only a forum”; it is
also “a public agency acting in its prosecutorial capacity to bring an
enforcement action,” independent of the employee’s actions, “to protect the
public interest under the Iowa Civil Rights Act.” (Rent-A-Center, at p. 737.)
More recently, two federal district courts have followed the reasoning of
Joulé and Rent-A-Center. In SBM Site Serv., LLC. v. Alvarez (D.Neb. Jan. 19,
2018, No. 4:17CV3028) 2018 U.S.Dist. LEXIS 19990, *12 (SBM), the federal
court held that the FAA did not bar the Lincoln Commission on Human
Rights (LCHR) from pursuing an administrative enforcement action based on
an employee’s discrimination claim even though the employee had agreed to
arbitrate that claim. Because LCHR brought the action in its own name “to
advance the City of Lincoln’s interest in preventing employment
discrimination,” the court held that “[t]he LCHR’s pursuit of victim-specific
relief does not transform the enforcement proceeding into one brought
directly by” the employee. (SBM, at p. *12.)
Similarly, the federal court in Charter Communications, Inc. v. Derfert
(W.D.N.Y. 2021) 510 F.Supp.3d 8, 19 (Charter Communications I), held that
the FAA does not displace an administrative hearing on an employee’s
discrimination complaint initiated and conducted by the New York State
Division of Human Rights (NYSDHR). Finding that the NYSDHR “performs
both prosecutorial and adjudicative functions,” the court nonetheless
27
concluded that “this case is more like Waffle House than like Preston”
(Charter Communications I, at p. 16), even though the only complaint was
the one filed by the employee (id. at p. 19). According to the court, this is
because of the similarities in “the role of the EEOC and” NYSDHR “in
enforcing civil rights protections by recovering ‘make whole’ damages for
individual employees, the broad authority conferred upon both agencies to
investigate and address particular violations, and the role of both agencies as
advocates before a neutral forum.” (Charter Communications, Inc. v. Derfert
(W.D.N.Y. Mar. 12, 2021, No. 1:20-cv-915) 2021 U.S.Dist. LEXIS 47241, *20
(Charter Communications II).)
The determination process under section 98.7 is not materially
different from the processes considered in the above cases. Like the agencies
in those cases, the Labor Commissioner may investigate and act on her own
without an employee complaint. (Compare § 98.7, subd. (a)(2) with Rent-A-
Center, supra, 843 N.W.2d at p. 731 [ICRC “may initiate a complaint”];
Charter Communications I, supra, 510 F.Supp.3d at p. 17 [NYSDHR may file
a complaint “on its own motion”].) Similarly, the Commissioner may, in her
sole discretion, issue a determination against an employer requiring a court
action to enforce it. (Compare § 98.7, subds. (a)(2) & (c)(1) with Joulé, supra,
459 Mass. at pp. 93–94 [MCAD has discretion to issue complaint to be heard
in a “public hearing”]; Rent-A-Center, at p. 731 [ICRC “may issue notice of
charges” that must be answered by the employer “at an administrative
hearing”]; SBM, supra, 2018 U.S.Dist. LEXIS 19990 at p. *10 [LCHR has
discretion to cause charges to be issued requiring the employer to respond at
an administrative hearing].) The Commissioner is the party plaintiff in that
action, although the employee may intervene. (Compare § 98.7, subd. (c)(1)
with Joulé, at pp. 93, 98 [MCAD “proceeds in its own name” although the
28
employee may “request to intervene”]; SBM, at p. *12 [Although the charge is
brought “ ‘on behalf of’ ” the employee, it is “brought in the name of the
LCHR”]; see also Waffle House, supra, 534 U.S. at p. 291 [EEOC may pursue
action on its own even though the employee may intervene].) Thus, the
Commissioner, and not the employee, controls the action. (See Rent-A-
Center, at p. 735 [“once . . . the ICRC initiates proceedings, the agency, not
the complainant, is the ‘master of its own case’ and determines the course of
the case”]; SBM, at p.*15 [complainant cannot “prevent the LCHR from
moving forward with its proceedings”]; Charter Communications II, supra,
2021 U.S.Dist. LEXIS 47241, at p.*23 [“although the complainant is one of
the parties to the proceeding,” the NYSDHR “is ‘in command’ of the
administrative process”].) Given these similarities, we reach the same
conclusion reached by these other state and federal courts: the FAA does not
supersede the determination process under section 98.7.
In reaching this conclusion, we find the fact that the Labor
Commissioner is a state, rather than a federal, agency to be immaterial. As
the Iowa Supreme Court explained, “[t]he essential point of Waffle House is
that the FAA’s reach does not extend to a public agency that is neither a
party to an arbitration agreement nor a stand-in for a party.” (Rent-A-
Center, supra, 843 N.W.2d at p. 736.) In any event, our state high court has
already extended Waffle House to enforcement actions by state agencies. (See
Iskanian, supra, 59 Cal.4th at pp. 386–387.)
Crestwood’s attempt to analogize the interim relief and determination
processes established by section 98.7 to the Berman hearing process
established by section 98.2 is unavailing. “[S]ection 98.2 and section 98.7
provide for very different procedures.” (American Corporate Security, supra,
220 Cal.App.4th at p. 45.) For example, although the Labor Commissioner
29
may represent the employee in the Berman hearing process (§ 98.4), she is
not a party. By contrast, the Commissioner, and not the employee, is the
party plaintiff in a court action seeking interim relief or enforcing a
determination (§ 98.7, subds. (b)(2)(A) & (c)(1); see id., subd. (c)(1) [employee
may “intervene as a party plaintiff”].) Thus, unlike the Berman hearing
process in which the employee controls the litigation, the Commissioner “is in
command of” the interim relief and determination processes under section
98.7. (Waffle House, supra, 534 U.S. at p. 291.) And in exercising that
command, the Commissioner is acting as a prosecutor to vindicate the public
interest. Because the Commissioner is not a party to the arbitration
agreement, the FAA simply does not apply. (See Preston, supra, 552 U.S. at
p. 359, fn. 7.)
That the Labor Commissioner may hold “an investigative hearing” as
part of the determination process does not compel a contrary conclusion.
(§ 98.7, subd. (b)(1).) Unlike the Berman hearing—which is a prerequisite for
relief from the Commissioner—a hearing is not required in the determination
process and, in fact, “rarely” occurs. (American Corporate Security, supra,
220 Cal.App.4th at p. 45 & fn. 4.) Although the Commissioner may hold that
hearing as part of the determination process, she may only use it “to
establish the facts.” (§ 98.2, subd. (b)(1).) Thus, the hearing serves an
“investigatory” purpose analogous to discovery, rather than an adjudicatory
one. (Ibid.) This conclusion is reinforced by the fact that a determination
“does not become ‘final’ ” without further action by the “Commissioner.”
(American Corporate Security, at p. 45.) Indeed, the Commissioner has the
“burden” of enforcing the determination “by bringing an action” in court.
(Id. at p. 46.) Sonic II and OTO—which only considered the Berman hearing
30
process—do not therefore apply. (OTO, supra, 8 Cal.5th at p. 118 [addressing
Berman hearing only]; Sonic II, supra, 57 Cal.4th at p. 1124 [same].)
Finally, the legislative history of the 2017 and 2019 amendments to the
Labor Code does not suggest otherwise. In 2017, the Legislature added,
among other things, the citation process found in section 98.74. (See
Stats.2017, ch. 460, § 2 [adding § 98.74].) And in 2019, the Legislature
amended that citation process. (See Stats.2019, ch. 721, § 1 [amending
§ 98.74].) In describing this new citation process, the Senate Judiciary
Committee claimed that it “mirror[ed] the existing procedures in the wage
claim context,” such as the Berman hearing process “found in Labor Code
[sections] 98, 98.1 and 98.2.” (Sen. Jud. Com., Analysis of Sen. Bill No. 229
(2019-2020 Reg. Sess.) Mar. 28, 2019, p. 4; see also Sen. Com. on
Appropriations, Analysis of Sen. Bill No. 306 (2017–2018 Reg. Sess.) Apr. 4,
2017, pp. 2–3 [by adding the citation process, “[t]his bill would permit the
Labor Commissioner to conduct hearings on retaliation claims similar to the
process for unpaid wage claims, including a potential appeal process to an
appropriate superior court”].) That legislative history, however, made no
such claim for the interim relief and determination processes found in section
98.7.4 Thus, even if the 2017 and 2019 legislative history suggests that the
citation process is analogous to the Berman hearing process, it says nothing
about the interim relief or determination processes under section 98.7.
Accordingly, the arbitration policy does not displace the independent
statutory authority of the Labor Commissioner to investigate Lacy’s
4 This omission is understandable. The determination process existed
before 2017, and the Legislature made no changes to that process in 2017 and
2019. (See Stats.2019, ch. 721, § 1; Stats.2017, ch. 460, § 2.) And interim
relief is not available in the Berman hearing process. (Compare § 98.7,
subd. (b)(2) with §§ 98–98.2).
31
retaliation complaint, seek interim relief, or issue a determination. Because
the arbitration order prevents the Commissioner from exercising this
authority indefinitely, it necessarily impairs the ability of the Commissioner
to protect the public interest. The denial of the intervention motion is
therefore reversed.
III.
The Motion to Vacate
Because it denied the intervention motion, the trial court took the
Labor Commissioner’s motion to vacate “off calendar as moot.” In doing so,
the court, in effect, denied that motion. Because we reverse the denial of the
intervention motion, we reverse the denial of the motion to vacate. On
remand, the trial court should consider whether the arbitration order should
be vacated in whole or in part in light of this opinion.
DISPOSITION
The September 11, 2019 Order Denying Labor Commissioner’s Motion
for Leave to Intervene and the September 17, 2019 Order Deeming Labor
Commissioner’s Motion to Vacate and in the Alternative for Reconsideration
Moot are reversed. The matter is remanded for proceedings consistent with
the views expressed in this opinion. The Labor Commissioner is entitled to
recover her costs on appeal.
32
_________________________
Chou, J.*
WE CONCUR:
_________________________
Tucher, P. J.
_________________________
Petrou, J.
A158830
*Judge of the Superior Court of San Mateo County, assigned by the
Chief Justice pursuant to article VI, section 6 of the California Constitution.
33
Crestwood Behavioral Health, Inc. v. Lacy
(A158830)
Trial Court: San Mateo County Superior Court
Trial Judge: Hon. Ethan P. Schulman
Attorneys:
State of CA, Dept. of Industrial Relations, Division of Labor Standards
Enforcement, Miles E. Locker, Phoebe P. Liu, and Adalberto Corres for
Appellant.
Littler Mendelson, Jennifer J. Walt and Bianca Rodriguez for Plaintiff and
Respondent.
34