Tarantino v. Cintas Corp. No. 3 CA3

Filed 5/10/16 Tarantino v. Cintas Corp. No. 3 CA3
NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Sacramento)
----
CHRISTOPHER TARANTINO, C077441
Plaintiff and Respondent, (Super. Ct. No. 34-2013-
00153412-CU-OE-GDS)
v.
CINTAS CORPORATION NO. 3,
Defendant and Appellant.
Plaintiff Christopher Tarantino brought suit against his former employer Cintas
Corporation No. 3 (Cintas), asserting a representative claim pursuant to the Labor Code
Private Attorney General Act of 2004 (PAGA) (Lab. Code, § 2698 et seq.) for failure to
provide accurate wage statements and to maintain records of hours worked. Cintas
moved to stay the litigation and to compel individual arbitration, based on the arbitration
clause in Tarantino’s employment agreement. The trial court denied the motion under the
authority of Iskanian v. CLS Transp. Los Angeles, LLC (2014) 59 Cal.4th 348 (Iskanian),
which held a pre-dispute waiver of the employee’s right to bring a representative PAGA
1
action violated public policy. This order is appealable under Code of Civil Procedure
section 1294, subdivision (a).
On appeal, Cintas contends: (1) Iskanian does not apply because the employment
agreement is governed by Ohio law; (2) even if California law applies, Tarantino validly
waived his right to bring a representative action under the PAGA after the dispute arose;
(3) the rule announced in Iskanian is preempted by the Federal Arbitration Act (FAA);
and (4) the trial court’s ruling is contrary to California law.
As we explain, we reject all of Cintas’s contentions and affirm. The trial court
properly applied California law because under choice of law principles the rule set forth
in Iskanian is a fundamental policy and California has a materially greater interest than
Ohio. Cintas has failed to show that Tarantino validly waived his right to bring a
representative PAGA suit after the dispute arose. We are bound by our Supreme Court’s
decision in Iskanian which found no preemption by the FAA. Finally, the trial court’s
ruling complies with California law.
BACKGROUND
Tarantino’s Complaint
Cintas is headquartered in Ohio and operates a nationwide business that
manufactures, sells, and rents uniforms and apparel. From June 29, 2009, until October
30, 2012, Tarantino worked for Cintas as a uniform sales service representative in
California. He worked as an hourly employee.
On October 22, 2013, Tarantino filed suit against Cintas. Tarantino alleged that
Cintas failed to provide accurate wage statements in violation of Labor Code section 226
and failed to maintain records of the hours worked by hourly workers in California.
Tarantino brought the action in his individual capacity and on behalf of all aggrieved
employees of Cintas pursuant to the PAGA.
The complaint sought statutory penalties, attorney fees, costs, and interest.
2
Cintas’s Motion to Stay and Compel Arbitration
Cintas moved to stay the action and compel arbitration. Cintas asserted that
during his employment, Tarantino agreed to arbitration as the exclusive method to
resolve his dispute with Cintas. On July 19, 2010, over a year after his employment
began, Tarantino signed an employment agreement in exchange for a pay raise. The
employment agreement contained an arbitration clause. The agreement provided in part
as follows:
8. EXCLUSIVE METHOD OF RESOLVING DISPUTES OR DIFFERENCES.
Should any dispute or difference arise between Employee and Employer
concerning whether either party at any time violated any duty, right, law, regulation,
public policy, or provision of this Agreement, the parties will confer and attempt in good
faith to resolve promptly such dispute or difference. The rights and claims of Employer
covered by this Section 8, including the arbitration provisions below, include Employer’s
claims for damages, as well as reasonable costs and attorneys’ fees, caused by
Employee’s violation of any provision of this Agreement or any law, regulation or public
policy. The rights and claims of Employee covered by this Section 8, including the
arbitration provisions below, include Employee’s rights or claims for damages as well as
reasonable costs and attorneys’ fees, caused by Employer’s violation of any provision of
this Agreement or any law, regulation or public policy. The rights and claims of
Employee covered by this Section 8, including the arbitration provisions below,
specifically include but are not limited to all of Employee’s rights or claims arising out of
or in any way related to Employee’s employment with Employer, such as rights or claims
arising under . . . state or local laws regarding employment . . . .
If any dispute or difference remains unresolved after the parties have conferred in
good faith, either party desiring to pursue a claim against the other party will submit to
the other party a written request to have such claim, dispute or difference resolved
through impartial and confidential arbitration. The place of arbitration shall be in the
county and state where Employee currently works for Employer or most recently worked
for Employer. . . . Arbitration under this Agreement will be conducted in accordance
with the AAA’s National Rules for Resolution of Employment Disputes, except if such
AAA rules are contrary to applicable state or federal law, applicable law shall govern.
The employment agreement further provided that it was governed by the law of
the State of Ohio.
3
Cintas argued Tarantino was entitled to individual arbitration on his claims of
labor law violations. Cintas denied that Tarantino could bring such claims in a
representative capacity.
Cintas requested judicial notice of two unpublished federal district court cases
upholding the validity of this arbitration agreement against the claim it was
unconscionable.
In opposition, Tarantino argued California law applied and PAGA claims were not
subject to arbitration. Tarantino provided a declaration in which he stated that he did not
negotiate the employment agreement; it was provided on a take-it-or-leave-it basis. He
understood he had to sign the agreement or end his employment. He did not expect to
lose his right to bring a PAGA claim.
The California Supreme Court issued its decision in Iskanian and the trial court
requested additional briefing. The court directed the parties to explain whether Iskanian
had any impact on the choice of law issue, specifically, whether Ohio law was contrary to
the fundamental policy of California law, in light of Iskanian.
Trial Court’s Ruling and Order
The trial court denied Cintas’s motion to stay and petition to compel arbitration.
Applying a choice of law analysis, the court found the public policy articulated in
Iskanian was a fundamental policy and California had a materially greater interest, so
California law applied. Under Iskanian, the arbitration clause was unenforceable as to a
PAGA claim, so there was no basis to compel arbitration.
DISCUSSION
I
PAGA Actions and Iskanian
As Iskanian explains, the PAGA was enacted to address two problems. First,
there was no enforcement of many Labor Code violations because the only penalty was a
criminal misdemeanor sanction and district attorneys directed their resources to violent
4
crimes and other priorities. (Iskanian, supra, 59 Cal.4th at p. 379.) The PAGA provides
civil penalties for Labor Code violations for which there was no such penalty. Generally,
the penalty is $100 for each aggrieved employee during the initial pay period and $200
per violation thereafter. (Lab. Code, § 2699, subd. (f)(2).)
The second problem the PAGA addressed was the shortage of government
resources to enforce labor law violations. The solution was to permit an aggrieved
employee to bring an action personally and on behalf of other current or former
employees to recover civil penalties. (Iskanian, supra, 59 Cal.4th at pp. 379-380.) Labor
Code section 2699, subdivision (a) provides: “Notwithstanding any other provision of
law, any provision of this code that provides for a civil penalty to be assessed and
collected by the Labor and Workforce Development Agency or any of its departments,
divisions, commissions, boards, agencies, or employees, for a violation of this code, may,
as an alternative, be recovered through a civil action brought by an aggrieved employee
on behalf of himself or herself and other current or former employees pursuant to the
procedures specified in Section 2699.3.” Of the penalties recovered, 75 percent are
distributed to the Labor and Workforce Development Agency for enforcement and
education; the remaining 25 percent is distributed to aggrieved employees. (Lab. Code,
§ 2699, subd. (i).)
“An employee plaintiff suing, as here, under the [PAGA], does so as the proxy or
agent of the state’s labor law enforcement agencies. The act’s declared purpose is to
supplement enforcement actions by public agencies, which lack adequate resources to
bring all such actions themselves. [Citation.] In a lawsuit brought under the act, the
employee plaintiff represents the same legal right and interest as state labor law
enforcement agencies—namely, recovery of civil penalties that otherwise would have
been assessed and collected by the Labor Workforce Development Agency. [Citation.]”
(Arias v. Superior Court (2009) 46 Cal.4th 969, 986.) “Because an aggrieved employee’s
action under the [PAGA] functions as a substitute for an action brought by the
5
government itself, a judgment in that action binds all those, including nonparty aggrieved
employees, who would be bound by a judgment in an action brought by the government.”
(Ibid.)
“A PAGA representative action is therefore a type of qui tam action.[1]
‘Traditionally, the requirements for enforcement by a citizen in a qui tam action have
been (1) that the statute exacts a penalty; (2) that part of the penalty be paid to the
informer; and (3) that, in some way, the informer be authorized to bring suit to recover
the penalty.’ [Citation.] The PAGA conforms to these traditional criteria, except that a
portion of the penalty goes not only to the citizen bringing the suit but to all employees
affected by the Labor Code violation. The government entity on whose behalf the
plaintiff files suit is always the real party in interest in the suit. [Citation.]” (Iskanian,
supra, 59 Cal.4th at p. 382.)
In Iskanian, the plaintiff employee had signed an arbitration agreement with
defendant employer providing that “ ‘any and all claims’ ” arising out of employment
were to be submitted to arbitration. (Iskanian, supra, 59 Cal.4th at p. 360.) The
arbitration agreement also contained an express waiver of any class or representative
claims. (Ibid.) It was undisputed that the waiver applied to plaintiff’s representative
PAGA action. (Id. at p. 378.) One of the issues presented was whether such waivers
were permissible under state law. (Ibid.)
1 “A qui tam action has been defined as follows, ‘An action brought under a statute that
allows a private person to sue for a penalty, part of which the government or some
specified public institution will receive.’ [Citations.] The term ‘qui tam’ comes from the
Latin expression ‘qui tam pro domino rege quam pro se ipso in hac parte sequitur,’ which
means, ‘who pursues this action on our Lord the King’s behalf as well as his own.’
[Citations.]” (People ex rel. Allstate Ins. Co. v. Weitzman (2003) 107 Cal.App.4th 534,
538.)
6
Our high court held that an employee’s right to bring a PAGA action is not
waivable. (Iskanian, supra, 59 Cal.4th at p. 382.) This conclusion was compelled by two
statutes. First, Civil Code section 1668 prohibits contracts to exempt an individual from
responsibility for his or her violation of law. “[T]he Legislature’s purpose in enacting the
PAGA was to augment the limited enforcement capability of the [Labor and Workforce
Development] Agency by empowering employees to enforce the Labor Code as
representatives of the Agency. Thus, an agreement by employees to waive their right to
bring a PAGA action serves to disable one of the primary mechanisms for enforcing the
Labor Code. Because such an agreement has as its ‘object, . . . indirectly, to exempt [the
employer] from responsibility for [its] own ... violation of law,’ it is against public policy
and may not be enforced. (Civ. Code, § 1668.)” (Iskanian, at p. 383.) Second, Civil
Code section 3513 provides that a private agreement may not contravene a law
established for a public reason. “The PAGA was clearly established for a public reason,
and agreements requiring the waiver of PAGA rights would harm the state’s interests in
enforcing the Labor Code and in receiving the proceeds of civil penalties used to deter
violations.” (Iskanian, at p. 383.)
The court rejected the argument that the arbitration agreement prohibited only
representative PAGA claims, but not individual PAGA claims, without deciding whether
a PAGA claim could be brought only individually. “[W]hether or not an individual claim
is permissible under the PAGA, a prohibition of representative claims frustrates the
PAGA’s objectives. As one Court of Appeal has observed: ‘[A]ssuming it is authorized,
a single-claimant arbitration under the PAGA for individual penalties will not result in
the penalties contemplated under the PAGA to punish and deter employer practices that
violate the rights of numerous employees under the Labor Code. That plaintiff and other
employees might be able to bring individual claims for Labor Code violations in separate
arbitrations does not serve the purpose of the PAGA, even if an individual claim has
7
collateral estoppel effects. [Citation.] Other employees would still have to assert their
claims in individual proceedings.’ [Citation.]” (Iskanian, supra, 59 Cal.4th at p. 384.)
The court held an employment agreement that compels the waiver of
representative claims under the PAGA “is contrary to public policy and unenforceable as
a matter of state law.” (Iskanian, supra, 59 Cal.4th at p. 384.) The court did not,
however, preclude all waivers of the right to bring a representative PAGA claim. “Of
course, employees are free to choose whether or not to bring PAGA actions when they
are aware of Labor Code violations.” (Id. at pp. 383, 387 [“Of course, any employee is
free to forgo the option of pursuing a PAGA action.”].)
Next, the Iskanian court considered whether the FAA preempted the rule against
PAGA waivers. “We conclude that the rule against PAGA waivers does not frustrate the
FAA’s objectives because, as explained below, the FAA aims to ensure an efficient
forum for the resolution of private disputes, whereas a PAGA action is a dispute between
an employer and the state [Labor and Workforce Development] Agency.” (Iskanian,
supra, 59 Cal.4th at p. 384.) “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—either the [Labor and Workforce Development]
Agency or aggrieved employees—that the employer has violated the Labor Code.”2 (Id.
at pp. 386-387.)
2 The concurring opinion disagreed with this reasoning. Instead, it found the arbitration
agreement unenforceable “because it purports to preclude Iskanian from bringing a
PAGA action in any forum.” (Iskanian, supra, 59 Cal.4th at p. 396 (concur. opn. of Chin,
J.).) The arbitration agreement at issue provided: “EMPLOYEE and COMPANY agree
that each will not assert class action or representative action claims against the other in
arbitration or otherwise.” (Id. at p. 394.)
8
II
Waiver of the Representative PAGA Claims
Initially, we note that unlike the arbitration agreement at issue in Iskanian, the
arbitration provision here does not contain an express waiver of the right to bring a
representative claim. Although not recognized in the briefing, both parties acknowledge
this point at oral argument. Nonetheless, the parties treat the arbitration agreement as
having such effect, although they fail to articulate exactly how they reach that
conclusion.3
The parties agree the arbitration provision does not provide for arbitration of
representative claims as it does not address that subject and thus does not indicate an
intent to submit such claims to arbitration.4 (See Stolt-Nielsen S.A. v. AnimalFeeds Int’l
Corp. (2010) 559 U.S. 662, 684 [176 L.Ed.2d 605] [“ a party may not be compelled
under the FAA to submit to class arbitration unless there is a contractual basis for
concluding that the party agreed to do so”].) “[C]onsent to class arbitration cannot be
inferred solely from the agreement to arbitrate, and the decision cannot be based on the
court’s view of sound policy regarding class arbitration but must be discernible in the
contract itself.” (Nelsen v. Legacy Partners Residential, Inc. (2012) 207 Cal.App.4th
1115, 1128, citing Stolt-Nielsen; but see Garden Fresh Restaurant Corp. v. Superior
Court (2014) 231 Cal.App.4th 678, 689 (Garden Fresh) [the question of whether a silent
3 Although Cintas does argue that the trial court incorrectly expanded Iskanian by
reading the case to hold that PAGA claims can never be arbitrated, he argues only that
such an expansion is preempted by the FAA. He does not argue that the trial court
incorrectly applied Iskanian per se.
4 Although the arbitration clause provides that arbitration will be conducted under the
AAA rules, neither party relies on those rules in addressing the arbitration of
representative claims. The only portion of the AAA rules in the record does not address
representative claims.
9
arbitration agreement permits arbitration of a representative claim is to be decided by the
court, not the arbitrator].)
Tarantino argues he cannot be compelled to arbitrate the PAGA claim, either
because Iskanian prohibits arbitration of such claims or because such representative
claims, being in effect between the State and the employer, are outside the scope of the
arbitration clause.
At times, Iskanian does suggest that a PAGA claim is not subject to arbitration.
For example, the court says, “a PAGA claim lies outside the FAA’s coverage.”
(Iskanian, supra, 59 Cal.4th at p. 386.) Also, “[n]othing in the text or legislative history
of the FAA . . . suggests the FAA was intended to limit the ability of states to enhance
their public enforcement capabilities by enlisting willing employees in qui tam actions.”
(Id. at p. 387.) The concurring opinion apparently reads the majority opinion to preclude
arbitration of PAGA claims and takes issue with “the majority’s view that the FAA
permits either California or its courts to declare private agreements to arbitrate PAGA
claims categorically unenforceable.” (Id. at p. 396 (conc. opn. of Chin, J.).) Other
language in Iskanian, however, suggests a representative PAGA claim can be subject to
arbitration. In remanding the case, the court stated the defendant “must answer the
representative PAGA claims in some forum. The arbitration agreement gives us no basis
to assume that the parties would prefer to resolve a representative PAGA claim through
arbitration.” (Id. at p. 391.) Given the absence of a clear directive, we do not read
Iskanian to hold that representative PAGA claims can never be subject to arbitration.
However, as the court noted in Garden Fresh, supra, 231 Cal.App.4th at page 689,
footnote 4, Iskanian raises a question as to whether a PAGA claim can be sent to
arbitration at all. In our view, whether a representative PAGA claim may be subject to
mandatory arbitration remains an open question in California. Here the parties agree this
arbitration agreement does not so provide and Cintas did not seek to compel arbitration of
10
the representative claim. Therefore, this case does not present the question of whether a
plaintiff may be compelled to arbitrate a representative PAGA claim.
Tarantino’s argument is thus reduced; he cannot be compelled to arbitrate his
individual PAGA claim because his individual claim is not divisible from the
representative claim. In Reyes v. Macy’s, Inc. (2011) 202 Cal.App.4th 1119, plaintiff
sued her employer for various labor law violations and included a PAGA claim. The
employer moved to compel arbitration of the individual claims and dismiss the class and
representative claims. (Id. at p. 1121.) The court found the PAGA claim was not an
individual claim, because the statute required that it be brought as a representative claim,
and therefore the PAGA claim was not within the employer’s request to arbitrate
individual claims. (Id. at pp. 1123-1124.) In Williams v. Superior Court (2015) 237
Cal.App.4th 642, at page 649, the court found no legal authority to split the PAGA claim
into an arbitrable individual claim and a nonarbitrable representative claim. “Because ‘
“every PAGA action,’ ” whether seeking penalties as to only one aggrieved employee or
as to other employees as well, ‘ “is a representative action on behalf of the state” ’ [citing
Iskanian], [the employee’s] individual PAGA claims are no more subject to his
[arbitration] agreement than are his representative claims.” (Franco v. Arakelian
Enterprises, Inc. (2015) 234 Cal.App.4th 947, 965, fn. 11.)
Cintas, on the other hand, contends that Tarantino can be compelled to arbitrate
his individual PAGA claim because the employment agreement--including the arbitration
clause--is governed by Ohio law, as set forth in the choice of law provision, and therefore
Iskanian and other California cases do not apply. The argument assumes that application
of Ohio law would permit and result in the waiver--or at least the bifurcation--of the
representative PAGA claims. Cintas’s argument is muddled because it fails to state
exactly how the case would be resolved under Ohio law. Indeed, in its opening brief,
Cintas fails to cite to any Ohio law, either statute or decision. Instead, it relies on
unpublished federal district court cases that have enforced the identical or similar
11
arbitration clauses, even when PAGA claims are asserted. (See, e.g., Castro v. Cintas
Corporation No. 3 (N.D.Cal. Apr. 11, 2014) 2014 U.S. Dist. Lexis 50695.)
In its reply brief, Cintas cites to Hawkins v. O'Brien (Ohio Ct. App. Jan. 9, 2009)
2009 Ohio 60, 2009 Ohio App. LEXIS 73, which found an arbitration clause
enforceable.5 The court stated, “The private attorney general and class action provisions
of R.C. 1345.09(D) are procedural mechanisms that aid consumers in their prosecution of
CSPA violations. They confer no additional substantive rights.”6 (Id. at ¶ 34.)
Presumably, Cintas reads this as indicating that Ohio law permits the waiver of the
representative PAGA claim because it is not a substantive right, only a procedural
mechanism. Neither Hawkins nor Ohio Revised Code section 1345.09, however,
contains private attorney general provisions that are the equivalent of qui tam PAGA
actions. Cintas offers no Ohio law as to whether qui tam actions are recognized in Ohio,
and if so, whether they may be waived or are subject to arbitration. While Cintas has
failed to show on appeal that Ohio law differs significantly from California law,
Tarantino conceded as much below. “The application of Ohio law is therefore contrary
5 The Ohio Supreme Court Rules for the Reporting of Opinions permits the citation of
unreported decisions. “All opinions of the courts of appeals issued after May 1, 2002
may be cited as legal authority and weighted as deemed appropriate by the courts without
regard to whether the opinion was published or in what form it was published.” (Ohio
S.Ct. Rep. Op. Rule 3.4.)
6 Although Hawkins refers to Ohio Revised Code section 1345.09(D), the relevant
subdivision appears to be (E): “When a consumer commences an individual action for a
declaratory judgment or an injunction or a class action under this section, the clerk of
court shall immediately mail a copy of the complaint to the attorney general. Upon
timely application, the attorney general may be permitted to intervene in any private
action or appeal pending under this section. When a judgment under this section
becomes final, the clerk of court shall mail a copy of the judgment including supporting
opinions to the attorney general for inclusion in the public file maintained under division
(A)(3) of section 1345.05 of the Revised Code.” (Ohio Rev. Code Ann. § 1345.09, subd.
(E).)
12
to the fundamental policy of California because application of Ohio law (which lacks a
PAGA statute) operates as a waiver of Tarantino’s representative PAGA action to enforce
the California Labor Code.”
Accordingly, in this case, where there is only a single representative PAGA cause
of action and an arbitration agreement that the parties agree does not provide for
arbitration of a representative claim, we accept the parties’ premise that enforcing the
arbitration agreement to require arbitration of Tarantino’s individual PAGA claims would
result in waiver of the representative PAGA claims. The parties further agree that result
would be permissible under Ohio law, but not under California law. To determine
whether the trial court erred in denying the motion to stay and the petition to compel
arbitration, we must determine whether the law of Ohio or California applies.
III
Choice of Law
As noted ante, the employment agreement contains a choice of law provision that
selects Ohio law as the governing law. Cintas contends this provision must be enforced.
“In determining the enforceability of arm’s-length contractual choice-of-law
provisions, California courts shall apply the principles set forth in Restatement section
187, which reflects a strong policy favoring enforcement of such provisions. [¶] More
specifically, Restatement section 187, subdivision (2) sets forth the following standards:
‘The law of the state chosen by the parties to govern their contractual rights and duties
will be applied, even if the particular issue is one which the parties could not have
resolved by an explicit provision in their agreement directed to that issue, unless either
[¶] (a) the chosen state has no substantial relationship to the parties or the transaction and
there is no other reasonable basis for the parties choice, or [¶] (b) application of the law
of the chosen state would be contrary to a fundamental policy of a state which has a
materially greater interest than the chosen state in the determination of the particular
issue and which, under the rule of § 188, would be the state of the applicable law in the
13
absence of an effective choice of law by the parties.’ ” (Nedlloyd Lines B.V. v. Superior
Court (1992) 3 Cal.4th 459, 464-465, fns. omitted (Nedlloyd).)
Cintas’s principal place of business is in Ohio. “This fact alone is sufficient to
establish a ‘substantial relationship’ between [Ohio] and the parties as well as a
‘reasonable basis’ for a contractual provision requiring application of [Ohio] law.”
(Hughes Electronics Corp. v. Citibank Delaware (2004) 120 Cal.App.4th 251, 258.)
The pivotal question is whether application of Ohio law would be contrary to a
fundamental policy of California. (Nedlloyd, supra, 3 Cal.4th at p. 465.) “To be
fundamental within the meaning of Restatement section 187, a policy must be a
substantial one. (Rest., § 187, com. g, p. 568.)” (Brack v. Omni Loan Co., Ltd. (2008)
164 Cal.App.4th 1312, 1323 (Brack).)
At oral argument, Cintas asserted that applying Ohio law would not be contrary to
the fundamental policy of California because PAGA provides only a procedural right, not
a substantive right. Cintas did not raise this point in its opening brief. While it discussed
the procedural nature of PAGA in its reply brief, it did not argue the procedural nature of
PAGA precludes finding a fundamental right for choice of law purposes. We are not
required to consider any point made for the first time at oral argument. (Kinney v.
Vaccari (1980) 27 Cal.3d 348, 356, fn. 6; Haight Ashbury Free Clinics, Inc. v.
Happening House Ventures (2010) 184 Cal.App.4th 1539, 1554, fn. 9 [“We do not
consider arguments that are raised for the first time at oral argument”].) Moreover,
Cintas failed to cite any legal authority that a procedural right cannot be a fundamental
policy. (See Aral v. EarthLink, Inc. (2005) 134 Cal.App.4th 544, 564 [finding “the right
of California to ensure that its citizens have a viable forum in which to recover minor
amounts of money allegedly obtained in violation of the UCL” was a fundamental
policy]; ABF Capital Corp. v. Grove Properties Co. (2005) 126 Cal.App.4th 204, 223
[finding the reciprocal attorney fee provision of Civ. Code § 1717 (characterized as a
“procedural issue”) was a fundamental policy of California].) We have not found any
14
such authority, nor do we discern a principled reason for making such a distinction
between procedural and substantive rights in determining fundamental rights.
We conclude the rule set forth in Iskanian is a fundamental policy of California.
First, Tarantino brought suit to enforce the provisions of Labor Code section 226.
“ ‘[T]he public policy in favor of full and prompt payment of an employee’s earned
wages is fundamental and well-established’ and the failure to timely pay wages injures
not only the employee, but the public at large as well.” (Pineda v. Bank of America, N.A.
(2010) 50 Cal.4th 1389, 1400.) Labor Code section 226 plays an important role in
vindicating this fundamental public policy. (Henry M. Lee Law Corp. v. Superior Court
(2012) 204 Cal.App.4th 1375, 1388.)
Second, “[t]he relative significance of a particular policy or statutory scheme can
be determined by considering whether parties may, by agreement, avoid the policy or
statutory requirement.” (Brack, supra, 164 Cal.App.4th at p. 1323.) Iskanian held the
parties may not waive the employee’s right to bring to a PAGA action before the dispute
arose. This no-waiver rule indicates the policy is significant and substantial.
Cintas argues the Iskanian rule is not a fundamental policy and Ohio law should
apply because such law is not “immoral and contrary to the general interests of California
citizens.” In asserting this standard, Cintas relies on a pre-Nedlloyd case, Wong v.
Tenneco, Inc. (1985) 39 Cal.3d 126, at pages 135-136. Wong is a comity case, deciding
whether California should apply the law of a foreign sovereign, Mexico, to a dispute
relating to farming operations there. Under the doctrine of comity, “the forum state will
generally apply the substantive law of a foreign sovereign to causes of action which arise
there. [Citations.]” (Id. at p. 134.) Wong recognized the “public policy” exception to the
comity doctrine. “The standard, however, is not simply that the law is contrary to our
public policy, but that it is so offensive to our public policy as to be ‘ “prejudicial to
recognized standards of morality and to the general interests of the citizens . . . .’ ” (Id. at
p. 135.) Cintas contends this is the proper standard for determining whether a policy is
15
fundamental in the choice of law context. Cintas applies the wrong standard. As Brack,
supra, 164 Cal.App.4th 1312 explains, a different, less stringent standard applies here. In
the choice of law context, “the policy need not be as strong as is required when a state
refuses to permit its courts to be used to prosecute a foreign cause of action. (Rest.,
§ 187, com. g, p. 569.) In such cases, in which a state’s obligations under the full faith
and credit clause of the United States Constitution are implicated, the policy must involve
“ ‘some fundamental principle of justice, some prevalent conception of morals, some
deep-seated tradition of the commonweal.’ ” (Rest., § 90, com. c, p. 267.)” (Brack, at p.
1323.) Under Nedlloyd, the policy need only be “fundamental.” (Nedlloyd, supra, 3
Cal.4th at p. 465.)
Finally, California has a materially greater interest than Ohio in the particular
issue. (Nedlloyd, supra, 3 Cal.4th at p. 465.) Tarantino’s suit involves enforcement of
California’s labor law as to California employees employed within California. Further,
the action is a qui tam action, brought on behalf of the State, with the greater share of any
penalties recovered going to the State.
The trial court did not err in applying California law.
IV
Claim of Post-Dispute Waiver
Cintas contends Tarantino freely and validly waived his right to bring a
representative PAGA action. Iskanian recognized that “employees are free to choose
whether or not to bring PAGA actions when they are aware of Labor Code violations.”
(Iskanian, supra, 59 Cal.4th at p. 383, emphasis added.) Cintas argues that Tarantino
freely chose to waive his right to bring a representative PAGA action because he signed
the employment agreement over a year after he began work, and in exchange for a pay
raise. Cintas reasons that the alleged failures to provide accurate wage statements and to
maintain proper records of hours worked arose “long before he signed the new
employment agreement containing the arbitration agreement.”
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Even assuming that the alleged labor law violations occurred throughout
Tarantino’s employment, nothing in the record indicates when Tarantino became aware
of them. The employment agreement cites as consideration that Cintas is increasing
Tarantino’s rate of compensation and agreeing to arbitrate certain claims. It does not
mention a waiver of any disputed labor claims or the right to bring a representative
PAGA action. That the agreement was signed after Tarantino’s employment began is
insufficient alone to show that there was an actual dispute at that time over the PAGA
claims. In Iskanian, the employee signed the arbitration agreement with the waiver of
class or representative claims nine months after he began employment. (Iskanian, supra,
59 Cal.4th at p. 360.) On those facts the Supreme Court did not find a valid post-dispute
waiver, but instead found the waiver unenforceable. (Id. at p. 384.)
V
Preemption by FAA
Cintas contends the rule of Iskanian is preempted by the FAA. Our Supreme
Court considered and rejected this contention in Iskanian, supra, 59 Cal.4th at pages 384-
388. We are bound by the decisions of our Supreme Court. (Auto Equity Sales, Inc. v.
Superior Court (1962) 57 Cal.2d 450, 455.)
Cintas contends the Supremacy Clause of the United States Constitution requires
that we disregard the decision of the California Supreme Court because it is at odds with
federal law. This point is not well taken. Cintas relies only on a number of federal
district cases that were not published. We are not bound by these decisions. “In the
absence of controlling United States Supreme Court decisional authority, we make an
independent determination of federal law. [Citations.] Decisions of the lower federal
courts are persuasive, but are not binding. [Citations.]” (Boucher v. Alliance Title
Company, Inc. (2005) 127 Cal.App.4th 262, 268.) Moreover, a recent Ninth Circuit
decision found that the FAA does not preempt the Iskanian rule. (Sakkab v. Luxottica
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Retail North America, Inc. (9th Cir. 2015) 803 F.3d 425, 433-440.) Federal law,
therefore, is not at odds with California law on this issue.
VI
Ruling Contrary to California Law
Cintas contends the trial court’s ruling is contrary to California law because “[i]t is
not disputed that the arbitration agreement at issue meets the Armendariz test under
California law.” Under the Armendariz test, an arbitration agreement is lawful if it “ ‘(1)
provides for neutral arbitrators, (2) provides for more than minimal discovery, (3)
requires a written award, (4) provides for all of the types of relief that would otherwise be
available in court, and (5) does not require employees to pay either unreasonable costs or
any arbitrators’ fees or expenses as a condition of access to the arbitration forum.’ ”
(Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 102.)
An aggrieved employee’s action under the PAGA functions as a substitute for an
action brought by the government itself. (Arias v. Superior Court, supra, 46 Cal.4th at p.
986.) Requiring Tarantino to arbitrate his individual PAGA claim and thus waive his
representative PAGA claim would not “provide[] for all the types of relief that would
otherwise be available in court.” (Armendariz, supra, 24 Cal.4th at p. 102.) If limited to
his individual claims, Tarantino could not--as agent of the State--recover penalties for all
of Cintas’s violations of California’s labor law, “penalties contemplated under the PAGA
to punish and deter employer practices that violate the rights of numerous employees
under the Labor Code.” (Brown v. Ralphs Grocery Co. (2011) 197 Cal.App.4th 489, 502,
fn. omitted, quoted with approval in Iskanian, supra, 59 Cal.4th at p. 384.)
Cintas has not shown that the trial court’s ruling is contrary to California law.
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DISPOSITION
The judgment is affirmed. Tarantino shall recover costs on appeal. (See Cal.
Rules of Court, rule 8.278(a)(1) & (2).)
/s/
Duarte, J.
We concur:
/s/
Hull, Acting P. J.
/s/
Hoch, J.
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