Friday, June 5, 2015

Arbitration & the Art of Truck Driving

Garcia v. Superior Court, No. B257054 (D2d1 as modified June 2, 2015)

Section 1 of the FAA carves out “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce” from FAA § 2’s mandate that contracts in commerce are generally arbitrable. Given the longstanding understanding of “foreign or instate commerce” as “any commerce,” see Wickard v. Filburn, 317 U.S. 111 (1942), it might seem natural to read the provision as saying that the FAA doesn’t apply to employment contracts. But—notwithstanding the fact that five years earlier it had broadly interpreted a reference to interstate commerce in FAA § 2 to mean the full extent of commerce and understood under the U.S. Constitution—in 2000, the Supreme Court read § 1 as limited to the employment contracts of workers who actually work in the instrumentalities of commerce like ship captains and railroad engineers. See Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001).  This case addresses whether § 1 applies to truck drivers who are defined under their contracts as independent contractors, as opposed to employees.

Here, the petitioners brought administrative wage claims before the Labor Commissioner asserting that a trucking company misclassified them as independent contractors instead of employees. The company went to court and filed a petition to compel the claims to arbitration, which the trial court granted. The truckers took a writ.

The issue comes down to what is a “contract of employment” subject to the exception in FAA § 1. If it includes a trucker contract that states the trucker is an independent contractor, then the FAA doesn’t apply and the claims aren’t arbitrable because California state law specifically exempts wage claims from arbitration. If it doesn’t the claims are arbitrable unless the truckers can establish the narrow grounds of avoiding arbitrability, like unconscionability, that apply in FAA cases.

The court of appeal grants the writ. The court finds that the issue of whether the truckers were employees was a threshold issue that needed to be decided by the trial court. The issue depends, not just on the face of the contract, but on the facts regarding relationship between the truckers and the company, particularly regarding how much control the company exercises. Although the evidence on these issues was in conflict, and although Code of Civil Procedure §§ 1281.2 and 1290.2 provide for summary, trial-like proceedings where the trial court can take testimony and make factual findings, the trial court declined to do so in this case. Thus, the case needed to be remanded for the trial court to take evidence on the status of the truckers, which would drive the question of whether arbitration could be compelled.

Writ granted.

This seems ok, but there’s a significant confounding question that’s unaddressed. Namely, that the threshold issue regarding arbitrability is essentially identical to ultimate issue in the case: Are the truckers employees or independent contractors?  So once the trial court makes that determination, will there ever need to be an arbitration? Is the court’s decision preclusive on either the Labor Commissioner or the arbitrator? How does this work?

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