STANLEY A. BOONE, District Judge
Currently before the Court is Defendant's motion to compel arbitration. The Court, having reviewed the record, finds this matter suitable for decision without oral argument.
On August 20, 2015, Plaintiff Jerad Tagliabue, on behalf of himself and all others similarly situated, filed this action in the Superior Court of California in the County of Stanislaus alleging employment related violations of state law. (ECF No. 1-1 at 4-24.
On October 30, 2015, Defendant filed a motion to compel arbitration. (ECF No. 18.) Plaintiff filed an opposition to the motion on December 2, 2015. (ECF No. 22.) On December 9, 2015, Defendant filed a reply. (ECF No. 23.)
In 1925 the Federal Arbitration Act ("FAA") was enacted in response to judicial hostility to arbitration agreements.
"In deciding whether a dispute is arbitrable, courts must consider: (1) whether a valid agreement to arbitrate exists; and (2) whether the scope of that agreement to arbitrate encompasses the claims at issue."
Defendant seeks to compel arbitration based upon two employment contracts under which Plaintiff was employed. Plaintiff does not challenge that the employment agreement requires arbitration of the individual or class action claims at issue in this action. Plaintiff contends that arbitration should not be required because he did not sign the employment contracts, the contracts are unconscionable, and Plaintiff cannot be compelled to arbitrate the PAGA claims.
Initially, the Court considers whether there was a valid agreement between the parties to arbitrate employment disputes.
First, Plaintiff challenges Defendant's evidence that there was a contract on the ground that it is not his physical signature on the documents. Plaintiff contends that he does not remember signing the agreement and argues that Defendant has not met its burden of proof to establish the validity of the electronic signature.
To the extent that Plaintiff challenges the lack of a physical signature on the document, California has enacted the Uniform Electronic Transaction Act which became effective on January 1, 2000. Cal. Civ. Code § 1633.1 et seq. The Act provides that a "signature may not be denied legal effect or enforceability solely because it is in electronic form[,]" and specifies that "[a] contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation." Cal. Civ. Code § 1633.7(a). Plaintiff's argument that the contract is not enforceable because it does not contain his physical signature is without foundation.
"To satisfy the requirement of authenticating or identifying an item of evidence, the proponent must produce evidence sufficient to support a finding that the item is what the proponent claims it is." Fed. R. Evid. 901(a). Authentication can occur by considering "[t]he appearance, contents, substance, internal patterns, or other distinctive characteristics of the item, taken together with all the circumstances." Fed. R. Evid. 901(b)(4).
Defendant has attached Plaintiff's personnel file which included the arbitration clause at issue here. (ECF No. 18-4 at 3, 5.) Other courts have found the declaration of the human resource employees sufficient to authenticate electronic signatures.
Defendant has submitted the declaration of the Senior Human Resources Manager for Defendant stating that Plaintiff electronically signed these documents. (Decl. of Amanda Hart ¶¶ 1, 3, ECF No. 18-3.) Also included is the declaration of Senior Human Resources Manager Catherine Edge explaining the new hire onboarding and current employee processes for completing company policies. (Decl. of Catherine Edge ¶¶ 4-13, ECF No. 18-5.) There are 20 discrete steps that a new hire has to follow and complete which the new hire does in the training room on a computer. (
Plaintiff does not claim that he never signed an arbitration agreement, but states that he does not remember signing the agreement. The evidence presented by Defendants shows that the documents were completed on January 1, 2012 and contain Plaintiff's electronic signature. Plaintiff also electronically signed the JCPenney Associate Parking agreement on November 29, 2012, and the attendance policy on June 23, 2006 and November 29, 2012. (ECF No. 18-6 at 15, 17, 19.) To access the associate kiosk which is accessible from any computer, the employee is required to enter his security number and password. (ECF No. 18-5 at ¶ 13; ECF No. 18-6 at 23.) Plaintiff was provided with his unique employee identification number and he created a password when he was hired. (ECF No. 18-5 at ¶ 11.)
Plaintiff relies on
2.
Plaintiff also argues that there is not mutual assent to the contract term. Contract based challenges to an agreement to arbitrate are governed by state law.
"Contract formation requires mutual consent, which cannot exist unless the parties agree on the same thing in the same sense."
(ECF No. 18-4 at 3, 5.)
Courts have long upheld agreements where a contract was formed when a plaintiff clicked on a button to assent to an agreement in which the terms themselves are accessed by a hyperlink.
Under California law, Plaintiff cannot avoid the terms of the contract by asserting that he failed to read it before signing. Mohamed, 2015 WL 3749716 at *7. Here, Defendant has presented evidence that Plaintiff was required to complete onboard training when he was hired. Plaintiff's onboard training was completed on January 1, 2012, and he electronically signed all twenty steps of the onboarding process, including the mandatory arbitration agreement.
Although Plaintiff now argues that he did not agree to arbitration, the Court finds that he did sign the separate Binding Mandatory Arbitration Agreement on two occasions. The language on the page clearly informed Plaintiff of the purpose of the document. The page directed Plaintiff to click on the link to the arbitration agreement and read it before signing. This is sufficient to find adequate notice of the contract terms "because courts have long upheld contracts where the consumer is prompted to examine terms of sale that are located somewhere else."
The Court finds that the parties entered into a valid and binding agreement to arbitrate disputes covered by and pursuant to the Rules of Employment Arbitration.
The Court next considers Plaintiff's argument that if a contract exists then the arbitration clause is unconscionable.
Where an arbitration clause exists there is a presumption of arbitrability and all doubts should be resolved in favor of arbitration.
"Generally applicable contract defenses, such as fraud, duress, or unconscionability, apply to arbitration agreements."
"A finding of unconscionability requires a procedural and a substantive element, the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results."
1.
Plaintiff argues that the provision is procedurally unconscionable because he was not aware that he signed the agreement and he was not provided with the opportunity to seek legal advice prior to signing the provision. "Procedural unconscionability concerns the manner in which the contract was negotiated and the respective circumstances of the parties at that time, focusing on the level of oppression and surprise involved in the agreement."
Plaintiff argues that the contract is procedurally unconscionable because, although the agreement states that the employee could seek legal advice, no such right exists as the employee is forced to sit in a room on the first day of employment and sign the documents as a mandatory condition of employment. While the Court considers that there is an opportunity for the employee to seek legal advice, it is unlikely that any employee would stop the onboarding process to contact an attorney regarding any documents that were presented during the process. As an employee, Plaintiff was required to sign the agreement prior to being able to complete the remaining steps in the onboarding process. Similar agreements have been found to be procedurally unconscionable under California law where the arbitration agreement was imposed upon the employee as a condition of employment.
Plaintiff additionally argues that he was not aware that he signed the document. However, as discussed above, Defendant has presented sufficient evidence to authenticate Plaintiff's electronic signature on the document. Further, the screen which was presented to Plaintiff for signature indicates that the document is a Binding Mandatory Arbitration Agreement and clearly states that the parties "agree to resolve disputes arising from, related to, or asserted after the termination of my employment through mandatory binding arbitration under the JCPenney Rules of Employment Arbitration" and "voluntarily waive the right to resolve these disputes in courts." (ECF No. 18-4 at 3, 5.) The documents show that Plaintiff was informed at the time of signing the agreement that he was agreeing to arbitrate any employment claims that fell within the agreement. The Court finds that there was no element of surprise involved.
Accordingly, the Court does find that the agreement has some level of procedural unconscionability.
In order to find the contract unconscionable, Plaintiff must also show that the arbitration policy is substantively unconscionable under the California law which occurs when the provision "is unjustifiably one-sided to such an extent that it `shocks the conscious.'" Chavarria, 733 F.3d at 923 (citations omitted). Plaintiff argues that the agreement is substantively unconscionable because it bars multi-party litigation, requires the employee to acknowledge that he had the opportunity to consult an attorney which is not true, the rules of arbitration are not provided in the same document, provides that the employee cannot seek certain injunctive relief in arbitration, and the arbitrator has sole authority to determine whether any temporary restraining order or preliminary injunction shall remain in place.
However, Plaintiff's arguments do not demonstrate that the provision is so unjustifiably one-sided that it shocks the conscious. California has "five minimum requirements for the lawful arbitration of [] rights pursuant to a mandatory employment arbitration agreement. Such 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.
The agreement here provides that the arbitrator is selected from a neutral arbitration service provider and JCPenney pays all arbitration fees. (JCPenney Rules of Employment Arbitration 1, ECF No. 18-4.) Plaintiff has not shown that he will be subjected to a biased arbitrator or to any arbitration fees or expenses under the arbitration agreement.
The agreement also states that the arbitrator may grant any remedy that could be granted by a judge, including damages and permanent injunctive relief. (
Since the arbitrator is also required to mail a final award that is supported by findings of fact and conclusions of law to the parties following the conclusion of the arbitration hearing, all five minimum requirements for a valid arbitration agreement are met. (
Plaintiff argues that the requirement that an employee cannot bring representative actions in itself is unconscionable. The Court finds that even if such a provision is not allowed under California law as to Plaintiff's representative claims, it would be severable. The Court may refuse to enforce a contract term that is unenforceable.
Here, the arbitration agreement provides that if any rule or subpart of the arbitration agreement is found to be unenforceable by any court or arbitrator, that part shall be stricken from the agreement. (Id. at Rule 21(B).) As the provision prohibiting representative actions would be severable from the agreement, the Court finds that the arbitration agreement is not substantively unconscionable under California law.
Plaintiff does not argue that only the employee is required to submit grievances to arbitration and the agreement itself provides that all claims shall be submitted to arbitration except claims
(ECF No. 18-4 at Rule 3.) Under this provision of the agreement both the employer and the employee are required to submit grievances to arbitration.
Plaintiff has not shown that the arbitration agreement is so one-sided that it would shock the conscious and the term prohibiting representative actions, if it is unlawful, would be clearly severable. In balancing the degree of procedural unconscionability, the Court considers that the degree of procedural unconscionability found would make the agreement unenforceable only if the degree of substantive unconscionability is high. Serafin, 235 Cal.App.4th at 185. As the Court finds that the potentially unconscionable provision is severable, no substantive unconscionability exists. Balancing the procedural and substantive unconscionability, the Court finds that the agreement is not unconscionable and that the arbitration agreement is enforceable.
Plaintiff argues that the provision prohibiting representative actions is unlawful. The arbitration agreement provides that there may be only one claimant per case and the parties waive their right to bring class and representative actions. (ECF No. 18-4 at Rule 8(A).) The party may challenge the efficacy of this waiver by filing a class or representative action in court. (Id. at Rule 8(B).) The opposing party may then file a motion to dismiss or stay the action pending arbitration and have the court determine whether the waiver bars the class or representative action before it. (
Under the PAGA an aggrieved employee can bring a civil action personally and on behalf of other current or former employees to recover for violations of the California Labor Code. Cal. Lab. Code § 2699(a). The statute provides that seventy-five percent of the civil penalties recovered shall go to the Labor and Workforce Development Agency and the remaining twenty-five percent goes to the aggrieved employees. Cal. Lab. Code § 2699(i).
To bring a PAGA claim, the employee is required to give written notice of the alleged Labor Code violations to the employer and the Labor and Workforce Development Agency which includes the facts and theories that support the alleged violation. Cal. Lab. Code § 2699.3(a)(1). The agency is to notify the employer and aggrieved employee if it does not intend to investigate the alleged violations within thirty days. Cal. Lab. Code § 2699.3(a)(2)(A). If no notice is provided within 33 calendar days, the aggrieved employee may commence a civil action under the PAGA. Id. An employee may amend an existing complaint within sixty days of the time periods specified in section 2699.3. Cal. Lab. Code § 2699.3(a)(2)(C).
PAGA only allows the aggrieved employees to recover statutory penalties for violations of the Labor Code.
In
On appeal in
The agreement itself contemplates that a court could find that the waiver of a class or representative action could be found to be invalid. The agreement states that "[t]o the extent permitted by law, the Parties waive their rights to bring class and representative actions." (ECF No 18-4 at Rule 8A.) The parties are permitted to challenge this waiver by filing a class or representative action in court. (
Since the waiver of representative claims is severable, the Court must consider whether the parties agreed to arbitrate the PAGA claims raised in the complaint. Plaintiff argues that
Based on the foregoing, IT IS HEREBY ORDERED that:
"The District Court has broad discretion to stay proceedings as an incident to its power to control its own docket."
In this instance, the Ninth Circuit has issued a decision finding that California's rule that an employee cannot waive PAGA claims does not conflict with the FAA. While Defendant argues that the Circuit will likely decide to hear