In Hoover v. American Income Life Insurance Company, Plaintiff was a sales agent for Defendant American Income Life Insurance Company (“AIL”), pursuant to a written contract that provided she was an independent contractor. In her lawsuit, she claimed, among other things, that AIL had improperly categorized her as an independent contractor, and that she was entitled to employee statutory rights under the Labor Code, including minimum wage and reimbursement of business expenses under Labor Code 2802.
Following 15 months of litigation, during which AIL had twice sought to remove the case to Federal District Court and extensive discovery had been conducted, AIL sought to enforce the arbitration provision in the contract and moved for an order compelling arbitration. The trial court denied the motion.
On appeal, the Fourth Appellate District, Division Two, affirmed the trial court’s denial of the motion to compel arbitration on two bases.
First, it held, AIL had waived its right to arbitration, noting that “[a]lthough participation in litigation of an arbitrable claim does not itself waive a party’s right to seek arbitration, at some point, litigation of the issues in dispute justifies a finding of waiver.”
As the Court explained, the relevant factors establishing waiver include:
whether the party’s actions are inconsistent with the right to arbitrate;
whether the litigation machinery has been substantially invoked and the parties were well into preparation of a lawsuit before the party notified the opposing party of an intent to arbitrate;
whether a party delayed for a long period before seeking a stay;
whether important intervening steps (e.g., taking advantage of judicial discovery procedures not available in arbitration) had taken place; and
whether the delay affected, misled, or prejudiced the opposing party.
Here, the Court ruled, these factors were met and AIL’s removal of the case to federal court, coupled with participation in several months of litigation, waives the right to arbitrate.
Second, the Court ruled, even if AIL had not waived its right to assert arbitration, AIL could not compel arbitration in the present case, since claims based on alleged wage and hour violations, the failure to reimburse employment-related expenses, and other related Labor Code claims, cannot be subject to arbitration.