Clothing Retailer Cannot Force Arbitration of Wage and Hour Claims Where Agreement Specifically Excluded Matters Within Labor Commissioner’s Jurisdiction

In deciding Tilly’s Inc.’s appeal to send a former warehouse employee’s proposed class action to arbitration, the Court of Appeal for the Fourth District of California held that arbitration provisions contained in the clothing retailer’s employment contracts excluded wage claims.  Affirming the trial court’s order denying Tilly’s Inc.’s motion to compel arbitration, the appellate court ruled that wording used in the company’s employment agreement with employee Maria Rebolledo was unambiguous and expressly excluded statutory wage claims from arbitration. The decision allows Rebolledo to proceed with her class action claims against Tilly’s in court. (Rebolledo v. Tilly’s Inc., (July 8, 2014, G048625) --- Cal.App. 4th ----).

Facts

Maria Rebolledo ("Rebolledo") worked in the clothing retailer’s warehouse from 2000–2012.  After her termination from the company, she filed a lawsuit on behalf of herself and a putative class of “similarly situated” persons.  Amongst her several causes of action, Rebolledo alleged that Tilly’s failed to provide workers with meal and rest breaks and other labor law violations.  Shortly after the filing of Rebolledo’s complaint, Tilly’s filed a motion to compel arbitration, which was denied by the trial court based on the conclusion that the parties’ arbitration agreement excluded wage claims from the arbitration obligation.

The arbitration provisions at issue were featured most prominently in an employment contract Rebolledo signed with Tilly’s in 2001.  The contract included a provision that expressly excluded both “matters governed by” and “matter[s] within the jurisdiction” of the California Labor Commissioner.  In the agreement, Tilly’s used the two phrases as being interchangeable.

Decision

The Court of Appeal interpreted this language broadly, and held that the provisions excluded from arbitration any claim that could be decided by the California Labor Commissioner’s Office.  Acknowledging that the Labor Commissioner’s jurisdiction is limited, the court stated that the types of legal claims Rebolledo asserted against her former employer would nonetheless fall within the Commissioner’s purview (e.g., statutory wage claims.)

Tilly’s unsuccessfully argued that the language used it its arbitration agreement served to exclude wage claims based on the forum selected by the employee, i.e., excluding wage claims actually brought before the Labor Commissioner.  Tilly’s further claimed that because the Commissioner never asserted jurisdiction over Rebolledo’s claims, she was required under the employment agreement to arbitrate.  The appeals court rejected the company’s argument that “within the jurisdiction” meant claims actually filed with the Commissioner, calling it a “strained interpretation” of the contract language.  The court stated, “[w]hen an employee’s claim falls ‘within the jurisdiction’ of the Commissioner, the employee has the option of filing the statutory wage claim before the Commissioner or in superior court.”

The court further stated, “[i]ndeed, to adopt [Tilly’s] interpretation we would have to ignore the portion of the agreement defining the exempted claims as ‘matters governed’ by the Labor Commissioner because this terminology does not suggest a particular forum of litigation, only a type of subject matter.”

The court also noted that Tilly’s “could have narrowly drafted and defined the phrases ‘matters governed’ and ‘matter[s] within the jurisdiction’ to mean ‘claims actually filed with the commissioner,” if it intended to exclude only statutory wage claims brought in one forum over another.

Topics:  Arbitration, Employee Rights, Mandatory Arbitration Clauses, Wage and Hour, Wages

Published In: Alternative Dispute Resolution (ADR) Updates, Civil Procedure Updates, General Business Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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