CA Court of Appeal Upholds Arbitration Agreement Under FAA Preemption

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Evenskaas v. California Transit Inc. reversed a Los Angeles Superior Court judge’s denial of an employer’s motion to compel arbitration of a former employee’s wage and hour class action. The trial court had concluded that the arbitration agreement included an illegal class waiver rendering the agreement unenforceable under Gentry v. Superior Court, 42. Cal.4th 433 (2007). However, the Court of Appeal on July 15, 2022, concluded that the Federal Arbitration Act applied and preempted California caselaw.

In a failing effort to assert that interstate commerce had not occurred, the plaintiff focused on the employer’s services occurring within Los Angeles County. However, the Court concluded that the paratransit services that the employer-provided involved interstate commerce as transportation is an “inherently commercial activity” that makes use of highways and vehicles, the services facilitated economic activity by the passengers and because the employer was providing services that were mandated by federal law, the Americans with Disabilities Act. 

Employers are cautioned to examine their arbitration agreements and any class waivers and to undertake efforts to ensure that Courts will recognize the extent to which those employers' services are involved in interstate commerce to leverage FAA preemption over California caselaw that may otherwise limit the enforceability of an arbitration agreement.  

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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