California Appellate Court Affirms Motion to Compel Arbitration

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In a victory for an employer, a California appellate panel affirmed an order to compel arbitration of a wage claim in a dispute against a mortgage company.
 

As part of her onboarding process with AmeriHome Mortgage Company, Sylvia Nixon executed a seven-page Employment and Confidentiality Agreement. The agreement covered a range of matters related to her position with the company and also included an arbitration clause. The clause provided that “any dispute or controversy arising out of or relating to” Nixon’s employment would be settled by arbitration.

In June 2019, Nixon filed a putative class action complaint on behalf of current and former hourly paid or nonexempt employees of AmeriHome, asserting that the company failed to pay minimum wages and owed overtime wages.

She specifically alleged that the first cause of action for unpaid wages was brought pursuant to Section 229 of the Labor Code, which provides that actions for unpaid wages may be brought in court “without regard to any private agreement to arbitrate.”

AmeriHome moved to compel arbitration of Nixon’s individual claims, dismiss the class claims and stay judicial proceedings pending completion of the arbitration.

Nixon objected. She argued that Section 229 was not preempted by the Federal Arbitration Act, in part because the arbitration agreement stated that it would be “construed … interpreted and enforced” in accordance with California law.

She also told the court that motions should be denied in light of a second case filed against AmeriHome, which created the possibility of conflicting rulings on common issues of fact and law.

The trial court sided with AmeriHome. Nixon appealed, and the appellate panel affirmed.

While recognizing that the parties could have provided in the arbitration agreement that a dispute regarding unpaid wages—the subject of Section 229—was not arbitrable, the choice of law provision in the agreement did not evidence such an intent, the court said.

The choice of law provision covered “a wide range of matters including interpretation of the at-will employment and confidentiality provisions in the parties’ agreement,” the court explained, and demonstrated the parties’ intent to arbitrate all employment disputes.

“[N]either the choice of law provision nor the arbitration agreement contains ‘unambiguous language’ making it ‘unmistakably clear’ that the parties intended to incorporate section 229 while agreeing to arbitrate ‘any dispute or controversy arising out of or relating to’ Nixon’s employment at AmeriHome,” the court wrote.

Nor was the court persuaded that the third-party litigation exception should apply, ruling that the trial court did not abuse its discretion by declining to deny or stay arbitration in Nixon’s case.

“The plaintiff in [the other case] seeks civil penalties in a representative action under the Private Attorneys General Act (PAGA) for Labor Code violations, while Nixon will be arbitrating only her individual wage claim,” the court said. “As the California Supreme Court recently explained, ‘[a] PAGA claim is legally and conceptually different from an employee’s own suit for damages and statutory penalties.’”

The panel affirmed the order to compel arbitration and dismiss the class claims.

To read the decision in Nixon v. AmeriHome Mortgage Company, LLC, click here.

Why it matters: The appellate panel read the language of the arbitration agreement as demonstrating an intent by the parties to arbitrate all employment-related disputes, refusing to read in the plaintiff’s desire to exclude Section 229 wage claims.

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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