United States District Court, N.D. California, San Jose Division
ORDER GRANTING DEFENDANTS' MOTION TO COMPEL
ARBITRATION; AND STAYING ACTION [RE: ECF 19]
LAB SON FREEMAN UNITED STATES DISTRICT JUDGE.
Connie Schwendeman asserts a single claim under
California's Private Attorneys General Act
(“PAGA”) against her former employers, Defendants
Health Carousel, LLC and Health Carousel Travel Network, LLC
(collectively, “Health Carousel”). Health
Carousel has filed a motion to compel arbitration and dismiss
considered the parties' briefs and supplemental briefs,
the relevant legal authorities, and the oral argument of
counsel, the Court GRANTS the motion to compel arbitration.
However, the Court STAYS the action pending completion of
arbitration rather than dismissing it as requested by Health
Carousel provides healthcare staffing for temporary
assignments at medical facilities across the United States.
Dalton Decl. ¶ 1-2, ECF 19-1. Schwendeman, a registered
nurse, began working for Health Carousel in 2017, when she
was placed at Lucile Packard Children's Hospital Stanford
in Palo Alto, California. Id. ¶ 3. Schwendeman
was employed by Health Carousel “in Palo Alto,
California from August 2017 to February 2018.” FAC
¶ 4, ECF 17. Prior to starting employment, Schwendeman
was provided with Health Carousel's standard new-hire
paperwork via an online portal. Id. ¶ 4. The
new-hire paperwork included a “Mutual Agreement to
Arbitrate Claims” (“Agreement”), a
five-page stand-alone document that requires binding
arbitration of certain disputes and waives the right to bring
class or collective claims. Id. ¶ 4 & Exh.
1 (Agreement). Execution of the Agreement is optional for
Health Carousel employees pursuant to a section titled
“An Employee's Right to Opt Out Of Arbitration,
” which states “Arbitration is not a mandatory
condition of employment at the Company, and therefore you may
submit a statement notifying the Company that you wish to opt
out and not be subject to this Agreement.” Agreement at
4. The same section of the Agreement states that “[a]n
employee's decision to be bound or not bound by this
Agreement is completely voluntary.” Id.
Schwendeman electronically signed the Agreement on July 6,
2017 and she never opted out of the Agreement. Id.
¶ 4 & Exh 1 (Agreement).
filed the complaint in this action on December 19, 2018,
asserting putative class and collective claims under
California law and the Fair Labor Standards Act. See
Compl., ECF 1. On January 8, 2019, Health Carousel's
counsel advised Schwendeman's counsel that the parties
had signed the Agreement. See Joint Stipulation at
2, ECF 15. The parties thereafter stipulated to dismissal of
all class and collective claims without prejudice, and to
amendment of the complaint to add a PAGA claim. See
Id. Schwendeman filed the operative first amended
complaint (“FAC”) on March 11, 2019, asserting a
single claim under PAGA. See FAC, ECF 17.
alleges that Health Carousel engages in numerous practices
that violate the California Labor Code. For example, she
alleges that Health Carousel provides its traveling employees
with stipends for housing, meals, and incidentals, but does
not include the value of those stipends in the regular rate
of pay when calculating overtime and double time.
See FAC ¶¶ 11-17. She also alleges that
Health Carousel does not include certain non-discretionary
bonus remuneration in the regular rate of pay when
calculating overtime and double time, and that wage
statements inaccurately show overtime and double time as paid
at the base hourly rate. See FAC ¶¶ 19-20.
Schwendeman seeks recovery of civil penalties for these Labor
Code violations on behalf of herself and other aggrieved
employees under PAGA. See FAC ¶ 39.
FAC's prayer indicates that the civil penalties sought
under PAGA include “the underpaid wages recoverable
through Labor Code section 558 and the penalties imposed by
Labor Code section 203 recoverable through Labor Code section
1197.1, as well as the amounts recoverable pursuant to Labor
Code section 2699(f).” FAC at 7 (Prayer). On September
12, 2019, the California Supreme Court held that
“unpaid wages are not recoverable as civil penalties
under the PAGA.” ZB, N.A. v. Superior Court of San
Diego Cty., 8 Cal. 5th 175');">8 Cal. 5th 175, 193 (2019). The parties
thereafter stipulated that “Plaintiff's prayer for
‘unpaid wages recoverable through Labor Code section
558 and the penalties imposed by Labor Code section 203
recoverable through Labor Code section 1197.1' is
stricken from the First Amended Complaint.” Joint
Stipulation and Order at 3, ECF 29. As a result, the
FAC's prayer for civil penalties is limited to those
available under California Labor Code § 2699(f).
Carousel contends that the PAGA claim is subject to binding
arbitration under the Agreement, and it moves to compel
arbitration and dismiss this action. In the course of
briefing and arguing the motion to compel, a dispute arose as
to which aspects of the motion to compel properly are
presented to the Court and which are reserved for the
arbitrator. The Agreement delegates to the arbitrator
“exclusive authority to resolve any dispute relating to
the interpretation, applicability, enforceability or
formation of this Agreement.” Dalton Decl. Exh. 1
(Agreement) at 1. While the parties agree that certain
arguments presented in the briefing fall within this
delegation clause, Schwendeman asserts that Health Carousel
has waived the right to have the arbitrator resolve those
arguments. Health Carousel denies that it has waived its
right to enforce the delegation clause. At the Court's
requested, the parties submitted supplemental briefing on the
Federal Arbitration Act (“FAA”) applies to
arbitration agreements affecting interstate commerce. 9
U.S.C. §§ 1 et seq. When it applies, the
FAA preempts state law rules that conflict with its
provisions, as well as “state-law rules that stand as
an obstacle to the accomplishment of the FAA's
objectives.” AT&T Mobility LLC v.
Concepcion, 563 U.S. 333, 341-43 (2011). Under the FAA,
contractual arbitration agreements “must be enforced
‘save upon such grounds as exist at law or in equity
for the revocation of any contract.'” Newton v.
Am. Debt Servs., Inc., 549 Fed. App'x. 692, 693 (9th
Cir. 2013) (quoting 9 U.S.C. § 2).
in deciding whether to compel arbitration, a court must
determine two ‘gateway' issues: (1) whether there
is an agreement to arbitrate between the parties; and (2)
whether the agreement covers the dispute.” Brennan
v. Opus Bank, 796 F.3d 1125, 1130 (9th Cir. 2015).
“If the response is affirmative on both counts, then
the Act requires the court to enforce the arbitration
agreement in accordance with its terms.” Chiron
Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126,
1130 (9th Cir. 2000).
these gateway issues generally are for the court to decide,
they “can be expressly delegated to the arbitrator
where the parties clearly and unmistakably provide
otherwise.” Brennan, 796 F.3d at 1130. For
example, the Supreme Court has “recognized that parties
can agree to arbitrate ‘gateway' questions of
‘arbitrability,' such as whether the parties have
agreed to arbitrate or whether their agreement covers a
particular controversy.” Rent-A-Ctr., W., Inc. v.
Jackson, 561 U.S. 63, 68-69 (2010). “When the
parties' contract delegates the arbitrability question to
an arbitrator, a court may not override the contract.”
Henry Schein, Inc. v. Archer & White Sales,
Inc., 139 S.Ct. 524, 529 (2019). “In those
circumstances, a court possesses no power to decide the
arbitrability issue.” Id. “That is true
even if the court thinks that the argument that the
arbitration agreement applies to a particular dispute is
wholly groundless.” Id.
“[t]he right to arbitration, like other contractual
rights, can be waived.” Martin v. Yasuda, 829
F.3d 1118, 1124 (9th Cir. 2016). “A determination of
whether the right to compel arbitration has been waived must
be conducted in light of the strong federal policy favoring
enforcement of arbitration agreements.” Id.
(internal quotation marks and citation omitted).
“Because waiver of the right to arbitration is
disfavored, any party arguing waiver of arbitration bears a
heavy burden of proof.” Id. (internal
quotation marks and citation omitted). “As such, a
party seeking to prove waiver of a right to arbitration must
demonstrate: (1) knowledge of an existing right to compel
arbitration; (2) acts inconsistent with that existing right;
and (3) prejudice to the party opposing arbitration resulting
from such inconsistent acts.” Id. (internal
quotation marks, citation, and alteration omitted).
Agreement provides for arbitration of “all claims or
controversies, past, present or future, including without
limitation, claims arising out of or related to my
application for employment, assignment/employment, and/or the
termination of my assignment/employment that the Company may
have against me or that I may have against the Company. . .
.” Agreement at 1. The Agreement specifies that it
encompasses “claims for wages or other compensation due
. . . and claims for violation of any federal, state or other
governmental law, statute, regulation, or ordinance, except
claims excluded in the subsection of this Agreement entitled
‘Claims Not Covered By The Agreement.”
Id. The subsection “Claims Not Covered By The
Agreement” excludes certain types of claims, including
claims for workers' compensation benefits, state
disability insurance benefits, and unemployment compensation,
as well as claims brought in small claims court. Id.
The Agreement also waives the right to assert a class or
collective action. Id. at 2. The Agreement does
not waive the right to assert a representative PAGA
claim. See generally Agreement.
Agreement contains a delegation clause stating in relevant
part that: “The Arbitrator, and not any federal, state,
or local court or agency, shall have exclusive authority to
resolve any dispute relating to the interpretation,
applicability, enforceability or formation of this
Agreement including, but not limited to any claim that
all or any ...