Filed 11/2/15
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
PERFORMANCE TEAM FREIGHT B259146
SYSTEMS, INC.,
(Los Angeles County
Plaintiff and Appellant, Super. Ct. No. BS149624)
v.
JORGE GARCIA ALEMAN et al.,
Defendants and Respondents.
APPEAL from an order of the Superior Court of Los Angeles County.
Susan Bryant-Deason, Judge. Reversed and remanded with directions.
Ogletree, Deakins, Nash, Smoak & Stewart, Johnnie A. James, Robert R.
Roginson, Kathleen Choi for Plaintiff and Appellant.
McAvoy & Rivera, D. Briana Rivera, Patricia Shackelford for Defendants and
Respondents Jorge Garcia Aleman, Silvia De Leon, Mauricio Orellana, Eulalio Figueroa,
Jorge Gomez Galvin, Martin Gonzalez, Jose Martin Gonzalez, Jose Luis Gonzalez,
Erasto Granados, Samuel Luna Granados, Jorge Luis Gutierrez Solis, Juan Medel, Victor
Orozco, Carlos Paredes, Armando Diaz, Alejandro Salazar, Ruben Funez Torres, Aldo
Vargas and Miguel A. Bravo Villalobos.
Bird, Marella, Boxer, Wolpert, Nessim, Drooks, Lincenberg & Rhow, Paul S.
Chan, Thomas V. Reichert, Douglas A. Fretty; Willeken Wilson Loh & Delgado, Paul J.
Loh, Aarti K. Wilson for Defendant and Respondent Julie A. Su.
___________________________________________________
The individual respondents are truck drivers who entered into “Independent
Contractor Agreements” with appellant. After the individual respondents filed wage
claims against appellant, appellant petitioned to compel arbitration based on arbitration
provisions in the agreements. The trial court denied the petition, ruling that the
agreements were exempt from the Federal Arbitration Act (9 U.S.C. § 1 et seq.) (FAA)
because the individual respondents were transportation workers and arbitration was not
compelled under California law. The trial court also found that the arbitration provisions
did not apply to the individual respondents’ claims.
We reverse. Respondents presented no evidence supporting their argument that
the agreements were exempt from the FAA, and we find that the arbitration provisions
were broad enough to cover the claims asserted. Moreover, respondents failed to submit
any evidence in support of their additional argument that the agreements were
unconscionable. The trial court, therefore, erred by denying appellant’s petition to
compel arbitration.
BACKGROUND
Appellant Performance Team Freight Systems, Inc. (Performance Team) is a
motor carrier company involved in warehousing, shipping, and distributing merchandise
from the Ports of Long Beach and Los Angeles to locations throughout California and the
United States. The individual respondents1 are truck drivers who provided trucking
services to Performance Team.
At various points in 2012 through 2014, the individual respondents filed wage
claims for unreimbursed business expenses and improper deductions with the Division of
Labor Standards Enforcement (DLSE). Respondent Julie Su is the California Labor
Commissioner, head of the DLSE, which investigates wage claims filed by California
1 The individual respondents are Jorge Garcia Aleman, Silvia De Leon, Mauricio
Orellana, Eulalio Figueroa, Jorge Gomez Galvin, Martin Gonzalez, Jose Martin
Gonzalez, Jose Luis Gonzalez, Erasto Granados, Samuel Luna Granados, Jorge Luis
Gutierrez Solis, Juan Medel, Victor Orozco, Carlos Paredes, Armando Diaz, Alejandro
Salazar, Ruben Funez Torres, Aldo Vargas, and Miguel A. Bravo Villalobos.
2
workers. (Lab. Code, § 98, subd. (a).) Following the filing of a wage claim, the
commissioner may either accept the matter and conduct an administrative hearing
(commonly known as a “Berman hearing”), prosecute a civil action for collection of
wages and other money due to employees, or take no further action. (Post v. Palo/Haklar
& Associates (2000) 23 Cal.4th 942, 946.) In matters where a Berman hearing is held,
the commissioner determines whether the claimant was an employee, and issues an order,
decision, or award stating, among other things, whether any sums are owing to the
claimant. (Id. at p. 947; Lab. Code, § 98.1.) “The Berman hearing procedure is designed
to provide a speedy, informal, and affordable method of resolving wage claims.” (Post,
at p. 947.)
In this matter, the commissioner set hearings for the individual respondents’ wage
claims. In July 2014, however, prior to commencement of the Berman hearings,
Performance Team filed in the superior court a petition to compel arbitration and motion
to stay the Berman hearings. Performance Team asserted that each of the individual
respondents entered into “Independent Contractor Agreements” that set forth the terms of
trucking services to be provided to Performance Team. The agreements contained an
arbitration provision stating: “Any dispute between the parties with respect to the
interpretation or the performance of the terms of this Agreement may be submitted to
arbitration by reason of either party giving written notice of its desire for arbitration to
the other party.”
Performance Team argued that the subject agreements were governed by the FAA,
and that the individual respondents’ claims fell within the scope of the arbitration
provision and were subject to arbitration. In moving for arbitration, Performance Team
submitted copies of each of the agreements signed by the individual respondents.
Performance Team also submitted the declaration of its driver manager. The declaration
discussed the work performed by the individual respondents and circumstances
surrounding the execution of the subject agreements.
The commissioner filed opposition papers to Performance Team’s petition. The
commissioner argued that the claims asserted by the individual respondents were not
3
covered by the arbitration provision, that the individual respondents were exempt from
the FAA because they were transportation workers, and that, in any event, the agreements
were unconscionable.
The individual respondents filed a response to Performance Team’s petition,
generally denying all contested allegations, but the individual respondents did not file a
formal opposition. Nor did they submit declarations or present evidence in opposition to
the petition.
The trial court denied Performance Team’s petition to compel arbitration and its
request to stay the Berman hearings. The court found that the individual respondents
were exempt from the FAA and that, in any case, the wage claims were not covered by
the arbitration provision.
Performance Team timely appealed.
DISCUSSION
An order denying a petition to compel arbitration is appealable. (Code Civ. Proc.,
§ 1294, subd. (a).) When a trial court’s order is based on a question of law, we review
the denial de novo. (Avery v. Integrated Healthcare Holdings, Inc. (2013) 218
Cal.App.4th 50, 60.) Decisions on issues of fact are reviewed for substantial evidence.
(Ibid.)
In moving for arbitration, the petitioner bears the burden of showing, by a
preponderance of the evidence, the existence of a valid arbitration agreement, while the
party opposing the petition bears the burden of proving any defense. (Pinnacle Museum
Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236
(Pinnacle); Garcia v. Superior Court (2015) 236 Cal.App.4th 1138, 1145 (Garcia).)
I. FAA section 1
The question of whether the individual respondents’ claims are arbitrable turns
largely on the application of the FAA. If this matter were governed only by California
law, and not the FAA, then determining arbitrability would be straightforward. Although
California has a “‘strong public policy in favor of arbitration as a speedy and relatively
inexpensive means of dispute resolution’” (Moncharsh v. Heily & Blase (1992) 3 Cal.4th
4
1, 9) and any doubts of arbitrability are resolved in favor of arbitration (Wagner
Construction Co. v. Pacific Mechanical Corp. (2007) 41 Cal.4th 19, 26), Labor Code
section 229 provides an exception under California law to this general rule favoring
arbitrability. The statute states that actions to collect “due and unpaid wages claimed by
an individual may be maintained without regard to the existence of any private agreement
to arbitrate.” (Lab. Code, § 229.) Both sides here acknowledge that the individual
respondents seek to recover due and unpaid wages within the meaning of Labor Code
section 229.
Performance Team asserts, however, that Labor Code section 229 is inapplicable
because the subject agreements are governed by the FAA. Section 2 of the FAA provides
that “[a] written provision in any maritime transaction or a contract evidencing a
transaction involving commerce to settle by arbitration a controversy thereafter arising
out of such contract . . . shall be valid, irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any contract.” Accordingly, in
most cases, the FAA mandates arbitration when contracts involving interstate commerce
contain arbitration provisions. (Southland Corp. v. Keating (1984) 465 U.S. 1, 10–11;
Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334, 1351.) In matters in
which the FAA applies, it preempts Labor Code section 229, requiring arbitration of
claims that otherwise could be resolved in court. (Perry v. Thomas (1987) 482 U.S. 483,
490-492.)
The commissioner acknowledges that the subject agreements involve interstate
commerce, but argues that they fall within a narrow exception, found in section 1 of the
FAA (section 1). Section 1 exempts from coverage of the FAA “contracts of employment
of seamen, railroad employees, or any other class of workers engaged in foreign or
interstate commerce.” (9 U.S.C. § 1, italics added; see also Circuit City Stores, Inc. v.
Adams (2001) 532 U.S. 105, 109 (Circuit City).) This “‘any other class of workers
engaged in foreign or interstate commerce’” has been defined to mean “transportation
workers.” (Circuit City, at p. 121.)
5
Truck drivers who cross interstate lines usually are considered transportation
workers. “The most obvious case where a plaintiff falls under the FAA exemption is
where the plaintiff directly transports goods in interstate, such as [an] interstate truck
driver whose primary function is to deliver mailing packages from one state into
another.” (Veliz v. Cintas Corp. (N.D.Cal. 2004) 2004 U.S. Dist. LEXIS 32208 at p. *18
(Veliz).) “[T]he FAA is inapplicable to drivers . . . who are engaged in interstate
commerce.” (Harden v. Roadway Package Systems, Inc. (9th Cir. 2001) 249 F.3d 1137,
1140 (Harden).)
It is not clear, however, that the individual respondents were transportation
workers under section 1. There is no evidence in the record that the individual
respondents ever provided interstate trucking services to Performance Team; rather, the
parties agree that the individual respondents’ routes were relatively short and to
destinations within California. The commissioner argues that, by transporting
international cargo from the Ports of Long Beach and Los Angeles to destinations within
California, the individual respondents were transportation workers involved in interstate
or foreign commerce. Performance Team counters that, because the individuals
respondents worked exclusively within California, they were not engaged in foreign or
interstate commerce.
We need not determine whether the individual respondents were transportation
workers under section 1, though, because we find there is insufficient evidence to
establish the other component of section 1—that the subject agreements were “contracts
of employment.”
“The FAA embodies a clear federal policy in favor of arbitration” (Simula, Inc. v.
Autoliv, Inc. (9th Cir. 1999) 175 F.3d 716, 719), and “any doubts concerning the scope of
arbitrable issues should be resolved in favor of arbitration” (Moses H. Cone Hospital v.
Mercury Constr. Corp. (1983) 460 U.S. 1, 24-25). Accordingly, the section 1 exemption
is given a “narrow construction.” (Circuit City, supra, 532 U.S. 105, 118.) The party
opposing arbitration bears the burden of demonstrating that the exemption applies.
(Cilluffo v. Cent. Refrigerated Servs. (C.D.Cal. 2012) 2012 U.S. Dist. LEXIS 188650 at
6
p. *11, citing Rogers v. Royal Caribbean Cruise Line (9th Cir. 2008) 547 F.3d 1148,
1151; Owner-Operator Independent Drivers v. Swift (D.Ariz. (2003) 288 F. Supp.2d
1033, 1035 (Swift); Veliz, supra, 2004 U.S. Dist. LEXIS 32208 at pp. **25-26.)
The only evidence relevant to the issue of whether the individual respondents
entered into contracts of employment was presented by Performance Team, which
submitted the subject agreements and the declaration of its driver manager.2 Each
agreement was labeled “Independent Contractor Agreement” and specifically described
each individual respondent as an “independent contractor.” Each agreement further
stated: “For all purposes, [individual respondent] shall be an independent contractor and
not an employee of [Performance Team].”
A number of cases have examined the effect of similar agreements characterizing
truck drivers as independent contractors. The majority of these cases have held that the
agreements should not be deemed “contracts of employment” unless the party opposing
arbitration demonstrates that they are such. (Swift, supra, 288 F.Supp.2d 1033, 1035-
1036; Villalpando v. Transguard Ins. Co. of Am. (N.D.Cal. 2014) 17 F.Supp.3d 969, 982
(Villalpando); Alvarado v. Pacific Motor Trucking Company (C.D.Cal. 2014) 2014 U.S.
Dist. LEXIS 109740 at pp. **10-12 (Alvarado); Owner-Operator Independent Drivers v.
United Van Lines, LLC (E.D.Mo. 2006) 2006 U.S. Dist. LEXIS 97022 at pp. **7-10;
Port Drivers Federation 18, Inc. v. All Saints Express, Inc. (D.N.J. 2011) 757 F.Supp.2d
463, 471-472; Carney v. JNJ Express, Inc. (W.D.Tenn. 2014) 10 F.Supp.3d 848, 852-
854.) This line of cases has held that “‘unless the non-moving party proves to the Court
that the FAA does not apply, the court should apply the characterization of the
relationship described in the agreement and find that [the non-moving party]
characterized as an independent contractor does not have a contract of employment with
2 The trial court did not consider the manager’s declaration because it did not state
when it was signed, in violation of Code of Civil Procedure section 2015.5. We likewise
do not consider the declaration. We do consider the subject agreements, however, as
neither side contends they were not properly before the trial court.
7
the carrier.’” (Alvarado, supra, 2014 U.S. Dist. LEXIS 109740 at p. *11.) This standard
“‘effectuates the FAA’s goals’” because it “‘not only furthers the complementary policies
favoring arbitration and narrowly construing the FAA’s exceptions, but also provides a
sound methodology, having the non-moving party prove the FAA does not apply, for
determining whether an agreement qualifies as a contract of employment.’” (Id. at p.
*12.)
We see no reason to depart from the majority view, particularly given the factual
posture presented on appeal.3 The question of whether a worker is an independent
contractor or an employee “is one of fact if dependent upon the resolution of disputed
evidence or inferences.” (S. G. Borello & Sons, Inc. v. Department of Industrial
Relations (1989) 48 Cal.3d 341, 349.) In Garcia, the trial court considered documentary
and testimonial evidence, conducting two days of hearings4 before granting an order
compelling arbitration. (236 Cal.App.4th 1138, 1143.) The trial court declined,
however, to rule on the issue of whether claimant truck drivers (who signed documents
labeled “Independent Contractor” agreements) had entered into “contracts of
employment” under section 1. (Garcia, at p. 1147.) The Court of Appeal found that
3 The commissioner relies on a case with a contrary holding: Owner-Operator
Independent Drivers v. C.R. England (D.Utah 2004) 325 F.Supp.2d 1252 (C.R. England),
which found that “Independent Contractor Operating Agreements” entered into by
plaintiff truck drivers were “contracts of employment.” (Id. at pp.1257-1258.) We agree
with C.R. England’s statement that “[f]or the purposes of [section 1], it is not dispositive
that Plaintiffs are categorized in the Operating Agreements as employees or independent
contractors.” (Id. at p. 1258.) The opinion has no further application to this matter,
though, because (unlike in C.R. England) the terms of the subject agreements here do not
establish that the agreements created employer-employee relationships.
4 “Code of Civil Procedure sections 1281.2 and 1290.2 provide for summary
proceedings in the trial court to resolve petitions to compel arbitration, in which the trial
court sits as a trier of fact, weighing documentary evidence and any oral testimony that
the court may hear in its discretion.” (Garcia, supra, 236 Cal.App.4th at p. 1145, citing
Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972, Rosenthal v.
Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.)
8
“[t]he evidence before the trial court was sufficient as a threshold matter to require the
court’s consideration of the issue,” and remanded the matter to the trial court to make a
factual determination whether the parties’ agreements constituted contracts of
employment of transportation workers. (Id. at pp. 1148-1150.)5
Here, only minimal evidence was presented to the trial court relevant to the issue
of whether the subject agreements were contracts of employment. The subject
agreements did not definitively establish that the individual respondents actually were
independent contractors—that determination would require an analysis of evidence
relating to issues including, among other things, the degree of control Performance Team
exercised over the manner and means of the individual respondents’ work, the right to
discharge at will without cause, the type of work performed by the individual
respondents, and whether the parties believed they created an employer-employee
relationship. (See Arzate v. Bridge Terminal Transport, Inc. (2011) 192 Cal.App.4th
419, 426.) Nevertheless, the only relevant, admitted evidence on the petition to compel
arbitration—the agreements themselves—characterized the individual respondents as
independent contractors and thus weighed in favor of a determination that the agreements
were not contracts of employment. (See, e.g., Swift, supra, 288 F.Supp.2d 1033, 1035-
1036; Villalpando, supra, 17 F.Supp.3d 969, 982; Alvarado, supra, 2014 U.S. Dist.
LEXIS 109740 at pp. **10-12.)
Of course, the mere label “independent contractor” in an agreement does not by
itself create an independent contractor relationship. The subject agreements also
contained terms consistent with an independent contractor relationship. For example,
5 It appears that the trial court here also did not consider the issue of whether the
agreements were “contracts of employment.” Although both sides presented argument
relevant to the issue, the trial court made no mention of the issue at oral argument, and
the court’s order finding the individual respondents exempt under section 1 only cited to
Harden, supra, 249 F.3d 1137, and Circuit City, supra, 532 U.S. 105, neither of which
analyzed whether a putative independent contractor agreement was a contract of
employment.
9
individual respondents (who were designated “Trucking Service” in the agreements)
could refuse requests and assignments made by Performance Team, could select and hire
drivers, and could choose days and hours of operations as well as routes. On the other
hand, certain terms in the agreements were possible indications of an employment
relationship. The individual respondents were given the option of using their own
trucking equipment or leasing it from Performance Team, but it appears that most if not
all respondents opted to lease, and the lease terms contained provisions limiting
respondents’ ability to use the equipment for non-Performance Team related services.
On balance, however, the subject agreements more closely resemble independent
contractor agreements than contracts of employment. The individual respondents
potentially could have rebutted the presumption that the agreements were not contracts of
employment by presenting evidence of an employment relationship (assuming such
evidence existed), but they did not attempt to do so.
In sum, although an agreement of the sort here does not definitively establish an
independent contractor relationship, it does weigh in favor of a conclusion that the
agreement is not a contract of employment under section 1. Absent any countervailing
evidence, we find that respondents failed to meet their burden in demonstrating that the
section 1 exemption should apply. Therefore, the trial court erred by finding that the
subject agreements were not governed by the FAA.
II. Scope of the arbitration provision
Performance Team argues that the trial court further erred by finding that the
individual respondents’ claims were not covered by the arbitration provision. Only
disputes that fall within the scope of an arbitration provision are arbitrable. (Elijahjuan v.
Superior Court (2012) 210 Cal.App.4th 15, 20 (Elijahjuan); Engineers & Architects
Assn. v. Community Development Dept. (1994) 30 Cal.App.4th 644, 653.) “‘[A]rbitration
is a matter of contract and a party cannot be required to submit to arbitration any dispute
which he has not agreed so to submit.’” (AT&T Technologies v. Communications
Workers (1986) 475 U.S. 643, 648 (AT&T Tech).)
10
The arbitration provision in the subject agreements states: “Any dispute between
the parties with respect to the interpretation or the performance of the terms of this
Agreement may be submitted to arbitration by reason of either party giving written notice
of its desire for arbitration to the other party. Said notice shall provide for each party to
appoint an arbitrator, and a third (but no more than three [3]) arbitrator shall be selected
by the two arbitrators and the majority decision of the arbitrators shall be final and
binding on all parties. Any arbitration shall be conducted in Los Angeles, California, in
accordance with the provisions of Title IX of the California Code of Civil Procedure,
Section 1280 et seq. The costs of any such arbitration shall be shared equally by the
parties.” (Italics added.)
The commissioner argues that the individual respondents’ claims against
Performance Team—wage claims requiring a determination of whether Performance
Team correctly classified respondents as independent contractors rather than employees
under California law—are not disputes “with respect to the interpretation or the
performance of the terms of” the agreements. The commissioner characterizes the scope
of the arbitration provision as “narrow” and contends there is no controversy as to the
terms of the agreements themselves.
In Elijahjuan, a case relied on by the commissioner, which involved claims of
alleged misclassification of employees as independent contractors, the arbitration
provision applied to disputes regarding the “‘application or interpretation’ of the parties’
contracts.” (210 Cal.App.4th 15, 17.) Division Eight of this district found, in the
majority opinion, that the lawsuit did “not concern the application or interpretation of the
Agreements, but instead seeks to enforce rights arising under the Labor Code benefitting
employees but not independent contractors.” (Id. at p. 21.) The court determined that the
ultimate conclusion of whether workers were employees or independent contractors “is
extracontractual and involves neither the application nor the interpretation of the
Agreements. It involves consideration of petitioners’ actual work.” (Id. at p. 22.)
In so deciding, the Elijahjuan court cited to Narayan v. EGL, Inc. (9th Cir. 2010)
616 F.3d 895, 899, a case involving misclassification claims but not an arbitration
11
agreement. In finding that a choice-of-law provision regarding how the agreement would
be “‘interpreted and enforced’” did not apply to the plaintiffs’ claims, the Narayan court
wrote: “While the contracts will likely be used as evidence to prove or disprove the
statutory claims, the claims do not arise out of the contract, involve the interpretation of
any contract terms, or otherwise require there to be a contract.” (Narayan, at p. 899.)
The court noted, however, that the scope of the choice-of-law provision was “narrow.”
(Id. at p. 898.) Similarly, in Elijahjuan, the arbitration provision was “much more narrow
and obviously differs from one encompassing ‘“any and all employment-related
disputes.”’” (210 Cal.App.4th at p. 24.)
In contrast, the language used in the arbitration provision here is not considered
narrow. In AT&T Tech, the United States Supreme Court examined a provision nearly
identical to the one in the subject agreements, that required arbitration of “‘differences
arising with respect to the interpretation of this contract or the performance of any
obligation thereunder.’” (475 U.S. 643, 644-645.) The high court deemed the arbitration
provision “broad.” (Id. at p. 650.)
Division Eight of this district recently considered whether a broad arbitration
provision covered misclassification claims in Khalatian v. Prime Time Shuttle, Inc.
(2015) 237 Cal.App.4th 651. As in this case, the agreement at issue in Khalatian
characterized the plaintiff as an independent contractor rather than an employee. The
plaintiff alleged various Labor Code violations, asserting that an employer/employee
relationship existed. (Id. at p. 655.) In finding arbitration required, the majority held:
“Broad arbitration clauses such as this one are consistently interpreted as applying to
extracontractual disputes between the contracting parties. . . . [¶] . . . Given the
preference for arbitration, and the broad language of the Agreement, plaintiff’s claims
that the Labor Code governs his compensation . . . fall within the ambit of the arbitration
clause.” (Id. at p. 660.)
The individual respondents’ claims likewise fall within the broad scope of the
arbitration provision here, as the parties have disputes “with respect to the interpretation
or the performance of the terms” of the agreements. The individual respondents contend
12
that they performed the trucking services required by the agreements, but that the
performance required by Performance Team (in the form of compensation) was
inadequate. Furthermore, an analysis of the individual respondents’ status as employees
or independent contractors will require an interpretation of the agreements’ terms (among
other evidence) to decide if the terms accurately reflect the parties’ working relationship.
Thus, the parties’ dispute encompasses both the interpretation and performance of the
subject agreements’ terms.6
Therefore, the trial court erred by finding that the individual respondents’ claims
were outside the scope of the arbitration provision.
III. Asserted unconscionability
Finally, the commissioner contends that, even if arbitration would otherwise be
compelled, the subject agreements are unenforceable because they are unconscionable.
The party asserting the defense of unconscionability bears the burden of proof on the
issue. (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 910 (Sanchez).)
“‘One common formulation of unconscionability is that it refers to “‘an absence of
meaningful choice on the part of one of the parties together with contract terms which are
unreasonably favorable to the other party.’” [Citation.] As that formulation implicitly
recognizes, the doctrine of unconscionability has both a procedural and a substantive
element, the former focusing on oppression or surprise due to unequal bargaining power,
6 The commissioner further contends that the phrase “may be submitted to
arbitration by reason of either party giving written notice of its desire for arbitration”
makes enforcement of the arbitration provision optional and not mandatory. We
disagree. The provision gives any party the option to submit a matter to arbitration by
giving notice, but once that option is exercised, arbitration is mandatory and binding;
hence, the provision’s term that “the majority decision of the arbitrators shall be final and
binding on all parties.” The two cases cited by the commissioner in support of its
argument are not apposite. In Briggs & Stratton Corp. v. Local 232, Intern. Union (7th
Cir. 1994) 36 F.3d 712, 715, each side elected not to arbitrate. The arbitration provision
at issue in Gangemi v. General Electric Co. (2d Cir. 1976) 532 F.2d 861 was not similar
to the one here, as it involved a number of significant preconditions to arbitration, and
resolution did not turn on the phrase “may be submitted.”
13
the latter on overly harsh or one-sided results. “The procedural element of an
unconscionable contract generally takes the form of a contract of adhesion, ‘“which,
imposed and drafted by the party of superior bargaining strength, relegates to the
subscribing party only the opportunity to adhere to the contract or reject it.”’”’” (Sonic-
Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1133 (Sonic II).)
“‘“The prevailing view is that [procedural and substantive unconscionability] must
both be present in order for a court to exercise its discretion to refuse to enforce a
contract or clause under the doctrine of unconscionability.” [Citation.] But they need not
be present in the same degree. “Essentially a sliding scale is invoked which disregards
the regularity of the procedural process of the contract formation, that creates the terms,
in proportion to the greater harshness or unreasonableness of the substantive terms
themselves.” [Citations.] In other words, the more substantively oppressive the contract
term, the less evidence of procedural unconscionability is required to come to the
conclusion that the term is unenforceable, and vice versa.’” (Sanchez, supra, 61 Cal.4th
899, 910.)
The subject agreements contain terms that would support a finding of substantive
unconscionability. The arbitration provision requires that costs of arbitration be shared
equally by the parties. A provision can be substantively unconscionable if it imposes
arbitration costs on an employee or similarly situated claimant that he or she would not
bear when bringing the action in court. (Armendariz v. Foundation Health Psychcare
Services, Inc. (2000) 24 Cal.4th 83, 110; Carlson v. Home Team Pest Defense, Inc.
(2015) 239 Cal.App.4th 619, 636 (Carlson).) Furthermore, the arbitration provision does
not provide for a proceeding similar to a Berman hearing within the context of
arbitration. Waiver of the sort of protections afforded by a Berman hearing can support a
finding of substantive unconscionability when the agreement “does not provide an
employee with an accessible and affordable arbitral forum for resolving wage disputes.”
(Sonic II, supra, 57 Cal.4th 1109, 1146.)
Substantive unconscionability alone does not render a contract unenforceable,
however. Procedural unconscionability must also be shown. (Pinnacle, supra, 55
14
Cal.4th 223, 247.) Procedural unconscionability exists in a contract of adhesion, one
presented by the stronger party to the weaker party on a take-it-or-leave-it basis. (Little v.
Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071; Serafin v. Balco Properties Ltd., LLC
(2015) 235 Cal.App.4th 165, 179.) In determining whether an agreement is procedurally
unconscionable, “courts focus on ‘two factors: oppression and surprise.’” (Carlson,
supra, 239 Cal.App.4th 619, 631.) “‘“Oppression occurs where a contract involves lack
of negotiation and meaningful choice, surprise where the allegedly unconscionable
provision is hidden within a prolix printed form.”’” (Pinnacle, at p. 247.)
The commissioner argues that the subject agreements were adhesive and were not
negotiated by the parties. If true, the individual respondents’ inability to negotiate the
agreements, and any lack of meaningful choice as to the terms of the agreements or the
opportunity to opt out of the agreements, could have been established by declaration or
other evidence. But respondents did not submit any evidence pertaining to the
circumstances surrounding formation or execution of the agreements, and the terms of the
agreements alone do not demonstrate that the agreements were adhesive. Based on the
limited admissible record presented to the trial court, it is entirely possible that the
agreements were the result of thorough, arm’s length negotiations.
Other asserted signs of procedurally unconscionability are likewise unsupported.
The commissioner argues that “[n]one of the agreements appear to have been
accompanied by Spanish-language translations, despite the language preference of the
drivers.” In support of this argument, the commissioner cites to the fact that the
individual respondents requested Spanish translators for the Berman hearings. No
evidence was presented, however, that the individual respondents did not understand the
subject agreements, that they requested Spanish translations of the agreements, that they
would have benefited from Spanish translations, or that translations were never provided.
The commissioner also contends that the Code of Civil Procedure was not attached to or
explained in the agreements, even though it was referenced in the arbitration provision as
establishing rules for arbitration. But there is no evidence regarding the extent of
15
materials respondents received from Performance Team, and, again, given the evidence
(or lack thereof), it is possible that copies of relevant code provisions were supplied.
Absent any evidence, we cannot just assume there was procedural
unconscionability. The commissioner cites to three cases that she contends support her
position: Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74,
Samaniego v. Empire Today, LLC (2012) 205 Cal.App.4th 1138, and Ajamian v.
CantorCO2e, L.P. (2012) 203 Cal.App.4th 771. In each of these cases, the party
opposing arbitration submitted evidence tending to show procedural unconscionability.
(See Carmona, at pp. 80-81 [evidence presented that plaintiffs could not read English,
were not given opportunity to negotiate, and understood that they could not work at car
wash without signing the documents given to them]; Samaniego, at pp. 1145-1146
[evidence that plaintiffs could not read English, plaintiffs requested but were not given
Spanish translations of documents, and plaintiffs were required to sign documents in
order to work]; Ajamian, at p. 796 [plaintiff submitted declaration that she wanted to
make changes to employment agreement, but was told she had to sign agreement to
receive bonus and salary increase].) No evidence demonstrating procedural
unconscionability was presented here.
With no showing of procedural unconscionability, the subject agreements cannot
be deemed unenforceable due to unconscionability.
DISPOSITION
The trial court’s order denying appellant’s petition to compel arbitration is
reversed. The case is remanded to the trial court with directions to enter a new order
granting the petition to compel arbitration. Appellant is awarded costs on appeal.
CERTIFIED FOR PUBLICATION.
BOREN, P. J.
We concur:
ASHMANN-GERST, J. CHAVEZ, J.
16