Epstein Becker Green (“EBG”) achieved a significant victory in the California Court of Appeal for its clients Prime Time Shuttle, Inc., and Rideshare Airport Management, LLC, on a motion to compel arbitration. In this case, Khalatian v. Prime Time Shuttle, Inc. et al., 2015 Cal. App. LEXIS 498 (Cal. App. 2d Dist. May 15, 2015), the plaintiff, an owner-operator driver, alleged that the defendants misclassified him as an independent contractor and, thus, failed to pay him all wages due, among other alleged violations of California’s wage and hour laws and Unfair Competition Law.

When EBG took over the case from predecessor counsel, a motion was made to compel arbitration pursuant to the arbitration provision in the parties’ services contract. The trial court denied Prime Time and Rideshare’s motion. The trial court ruled that the plaintiff’s wage and hour claims were based on statute, the California Labor Code, and therefore were not arbitrable, and that the defendants waived arbitration.

In cases where plaintiffs alleged that they were misclassified as independent contractors and denied unpaid wages and other obligations owed to employees, California courts have held that Labor Code claims are based on statutory rights, not a contract between the parties. Courts have held that Labor Code claims are not subject an arbitration agreement because the claims do not “arise out of or relate to” the parties’ services contract. (See Hoover v. American Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1206-1208, and Elijahjuan v. Superior Court (2012) 210 Cal.App.4th 15, 23-24.)

However, an exception to California’s rule against arbitration of statutory wage claims exists when the arbitration agreement is governed by the Federal Arbitration Act (“FAA”). The FAA preempts any contrary state rule restricting arbitration. EBG appealed the trial court’s ruling and successfully persuaded the Court of Appeal that the FAA applied to the plaintiff’s claims. Unlike the defendants in Hoover and Elijahjuan, Rideshare presented ample evidence that the parties’ contract affected interstate commerce, resulting in the FAA’s preemption of any contrary California rule preventing arbitration, and that the plaintiff’s claims did, in fact, arise out of or relate to in the parties’ services contract. EBG also successfully persuaded the Appellate Court that the defendants did not waive arbitration. On May 1, 2015, the Court of Appeal reversed the trial court’s ruling in full, and on June 9, 2015, the Court of Appeal granted EBG’s request to publish its Opinion.

This victory is important in upholding the defendants’ right to contractual arbitration. In addition, this published Opinion provides favorable precedent for alleged employers defending against wage and hour claims by independent contractors and provides guidance on drafting arbitration agreements with independent contractors.   

Jump to Page

Privacy Preference Center

When you visit any website, it may store or retrieve information on your browser, mostly in the form of cookies. This information might be about you, your preferences or your device and is mostly used to make the site work as you expect it to. The information does not usually directly identify you, but it can give you a more personalized web experience. Because we respect your right to privacy, you can choose not to allow some types of cookies. Click on the different category headings to find out more and change our default settings. However, blocking some types of cookies may impact your experience of the site and the services we are able to offer.

Strictly Necessary Cookies

These cookies are necessary for the website to function and cannot be switched off in our systems. They are usually only set in response to actions made by you which amount to a request for services, such as setting your privacy preferences, logging in or filling in forms. You can set your browser to block or alert you about these cookies, but some parts of the site will not then work. These cookies do not store any personally identifiable information.

Performance Cookies

These cookies allow us to count visits and traffic sources so we can measure and improve the performance of our site. They help us to know which pages are the most and least popular and see how visitors move around the site. All information these cookies collect is aggregated and therefore anonymous. If you do not allow these cookies we will not know when you have visited our site, and will not be able to monitor its performance.