Transportation Workers Get a Green Light to Ignore Arbitration Agreements for Wage Claims

The California Court of Appeal in Nieto v Fresno Beverage Company took the position that a driver who delivered beverages solely within the state of California was nonetheless a “transportation worker” who was exempt from the Federal Arbitration Act (“FAA”) provisions that encourage a policy favoring arbitration. The court embraced the reasoning that “intrastate delivery of goods are considered to be part of interstate commerce if the deliveries are merely a continuation of an interstate journey…” Indeed in this instance the employer had made the argument that the FAA applied to the arbitration agreement because of the employers activities in interstate commerce.

Given that the court applied an interpretation of a transportation worker to be one that included someone who never crossed state lines — as well as a supervisor who oversees those workers — the employee was exempt from the FAA. Without application of the FAA policies favoring arbitration, the court applied California Labor Code section 229 to the driver’s complaint-as well as to the class of drivers for whom he brought the class action. California Labor Code section 229 provides that wage hour claims may be maintained in court despite an agreement to arbitrate. Accordingly now anyone who might be considered a transportation worker has a bright green light to bring an individual or class action claim for wage violations despite their execution of an arbitration agreement — and class action waiver — that would otherwise be valid and enforceable.

Despite the court’s treatment of arbitration agreements (including those with class action waivers), such agreements can still be important instruments to limit the costs associated with employment litigation.            

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