The Federal Arbitration Act preempts state law that would preclude arbitration of claims. California has such a law, which prohibits arbitration of wage claims. See Lab. Code section 229. So, if the FAA applies, it preempts that law. The U.S. Supreme Court has so held.
The FAA contains an exemption, however. Per the court of appeal:
Specifically, section 1 provides (in relevant part) that nothing in the FAA “shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” (9 U.S.C. § 1.) The United States Supreme Court interpreted this language in Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105 [121 S.Ct. 1302, 149 L.Ed.2d 234], reversing the lower court’s ruling that had held the section 1 exemption from the FAA applicable to all contracts of employment. The better reading of the law, the Supreme Court held, is that Section 1 exempts only “contracts of employment of transportation workers”—meaning “workers actually engaged in the movement of goods in interstate commerce.” (Id. at pp. 106, 112, 119.)
In this case, the plaintiffs are truckers, who claimed they were mis-classified as independent contractors. The trial court did not hold a hearing on whether the FAA applied to them. The plaintiffs argued they had "contracts of employment" and were "transportation workers" in interstate commerce.
To have "contracts of employment," possibly falling outside the FAA's coverage, the truckers would have to be "employees," not independent contractors. But the trial court would not consider that argument, and instead focused on whether the agreements were unconscionable.
The court of appeal decided that the trial court should have held a hearing regarding the applicability of the FAA, because if it did not apply, the truckers could not be compelled to arbitrate their wage-hour claims.
Petitioners were (and are) entitled to the court’s determination whether their agreements are contracts of employment for transportation workers engaged in interstate commerce, within the meaning of the FAA’s section 1 exemption as interpreted by the Supreme Court in Circuit City Stores, Inc. v. Adams, supra, 532 U.S. 105. That law, if it applies, would exempt their agreements from the FAA’s requirement that their arbitration agreements must be enforced. There is a strong policy in favor of enforcing agreements to arbitrate, and under the FAA. “‘Questions of arbitrability must be addressed with a healthy regard for the federal policy favoring arbitration.’” (Armijo v. Prudential Ins. Co. of America (10th Cir. 1995) 72 F.3d 793, 797, quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. (1985) 473 U.S. 614, 626 [105 S.Ct. 3346, 87 L.Ed.2d 444]; see also Moses H. Cone Memorial Hospital v. Mercury Construction Corp., supra, 460 U.S. at p. 25 [103 S.Ct. 927, 74 L.Ed.2d 765].) Nevertheless, “there is no policy compelling persons to accept arbitration of controversies . . . which no statute has made arbitrable.” (Freeman v. State Farm Mut. Auto. Ins. Co. (1975) 14 Cal.3d 473, 481.)This case applies only to transportation workers. However, it also reminds us to ensure that one cannot take the applicability of the FAA for granted when filing Petitions to compel arbitration.
This case is Garcia v. Superior Court and the opinion is here.
