In re Uber Techs. Wage & Hour Cases

95 Cal.App.5th 1297

313 Cal.Rptr.3d 867

IN RE UBER TECHNOLOGIES WAGE AND HOUR CASES.

A166355

Court of Appeal, First District, Division 4, California.

Filed September 28, 2023

Keker, Van Nest & Peters, Rachael E. Meny, R. James Slaughter, San Francisco; Munger, Tolles & Olson, Rohit K. Singla, San Francisco, Jeffrey Y. Wu, Jennifer L. Bryant, and Benjamin G. Barokh, Los Angeles, for Defendant and Appellant Lyft, Inc.

Gibson, Dunn & Crutcher, Theane Evangelis, Los Angeles, Blaine H. Evanson, Irvine, Heather L. Richardson, Los Angeles, and Alexander N. Harris for Defendants and Appellants Uber Technologies, Inc., Raiser-CA, LLC, Uber-USA, LLC, and Portier, LLC.

David M. Balter, San Francisco, Miles E. Locker, Alec L. Segarich, San Francisco, and M. Colleen Ryan for Plaintiff and Respondent Lilia García-Brower.

Rob Bonta, Attorney General, Satoshi Yanai, Assistant Attorney General, Joanna Hull, Lillian Tabe, Kwi Choi, Katherine Read and Mana Barari, Deputy Attorneys General; Hydee Feldstein Soto, City Attorney (Los Angeles), Michael Bostrom, Assistant City Attorney, Joshua Crowell, Deputy City Attorney; Mara W. Elliott, City Attorney (San Diego), Mark Ankcorn, Chief Deputy City Attorney, Kevin King and Julie Rau, Deputy City Attorneys; David Chiu, City Attorney (San Francisco), Yvonne R. Meré, Chief Deputy City Attorney, Sara J. Eisenberg, Chief of Complex and Affirmative Litigation, Matthew D. Goldberg, Chief Worker Protection Attorney, and Molly J. Alarcon, Deputy City Attorney, for Plaintiff and Respondent the People.

STREETER, J.

In these coordinated proceedings, defendants Uber and Lyft¹ appeal after the trial court denied their motions to compel arbitration of claims brought against them in civil enforcement actions by the People of the State of California (the People)² and by the Labor Commissioner through the Division of Labor Standards Enforcement (DLSE).³ We conclude the court correctly denied the motions because the People and the Labor Commissioner are not parties to the arbitration agreements invoked by Uber and Lyft. We therefore affirm.

I. BACKGROUND

A. The People's and the Labor Commissioner's Actions Against Uber and Lyft

In May 2020, the People filed this action. In their operative complaint, the People allege Uber and Lyft violated the Unfair Competition Law ( Bus. & Prof. Code, § 17200 et seq. ) (UCL) by misclassifying their California ride-share and delivery drivers as independent contractors rather than employees, thus depriving them of wages and benefits associated with employee status.⁴ The People allege the misclassification harms workers, competitors, and the public. The People seek injunctive relief, civil penalties, and restitution under the UCL. ( Bus. & Prof. Code, §§ 17203, 17204, 17206.) The People also seek injunctive relief under the statutory scheme established by Assembly Bill No. 5 (2019–2020 Reg. Sess.) (Assembly Bill 5), specifically Labor Code section 2786,⁵ which authorizes such relief to prevent misclassification of employees as independent contractors.

The People sought, and the trial court entered, a preliminary injunction prohibiting Uber and Lyft from misclassifying their drivers as independent contractors in violation of Assembly Bill 5. ( People v. Uber Technologies, Inc., supra, 56 Cal.App.5th at pp. 281–282, 270 Cal.Rptr.3d 290.) We affirmed in an October 2020 opinion. ( Id. at p. 316, 270 Cal.Rptr.3d 290.) Following the passage of Proposition 22, which altered the standards for determining whether app-based drivers are independent contractors ( Bus. & Prof. Code, § 7451 ), the People and Uber and Lyft stipulated to dissolve the preliminary injunction, which had been stayed since it was entered. The People's operative first amended and supplemental complaint clarifies that the People seek injunctive relief to the extent Proposition 22 is unconstitutional or otherwise invalid.⁶

In August 2020, the Labor Commissioner filed separate actions against Uber and Lyft, pursuant to her enforcement authority under the Labor Code. (E.g., Lab. Code, §§ 61, 90.5, 95, 98.3, subd. (b).) The Labor Commissioner alleges Uber and Lyft have misclassified drivers as independent contractors and have thus violated certain Labor Code provisions and wage orders. The Labor Commissioner seeks injunctive relief, civil penalties payable to the state, and unpaid wages and other amounts alleged to be due to Uber's and Lyft's drivers, such as unreimbursed business expenses.⁷

The People's action and the Labor Commissioner's actions were coordinated (along with other cases not involved in this appeal)⁸ as part of Uber Technologies Wage and Hour Cases .

B. Uber's and Lyft's Motions To Compel Arbitration Based on Their Arbitration Agreements With Drivers

As we noted in People v. Uber Technologies, Inc. , supra , 56 Cal.App.5th at p. 312, fn. 24, 270 Cal.Rptr.3d 290, foreshadowing this appeal, Uber and Lyft filed motions to compel arbitration in the People's action; they also filed similar motions in the Labor Commissioner's actions. Uber and Lyft sought to require arbitration of those actions to the extent they seek remedies that Uber and Lyft characterize as "driver-specific" or " ‘individualized’ " relief, such as restitution under the UCL and unpaid wages under the Labor Code.

Uber's and Lyft's motions did not seek to compel arbitration of the People's and the Labor Commissioner's requests for civil penalties and injunctive relief, but they nonetheless asked the court to stay those portions of the actions pending completion of any driver arbitrations. Finally, as an alternative to their requests to compel arbitration, Uber and Lyft asked the court to strike the People's and the Labor Commissioner's requests for restitution and certain other relief.

In their motions, Uber and Lyft relied on arbitration agreements they entered into with drivers. The agreements require drivers to arbitrate on an individual basis most disputes arising from their relationship with Uber or Lyft. The People and the Labor Commissioner are not parties to the agreements.

Following coordination, the parties filed additional briefing pertaining to the motions, and the trial court heard argument on August 26, 2022. On September 1, 2022, the court entered an order denying Uber's and Lyft's motions.

Uber and Lyft appealed.

II. DISCUSSION

Uber and Lyft contend the arbitration agreements they entered into with their drivers require that portions of the civil enforcement actions brought by the People and the Labor Commissioner be compelled to arbitration. If this court orders arbitration, they argue, the remaining portions of the People's and the Labor Commissioner's actions should be stayed. We conclude, as the trial court did, that there is no basis to compel arbitration.

A. Standard of Review

"Whether an arbitration agreement binds a third party is a legal question we review de novo." ( Department of Fair Employment and Housing v. Cisco Systems, Inc. (2022) 82 Cal.App.5th 93, 99, 297 Cal.Rptr.3d 827 ( Cisco ).)

B. The People and the Labor Commissioner Are Not Bound by Uber's and Lyft's Arbitration Agreements with Their Drivers

Both the federal government and California have strong public policies " ‘in favor of arbitration as an expeditious and cost-effective way of resolving disputes.’ " ( People v. Maplebear Inc. (2022) 81 Cal.App.5th 923, 930, 297 Cal.Rptr.3d 652 ( Maplebear ).) But "[e]ven though the ‘ " ‘law favors contracts for arbitration of disputes between parties’ [citation], ‘ "there is no policy compelling persons to accept arbitration of controversies which they have not agreed to arbitrate ...." ’ " ’ " ( Id. at p. 931, 297 Cal.Rptr.3d 652.)

The trial court correctly concluded there is no basis to compel arbitration here because the People and the Labor Commissioner are not parties to the arbitration agreements Uber and Lyft entered into with their drivers. Uber and Lyft contend arbitration nevertheless should be compelled on the basis of either (1) federal preemption or (2) equitable estoppel. We disagree.⁹

1. Preemption

Uber and Lyft argue the Federal Arbitration Act ( 9 U.S.C. § 1 et seq. ) (FAA) precludes the People and the Labor Commissioner from pursuing in court some of the types of relief they seek in their enforcement actions, including restitution under the UCL and unpaid wages and business expenses of drivers under the Labor Code. Characterizing these forms of relief as "individualized" or "driver-specific," they argue that, because such relief may benefit individual drivers, any claim seeking it "belong[s]" to the drivers (and the People and the Labor Commissioner only "stand[ ] in the [drivers’] shoes," while the drivers are the "real parties in interest"). Thus, they conclude, those portions of the People's and the Labor Commissioner's actions must be compelled to arbitration. We disagree.

The United States Supreme Court has emphasized that, while the FAA embodies a strong federal policy in favor of enforcing parties’ agreements to arbitrate, that policy is founded on the parties’ consent, and there is no policy in favor of requiring arbitration of disputes the parties have not agreed to arbitrate. ( Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. ––––, ––––, 142 S.Ct. 1906, 1918, 213 L.Ed.2d 179 ( Viking River ) ["the ‘first principle’ of our FAA jurisprudence" is "that ‘[a]rbitration is strictly "a matter of consent" ’ "]; id. at p. ––––, 142 S.Ct. at p. 1917 ; E.E.O.C. v. Waffle House, Inc. (2002) 534 U.S. 279, 294, 122 S.Ct. 754, 151 L.Ed.2d 755 ( Waffle House ) ["Because the FAA is ‘at bottom a policy guaranteeing the enforcement of private contractual arrangements,’ [citation], we look first to whether the parties agreed to arbitrate a dispute, not to general policy goals, to determine the scope of the agreement."].)

" ‘ "Whether an agreement to arbitrate exists is a threshold issue of contract formation and state contract law." [Citations.] "The party seeking to compel arbitration bears the burden of...