Lainez v. Wilhelm, LLC

Background

Jose Lainez filed a class action in Sonoma County Superior Court, later dismissing the class claims and leaving a claim under California’s Private Attorneys General Act (PAGA) for civil penalties. He alleged that Wilhelm, LLC failed to pay for all hours worked, including overtime and pre- and post-shift work; denied adequate meal and rest periods; failed to provide accurate, itemized wage statements; and failed to pay all compensation owed when former employees separated from employment.

Wilhelm removed the case to federal court on August 25, 2023. Wilhelm asserted that Lainez’s employment had been governed by a collective bargaining agreement (CBA) since January 1, 2020, and that at least some of the alleged violations were preempted by Section 301 of the Labor Management Relations Act (LMRA). Lainez moved to remand, arguing that removal was untimely and that the claims were not preempted. Wilhelm also moved to compel arbitration and sought judgment on the pleadings.

Motion to Remand

The court denied Lainez’s motion to remand. It found that removal was timely because the January 2021 personnel-file documents did not trigger the 30-day removal period. Under the removal statute, that period begins when the plaintiff provides an amended pleading, motion, order, or other paper showing that the case has become removable. The court found that no such document had been filed or otherwise presented by Lainez in the state-court case. The court also noted that, as of March 30, 2022, neither side’s counsel knew that Lainez was a union member.

The court further held that Section 301 of the LMRA supplied a basis for federal jurisdiction. Section 301 can completely preempt certain state-law claims, meaning that a claim treated as state-law-based may be considered a federal claim for purposes of removal. The court rejected Lainez’s argument that he could avoid removal by not mentioning the CBA in his complaint.

The court concluded that at least part of the PAGA claim was preempted. Lainez sought to represent both unionized and non-unionized employees, and the claim included overtime and meal-period allegations. The court found that the CBA addressed overtime and meal periods and provided terms that satisfied the relevant California Labor Code exceptions. As a result, the rights concerning overtime and meal-period wages for covered employees existed because of the CBA. The court did not find that Wilhelm had shown that the CBA covered the remaining allegations concerning rest periods, wage statements, and waiting-time penalties. It nevertheless held that the clear preemption of at least part of the claim was enough to establish federal jurisdiction. The motion to remand was therefore denied.

Motion to Compel Arbitration

The court granted Wilhelm’s motion to compel arbitration of Lainez’s individual claim. Lainez signed a two-page arbitration agreement during the October 7, 2019 onboarding process. The agreement covered disputes arising from or related to his employment, required the selection of a mutually agreed neutral arbitrator, allowed reasonable discovery, required a written award, did not limit available remedies, and required Wilhelm to pay fees and costs unique to arbitration. Lainez did not dispute that the agreement involved interstate commerce and was governed by the Federal Arbitration Act. He argued instead that the agreement was unconscionable, meaning unfairly imposed or unfair in its terms.

The court found some procedural unconscionability because Lainez had to sign the agreement as a condition of employment, making it a contract of adhesion. The court rejected Lainez’s argument that the lack of a Spanish translation made the agreement unenforceable. The court stated that limited English proficiency generally does not by itself prevent enforcement and found that Lainez had not claimed that Wilhelm fraudulently induced him to sign.

The court found no substantive unconscionability because the agreement did not waive Lainez’s representative PAGA claim. The agreement stated that the parties would be precluded, to the extent permitted by law, from asserting certain matters in arbitration. The court reasoned that California law does not permit a categorical waiver of representative PAGA claims, so the agreement did not waive that right. The court therefore compelled arbitration of Lainez’s individual claim.

The court stayed the representative portion of the PAGA claim and the court proceedings while arbitration was pending, as required by the Federal Arbitration Act.

Motion for Judgment on the Pleadings

The court denied Wilhelm’s motion for judgment on the pleadings without prejudice. Because arbitration had been ordered, the court declined to address the sufficiency of the pleadings at that stage and stated that Wilhelm could refile a Rule 12(c) motion before the arbitrator.

Disposition

Lainez’s motion to remand was DENIED. Wilhelm’s motion to compel arbitration was GRANTED. The proceedings were STAYED pending arbitration, and the parties were required to provide a joint status report every 180 days or within 30 days after arbitration ended, whichever came first. Wilhelm’s motion for judgment on the pleadings was DENIED without prejudice.