Sheppard v. Staffmark Investment, LLC

Background

Tracee Sheppard brought five class claims against Staffmark Investment, LLC, and UPS Mail Innovations, Inc. The claims concerned alleged failures to provide meal periods and rest breaks, provide accurate wage statements, pay all wages due when employment ended, and comply with California’s unfair-practices law. Sheppard later added a representative claim for civil penalties under California’s Private Attorneys General Act, or PAGA.

Staffmark had placed Sheppard in a temporary assignment at UPS Mail Innovations. Sheppard worked as a sorter, removing mail from a conveyor belt, sorting it by ZIP code, and placing it into mail bags. During Staffmark’s electronic onboarding process, Sheppard reviewed and signed an arbitration agreement. The agreement required employment claims to be resolved by binding arbitration rather than in court and prohibited class, collective, or representative proceedings without mutual consent.

Staffmark moved to compel arbitration of Sheppard’s individual first through fifth claims and asked the court to stay the PAGA claim. UPS Mail Innovations later filed its own motion to compel arbitration. Sheppard did not oppose UPS Mail Innovations’ motion and stated at the hearing that the decision on Staffmark’s motion would also resolve that motion.

Arbitration Agreement and Federal Arbitration Act Exemption

Under the Federal Arbitration Act, or FAA, a court generally must enforce a valid arbitration agreement when the dispute falls within the agreement’s terms. The court found that Sheppard knowingly signed the agreement and that her first five claims arose from her employment and fell within the agreement’s broad definition of covered employment claims.

Sheppard argued that the FAA’s Section 1 exemption for transportation workers applied because she handled packages in the mailing industry. The court rejected that argument. It explained that the exemption covers workers actually engaged in moving goods in interstate commerce. Sheppard did not physically transport packages, work closely with employees who delivered them, or load packages onto delivery trucks. Her work was limited to sorting packages at the facility. The court therefore found that she was not a transportation worker exempt from the FAA.

Because the court found that the FAA applied, it did not decide Sheppard’s separate argument that the agreement’s class-action waiver was unenforceable under California law.

Claims Against UPS Mail Innovations

The court also ordered arbitration of Sheppard’s claims against UPS Mail Innovations. Although UPS Mail Innovations was not a signatory to the arbitration agreement, the court applied California’s equitable-estoppel doctrine. That doctrine can allow a non-signatory to enforce an arbitration agreement when the claims against it are based on the same facts and are closely intertwined with claims against a party that signed the agreement.

The court found that Sheppard’s claims against both defendants arose from her assignment at UPS Mail Innovations. She alleged that Staffmark and UPS Mail Innovations were joint employers and agents of each other, referred to them collectively as the defendants, and relied on the same facts without differentiating between them.

Disposition

The court granted the defendants’ motions to compel arbitration for Sheppard’s individual Claims One through Five against Staffmark and UPS Mail Innovations. Those claims were dismissed without prejudice. The court dismissed Sheppard’s class claims with prejudice as to Sheppard and without prejudice as to the putative class members.

The court declined to continue exercising supplemental jurisdiction over the remaining PAGA claim. Supplemental jurisdiction is a federal court’s discretionary authority to hear related state-law claims alongside federal claims. Because the court had dismissed the other claims, had not considered the merits of the PAGA claim, and found that judicial efficiency, fairness, convenience, and respect for California courts favored state-court proceedings, it remanded the PAGA claim to the Santa Clara County Superior Court. The clerk was directed to close the case.