A 2-1 California Court of Appeal held on October 17 that drivers for a food service provider did not have to arbitrate their state statutory claims brought under the California Labor Code despite a binding arbitration agreement covering the “application or interpretation” of the driver agreements. The drivers alleged that their employer, Mike Campbell & Associates, misclassified them as independent contractors, denying them wage law protections under the California Labor Code, and was thus liable for nonpayment of wages, illegal deductions, and recordkeeping violations. Rather than challenge the trial court’s ruling that they were bound by the arbitration clause, the drivers argued that their statutory claims did not arise out of the arbitration agreement and thus did not require an interpretation of the arbitration clause.
The central question before the appeals court was whether an agreement to arbitrate the application or interpretation of the drivers’ contracts included claims of misclassification. Holding for the drivers, the court said that the typical factors for deciding an employer-independent contractor classification issue, such as level of control, skill required, and method of payment, are “extra-contractual” and do not require an interpretation of the agreement between the parties. The court also relied on the limited authority granted to the arbitrator in the parties’ contract. The court stated that because the contract required the arbitrator to base any award on the words of the agreement, federal transportation law, or the Federal Arbitration Act, the contract excluded an arbitration award based on state law, which formed the basis of the misclassification complaint. Therefore, the plaintiffs were free to pursue their claims in court.