Page 1
City Suing for Unfairness to Workers Is Not Bound by Their Arbitration Agreement—C.A.
Opinion Rejects Contention That Plaintiff Stands in Shoes of Employees Whose Interests It Seeks to Vindicate in Action Under UCL for Misclassification
By a MetNews Staff Writer
Instacart, a service that shops for customers’ goods and deliver them, has lost its bid in the Court of Appeal to have an action brought against it by the Office of San Diego City Attorney shunted to arbitration, with the justices of the Fourth District’s Div. One rejecting its argument that because it has an arbitration agreement with its shoppers, the city, in suing on their behalf, stands in their shoes and is bound by that agreement.
Presiding Justice Judith McConnell authored the opinion, filed Wednesday. It affirms an order by San Diego Superior Court Judge Timothy B. Taylor denying a motion to compel arbitration brought by Maplebear Inc., which does business as “Instacart.”
The City of San Diego sued Instacart in 2019, under the Unfair Competition Law (“UCL”), alleging that the company improperly classified its shoppers as independent contractors, rather than employees, cheating them out of minimum wages, overtime, rest breaks and other rights, and gaining an advantage over competitors that were complying with the law. Although Proposition 22, the “App-Based Drivers as Contractors and Labor Policies Initiative (2020),” authorizes such a classification prospectively, the suit under the UCL continues based on Instacart’s earlier conduct, which carries a potential civil penalty of up to $2,500 per violation.
Supreme Court Opinion
Instacart drew inspiration from the California Supreme Court’s 2014 decision in Iskanian v. CLS Transportation Los Angeles, LLC in which it was held that arbitration agreements barring class actions cannot be applied to suits for Labor Code violations brought by private plaintiffs, on behalf of the state, under the Private Attorney General Act of 2004 (“PAGA”).
Justice Goodwin Liu said in the course of the majority opinion that although “a portion of the penalty goes not only to the citizen bringing the suit but to all employees affected by the Labor Code violation,” the “government entity on whose behalf the plaintiff files suit is always the real party in interest in the suit.” (The portion is 25 percent.)
From that, Instacart reasoned that where the City of San Diego is acting on behalf of the shoppers, they are, in reality, the real parties, and effect must be given the arbitration provisions in the contracts with them.
McConnell’s Opinion
“We reject this analogy,” McConnell wrote.
In Iskanian, Liu said that the Legislature chose to “deputize and incentivize employees” to prosecute Labor Law violations.
The presiding justice said in Wednesday’s opinion:
“The People are not deputized by the UCL to vindicate the individual rights of Instacart’s Shoppers. Rather, the City of San Diego is acting in its own law enforcement capacity….”
She declared:
“Contrary to Instacart’s assertion, the Shoppers are not the real party in interest in this case, the People are.”
Under PAGA, a suit may not be brought before notifying the state’s Labor and Workforce Development Agency of the alleged violations, affording it a 60-day period within which to determine whether to undertake an investigation. If it chooses not to proceed against an employer, that decision may be challenged in court, and if an action is allowed to proceed, the agency has continuing authority.
Contrasting that with the city’s action against Instacart under the UCL, McConnell set forth:
“No individual shopper has control over this litigation and the City did not need any individual Shopper’s consent to bring the action.”
She added:
“Further, as the trial court found, the City’s claims for civil penalties and injunctive relief seek to vindicate public harms. That the complaint also includes victim-specific restitution does not make the case private in nature.”
The case is People v. Maplebear Inc., 2022 S.O.S. 2173
Copyright 2022, Metropolitan News Company