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Drivers Making In-State Delivery of Out-of-State Goods Protected from Mandatory Arbitration of California Wage Claims

April 10, 2019 by

California labor law has a number of worker-friendly provisions that offer better protection to workers than federal minimum standards. California’s requirements that employees be paid daily overtime pay after eight hours and that employees receive one hour’s extra wages for a missed meal break are just two examples. California law also contains a provision designed to protect these benefits from being watered down through mandatory arbitration agreements – Labor Code Section 229 requires that litigants be provided a judicial forum for resolving wage disputes notwithstanding any arbitration agreement the workers may have entered into with their employer.

The U.S. Supreme Court, however, several years ago ruled that the Federal Arbitration Act (FAA), which is designed to encourage arbitration on a uniform, nation-wide basis, trumps Labor Code Section 229, rendering it unenforceable where the FAA applies. And the FAA applies very broadly. The single, notable exception to FAA coverage is for transportation workers employed in interstate commerce (commerce, that is, that crosses state lines).

A California Court of Appeal has now issued an important decision clarifying the scope of this FAA exemption. In Nieto v. Fresno Beverage Co., (3/7/19), the court upheld a trial court determination that the plaintiff truck driver, who made strictly in-state deliveries of his employer’s products, was nonetheless engaged in interstate commerce and thus exempt from the FAA.

The plaintiff driver sued his former employer claiming violation of his rights to meal and rest breaks, daily overtime, and timely payment of his final paycheck. The driver had signed an arbitration agreement when he began work with the company, and the company responded to the lawsuit by arguing it must be arbitrated per the FAA. The company argued that the FAA’s transportation worker exemption did not apply because plaintiff simply made deliveries from the company’s California warehouse to the company’s customers in California.

The trial court, with Court of Appeal approval, disagreed. Both courts pointed out that the company purchased its products from out-of-state manufacturers, that those products were then transported to the company’s California warehouse where they were stored for only a short period before being delivered to customers by the company’s drivers, including the plaintiff. From this, both courts concluded that the plaintiff driver was making in-state deliveries of out-of-state products, and that the process of delivery from the out-of-state source to the in-state destination was continuous. The goods delivered in state, in other words, were deemed to be “in the stream of interstate commerce.”

This case illustrates that it is not only truck drivers (and other transportation workers) who drive directly across state lines who are protected by California’s ban on mandatory arbitration of state wage claims; those who make in-state delivery of goods (or people) which (or whom) are simply completing their continuous trip across state lines are also protected.

You can read the opinion here:

The material on this website is provided by Beeson, Tayer & Bodine for informational purposes only and does not constitute legal advice. Readers should consult with their own legal counsel before acting on any of the information presented. Some of the articles are updated periodically, and are marked with the date of the last update. Again, readers should consult with their own legal counsel for the most current information and to obtain professional advice before acting on any of the information presented.