Appeals Court Denies AIL’s Request to Compel Arbitration in Wage-Hour Case

07/03/2012 // San Francisco , CA, USA // Keller Grover LLP // Eric Grover, partner at Keller Grover LLP // (press release)

San Francisco, CA— An appeal of an order refusing to compel arbitration between American Income Life Insurance Company (AIL) and the plaintiff has ended with a decision in the plaintiff’s favor. The Superior Court of San Bernardino County found that a contractual arbitration clause did not apply denied AIL’s petition to force arbitration, reports Eric Grover, a Bay Area employment lawyer.

The plaintiff, Martha Hoover, worked for AIL for about four months as a sales agent and ended that employment of her own volition. In September 2009, Hoover and a co-plaintiff filed a class action lawsuit against AIL. The lawsuit alleged that AIL hired them to sell insurance and misclassified them and other agents as independent contractors, and subsequently failed to reimburse them for business expenses, pay them minimum wage during training, or earned wages after they were fired, the court documents stated.

The lawsuit accused AIL of violating statutory rights under the Labor Code and violations of California’s Unfair Business Practices act. The suit maintains they were not reimbursed for business expenses, such as auto mileage; they were entitled to minimum hourly wages for training periods because; AIL failed to pay all “earned wages” upon termination of employment; and engaged in unfair business practices by misclassifying sales agents as independent contractors.

From September 2009 to December 2010, the parties actively litigated the case. After a year of litigation, in December 2010, AIL filed a motion to compel arbitration and to stay litigation of Hoover’s individual claims based on arbitration provision in the contract she signed.

The trial court denied the motion to compel, stating that Hoover’s “statutory wage claims are not subject to arbitration because neither the arbitration agreement nor the CBA refers to the arbitration of statutory rights” and because “AIL has waived its rights to arbitrate…through its participation in the litigation process.”

AIL promptly filed an appeal. The court of appeal did not rule as to whether Hoover was in fact an employee of AIL or an independent contractor, but it did deny AIL’s petition to compel arbitration. According to the court, “If Hoover was an employee with viable statutory labor claims, her claims are not subject to arbitration. If Hoover was an independent contractor she cannot assert statutory labor claims as an employee and therefore the question of arbitration seems irrelevant.” In addition, because of AIL’s 15-month delay in petitioning for arbitration, the court found that AIL had waived its right to compel arbitration.

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