Statutory Labor Code Violations Subject to Contractual Arbitration

The Plaintiff in Galen v. Redfin Corp. (227 Cal.App.4th 1525) attempted to avoid contractual arbitration, arguing that Labor Code violations were statute-based and outside of the contract scope. Galen had entered into an employment agreement with Redfin as a real estate broker.  The agreement classified Galen as an independent contractor, required “all disputes arising out of or related to this Agreement” be resolved by arbitration, and provided Washington State as the choice of law.  Galen brought suit, alleging improper classification as an independent contractor under the California Labor Code, as well as other Labor Code and Unfair Competition Law violations.  The Defendant moved to compel arbitration, but was denied.  The trial court held under California law that the arbitration clause did not apply to the statutory claims, and alternatively, the agreement was unconscionable.  Redfin appealed.

The Court of Appeal rejected Galen’s claim that statutory violations were outside of the arbitration provision.  Supreme Court precedent held that the Federal Arbitration Act preempts Labor Code violations outside of a private arbitration agreement involving interstate commerce.  Galen could neither claim that the misclassification was extra-contractual, as the contract was the instrument that classified him.  The Court then found the choice of law immaterial, as either gave the same result.  Finally, the court rejected Galen’s unconscionability claim.  The agreement was neither procedurally nor substantively unconscionable.  The record demonstrated no evidence of surprise or oppression from unequal bargaining power, the arbitration provision was conspicuous, the attorney’s fee provision was mutual, and the forum-selection clause was fair. The court would not find an inconvenient forum unconscionable, unless other evidence demonstrated an attempt to deprive a plaintiff of judicial relief.

The Court of Appeal held the arbitration agreement not unconscionable and reversed the trial court’s order.