Food-delivery platform DoorDash Inc. must face allegations that it impermissibly used customer tips to meet minimum pay requirements for drivers, after a California appeals court declined Monday to compel arbitration of claims filed on behalf of the state.
Delivery driver Brandon Campbell sued DoorDash under California’s Private Attorneys General Act, which authorizes an employee to sue their employer for labor violations on behalf of the state, and to collect civil penalties.
The company guarantees a certain minimum pay to its workers for each delivery, an amount determined by various factors including order size, delivery distance, and logistics, Campbell said. DoorDash’s policy of using customer tips to meet that minimum payment violates state labor laws, which prevent employers from collecting an employee’s gratuity, he alleged.
San Francisco Superior Court sided with other state courts in declining to force arbitration of PAGA claims.
The issue is controlled by the California Supreme Court’s decision in Iskanian v. CLS Transportation, the court said. In that 2014 decision, the California Supreme Court held that a ban on bringing PAGA actions violated public policy. And the ruling wasn’t preempted by the Federal Arbitration Act because the claim was a governmental one, rather than a dispute between employee and employer, the court said.
While PAGA faces challenges by opponents who say it violates due process guarantees and the separation of powers doctrine, California appellate courts have uniformly declined to force gig workers into arbitration, whether over misclassification or wages.
In an unpublished opinion, the California Court of Appeals, First District, rejected DoorDash’s argument that Iskanian is no longer good law in light of the U.S. Supreme Court’s 2018 ruling in Epic Systems Corp. v. Lewis. That case held that the federal law on arbitration requires enforcement of class action waivers and reaffirmed the broad scope of the FAA.
But the claim at issue in Epic Systems was fundamentally different, because it involved an employee asserting claims on behalf of other employees, rather than on behalf of a state, Justice Ioana Petrou wrote for the court. California trial and appellate courts are therefore bound to the state supreme court’s decision.
Petrou also rejected Doordash’s attempt to differentiate Campbell’s claims from other recently decided cases in which the First District declined to force arbitration of PAGA claims, including against rideshare platform Lyft Inc.
Campbell simply chose not to opt out of arbitration by signing an agreement that wasn’t mandatory for his employment, DoorDash said. And the FAA should apply with particular force to those who voluntarily choose to arbitrate.
The fact that Campbell willingly signed the arbitration agreement is immaterial, Petrou said. The intent behind PAGA was to empower employees to enforce the labor code as state representatives, and that doesn’t turn on how the employer and employee entered into the agreement.
Presiding Justice Peter J. Siggins and Justice Mark B. Simons joined the opinion.
Parris Law Firm represents Campbell. Gibson, Dunn & Crutcher LLP represents DoorDash.
The case is Campbell v. DoorDash Inc., Cal. Ct. App., 1st Dist., No. A159296, unpublished 11/30/20.