Appellate court exempts trucker from federal arbitration law cited in contract

Just because something is in a contract does not mean it is legally sound. A California appellate court has confirmed a lower court’s ruling for a truck driver who argued an arbitration provision in his employment contract was invalid, allowing him to file a class action lawsuit per California’s labor laws.

In May 2012, Tony Muro was hired by Cornerstone Staffing Solutions, an employee staffing firm providing assistance to a variety of employers throughout California, Michigan, Nevada and New Jersey, according to court documents. Cornerstone specialized in logistics and transportation staffing and recruitment. Muro’s position was to drive trucks for Team Campbell, shipping products from its location in Fontana, Calif., across the country.

Muro was a trucker for Team Campbell for more than two years, making frequent deliveries in California and several states in the South and Southwest regions of the country.

According to Muro’s employment contract that he signed, all disputes had to be submitted to binding arbitration as governed by the Federal Arbitration Act (FAA). This provision waived a jury trial and the right to file or participate in a class action suit.

Despite the arbitration provision, Muro ended up filing a complaint against Team Campbell and Cornerstone for failure to pay all compensation for time worked, failure to provide meal periods, failure to authorize/permit rest breaks, failure to comply with itemized wage statements, failure to pay timely wages due at termination/waiting time penalties, and violation of the unfair competition law.

Based on the fact that Muro and Cornerstone engaged in interstate commerce and because the policy specifically refers to the FAA, the staffing agency argued that the dispute should be arbitrated individually. However, Muro argued that because he was by definition a “transportation worker,” he was exempt from the FAA. Consequently, the dispute would fall under California law. California Labor Code section 229 allows for the recovery of unpaid wages to continue regardless of policy terms.

Cornerstone argued in the original suit that Section 2 of the FAA states that a written provision “evidencing a transaction involving commerce to settle by arbitration a controversy” makes the contract valid per the FAA. However, Section 1 of the FAA states “nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”

Muro argued that the latter exemption includes transportation workers. According to the superior and appellate courts, other courts have consistently found transportation workers’ employment agreements exempt from the FAA. Furthermore, drivers who transport goods across state lines have been considered “transportation workers” in numerous cases.

Despite the precedent set, Cornerstone tried to argue that the exemption only applies to transportation workers who are employed by an employer within the transportation industry, citing a separate case where that was affirmed. However, the appellate court cited other cases that mentions the FAA never mentions to what extent a particular business needs to be involved in transportation.

More than 8 percent of Cornerstone’s total revenue came from its own transportation division, which includes an employee with a position titled “Department of Transportation compliance coordinator/payroll administrator.”

Furthermore, other cases focused on the job function of the employee rather than the employer. The appellate court declined to clarify the exemption language by stating an employee’s job duties proves an employer’s involvement in the transportation industry without U.S. Supreme Court direction, thus, maintaining precedent determining a company’s primary business does not need to be within the transportation industry in order for an employee to be exempt from the FAA.

On Feb. 23, a three-judge appellate court panel concurred with the trial court’s ruling exempting Muro from the FAA and allowing him to file a class action suit pursuant to California’s labor laws.