Plaintiff Carlos Villalobos was employed by Simplified Labor Staffing Solutions, Inc., a temporary staffing services company that supplies labor and staffing to its customers. Simplified Staffing placed plaintiff with Maersk Warehouse and Distribution Services, where he worked first as a materials handler and later as a forklift operator. Simplified describes Maersk as “a warehousing and logistics company that warehouses goods in California that originate outside California and processes logistics for customers all over the United States.”

Plaintiff filed a class action alleging multiple wage and hour claims under the Labor Code, and an unfair competition claim, against defendant Maersk, Inc. The first amended complaint identified Maersk, Inc., Damco Distribution Services Inc. (now known as Maersk Warehouse and Distribution Services USA LLC), and Simplified Labor Staffing as plaintiff’s employers.

Plaintiff also filed a separate representative action against Maersk, Inc. for civil penalties under PAGA on behalf of himself and other current and former employees. The two cases were later consolidated.

The parties to the arbitration agreement are plaintiff and Simplified Labor Solutions. The arbitration agreement in this case consists of two separate documents: a May 11, 2020 “Employee Agreement to Arbitrate” (the employee agreement) and a “Notice to Employees About Our Mutual Arbitration Policy” (the arbitration policy), both requiring binding arbitration of all disputes with the company that relate in any way to plaintiff’s employment.

The three defendants filed a joint motion to compel arbitration. The trial court granted defendants’ motion in part and denied it in part. First, the court addressed defendants’ contention that the parties delegated resolution of enforcement issues to the arbitrator. The court found there was not a clear and unmistakable agreement to delegate enforceability issues to the arbitrator, citing cases holding (among other points) that in the employment context, an agreement incorporating by reference an arbitration organization’s standardized rules did not meet the clear and unmistakable test.

The trial court then turned to the substance of plaintiff’s opposition to arbitration, ultimately concluding plaintiff “was among a class of workers engaged in foreign or interstate commerce,” and the FAA did not apply to the agreement; “[t]he California Arbitration Act (CAA) and other provisions of California law apply instead.”

Third, the court found that under Labor Code section 229, if a cause of action seeks to collect due and unpaid wages pursuant to sections 200 through 244, the action may be maintained in court despite an agreement to arbitrate. Thus plaintiff could maintain in court his claim for nonpayment of minimum wages; his other claims (missed meal and rest breaks, overtime, and so on) were outside the purview of section 229.

Fourth, the trial court agreed with plaintiff that Labor Code section 229 also shielded from arbitration his claim for waiting time penalties, to the extent that claim was based on failure to pay minimum wages. (The court observed that “[a]s a practical matter, . . . without first deciding whether Defendants failed to pay [plaintiff] minimum wages (non-arbitrable Count 1), the arbitrator cannot possibly decide whether Defendants ought to be penalized for the failure to timely pay [plaintiff] minimum wages.”)

Fifth, the court concluded that under California law, no part of plaintiff’s PAGA claim was arbitrable, stating that “[s]tate law rules that are preempted by the FAA are nevertheless good law in cases that do not involve the FAA.”

Thus, the court denied defendants’ motion to compel plaintiff to arbitrate his minimum wage claim, his waiting penalties claim to the extent it is based on his minimum wage claim, and the PAGA action. The court granted defendants’ motion to compel arbitration of plaintiff’s other wage and hour claims and his unfair competition claim (counts 2-6, 7 (in part) & 8). The court denied defendants’ motion to dismiss the non- individual PAGA claims, granted defendants’ motion to dismiss the putative class claims, and granted defendants’ motion to stay proceedings.

The defendants appealed. The Court of Appeal affirmed the trial court’s ruling in its entirety in the published case of Villalobos v. Maersk, Inc. -B333556 (October 2025).

“Under California law, it is presumed the judge will decide arbitrability, unless there is clear and unmistakable evidence the parties intended the arbitrator to decide arbitrability.” (Dennison v. Rosland Capital LLC (2020) 47 Cal.App.5th 204, 209.) This is a well-established principle of arbitration law, applied in both state and federal cases. (E.g., First Options of Chicago, Inc. v. Kaplan (1995) 514 U.S. 938, 944 (First Options) [“Courts should not assume that the parties agreed to arbitrate arbitrability unless there is ‘clea[r] and unmistakabl[e]’ evidence that they did so.”].)

“Here we hold, in the context of a mandatory arbitration agreement between an employer and an hourly worker, that the incorporation of the rules of an arbitration provider – without expressly specifying in the parties’ agreement that under those rules the arbitrator will decide the scope and validity of the arbitration agreement – is not clear and unmistakable evidence of the parties’ intent to have those issues decided by the arbitrator. Absent unusual circumstances, an employer who intends to delegate issues of arbitrability to the arbitrator must express that intent in the arbitration agreement itself. Anything less is not clear and unmistakable evidence that both parties understood and intended that the arbitrator would decide arbitrability questions.”