In Vaughn v. Tesla, Inc., A164053 (January 4, 2023), the plaintiffs alleged claims of workplace racial discrimination against the defendant, Tesla. The plaintiffs electronically signed employment agreements that contained arbitration agreements. The trial court upheld the arbitration agreements as valid but declined to mandate arbitration of the plaintiffs’ request for a public injunction. Tesla appealed.

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Plaintiffs may seek a public injunction under the FEHA

The California First District Court of Appeal explained that under McGill v. Citibank, N.A., (2017) 2 Cal.5th 945 (“McGill”), an arbitration agreement that precludes a plaintiff from pursuing public injunctive relief in any forum is invalid and unenforceable as a matter of state law. Public injunctive relief is relief that, by and large, benefits the general public and benefits the plaintiff only incidentally or as a member of the general public. In this case, the plaintiffs sought a public injunction enjoining Tesla from committing further violations of FEHA with respect to race discrimination and harassment against Black and/or African-American workers, and failure to prevent such.

Tesla argued that the requests for injunctive relief under the statutes addressed in McGill, supra (namely, the Unfair Competition Law, the Consumer Legal Remedies Act, and the False Advertising Law) could have the primary purpose and effect of prohibiting unlawful acts that threaten future injury to the general public, but an injunction sought under FEHA could not. 

The Court rejected Tesla’s argument, noting that FEHA is premised on the Legislature’s finding that insidious discrimination harms the public at large, including individuals lacking any direct connection to the workplace involved. The Court found that an injunction against further employment discrimination by Tesla would inure to the benefit of not only current Tesla employees, but to their families and their communities, as well as to future Tesla applicants and employees.

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The FAA does not preempt California’s rule against contractual waivers of the right to seek a public injunction

Tesla argued that the recent United States Supreme Court decision in Viking River Cruises, Inc. v. Moriana, (2022) 142 S.Ct. 1906, 213 L.Ed.2d 179 (“Viking River”), required the Court to conclude that McGill’s no-waiver rule is preempted by the FAA. The Court disagreed and noted that Viking River, supra, did not purport to abrogate McGill, supra,  in whole or in part, or use the phrase “public injunction.” Instead, Viking River, supra, overruled Iskanian v. CLS Transp. Los Angeles, LLC, (2014) 59 Cal.4th 348, which involved PAGA claims. The Court explained that the “conflict” between PAGA and the FAA derives from the statute’s built-in mechanism of claim joinder. A public injunction claim presents no possibility of the joinder of the claims of a multitude of other employees to the individual plaintiff’s claims. Additionally, unlike a PAGA claim, a public injunction is a unitary remedy that can not be divided into “individual” and “representative” components. Furthermore, PAGA is a procedural device, while a public injunction is a substantive statutory remedy. The Court concluded that preemption of a rule prohibiting waiver of the right to seek a public injunction would directly contradict the proposition that the FAA does not require courts to enforce contractual waivers of substantive rights and remedies.

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Disposition

The Court affirmed the trial court’s order.