Exclusionary Provision In the Federal Arbitration Act
"The Federal Arbitration Act contains no express pre-emptive provision, nor does it reflect a congressional intent to occupy the entire field of arbitration." (Volt Info. Sciences v. Leland Stanford Jr. U. (1989) 489 U.S. 468, 477, 109 S. Ct. 1248, 103 L. Ed. 2d 488.)
Yet it has been construed as "a congressional declaration of a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary.
The effect of the section is to create a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act." (Moses H. Cone Hospital v. Mercury Constr. Corp., supra, 460 U.S. at p. 24.)
Were it not for the dispute regarding the construction and effect of the exclusionary provision contained in section 1 of the Federal Arbitration Act, there would be no question that the Federal Arbitration Act preempts Labor Code section 229.
This issue was squarely decided by the United States Supreme Court in Perry v. Thomas, supra, 482 U.S. 483. That case involved a claim for unpaid commission wages by a stockbroker. Considering the federal policy favoring arbitration, the court concluded:
"This clear federal policy places 2 of the Act in unmistakable conflict with California's 229 requirement that litigants be provided a judicial forum for resolving wage disputes.
Therefore, under the Supremacy Clause, the state statute must give way." ( Id. at p. 491.)
In Perry v. Thomas (1987), however, "the demands for arbitration were based on a provision found in a Uniform Application for Securities Industry Registration form, which Thomas completed and executed in connection with his application for employment." (482 U.S. 483, 485, 107 S. Ct. 2520, 96 L. Ed. 2d 426.)
Perhaps because Perry did not involve an employment contract, the court in that case was not asked to consider the scope of the exclusionary provision in section 1 of the the Federal Arbitration Act.
California cases are uniformly in accord with Perry, holding that where there is an arbitration agreement subject to the FAA, the federal act preempts Labor Code section 229. (See Baker v. Aubry (1989) 216 Cal. App. 3d 1259, 1267, 265 Cal. Rptr. 381 ["Construction of the valid arbitration agreement presented here is governed by section 2 of the [FAA] which favors strongly the enforcement of such agreements.
The [FAA] preempts our state law in this area."]; Stirlen v. Supercuts, Inc. (1997) 51 Cal. App. 4th 1519, 1543-1544 [reaffirming FAA preemption of Labor Code 229]; see also Chase v. Blue Cross (1996) 42 Cal. App. 4th 1142, 1160-1161.) As in Perry, however, none of these cases specifically addressed the exclusionary clause contained in section 1.