Rene Flores Et. Al. v. Axxis Network and Telecommunications Inc. Et. Al.
Filed April 8, 2009
Second Appellate District of State of California
Cite as B207453

CA Denies Axxis' Petition for Arbitration

In May 2003, the Los Angeles Unified School District (LAUSD) entered into a “Project Stabilization Agreement” with Los Angeles/Orange Counties Building and Construction Trades Council and various craft unions to ensure that the construction and rehabilitation of over 1,000 school buildings and facilities would be completed on time and within the budget.

Axxis Network & Telecommunications, Inc. (Axxis), a licensed contractor was bound by abovementioned agreement as it has various contracts with the LAUSD to provide electrical, networking and telecommunications services.

Rene Flores, Jorge Roa, and Miguel Arteaga were employed by Axxis to implement, install, and construct networking and electrical services for LAUSD. They sued Axxis and its payment bond surety, Merchants Bonding Company in February 2007 for allegedly not paying them prevailing statutory wages and other benefits for work performed on various LAUSD construction projects.

An amended complaint was filed on January 2008, asserting three causes of action for (1) failing to pay prevailing wages under Labor Code sections 1771, 1774 and 1194, (2) failing to pay waiting time penalties under Labor Code sections 203 and 204.5, and (3) recovery on the payment bonds under Civil Code section 3250 as against Merchants Bonding Company.

Axxis’ petition to compel arbitration of former employees’ claims under the grievance and arbitration provision of the agreement was junked by the Trial Court. Following the case of Vasquez v. Superior Court, the Court found that the the agreement did not contain the “clear and unmistakable waiver of [employees’] right[s] to a judicial forum necessary to compel arbitration of [their] statutory claims.

Hence this appeal. Axxis argues that Labor Code section 229 requires that the employees’ claims be arbitrated because they concern the interpretation and application of the agreement.

However, the Appellate Court agreed with the TC that the arbitration provision of the agreement between the LAUSD and trade unions involved in the projects did not mandate arbitration of these statutory prevailing wage claims. The CA ruled that:

• Labor Code section 229 is inapplicable to the present dispute and does not provide support for compelling arbitration of the prevailing wage claims in this case.


• The agreement itself carved out an exception from arbitration for alleged violations of prevailing wage laws. Article 5 of the agreement concerned “Wages and Benefits” and section 5.4 of this article prescribed a procedure for resolving claims of prevailing wage law violations which, by its terms, expressly bypassed the arbitration provision.


• The agreement had a distinct intent to treat prevailing wage law violations differently and this is evidenced by Section 5.4 which was entitled “Compliance with Prevailing Wage Laws” and specified: “The parties agree that the Project Labor Coordinator [person or entity designated by the LAUSD] shall monitor the compliance by all contractors and subcontractors with all applicable federal and state prevailing wage laws and regulations, and that such monitoring shall include contractors engaged in what would otherwise be Project Work . . . . All complaints regarding possible prevailing wage violations shall be referred to the Project Labor Coordinator for processing, investigation and resolution, and if not resolved within thirty calendar days, may be referred by any party to the state labor commissioner.”


• Instead, it specified that “complaints” of prevailing wage law violations were to be resolved entirely outside the arbitration procedure by first referring the matter directly to LAUSD’s representative in charge of the project, and then if not timely resolved, to the state labor commissioner—both steps outside the arbitration procedure.

Thus, because the agreement which is binding on Axxis and its employees did not state that alleged violations of law were subject to resolution under the arbitration agreement and its provisions clearly carve out an exception from arbitration for alleged violations of prevailing wage laws, the CA affirms the trial court’s denial of Axxis’s petition to compel arbitration of the employees’ prevailing wage law claims.