A federal appeals court Friday revived a worker's minimum wage claim against Marriott Hotel Services Inc. in a case that pit federal collective bargaining laws against a California city's minimum wage ordinance.

The three-judge panel of the U.S. Court of Appeals for the Ninth Circuit overturned a lower court's ruling that had gone against the hotel worker, Ian McCray, who argued he was paid less than the minimum wage set by the city of San Jose. The divided appeals court said the trial judge did not have jurisdiction over the dispute and ordered that the merits of the dispute should play out in state court, where the case originated.

The dispute centers around a San Jose ordinance that set a minimum wage higher than the national rate, increasing with cost-of-living raises each year since 2012 to reach $15 by January 2019. The minimum wage is currently set at $13.50 per hour. McCray's union waived the ordinance's minimum wage requirement to bargain instead for other benefits.

McCray filed a lawsuit in Santa Clara court against the Marriott Hotel in San Jose, where he worked in the restaurant for $9 per hour. At that time, the city ordinance set the minimum wage at $10 per hour. Marriott and the workers union, Unite Here Local 19, agreed that workers could be paid less than $10 hourly. McCray's suit said Marriott owed workers the difference between their wages and the minimum wage.

Marriott, represented by Seyfarth Shaw, removed the case to the U.S. District Court for the Northern District of California. The company's lawyers argued that the claims were pre-empted by federal laws that govern collective bargaining.

The appeals court panel held Friday that the district court “lacked subject matter jurisdiction to hear the case” and ordered the district court to return the case to state court to determine the merits of the argument.

“While we recognize the strong pre-emptive force of (the federal statute), McCray's lawsuit amounts to an interpretive challenge to the San Jose ordinance, not one that requires substantial analysis of his union's collective-bargaining agreement,” Judge Albert Diaz wrote for the majority, which included Judge Ronald Gould. Judge Mary Schroeder dissented. Diaz, a judge on the Fourth Circuit, was sitting by designation.

Seyfarth Shaw partner William Dritsas in San Francisco, a lawyer for Marriott, declined to comment. The union, participating as an amicus, was represented by Paul More of McCracken, Stemerman & Holsberry. James Pagano of Pagano & Kass, who represented McCray, applauded the Ninth Circuit's ruling.

“It is our hope that when the arguments about the meaning of the statute are fleshed out, many more employees who, frankly, we believe have been cast aside by their union, will be entitled to receive the bare minimum wages to which they have long been entitled,” Pagano said in an email Friday.

Anticipating the passage of San Jose's minimum wage ordinance, Marriott and Unite Here opted out of the requirement. The union said it decided to negotiate health care and other benefits for its members.

“At bottom, this case is a matter of statutory interpretation,” Diaz wrote on Friday. “The primary task of the court deciding this case will be to determine whether the minimum wage established by the ordinance is waivable.”

Schroeder argued in her dissent that the heart of McCray's case was a collective bargaining agreement, which was subject to federal law and not an interpretation of a city statute.

“The essence of McCray's claim is that the employer is required to pay the city's minimum wage. Thus, he contends the opt-out contained in the (collective bargaining agreement) is not to be given effect,” Schroeder wrote. “Of course McCray's complaint does not discuss the (collective bargaining agreement) because he wishes the claim to be litigated in state court, but the district court correctly recognized that the dispute is actually about the (agreement). We should similarly reject the pretense that this case is about state law.”

The Ninth Circuit's ruling is posted below:

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