The federal appeals court that oversees cases arising from California recently handed down an opinion that provides guidance to employers trying to comply with collective bargaining agreements (CBAs) while simultaneously being challenged to apply potentially inconsistent definitions in California's overtime law. The U.S. Court of Appeals for the Ninth Circuit's Jan. 29 decision in Curtis v. Irwin Industries handed a victory to the employer in question, though this does not necessarily provide employers with an automatic reprieve from state law.

The Framework: Pre-emption Should Be Narrowly Applied

In defending against certain employment claims, employers may argue the claims are pre-empted by the Labor Management Relations Act (LMRA), a federal law that provides parameters for unionized workplaces. The U.S. Supreme Court has emphasized that LMRA pre-emption cannot be read broadly, however, and thus courts apply a two-question test to ensure that pre-emption is applied only where necessary to keep the role of labor arbitration intact with resolving CBA disputes.

The first question is whether the claim seeks “purely to vindicate a right or duty created by the CBA itself.” If yes, then the claim is pre-empted. If no, then the court examines the second question: whether the state law claim is “substantially dependent” on analysis of the CBA such that it requires interpretation of the meaning of the contract terms in the CBA.

The Set-Up: Employee Claims Overtime Law Applies Independently of His CBA Terms

Carl Curtis formerly worked for Irwin Industries on an oil platform on the Outer Continental Shelf. His employment was subject to two CBAs that contained detailed provisions on wages, overtime and work hours. Curtis' work schedule consisted of 12-hour shifts for a seven-day period, during which time he had to remain on the oil platform.

Curtis filed a class action arguing that the 12 hours he was off-duty each day counted as “hours worked” under California's Labor Code because he was unable to leave the oil platform during those off-duty hours. He argued that because a 2015 California Supreme Court case found that security guards were entitled to compensation for on-call hours at the worksite, the same logic should apply to his off-duty hours.

Irwin filed a motion to dismiss, arguing that the LMRA pre-empted Curtis' claims. In response, Curtis argued that his claims were based on statutory rights that exist independently of the CBAs, do not require any interpretation of the CBAs and therefore were not pre-empted. Ultimately, the dispute landed before the Ninth Circuit, which issued its ruling in early 2019.

The Issue: Is California's Overtime Law Pre-empted by the LMRA?

Curtis cited to Gregory v. SCIE, a 2003 case from the Ninth Circuit, where the court held a claim for overtime hours was not pre-empted by the LMRA. In that case, the court concluded that Section 510 of California's Labor Code determined what constitutes “overtime hours,” and thus the claim rested on the interpretation of California law rather than a CBA. Because the analysis did not require an interpretation of the CBA, the claims were not preempted. Curtis said that the court should follow its own precedent and rule that the overtime claims were not pre-empted by federal law.

However, the Ninth Circuit noted that Gregory was determined without the benefit of any California cases on the subject. It went on to examine the applicable statutes and recent case law relating to overtime compensation.

The court first pointed out that California's overtime law, Labor Code Section 510, contains an express exception that “requirements of this section do not apply to the payment of overtime compensation to an employee working pursuant to … an alternative workweek schedule adopted pursuant to a collective bargaining agreement pursuant to Section 514.” Section 514 exempts an employer from California's overtime laws if a CBA “expressly provides for the wages, hours of work, and working conditions of the employees, and if the agreement provides premium wage rates for all overtime hours worked and a regular hourly rate of pay for those employees of not less than 30 percent more than the state minimum wage.” The court reasoned that if the applicable CBAs met the requirements of Labor Code Section 514, Curtis' right to overtime existed solely within the CBA and thus is pre-empted.

Curtis argued that the CBAs did not meet the requirements because the CBA's definitions of overtime and overtime rates did not match the definitions in Labor Code Section 510. The Ninth Circuit dismissed this argument, noting that if a CBA had to meet all of the requirements of Labor Code Section 510 in order to qualify, such an interpretation would make the exception superfluous.

Next, the Ninth Circuit examined a 2014 California Appellate Court case wherein employees argued that because their CBA's definition of overtime was less generous than the provisions of Labor Code Section 510, the employer had to pay overtime in accordance with the Labor Code. In that case, the court found that as long as the CBA meets the requirements of Labor Code Section 514, the employer is only required to comply with the terms of the CBA. As a result, the Ninth Circuit held the court must examine the CBA to determine what constitutes overtime, triggering the second prong of the pre-emption test.

The Bottom Line: LMRA Pre-emption Applies to Some Overtime Claims  

The Ninth Circuit held that Curtis' claim for overtime pay was controlled by his CBAs because it met the requirements of Labor Code Section 514. Thus, because Curtis' right to overtime existed solely as a result of the CBAs, the Ninth Circuit found that Curtis' claim for overtime pay was pre-empted by LMRA. It affirmed the dismissal of Curtis' overtime claims and handed a victory to Irwin.

What Does This Decision Mean for Employers?

You should always seek legal counsel when negotiating the terms of a CBA, specifically to help you navigate the waters related to LRMA pre-emption and overtime. This decision does not change prior to Ninth Circuit decisions holding that a CBA cannot waive an employee's right to overtime under federal law (specifically, the Fair Labor Standards Act).

Although the application of this ruling is contingent on ensuring any CBA properly addresses the requirements of Labor Code Section 514, employers can now be assured a CBA can be structured so that they do not have to worry about compliance with both California's overtime requirements and the requirements of a CBA.

Rebecca S. King is an associate with Fisher Phillips in Irvine, California. She may be reached at [email protected].