The Impact of Collective Bargaining, Legislation and Recent Decisions on Independent Contractor Litigation

I. Introduction

The cutting edge in labor relations is the crafting of conditions in labor agreements that either preempt private class actions or shift their adjudication to grievance and arbitral forums; or alternatively, set different wage and working conditions. Related to this is the expansion to broad form of arbitration agreements outside the bargaining forum. Also noteworthy are judicial decisions that craft new uniform laws in the gig and independent workers economy.

The readers in our modes can expect to see new forms of labor agreements adapt to the new economic and legal environment given the foregoing. This article commences a discussion on this issue, certain to be the dominant one in traditional labor relations and litigation for the foreseeable future.

II. Unpaid Wage Claim Held Not Preempted By Union Contract (By Ronald W. Novotny)

In Melendez v. San Francisco Baseball Associates LLC (2019) S245607, the California Supreme Court recently held that a security guard’s state law claim for unpaid wages and “waiting time” penalties could proceed over his employer’s objection’s that they had to be resolved under his union’s agreement. Because the employee’s claim was founded on a right existing in state law, and not the agreement, he was permitted to proceed with his claim in court even though the agreement was relevant to the claim and would have to be “consulted” in determining it.

George Melendez worked as a security guard at AT&T Park in San Francisco, and filed a lawsuit when he was not paid his final wages immediately after the end of each San Francisco Giant’s home stand, concert, or other event at the stadium that he worked at. He primarily claimed that the Giants’ failure to pay him wages due at the time of termination entitled him to “waiting time” penalties of up to 30 days’ additional pay after the completion of each assignment. He principally relied on a 2006 Supreme Court case, Smith v. Superior Court (2006) 39 Cal.4th 77, which held that a hair dresser who was hired to work for only a single day was required to be paid at the end of that job.

The Giants argued that there were numerous provisions in its collective bargaining agreement with the Service Employees International Union, Melendez’s collective bargaining representative, which showed that security guards were employed on a continuous year-round basis and were not terminated after single job assignments. These included provisions that classified employees based on the number of hours worked per year, provided for probationary period of 500 hours of work, and required drug screening for new hires. Because of these provisions, the Giants argued that Melendez’s claim was preempted by Section 301 of the Labor Management Relations Act, because it required “interpretation and application” of the union agreement.

Relying on past cases, including the Ninth Circuit Court of Appeal’s 2000 decision in Balcorta v. Twentieth Century-Fox Film Corp. (9th Cir. 2000) 208 F.3d 1102, the California Supreme Court rejected the Giants’ federal preemption defense. The Court stated that not every claim that requires resort to the language in a labor-management agreement is necessarily preempted, and that this is particularly the case when the meaning of the contract is not in dispute. The case at hand did not involve a dispute over the terms of the agreement that required a court to interpret them, and preemption could not be found based only on the fact that interpretation of the contract terms was required to determine the validity of the employer’s defense. Instead, because the legal character of the claim relied on a state law right that was not substantially dependent on the contract’s terms, the employee was permitted to proceed in court with his unpaid wages and waiting time penalty claim.

The Melendez case confirms the important principle that unless a claim under a statutory law is expressly made the subject of an agreement to arbitrate under a union agreement, or is clearly and unmistakably provided for in the arbitration clause of the agreement, such a claim may proceed even though the employer’s factual and legal defenses to the claim are based on the provisions of the agreement.

III. Preemption and the Federal Arbitration Act

(1) WSTA Litigation Update

California’s Attorney General issued the following press release:

California Attorney General Xavier Becerra today issued the following statement after U.S. District Judge Morrison C. England, Jr. dismissed a federal lawsuit filed by the Western States Trucking Association (WSTA) seeking to undermine state regulations that protect the welfare of workers. The ruling in Western States Trucking Association v. Schoorl [No. 2:2018cv01989 - Document 34 (E.D. Cal. March 28, 2019)] upholds California’s framework of laws and regulations determining the status and classification of workers as employees.

This court ruling is a victory for truck drivers and for all California workers who put in the time and labor at the behest of their employer,” said Attorney General Becerra. “The courts have once again demonstrated that it is well within a state’s right to establish standards for the welfare of those working within its borders. To all those in California who work hard to make an honest living: we’ve got your back. “This is another victory in our fight to protect truck drivers from misclassification,” said California Labor Secretary Julie A. Su. “When drivers' rights to basic workplace standards are violated, this case makes clear that the state has the right and responsibility to protect them according to California law.

In the decision, Judge England ruled that WSTA failed to demonstrate a viable claim in its challenge to the ABC test, which determines if a worker should be deemed an employee or an independent contractor. The test stems from the California Supreme Court’s 2018 decision in Dynamex Operation West, Inc. v. Superior Court and provides guidance on interpreting California’s wage orders, which are regulations issued by the California Department of Industrial Relations. The purpose of wage orders is to provide for both minimum wages and the general welfare of employees across a wide range of industries.

The favorable ruling in this court case builds on Attorney General Becerra’s efforts to protect the rights of workers across California. In February, Attorney General Becerra and the California Labor Commissioner’s Office filed a petition before the U.S. Court of Appeals for the Ninth Circuit to defend California meal and rest break rules. In January, the California Department of Justice joined a multistate comment letter opposing a National Labor Relations Board proposal that would diminish protections for millions of workers. Last year, Attorney General Becerra filed an amicus brief supporting the rights of truck drivers to receive reimbursement for certain expenses incurred in relation to their employment. Attorney General Becerra also co-led a coalition of 17 attorneys general opposing a Trump Administration rule to allow employers to pocket the tips of certain employees, threatening the loss of up to $5.8 billion of workers’ earned tips. In November 2017, Attorney General Becerra filed a lawsuit against One Source, a janitorial subcontracting company based in Orange County, to protect janitorial workers in retail establishments all over California from wage theft.

(2) Interstate Trucking and Arbitration

In Muller v. Roy Miller Freight (California Ct App 05/01/2019) the Court concluded that the Federal Arbitration Act (FAA) applied to Muller as a transportation worker employed by a licensed motor carrier engaged in interstate commerce because the near totality of the goods transported were transported in interstate commerce under 9 USC section 1 and thus exempt from FAA coverage. The Court recognized that California Labor Code Section 229 bars arbitration of claims for unpaid wages despite clear inclusive language in the arbitration agreement. For now, however, the private claim was stayed pending the arbitration of the trucker’s other claims.

(3) Dynamex and Retroactivity

In a decision that is certain to increase the volume of Prong B litigation against transportation industry companies, Vazquez v. Jan-Pro Franchising International, (https://cdn.ca9.uscourts.gov/datastore/opinions/2019/05/02/17-16096.pdf, the Ninth Circuit concluded that implementation of the so-called “ABC” test by the California Supreme Court was declarative of California law and thus potentially applicable retroactively to other pending cases. In this case, the Court concluded that the unique aspects of franchise arrangements were not an exception.

It is possible that transportation sub-industries, such as brokerage transport, will have a chance to be treated differently, especially if a court recognizes the highly regulated licensure and ownership relationships of drivers to their industry not present in the Dynamex case. The future is more uncertain for other mode related sub-industries, such as air related industries like fixed base operators and shuttle services, along with gig drivers, as well as the drivers engaged in port services.

IV. CONCLUSION

In so far as California is, on occasion, the tipping point in the litigation universe, the California legislature may be, with the consideration of current legislation on independent contractors https://www.billtrack50.com/BillDetail/996562, the most crucial predictor of what the law nationally will be. Robert Fried handles legislative affairs as a part of his policy practice and was amicus counsel at the California Supreme Court in Dynamex. He can be contacted for the latest details.

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