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On September 12, 2019, the California Supreme Court decided in a unanimous decision that in a Private Attorneys General Act (PAGA) action seeking to recover penalties under California Labor Code Section 558, a plaintiff may recover civil penalties but may not recover actual unpaid wages. This is an important decision, which now clearly prevents a plaintiff from seeking both statutory penalties and wages under PAGA (as is often argued by the plaintiff). The high court did, however, reinforce that actions seeking statutory penalties under PAGA cannot be compelled to arbitration.

On June 3, 2019, the United States Supreme Court issued a rare unanimous decision authored by Justice Ruth Bader Ginsberg in Fort Bend County, Texas v. Davis (2019) — S.Ct. —, 2019 WL 2331306.  The Court held the charge-filing requirements specified in Title VII of the Civil Rights Act of 1964 are not jurisdictional.  If a requirement is jurisdictional, courts may not adjudicate a claim unless the requirement has been met.  Challenges to a court’s subject-matter jurisdiction may be raised by a defendant at any time during litigation.  On the other hand, if a claim-filing requirement is simply a procedural prerequisite to filing a lawsuit, a defendant employer must timely object based on the plaintiff’s failure to comply, or forfeit the objection. 

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 objections 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” and 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 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.

Clients with questions regarding this case or arbitration and grievance procedures in collective bargaining agreements may contact the author or their usual labor law counsel at Atkinson, Andelson, Loya, Ruud & Romo.

In two decisions issued within the last month, the California appellate courts broadened the circumstances under which agreements to arbitrate civil claims can be enforced. One court held that an employee effectively entered into an agreement by continuing to work for the company around the same time a claim was filed, while another held that an arbitration agreement applied to a claim even after a lawsuit was filed. The two cases clarified the availability of arbitration agreements to insulate employers from the prospect of jury trials in both such situations.

Representative claims brought under the California Private Attorney General Act of 2004 (“PAGA”), Labor Code § 2699 et seq., will remain before the court for the foreseeable future. In a recent case, Correia v. NB Baker Electric, Inc., the California Court of Appeal again confirmed that employers cannot compel employees to arbitrate their PAGA claims, no matter the existence of an arbitration agreement, without some evidence that the State of California consented to the employee’s waiver of the right to bring the PAGA claim in court.

Tags: PAGA

In a case of first impression, the California Supreme Court recently decided that an employee cannot sue a payroll company for failing to include the legally required information on the employee’s earnings statements.  The Court held that because a payroll company’s obligations are solely to the employer, an employee cannot claim that they are a third‑party beneficiary of the employer’s contract for payroll services, and cannot maintain a claim for breach of that contract against the payroll provider. (Goonewardene v. ADP, No. S238941, February 7, 2019)

Effective January 1, 2019, construction workers covered by certain collective bargaining agreements (“CBA”) will be exempt from the Private Attorneys General Act of 2004, commonly referred to as PAGA. 

Many employers outsource some or all of their payroll and related tax duties to third party payroll service providers.  These related tax duties may include withholding, reporting, and paying over certain employment (i.e. FICA, Medicare, SDI) and income taxes to the Internal Revenue Service (IRS) and California Employment Development Department (EDD).

On September 15, 2017, the 2017 California legislative session ended, with several employment-related bills being sent to the Governor’s desk.  The Governor has until October 15, 2017 to sign or veto bills passed by the Legislature.  Below is a quick summary of key bills that may be signed and become effective in the upcoming year:

On May 16, 2017, the Court of Appeals held that a company that obtains workers from a temporary staffing agency can enforce the arbitration agreement entered into between the temporary workers and the staffing agency.  See Garcia v. Pexco, LLC, No. G052872, 2017 WL 1435788 (Cal. Ct. App. Apr. 24, 2017).

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