CA Appeals Court Refuses to Compel Arbitration in Employment Wage Claim

California union workers who work under a collective bargaining agreement are often compelled into arbitration by the provisions of their agreements. Courts in the state and across the country have been deferring to arbitration clauses more frequently. However, a recent decision from the California Supreme Court found that arbitration is not always mandated if the questions turn on interpretations of state law rather than on the provisions of the collective bargaining agreement. Melendez v. San Francisco Baseball Associates LLC, Cal. Sup. Ct., Case No. S245607 looked at whether security guards who worked for the Giants were discharged at the end of each job or if they were continuous employees, and the Supreme Court held that the question dealt with interpretations of state law rather than on the provisions of the CBA.

The lead plaintiff in the case was named George Melendez. He was employed as a security guard by the San Francisco Giants. He alleged that he and other security guards who worked for the team were routinely discharged at the end of the baseball season, at the end of homestands, and at the end of other events that were scheduled in between seasons. Since he believed that the end of each job assignment with the Giants counted as a discharge, he argued that the team should pay him immediately. The Giants, however, paid Melendez and the other workers on a semi-monthly basis instead of paying them in full what they were owed at the end of each assignment. Melendez filed a lawsuit against the Giants, arguing that the end of each job assignment counted as a termination and should have entitled him to immediate and full pay under Cal. Labor Code § 201.

The Giants countered the lawsuit by arguing that the collective bargaining agreement that it had negotiated with Melendez's union, the Service Employees International Union, called for mandatory arbitration for any labor disputes that might arise. It argued that the mandatory arbitration clause preempted Melendez's ability to file a lawsuit and that the dispute should instead be sent to arbitration. The Giants also argued that Cal. Labor Code § 204 should apply instead of § 201 because Melendez was continuously employed by the Giants. While § 201 calls for immediate and full payment of all wages that are owed to an employee upon his or her termination, § 204 calls for semi-monthly payments to workers who are continuously employed.

The Superior Court looked at whether the mandatory arbitration clause preempted the lawsuit. It found that the case turned on questions of state law and not on interpretations of the provisions of the CBA. As such, it held that the state court was the appropriate forum to hear the dispute. The Giants appealed the court's decision to the California Court of Appeals.

On appeal, the California Court of Appeals reversed the lower court's ruling and held that the issue would have to be decided in arbitration rather than through the court's system. It found that arbitration clauses are generally favored in labor disputes and that the court system was not the proper forum to handle the dispute. Melendez then appealed the Court of Appeals decision to the California Supreme Court.

In their written briefs before the California Supreme Court, both sides argued about interpretations of § 201 and whether Melendez was continuously employed by the Giants or whether he was instead discharged at the conclusion of each job assignment. The Giants argued that since the CBA contained a mandatory arbitration clause, the court should have dismissed the lawsuit and sent the matter to arbitration instead.

The Giants argued that the question of whether Melendez was continuously employed or was terminated at the end of each assignment turned on interpretations of certain provisions within the CBA itself such as the calculation of number of hours worked per year to gain increased status as an employee, the requirement of a pre-employment drug screen and background check, and the inclusion of holidays within the agreement. The Giants argued that all of these provisions would need to be interpreted to answer the question of whether Melendez was continuously employed or if he was instead terminated at the end of each assignment.

Under Sect. 301(a) of the Labor Management Relations Act, which is codified at 29 U.S.C. § 185(a), jurisdiction over labor disputes involving unions is granted to federal courts. The courts have interpreted this statute as preempting state law claims that involve collective bargaining agreements.

Courts have also interpreted this law as favoring arbitration as a means to resolve labor disputes. In Balcorta v. Twentieth Century-Fox Film Corp., 208 F.3d 1102 (2000), the court found that Sect. 301(a) preempts most state law claims in cases involving collective bargaining agreements. However, the court did rule that not all claims that require courts to look at the provisions of collective bargaining agreements will require preemption.

The California Supreme Court analyzed the arguments that were made by both sides. Looking at the Balcorta case, the court focused on the ruling that some claims will not require preemption. The California Supreme Court noted that the U.S. Supreme Court has carved out claims that simply require courts to look at the provisions of a collective bargaining agreement as opposed to requiring that the provisions are interpreted by them.

In reviewing the arguments made by the plaintiff and the San Francisco Giants, the court noted that neither party was disputing any of the provisions of the collective bargaining agreement itself. Instead, the legal dispute turned on whether Melendez was terminated and thus entitled to immediate payment under Cal. Labor Code § 201 or if he was continuously employed and was instead subject to the wage and hour provisions of § 204.

While the Giants argued that the provisions about employee classification, holidays, and pre-employment drug and background checks all needed to be interpreted to determine whether Melendez was continuously employed, the California Supreme Court disagreed. It stated that those provisions might be relevant, but they simply would need the court to look at them instead of to interpret them. Because the provisions of the actual collective bargaining agreement were not in dispute, they didn't require the court to interpret them. The Supreme Court overruled the Court of Appeals and remanded the case back to the Superior Court for further proceedings.

Employees have increasingly been compelled to arbitrate their employment claims, including wage claims, in California and across the nation. This case cuts against this trend, however. By finding that arbitration does not have to be compelled in cases that only involve an interpretation of state laws, the court has provided attorneys and courts with some guidance about when claims can be filed in court as opposed to being forced into arbitration.

The California Supreme Court did not decide the case on its merits. Instead, it remanded the case back to the Superior Court for further proceedings.

If you have a wage and hour dispute with your employer and have a mandatory arbitration clause in your employment contract, you might be able to file a claim in court instead of being forced into arbitration. An experienced employment and labor law attorney may be able to advise you about your rights. Contact an attorney at the Law Offices of Steven M. Sweat to learn about the steps that you might take.

• Melendez v. San Francisco Baseball Associates LLC
• California Legislative Information
• 29 U.S. Code § 185 - Suits by and against labor organizations
• Balcorta v. Twentieth Century-Fox Film Corp., 208 F. 3d 1102 - Court of Appeals, 9th Circuit 2000