2004-18

Wage Claims By Union Worker May Proceed Because The Claims Do Not Involve Rights Deriving From Collective Bargaining Agreement

In Prachasaisoradej v. Ralphs Grocery Company, Inc., 2004 DJDAR 11115 (Cal. App. 2nd Dist., Div. 2, September 8, 2004) (published Sept. 9)(opinion by Todd, J., Gilbert and Coffee, JJ. concurring), the Court held that the plaintiff's claims were not preempted by section 301 of the Labor Management Relations Act (29 U.S.C. ? 185(a)) ("LMRA") because they involve independent rights that neither derive from nor require interpretation of a collective bargaining agreement.

Eddy Prachasaisoradej ("plaintiff") was employed by Ralphs as a produce manager. Throughout his employment, he and other similarly situated employees were paid a bonus that was calculated using a formula that included deductions for any expenses and losses due to cash shortages, merchandise shortages and shrinkage, workers' compensation, tort claims by non-employees, and other losses beyond Plaintiff's control. According to the plaintiff, Ralph's wrongfully deducted expenses from the wages of its employees.

Plaintiff filed his original complaint to bring a class action alleging that Ralphs' improper calculation of earnings violated Business and Professions Code ? 17200 and Labor Code ?? 221, 400-410 and 3751. In turn, Ralphs moved to remove the matter to federal court on the ground that ? 301 of the LMRA preempted plaintiff's action because his employment was governed by a collective bargaining agreement ("CBA"). Plaintiff filed a motion to remand the matter contending that removal was improper because his complaint alleged no federal claim. According to plaintiff, his state-law claims were not based on any asserted breach of a CBA, were independent of any rights provided by a CBA, and were not substantially dependent on an analysis of any CBA. The case was remanded to state court for lack of subject matter jurisdiction.

Following remand, the plaintiff filed a second amended complaint, alleging four cause of action: (1) unlawful deductions from earnings in violation of Labor Code ?? 221, 400-410 and 3751, and title 8 of the California Code of Regulations, ? 11070; (2) unlawful and unfair business practices concerning earnings bonus calculations in violation of Labor Code ?? 221, 400-410 and 3751, and Business and Professions Code ? 17200; (3) unlawful and unfair business practices regarding unlawful deductions for costs for workers' compensation in violation of Labor Code ?? 221, 400-410 and 3751, and Business and Professions Code ? 17200; and (4) failure to pay wages upon discharge in violation of Labor Code ? 201.

Ralphs demurred on the grounds that ? 301 preempted all causes of action, that the National Labor Relations Act (29 U.S.C. ? 151 et seq.)("NLRA") preempted the second and third causes of action, and that appellant alleged no violation of state law. With respect to ? 301 preemption, Ralphs asserted that since October 1995, plaintiff's employment had been governed by two CBA's which provided in pertinent part: "BONUS PAYMENTS. Bonus or lump sum payments to employees, other than regular wage payments, shall not be used to defeat the wage provisions of this [CBA]." In view of this provision, Ralphs contended that because the bonus plan was the product of collective bargaining, plaintiff's claim for additional bonus payments necessarily stemmed from the CBA provision. Ralphs argued that ? 301 therefore preempted the plaintiff's claims because they were founded on rights created by the CBA, and because they were substantially dependent on an analysis and interpretation of the CBA. The trial court agreed, sustained Ralph's demurrer, and granted attorney fees in the amount of $275,000.

The Court of Appeal reversed concluding that the state-law statutory violations alleged in the plaintiff's complaint involve independent rights that neither derive from the CBA nor require an interpretation of the CBA. Further, the court concluded that the demurrer would not have been properly sustained on the other grounds asserted by Ralphs.

In making this finding, the Court of Appeal analyzed ? 301 and its applicability to the case at hand. The Court acknowledged that ? 301 is a jurisdictional statute under which "suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce, or between any such labor organizations, may be brought in any district court of the United States having jurisdiction of the parties." However, the Court pointed out that the United States Supreme Court has repeatedly admonished that ? 301 preemption is not designed to trump substantive and mandatory state law regulation of the employee-employer relationship. To make a decision on preemption, a court must focus on the plaintiff's actual claim.

In analyzing the plaintiff's claims, the Court of Appeal pointed out that the Labor Code provisions at issue, as well as the regulation, were designed to protect employees. With the exception of Labor Code ? 201, the violation of any of the provisions is a crime under California law. A violation of Labor Code ? 201 results in civil monetary penalties imposed on the employer. Moreover, the protections of Labor Code ? 221 are nonnegotiable. The United States Supreme Court, in Livadas v. Bradshaw, 512 U.S. 107 (1994), had previously concluded that the preemptive reach of ? 301 does not extend to nonnegotiable rights conferred on individual employees as a matter of state law. Applying this reasoning, the Court of Appeal recognized that an employee's claim, based on rights arising out of a statute designed to provide minimum substantive guarantees to individual workers, is not preempted because it may exist without any need to interpret a collective bargaining agreement. Here, the plaintiff's claims alleged violations of statutory minimum labor standards, and should not be subject to preemption.

Additionally, the Court found that the plaintiff's claims alleging that the bonus calculations violated California law are neither founded on the bonus provision in the CBA nor dependent upon an interpretation of that provision. Ralphs had argued that because the right to a bonus emanated from the CBA, any claim touching on the payment of the bonus was preempted. The Court disagreed and stated that if this were true, it would necessarily follow that any claim concerning the payment of wages would always be preempted, since the payment of wages derives from a CBA. Thus, the Court found that if an employee's claim is based on state law independent of the rights afforded by a CBA, even if the CBA also addresses those rights, the claim is not preempted.

The Court of Appeal also addressed the two other grounds raised by Ralphs in support of its demurrer. The Court found that the NLRA does not preempt plaintiff's claims because they are unrelated to the collective bargaining process and conflict with none of the purposes of the NLRA. Also, the Court found that the plaintiff had alleged sufficient facts to state valid causes of action under California law.

Back to Top | Back to Summaries