Properly drafted collective bargaining agreements can protect construction industry employers from wage and hour class actions. A team of attorneys at Atkinson, Andelson, Loya, Ruud & Romo led by Ron Novotny and Brian Wheeler is at the forefront in utilizing the collective bargaining exemptions to win wage and hour class actions. Recently the team won a major victory for a refinery contractor client.

TRAVEL TIME ISSUES IN REFINERIES Compensation for travel time in refineries is problematic. The employees badge-in at a main gate. Then, they either walk or are driven to their reporting location for a safety briefing. Compensable time is normally calculated from the start of the safety briefing.

Employees frequently work a 10 or 12-hour shift. The practice is to relieve employees from work 30 minutes before the end of the shift to clean up and exit the facility.

There is an issue as to whether the time from the badge-in to the commencement of the safety briefing is time worked. Since employees are allowed to stop work before the end of the shift, the understanding with the unions is “in on the employee’s time and out on the company’s time.”

California and federal law require that employees be paid for all hours worked. Under California law, employees who badge-in and are REQUIRED to take transportation to the worksite are entitled to compensation. If the employee is given a choice between walking or taking transportation to the worksite, the time is not compensable.

THE COLLECTIVE BARGAINING AGREEMENT DEFENSE When the Wage Orders were revised in 2002, the issue of travel time agreements between employers and the construction unions was addressed. Since that time, Section 5(D) of Wage Order 16 has stated that the time spent traveling to the first place that the employee is required to report is compensable work time; and that this requirement applies to employees covered by a collective bargaining agreement unless the agreement “expressly provides otherwise.” The language was not previously litigated before a state court.

The Carpenters 46 Northern California Counties Conference Board was very helpful in confirming the long-standing agreement between the parties that it was “in on the employee’s time and out on the company’s time.” It signed a Letter of Understanding with the employer confirming that the time spent traveling to the first place of work was not compensable work time within the meaning of the Wage Order.

In a recent decision in Northern California, an employee in a class action case argued that employees were entitled to be paid at least the minimum wage regardless of what their union agrees to. However, an Alameda County Superior Court judge ruled that the agreement between the employer and the union was a complete defense to the claim that employees were not properly paid from badge-in to badge-out.

WHAT DOES IT MATTER? If the judge had ruled that the collective bargaining exemptions did not apply, then the court would have found that the employees were not properly compensated for their time after badge-in before the start of the safety meeting.

The employer would not just be liable for the hourly wage that was not paid, but also for penalties, attorneys’ fees, interest, and waiting time penalties of up to 30 days. In many similar wage and hour cases, the liability can exceed $100 million.

CARPENTERS UNION AND THE IBEW SPONSOR LEGISLATION The Carpenters Union and the IBEW have introduced a bill in Sacramento that will increase protection from wage and hour class actions for union signatory employers, Assembly Bill 1654.

The California courts have held that Private Attorney General Act (“PAGA”) claims could be brought as representative actions against union signatory employers and that these claims were not subject to mandatory arbitration under the collective bargaining agreements.

The potential liability in PAGA litigation is huge. A penalty can be up to $200 per pay period for every employee for a year. Thus, if a mistake in complying with one provision of the California Labor Code, the employer would owe a penalty of $10,300 for each of its employees, plus interest, plus attorneys’ fees.

AB 1654 would amend PAGA to carve out employers in the construction industry with collective bargaining agreements meeting specified criteria by making the following change to the Labor Code:

2699.6. (a) This part shall not apply to an employee in the construction industry with respect to work performed under a valid collective bargaining agreement if the agreement expressly provides for the wages, hours of work, and working conditions of employees, premium wage rates for all overtime hours worked, and for the employee to receive a regular hourly pay rate of not less than 30 percent more than the state minimum wage rate, and the agreement does all of the following:

(1) Prohibits all the violations of this code that would be redressable pursuant to this part, and provides for a grievance and binding arbitration procedure to redress those violations.

(2) Expressly waives the requirements of this part in clear and unambiguous terms.

(3) Authorizes the arbitrator to award any and all remedies otherwise available under this code.

(b) For purposes of this section, “employee in the construction industry” means an employee performing work associated with construction, including work involving alteration, demolition, building, excavation, renovation, remodeling, maintenance, improvement, repair work, and any other work as described by Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code, and other similar or related occupations or trades.

LESSONS FOR EMPLOYERS Two primary takeaways from this decision and other recent decisions that Ron and his team have won are:

  1. Negotiate contract language with the construction unions to protect the company from wage and hour class actions.
  2. If you get sued, hire a law firm that understands the nuances of the collective bargaining exceptions to California employment law.