Seyfarth Synopsis: The California Supreme Court held that the Labor Management Relations Act does not preempt claims under the Labor Code where a defense requires little more than referring to a collective bargaining agreement, as opposed to actually interpreting the agreement. Melendez v. San Francisco Baseball Associates LLC.

The Facts

The plaintiffs, security guards at San Francisco’s Oracle Park (the former AT&T Park), sued their employer, San Francisco Baseball Associates LLC (“the Giants”), alleging a violation of California Labor Code section 201 for failure to pay all wages due at the time of termination.

The security guards claimed that they were employees who were discharged intermittently—at the end of each Giants homestand, at the end of the baseball season, and at the end of other events at the park. Consequently, the security guards claimed that they were entitled to receive their unpaid wages immediately after each discharge, as required by Section 201. The Giants responded that the security guards were not “intermittent employees” but were year-round employees who were not discharged until their resignation or termination pursuant to the terms of a collective bargaining agreement (“CBA”) between the Giants and the union that represents the security guards.

The Giants sought to compel arbitration under the CBA, arguing that the guards’ claims were preempted by the Labor Management Relations Act (“LMRA”) because the controversy required interpretation of the CBA.

Trial Court Decision

The trial court denied the Giants’ motion to compel arbitration, holding that the Labor Code claims were not preempted by the LMRA. According to the trial court, resolution of the controversy regarding whether the security guards were discharged intermittently did not require interpretation of the CBA. Instead, the trial court thought that the timing of discharge was determined solely by Labor Code section 201. The Giants appealed.

The Court of Appeal’s Decision

The Court of Appeal, agreeing with the Giants that the LMRA preempted the Labor Code claims, reversed the order denying the Giants’ motion to compel arbitration. In reaching its decision, the Court of Appeal concluded that one must interpret the CBA to resolve the controversy. Specifically, the Court of Appeal determined that inferences drawn from various CBA provisions—such as the hours required to be classified as a “regular” employee, employee seniority, and pre-hire practices—were needed to decide whether the security guards were “intermittent” employees.

The California Supreme Court’s Decision

The Supreme Court reversed the Court of Appeal’s decision to grant the Giants’ motion to compel arbitration. The Supreme Court concluded that while LMRA section 301 furthers the policy goals of ensuring uniformity in the interpretation of CBAs and preserving arbitration as the method to resolve CBA disputes, courts must also honor state interests in overseeing substantive labor rights. Federal preemption under Section 301 cannot not be “lightly inferred,” because labor standards are traditionally left to the states.

The Supreme Court applied Sciborski v. Pacific Bell Director, its decision outlining a two-part test to determine whether a claim is preempted under Section 301: First, a court must determine whether a claim arises from the CBA or from independent state law. Second, if the claim arises under state law, a court must decide whether (a) the claim requires “interpretation or construction of a labor agreement” (i.e., must competing reads of the CBA be assessed?) or (b) the CBA will merely be referred to in resolving the claim. Where a claim arises under state law and the CBA will be merely referred to—rather than interpreted—there is no Section 301 preemption.

The Supreme Court determined that the security guards’ claim, which clearly arose from independent state law (Labor Code section 201), did not require more merely referring to the CBA. In reaching this conclusion, the Supreme Court noted that the parties’ arguments all turned on the definition of “discharge” under Section 201, and not on any provision of the CBA. The Supreme Court further noted that “nothing in the [CBA] addresses the timing of wage payments, which shows that plaintiffs’ complaint is aimed at an issue separate from the benefits bargained for in the agreement.”

The Supreme Court held that while the CBA may be relevant to the lawsuit, the dispute turned on the meaning of “discharge” under Section 201 rather than an interpretation of the CBA itself; therefore, the lawsuit was not preempted and arbitration was not required.

What Melendez Means for Employers

Under Melendez, it will be more difficult for employers to invoke CBA arbitration provisions when the claims asserted do not expressly require interpretation of terms within the CBA. Before proceeding with a motion to compel arbitration, employers would be wise to consider the Melendez ruling to determine whether such a motion would be worthwhile.