California has a reputation for strictly enforcing its wage and hour laws regardless of federal law or an agreement between the parties. But the United States Court of Appeals for the Ninth Circuit recently held that these laws can be preempted by federal labor law in the collective bargaining context. In Curtis v. Irwin Industries Inc., the Ninth Circuit affirmed a district court’s ruling that overtime claims alleged by employees on off-shore oil drilling platforms were preempted by section 301 of the Labor Management Rights Act (“LMRA”).   

Background

Carl Curtis worked on oil platforms on the Outer Continental Shelf located off the coast of California.  Curtis’s schedule required him to stay on the oil platforms for seven consecutive days, where he was on-duty 12-hours each day, followed by 12-hours off-duty. The terms of Curtis’s employment were covered by collective bargaining agreements (“CBAs”) between his employer, Irwin Industries (“Irwin”), and his union. After leaving his employment, Curtis sued Irwin claiming it had failed to pay him overtime for the 12 off-duty hours spent on the platform each day. Curtis also argued that he was entitled to minimum wages under California law for all off-duty time spent on the oil platforms because he was not free to leave the platforms during this time, and missed meal and rest periods.  

California’s Daily Overtime Requirements

Section 510 of the California Labor Code requires employers to pay overtime for all hours worked over eight in a day, and for all hours worked on the seventh consecutive day worked. However, Labor Code section 514 also provides an exemption from these requirements for employees covered by a collective bargaining agreement if certain requirements are met.  Section 514 states that California’s statutory overtime requirements do not apply “if the agreement expressly provides for the wages, hours of work, and working conditions of the employees, and if the agreement provides premium wage rates for all overtime hours worked and a regular hourly rate of pay for those employees of not less than 30 percent more than the state minimum wage.” The CBAs at issue here satisfied these minimum requirements. 

LMRA Section 301 Preemption

Under LMRA section 301 (“Section 301”), federal courts have jurisdiction to decide disputes that arise out of collective bargaining agreements. When an issue involves both an agreement’s provision and a state law, determining whether the state law is preempted requires application of a two-part test. First, a court asks if the claim involves a right that solely exists as a result of the collective bargaining agreement. If the claim is trying to enforce a right created by the collective bargaining agreement itself, then the claim is preempted. If not, the second step asks whether the state law right “is substantially dependent on analysis of the [agreement].” In other words, the state law claim is not preempted if it does not involve issues about the agreement’s scope, meaning or application.

The Decision

Curtis claimed the Labor Code’s overtime exemption did not apply because his CBAs’ definition of overtime was not equal to California’s definition of overtime. Without the exemption, he argued, resolving his overtime rights did not require any interpretation of the CBAs. 

The Court rejected this argument, pointing out that if all collective bargaining agreements were required to define overtime the same way as the Labor Code, the section 514 exemption would be superfluous. Adopting the rationale of Vranish v. Exxon Mobil Corp., 223 Cal.App.4th 103 (2014), the Court held that if a collective bargaining agreement satisfies the minimum requirements of the Labor Code exemption, California’s overtime requirements do not apply. The Court then held that because the exemption applied, Curtis’s right to overtime existed solely as a result of the CBAs, and his overtime claims were preempted under Section 301.
Curtis’s minimum wage and meal and rest period claims were remanded to the district court for further findings on whether they were preempted by Section 301 or the Outer Continental Shelf Lands Act.

Key Takeaways for Employers

For California employers this case highlights that certain Labor Code and wage order provisions may be waived through collective bargaining agreements that meet certain minimum requirements. Employers are encouraged to review potential exemptions with experienced counsel. Also, employers will want to monitor this case on remand for further developments concerning application of Section 301 preemption defenses to the remaining California wage and hour claims.