In the past few years, thousands of companies have been targeted by opportunistic plaintiffs’ lawyers looking to make money from hyper-technical violations of state and federal wage and hour laws. Regardless of the sophistication of the company’s payroll or human resources department, misunderstanding, misapplication and/or mistakes of law can occur every day which can cause violations for unpaid wages, multiple penalties and attorneys’ fees. Just one disgruntled union member can then result in a class action case with hundreds or thousands of workers. Depending on the claims, the potential damages could go back four years and add up to hundreds of thousands or even millions of dollars. Many companies believe that their CBA protects them from these types of class action claims because they have already negotiated with their union as to how to resolve wage and hour disputes through a specific dispute resolution process. Most companies, however, are likely wrong in this belief and have limited or no protection because their CBAs are inadequate.
If your company has a CBA that includes mandatory arbitration of employee claims, you may not have the dispute resolution process for which you bargained. Below is a recent example of a company that thought they were immune from class action cases and believed that all their wage and hour disputes with union employees were to be resolved pursuant to the terms they bargained for in their CBA. On October 21, 2014, however, the Central District of California vacated a labor arbitration decision, finding that the labor arbitrators “manifestly disregarded” federal law when they determined that the plaintiff’s statutory claims were arbitrable under the parties’ CBA.
In this case, the plaintiff filed a class action lawsuit against his employer in state court for alleged wage and hour violations of the California Labor Code. The employer moved to compel the plaintiff to arbitrate his claims in accordance with the parties’ CBA which provided that “[a]ll grievances or questions in dispute” shall be subject to the grievance and arbitration procedures of the CBA. The CBA also declared that a joint labor-management committee was empowered to decide the question of whether any particular dispute was subject to arbitration. The employer’s motion to compel arbitration was granted by the California Superior Court and the parties completed the arbitration of plaintiff’s individual unpaid wage claims. The plaintiff then filed a complaint in the California District Court to vacate the joint committee’s determination that the claims must be arbitrated. The plaintiff argued that under the U.S. Supreme Court’s decision in Wright v. Universal Maritime Services, Corp., the CBA must contain a “clear and unmistakable” agreement to arbitrate specifically statutory claims. The federal district court agreed and found that language in the parties’ CBA requiring arbitration of “all grievances or questions in dispute” was too broad and “lack[ed] the specificity to waive access to a judicial forum.” The court found that “without explicit reference to statutory rights ‘all claims’ does not encompass the rights embodied in legislation.” Importantly, the court reached this conclusion in spite of the fact that the CBA described the wage and hour obligations between the employer and employees at length, and despite the employer’s history with this union, where numerous other wage and hour issues had already been resolved under this procedure.
This case serves as a good reminder to employers covered by a CBA that not all employment-related claims between the employer and its employees are necessarily subject to the grievance and arbitration procedures of the CBA. CBAs often provide for grievance and arbitration of any dispute arising under the terms of the CBA and, therefore, only claims for breach of the CBA must be arbitrated.
Employers should consider whether they would want the grievance and arbitration procedures of the CBA to cover all employment claims, such as statutory claims for discrimination under Title VII; disability discrimination under the Americans with Disabilities Act; failure to provide family leave under the Family Medical Leave Act; wage and hour claims under the Fair Labor Standard Act; or similar state law claims. Employers should negotiate with their unions and agree to work together to resolve these types of disputes, if they determine it would be in their best interests, and if the relationship between the employer and the union would facilitate it.
If an employer and union agree they want their CBA to cover all disputes, including statutory claims, there must be “clear and unmistakable” language in the CBA demonstrating this intent. For example, the U.S. Supreme Court’s case of 14 Penn Plaza v. Pyett provided an example of an arbitration clause in a CBA that covered statutory claims:
There shall be no discrimination against any present or future employee by reason of race, creed, color, age ... including, but not limited to, claims made pursuant to Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Age Discrimination in Employment Act ... or any other similar laws, rules, or regulations. All such claims shall be subject to the grievance and arbitration procedures (Articles V and VI) as the sole and exclusive remedy for violations.
Here, the U.S. Supreme Court held this language was sufficient to require union members to arbitrate Age Discrimination in Employment Act claims. Anything short of this, however, will likely not be clear enough to require arbitration of statutory claims. Even all-encompassing clauses, providing for arbitration of “all claims,” are usually not enough to require arbitration of statutory claims, despite that such language is sufficient in other employment arbitration agreements.
These rulings and interpretations effectively undermine the role of the union in negotiating on behalf of workers and create onerous drafting requirements that are not required for non-union companies. Thus, if your CBA does not explicitly reference the claims you want covered, then you are exposing your company to a huge potential risk of unwanted class actions and other claims. To help avoid this risk, a member of Snell & Wilmer’s labor and employment law team can review or revise your CBA to help ensure that you are getting the resolution procedure for which you bargained.
