Employers should always look for a preemption defense when a FLSA suit is lodged against a unionized client.  Clear proof of that was just given by the Ninth Circuit when that Court held that unionized offshore oil rig workers could not pursue overtime claims because the Labor Management Relations Act (LMRA) barred the suit.  The case is entitled Curtis et al. v. Irwin Industries Inc. et al. and issued from the Court of Appeals for the Ninth Circuit.

The Court affirmed the lower court.  The holdings were based on the fact that the labor contract satisfied the California overtime pay requirements.  The Court found that “Curtis’s claim for overtime pay is preempted under § 301 of the Labor Management Relations Act because California overtime law does not apply to an employee working under a qualifying collective bargaining agreement, and Curtis worked under such an agreement…”

The workers did twenty-four hour shifts on offshore oil rigs.  They worked twelve and were off for twelve but asserted that they could not leave the platform or otherwise use the time for their own pursuits.  They were on the platforms for seven consecutive days.  The workers worked under two separate labor agreements.

The Ninth Circuit noted that Section 301 meant that “nonnegotiable rights” under state law, i.e. minimum wage and overtime, were not always preempted, even if the parties had a labor contract.  The Court stated that a two-step test should be utilized to determine if preemption was appropriate.

The first prong of the test is to determine if the controversy concerned a right inuring to the employees only because of its presence in the labor contract.  That would be sufficient to find that preemption was appropriate.  If a court determined the controversy involved a right established under state law, then the court would inquire whether any provision(s) of the labor contract had to be interpreted for the claim to be resolved and if such an analysis was necessary, then the matter was also preempted.  The Court found that “because Curtis’s right to overtime ‘exists solely as a result of the CBA,’ his claim that Irwin violated overtime requirements by not paying him for the 12 off-duty hours is preempted under § 301.”

The Takeaway

Whenever there is a labor contract involved, try to find some connection between provisions in that contract and the purported overtime or other claim.  Stress that contractual interpretation is required to resolve the dispute, so it is an arbitral issue, rather than a statutory one. Or violation.

It’s certainly worth a try…

When hit with a wage hour suit, class action or single, employers are well advised to look for a preemption argument, whether from a union contract (e.g. National Labor Relations Act) or a statutory construct.  If the preemption argument is successful, the entire suit goes away.  Therefore, such an argument can become the proverbial “magic bullet” that defense practitioners (i.e. myself) yearn for.  The Third Circuit has just ruled that a federal law that confines state regulation of the trucking industry does not preempt the Illinois Wage Payment and Collection Act.  Thus, the claims of a class of drivers asserting that illegal deductions were made stays alive.  The case is entitled Lupian et al. v. Joseph Cory Holdings LLC, and issued from the Third Circuit Court of Appeals.

Trucking and the motor carrier exemption
Copyright: vitpho / 123RF Stock Photo

The appellate court affirmed the lower court ruling, where Judge Martini found that the state law was not preempted by the Federal Aviation Administration Authorization Act, a law that preempts any state law “relating to a price, route or service of any motor carrier.”  The Court stated that “the IWPCA claims here are too far removed from the [FAAAA’s] purpose to warrant preemption.  With no record to demonstrate otherwise, we hold that the impact of the IWPCA is too tenuous, remote and peripheral to fall within the scope of the FAAAA preemption clause.”

The plaintiffs sued in August 2016 on a theory that they were not independent contractors and had suffered illegal wage deductions.  They charged that the Company violated the section of the Wage Payment Act that required a written authorization in order to deduct from their compensation.  The lower federal court rejected the preemption defense, asserting that the state law’s “effect on motor carriers does not warrant preemption.”

The Third Circuit agreed and was guided by similar cases from the Seventh and Ninth Circuits.  The Court stated that these kinds of laws (e.g. Wage Payment laws) are “a prime example of an area of traditional state regulation.”  The Court observed that “while the fact that the IWPCA does not regulate affairs between employers and customers is not dispositive, it does demonstrate that the operation of the IWPCA is steps away from the type of regulation the FAAAA’s preemption clause sought to prohibit.  We cannot say, particularly at this procedural juncture, that the IWPCA has a significant impact on carrier rates, routes or services of a motor carrier or that it frustrates the FAAAA’s deregulatory objectives.”

The Takeaway

Well, sometimes the magic works and sometimes it doesn’t…