United States: California Court Of Appeal Holds That A CBA Arbitration Provision Does Not Cover Statutory Wage And Hour Claims When Not Explicitly Stated

California and federal case law has established that a collective bargaining agreement (CBA) may necessitate arbitration of a statutory claim if, in an explicit waiver, it is clear and unmistakable that the parties intended to waive their right to proceed in a judicial forum for statutory claims. Courts require this heightened degree of clarity because the right to a judicial forum is of sufficient importance to be protected against a less-than-explicit union waiver in a CBA. 

The recent decision, Vasserman v. Henry Mayo Newhall Memorial Hospital, (February 7, 2017) No. B267975, Calif. App., 2nd Dist., Div. 4, 2017 Cal. App. LEXIS 90, illustrates how difficult it is to meet this standard. At issue was a CBA that contained a comprehensive arbitration provision and mentioned the administrative and statutory schemes, i.e., applicable Wage Order and the California Labor Code provisions that were implicated in this case. Nonetheless, the court declined to find that the parties intended to waive their rights to a judicial forum because the CBA was too broad, nonspecific, and failed to incorporate explicit statutory requirements.

Waiver of Judicial Forum Requires the CBA to Specifically State Intent to Arbitrate Statutory Rights

The plaintiff, a registered nurse at Henry Mayo Newhall Memorial Hospital, filed suit against her employer alleging several violations of the California Labor Code and other statutes relating to meal and rest breaks, unpaid wages, and unpaid overtime compensation. The plaintiff's employment with the hospital was governed by a CBA entered into between the California Nurses Association (CNA) and the hospital (the CNA CBA).

Following an unsuccessful attempt to remove the case to federal court, the hospital moved to compel this matter to arbitration based on various provisions in the CNA CBA. The hospital cited 14 Penn Plaza LLC v. Pyett (2009) 556 U.S. 247, arguing that as long as an agreement to arbitrate statutory claims is "explicitly stated" in the CNA CBA, arbitration is required. The hospital argued in part that the CNA CBA included mandatory grievance and arbitration provisions relating to payment of overtime and meal and rest periods and, therefore, required arbitration of the plaintiff's claims. 

In opposition, the plaintiff argued the CNA CBA lacked a clear and unmistakable waiver of statutory rights because there was no reference to the statutes identified in her complaint. In response the hospital averred that referencing the Labor Code elsewhere in the CNA CBA was sufficient to constitute a waiver. The trial court disagreed with the Hospital and determined that the waiver of statutory claims in the CNA CBA was not sufficiently explicit; consequently, the hospital's motion was denied.

After analyzing the CNA CBA, the California Court of Appeal agreed with the trial court. The Court reasoned that Article 12 of the CNA CBA, which described the grievance procedure, did not include any reference to the California Labor Code or any other state or federal authority. Furthermore, this section did not include any agreement to submit statutory causes of action to arbitration. The provision did, however, require submission to arbitration of all grievances or questions of interpretation arising under the CNA CBA. Still, its failure to cite any statutory authority or mention waiver of a judicial forum made it too general to effect a waiver.

While there is California precedent finding waiver appropriate when broad, nonspecific language in the arbitration clause is coupled with an explicit incorporation of statutory requirements elsewhere in the contract, this was not persuasive in the instant action. This was because Article 14 of the CNA CBA, which addresses compensation—even when read in conjunction with Article 12—failed to clearly state that the parties waived the right to a judicial forum for alleged statutory violations. Article 14 did not reference California law or other statutes involving employees' compensation. While Article 14 sets forth various requirements concerning the claim at issue, discussing a topic while at the same time saying nothing about the statutory right at issue does not constitute a clear and unmistakable waiver of that right.

The Court's conclusion was further supported by its analysis of Article 15 of the CNA CBA, which includes meal and rest period provisions. This section states that a nurse shall receive any and all penalties provided for under this Article, the Labor Code, or the Wage Order. The hospital accordingly argued that this reference to wage and hour claims under the Labor Code and applicable Wage Order was sufficient to effectuate a clear and unmistakable agreement to arbitrate the plaintiff's meal and rest period claims. The Court flatly rejected this argument, stating: "[a]n employer's agreement to pay a penalty required by law is not the same thing as a union's agreement to waive members' rights to a judicial forum for statutory violations." In other words, Article 15 did not make compliance with the Labor Code an express contractual commitment. Therefore, the hospital's motion to compel arbitration was denied, and the plaintiff was able to proceed with her claims in court notwithstanding the CNA CBA.

Recommendations

The touchstone of the Court's analysis is whether a CBA makes compliance with a statute at issue in litigation a contractual commitment subject to the arbitration clause contained therein. In making this determination, the Court here assessed:

  • The generality of the arbitration clause;
  • Explicit incorporation of statutory requirements; and
  • The inclusion of specific contractual provisions.

In order to compel arbitration of claims brought by an employee who is subject to a CBA, the employer should ensure during negotiations with unions that CBAs governing its employees expressly state, preferably in the grievance arbitration provision, that the dispute resolution procedure extends to wage and hour claims, including claims alleging violation of the applicable Labor Code, Wage Order, and/or the Fair Labor Standards Act. These grievance procedures should additionally be incorporated by reference in any other section of the CBA mentioning statutory rights. Doing so will help establish the clear and unmistakable intent necessary to compel arbitration.

We will keep you apprised of any future developments affecting the relevant standards for compelling arbitration pursuant to applicable CBA.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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