PREEMPTION AT SEA: COURT APPLIES NLRA TO SHIP OFFSHORE WAGE CLAIMS TO ARBITRATOR

JasonAlbrightblog12-24-15

Does the extraordinary preemptive force of the National Labor Relations Act begin to weaken somewhere west of Malibu? A proposed class of employees on a Pacific oil rig argued that the NLRA should not apply to their state wage claims, but a federal court in California ordered them to sail straight to arbitration under two labor contracts that may or may not even have applied to the offshore location.

Holding that it had to interpret the labor contracts to decide whether they applied to the oil platform, the court found that the claims were preempted, and then it ordered the parties to go to arbitration before saying whether the contracts applied. Curtis v. Irwin Indus., Inc., 2015 LRRM 374933, 2015 BL 374933 (C.D. Cal. 2015). The case shows how quick some courts have become to apply and defer to an agreement to arbitrate wage disputes.

Marooned?

The plaintiffs, two former employees, worked on an oil platform off the California coast where shifts usually lasted seven days.

They said they were paid for 12 hours a day but couldn’t reasonably leave the oil platform during their weeklong shifts.

No man is an island

Both plaintiffs belonged to a union. They didn’t dispute that they were members of a United Steelworkers local during their employment on the platform.

There were also a couple of labor contracts that might apply. The union and the employer had entered into two contracts, and both contained arbitration clauses. Both contracts covered wage disputes and said, “[a]ny alleged violation of any applicable wage order shall be resolved exclusively under and in accordance with the procedure for settlement of grievances and disputes.”

Full speed ahead

Plaintiffs sued in California state court, individually and on behalf of a proposed class of the employer’s hourly employees who worked for periods of 24 consecutive hours or more at any time within four years of the date of filing. This included more than 25 employees.

Plaintiffs alleged California minimum wage violations, pay stub violations, unfair competition, failure to pay final wages on time, failure to provide lawful meal and rest periods, and failure to pay overtime and double-time wage premiums. They also asked for civil penalties under California’s Private Attorneys General Act of 2004.

Wet suit?

The employer, not about to run aground, removed the case to federal court, where it asked that the case be dismissed.

The employer’s argument, to be crude, was that federal labor law took the place of the state claims. The employer said plaintiffs’ reliance on state law is misplaced, federal labor law preempts the claims, and that plaintiffs failed to exhaust their remedies under the labor contracts.

A fourth argument was that the plaintiffs are exempt from overtime requirements under the California labor code and a state industrial wage order.

Off the shelf

In response to the preemption defense, plaintiffs contended that the labor contracts don’t apply to any proposed class members. First, they said the contracts don’t cover work performed in federal territories, like an oil platform in the Pacific Ocean more than three miles from shore. They also argued that the contracts don’t say anything at all about whether they cover the oil platforms.

The court first recognized that not every claim that requires it to refer to the language of a labor contract is preempted for that reason. The court pointed out the difference between preempted claims, which require interpretation or construction of a contract, and those that require only that the court “look at” some obvious contract term.

Ahoy there!

Then the court said something interesting: “When courts must interpret or construct a labor agreement, the rationale underlying §301—promoting the arbitration of labor contract disputes—mandates a finding of preemption.” Interesting because the rationale of Section 301 when Congress enacted the Labor Management Relations Act in 1947 had nothing to do with arbitration. The act was intended to open access to the federal courts in cases alleging breaches of labor contracts.

Finding that it could not simply “look at” the contracts but must interpret and possibly construct them, the court said the claims were preempted, and then it ordered the parties to arbitrate them.

What the court didn’t say was whether either contract covered the oil platform at all, and thus whether there was any basis for arbitrating claims arising there. Arbitration may have seemed more sensible than sending the claims back to a California court, but the court didn’t explain exactly how it arrived at that port of call.

On December 10, the plaintiffs asked the court to alter or amend its judgment. Among other things, they argued that the court didn’t find a “clear and unmistakable” waiver of the state-law claims, and that the court must address their argument that the Outer Continental Shelf Lands Act gives California a vested right to regulate employment on the oil platform.

Whatever the court or a federal appellate court finally decides, the case illustrates what sometimes happens in the uncertain gulf between the LMRA and the Federal Arbitration Act, as judges seek both efficiency in the management of their dockets and deference to the contractual choices of unions and employers.

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