Employees Can Sue Even When Unions Have Arbitrated Claims

Published in The Daily Journal, Forum Column, October 23, 2006
By Douglas N. Silverstein and Alexandra M. Steinberg

So you think that those wage claims you arbitrated last month are resolved and your employees can't sue? Think again. 

More and more, employers are requesting - and often requiring - employees to agree to arbitrate their claims, in theory to manage the unpredictability of jury verdicts, reduce the cost of litigation and obtain a quick decision. In the unionized workplace, grievance and arbitration procedures are standard terms of collective bargaining agreements. However, there are important limitations on whether arbitration is final and binding, thus preventing employees from additionally pursuing the identical claims in court. 

In September, the 2nd District Court of Appeal held that a union did not waive its members' statutory rights and the employees could sue in court even though the union had grieved the same issue under the collective bargaining agreement's grievance and arbitration procedure. Zavala v. Scott Brothers Dairy, 2006 DJDAR 13130 (Sept. 28, 2006). Tempting though it may be to dismiss this as some liberal aberration out of California, for more than 25 years the United States Supreme Court has recognized that contractual rights and statutory rights are different and that disputes arising under them may be handled best in different fora. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991). This is because a union seeks to maximize collective interests, not individual interests, and because a union arbitrator with specialized competence "may not be conversant with the public law considerations" underlying statutory rights. Barrentine v. Arkansas-Best Freight System, 450 U.S. 728 (1981).

The recent decision stems from a 2005 class action filed by Robert Zavala against his employer, Scott Brothers Dairy, for failure to provide statutory rest breaks to its employees, failure to provide properly itemized wage statements, and unfair competition. A month before, the union grieved the rest break issue and resolved it with the Dairy shortly after the lawsuit was filed. The collective bargaining agreement provided for two 10-minute coffee breaks per day - and binding arbitration for "all disputes or controversies arising under [the] Agreement." 

Arguing that Zavala's claims were pre-empted by Section 301 of the Labor Management Relations Act and that he had agreed to arbitrate his statutory rest break claims, the company moved to compel arbitration. The trial judge denied the motion.

No Pre-emption for Statutory Rights 

Barrentine made clear that statutory claims are generally not pre-empted by federal labor law in the unionized workplace. Last year, the 3rd District Court of Appeal applied the same rule to California wage-and-hour laws. Cicairos v. Summit Logistics Inc., 133 Cal.App.4th 949 (2005). 

Simply put, rights granted by collective bargaining agreements are contractual in nature, whereas statutory rights are minimum labor standards that are nonnegotiable and cannot be pre-empted by federal labor law. This applies whether the claim is for wage-and-hour violations, as in Zavala, or other violations of statutory rights, such as discrimination. Wright v. Universal Maritime Service Corp., 525 U.S. 70 (1998). A prudent employer does not expend resources by removing such cases to federal court and bringing motions to dismiss based on pre-emption, because, absent some other basis for federal jurisdiction, it will find itself remanded to state court.

Statutory Rights Not Arbitrable 

Under Zavala, an employer can recite a statute verbatim in its collective bargaining agreement, then provide that all claims arising under the contract are subject to mandatory arbitration - and still find itself litigating those issues in court: "Mere recital of the statutory requirements in the CBA does not render arbitration of alleged violation of those statutory rights." In theory, the union and the employer could agree to arbitrate at least some statutory rights by making the waiver clear and unmistakable. However, no known cases have found a waiver to meet these criteria. More important, unions and employers typically don't want statutory claims to be part of a collective bargaining agreement's grievance and arbitration procedure because the courts are better equipped to adjudicate such claims.

Whether a waiver ever would be upheld for wage-and-hour claims that provide minimum labor standards such as rest periods or itemized wage statements is questionable, because the state Legislature has declared such rights to be nonwaivable under a collective bargaining agreement. Labor Code Section 219.

What is clear and unmistakable is that the Legislature intends employees to be able to bring their statutory rights for wage-and-hour violations before the courts. With such a strong position by the legislative and judicial branches, it makes little sense for employers to bring a motion to compel arbitration when faced with a statutory claim by a unionized employee.

No Claim/Issue Preclusion 

The point of collateral estoppel and res judicata is to avoid having to relitigate issues that have been adjudicated. No employer wants to expose itself to a second round of defending claims if it can resolve them once and for all. But that is exactly the case if a unionized employee grieves a statutory claim, then sues in court for the identical claims. 

The Zavala court held that there was no collateral estoppel or res judicata even where the rest break claims had been grieved fully to resolution through the union's grievance and arbitration procedure. Countless employees have been advised by plaintiffs' attorneys that they do not have a remedy in court because their unions had grieved identical issues. Zavala gives much-needed guidance that employees still may file their claims in court. 

Employers with unionized work forces should consider this carefully in their contract negotiations. And, where an employee brings a statutory claim in court, the employer is well-advised to stop fighting the losing battle of forums and tackle the merits of the claim.

© Alexandra M. Steinberg 2016 All rights reserved.