The panel found the federal judge who effectively scuttled the lawsuit did not have jurisdiction to hear the case, and sent it back to state court for more proceedings.
The dispute began when Ian McCray, who worked as a server at the Marriott Hotel in San Jose, noticed his wages hadn’t gone up even after San Jose voters passed an initiative establishing a $10 minimum wage for workers in the city.
McCray made $9 an hour. He questioned why he was being paid less and was told that his union, United Here Local 19, had opted out of the $10 minimum wage law so it could get other benefits like health insurance for its members.
McCray sued in state court to strike down the agreement between his union and Marriott. Marriott removed the case to federal court, where U.S. District Judge Nathanael Cousins granted summary judgment in its favor by finding McCray had failed to exhaust his collective bargaining agreement’s grievance process. McCray appealed.
In a 2-1 decision, a three-judge appellate panel said Cousins should have sent the case back to state court, as McCray had requested, because his claims arise under California law and assert rights that are not solely granted by the labor agreement.
“The rights at issue – that is, the right to be paid the $10 hourly minimum wage and the right to receive back pay and other compensation for Marriott’s alleged failure to do so – arise under state and local law and would exist with or without the CBA [Collective Bargaining Agreement],” U.S. Circuit Judge Albert Diaz wrote for the majority. Diaz, who is from the Fourth Circuit and was sitting on the panel by designation, was joined by U.S. Circuit Judge Ronald Gould.
U.S. Circuit Judge Mary Schroeder dissented, saying she would affirm Cousins’ ruling because the terms of the agreement should be interpreted under federal law. Schroeder said Cousins got it right, noting that when state law claims require analysis of a collective bargaining agreement, the claims are pre-empted by the federal Labor Management Relations Act which grants the federal court jurisdiction.
“The essence of McCray’s claim is that the employer is required to pay the city’s minimum wage. Thus, he contends the opt-out contained in the CBA is not to be given effect. Of course McCray’s complaint does not discuss the CBA because he wishes the claim to be litigated in state court, but the district court correctly recognized that the dispute is actually about the CBA. We should similarly reject the pretense that this case is about state law,” she wrote.
McCray’s lawsuit could have far-reaching implications for municipal minimum wage laws throughout California. Several cities in California, including San Francisco and Los Angeles, have adopted ordinances that raise the minimum wage to $15, typically in increments of about $1.50 per year.
However, most of these cities have included provisions that waive collective bargaining agreements. San Francisco’s minimum wage law explicitly provides for a union opt-out.
San Jose’s ordinance, which is mostly identical to San Francisco’s, reads: “To the extent required by federal law, all or any portion of the applicable requirements of this chapter may be waived in a bona fide collective bargaining agreement, provided that such waiver is explicitly set forth in such agreement in clear and unambiguous terms.”
The one important difference is the condition precedent “To the extent required by federal law. As Diaz noted in his opinion, “no federal law requires the minimum wage requirement to be waivable.”
McCray’s attorney James Pagano said the issue will come down to whether the additional line of language in San Jose’s ordinance is taken as intentional.
“We will argue the distinction because the language is identical with exception of the condition precedent, they knew how San Francisco wrote it and they wrote it differently, and you can’t just ignore that. There’s a reason they put this condition in,” he said.