Choate v. Celite Corp.

• Decision Date: 02 May 2013
• Docket Number: 2d Civil No. B239160
• Citation: 155 Cal.Rptr.3d 915,215 Cal.App.4th 1460
• Court: California Court of Appeals Court of Appeals
• Parties: Howard CHOATE et al., Plaintiffs and Respondents, v. CELITE CORPORATION, Defendant and Appellant.

215 Cal.App.4th 1460

155 Cal.Rptr.3d 915

Howard CHOATE et al., Plaintiffs and Respondents,

v.CELITE CORPORATION, Defendant and Appellant.

2d Civil No. B239160

Court of Appeal, Second District, Division 6, California.

Filed May 2, 2013

Reversed and remanded.

See 3 Witkin, Summary of Cal. Law (10th ed. 2005) Agency and Employment, § 418.

James W. Brown, Judge, Donna D. Geck, Judge, Superior Court County of Santa Barbara. (Super.Ct. No. 1336975) (Santa Barbara County)

Sheppard, Mullin, Richter & Hampton LLP, Jeffrey A. Dinkin, Santa Barbara, and Karin Dougan Vogel, San Diego, for Defendant and Appellant.

Gilbert & Sackman, Los Angeles, Robert A. Cantore and Adrian Barnes for Plaintiffs and Respondents.

HOFFSTADT, J.^*

An employer in California must immediately pay a terminated employee for all of his “vested vacation time” unless the union representing that employee has negotiated a collective bargaining agreement that “otherwise provide[s].” (Labor Code, §§ 227.3, 201.) ¹ We hold that a collective bargaining agreement “otherwise provide[s]” and thereby abrogates an employee's statutory right under section 227.3 to immediate payment for vested vacation time only if the agreement clearly and unmistakably waives that right. Because the agreement in this case lacked this clarity, Celite Corporation (Celite) was required to immediately pay terminated employees for all their vested vacation time. We nevertheless reverse the trial court's judgment imposing waiting time penalties because Celite's nonpayment was not “willful.”

FACTS AND PROCEDURAL HISTORY

Celite mines and manufactures diatomaceous earth in Lompoc, California. International Chemical Workers Union/C–UFCW Local 146–C (Union) represents Celite's employees. Under the collective bargaining agreements in effect between 2003–2007 and 2007–2010 (the Agreements), Celite granted its employees between one and five weeks of vacation annually. Each January, Celite calculated a yearly “vacation allotment” based on each employee's length of employment and the number of hours they worked the year before.

Under the Agreements, employees terminated from Celite were entitled to “receive whatever vacation allotment is due them upon separation.” ² For 25 years, both Celite and the Union understood this provision to refer to the “vacation allotment” as defined above. Accordingly, Celite paid terminated employees for the vacation time already allotted to them for the year of their termination, but did not pay them the vacation time they had accrued toward the next year's allotment.

Howard Choate (Choate), Billy Henry (Henry), and Leroy Stricklin (Stricklin) (collectively, Plaintiffs) worked for Celite until they were laid off on March 1, 2007. Celite immediately paid Plaintiffs their “vacation allotment” for 2007, but did not pay them for vacation time they had accrued toward January 2008's allotment between January 1 and March 1, 2007.

Plaintiffs thereafter filed a class action against Celite seeking (1) the pro rata portion of the January 2008 “vacation allotment” they had earned while employed between January 1 and March 1, 2007, pursuant to section 227.3 (pro rata vacation time); (2) thirty days of salary, as waiting time penalties pursuant to section 203, because Celite had “willfully” refused to pay them immediately for the pro rata vacation time; and (3) damages arising from these violations, which they allege violated the unfair competition law, Business and Professions Code section 17200.³

The parties made cross-motions for summary adjudication based on stipulated facts. The trial court denied summary adjudication of Plaintiffs' vacation pay and unfair competition claims.

The court granted summary adjudication to Plaintiffs on their waiting time penalties claim. The court concluded that section 227.3 obligated Celite to pay Plaintiffs for their pro rata vacation time immediately upon their termination unless the Agreements “otherwise provided.” The court ruled that the Agreements did not waive Plaintiffs' rights to the pro rata vacation time in clear and unmistakable terms. The court further determined that Celite had acted willfully in refusing to pay Plaintiffs because Celite's legal duty to do so was clear and because Celite acted unreasonably in believing that the Agreements' implicit waiver of these rights was valid. The court also rejected Celite's argument that Plaintiffs' claims were preempted by the Labor Management Relations Act (LMRA). The court accordingly concluded that Celite owed waiting time penalties.

Plaintiffs dismissed their unpaid vacation claim because Celite eventually paid them for the pro rata vacation time, and dismissed their unfair competition claim to expedite appellate review. The parties also stipulated to class certification for the waiting time penalties claim. The court subsequently entered judgment for Plaintiffs.

DISCUSSION

Celite argues that it should not be held liable for waiting time penalties because (1) it never owed Plaintiffs the pro rata vacation time in the first place; (2) even if it did, it did not “willfully” refuse to pay Plaintiffs because it reasonably believed the Agreements had waived Plaintiffs' right to that pay; and (3) Plaintiffs' claims are preempted by the LMRA in any event.

I. Celite Owed Plaintiffs Pro Rata Vacation Time

Celite contends that the Union waived Plaintiffs' statutory right under section 227.3 to the pro rata vacation time. As evidence of this waiver, Celite notes that (1) the Agreements discuss what vacation pay terminated employees are to receive and limit that pay to the “vacation allotment” for the year of termination; and (2) consistent with the Agreements, Celite had for decades paid terminated employees only the “vacation allotment” without any objection from the Union. Because section 227.3 empowers a union to waive its members' rights to “vested vacation time” by entering into a collective bargaining agreement that “otherwise provide[s]” (§ 227.3), Celite's arguments present two questions for review: How clearly must a waiver of rights under section 227.3 be, and do the Agreements here meet that standard? We review both questions de novo. ( Coito v. Super. Ct. (2012) 54 Cal.4th 480, 488, 142 Cal.Rptr.3d 607, 278 P.3d 860 [issues statutory construction reviewed de novo]; Roybal v. Governing Bd. of Salinas City Elem. Sch. (2008) 159 Cal.App.4th 1143, 1148, 72 Cal.Rptr.3d 146 [application of law to undisputed facts reviewed de novo].)

A. A waiver of rights under section 227.3 must be clearly and unmistakably stated in the collective bargaining agreement

Once an employer makes vacation pay a term of employment, section 227.3 entitles terminated employees to immediate payment for any “vested vacation time” unless a collective bargaining agreement “otherwise provide [s].” (§ 227.3, 201; cf. Suastez v. Plastic Dress – Up Co. (1982) 31 Cal.3d 774, 784, 183 Cal.Rptr. 846, 647 P.2d 122 ( Suastez ) [if employer does not offer vacation time, § 227.3 does not apply]; Boothby v. Atlas Mechanical, Inc. (1992) 6 Cal.App.4th 1595, 1602, 8 Cal.Rptr.2d 600 [if employer “caps” vacation accrual, § 227.3 does not override that cap].) ⁴ The parties disagree on what our Legislature meant when it required collective bargaining agreements to “otherwise provide[ ]”: Celite contends that a waiver of the right to payment under section 227.3 may be inferred from the totality of the circumstances, while Plaintiffs defend the trial court's ruling that any waiver must be clearly and unmistakably stated in the collective bargaining agreement. We agree with the trial court that section 227.3 requires any union waiver of its members' statutory right to payment under section 227.3 be made clearly and unmistakably.

Three canons of statutory construction dictate this conclusion. First, we are required to construe statutes to avoid absurd consequences. ( In re Greg F. (2012) 55 Cal.4th 393, 406, 146 Cal.Rptr.3d 272, 283 P.3d 1160.) As it stands now, a collective bargaining agreement validly waives a union member's right to litigate federal or state claims in a judicial forum only if the waiver is clear and unmistakable. ( Vasquez v. Super. Ct. (2000) 80 Cal.App.4th 430, 434–435, 95 Cal.Rptr.2d 294( Vasquez ) [under state law] ); 14 Penn Plaza v. Pyett (2009) 556 U.S. 247, 272, 274, 129 S.Ct. 1456, 173 L.Ed.2d 398 [under federal law]. The same is true for waivers of substantive rights conferred by federal statute Metropolitan Edison Co. v. NLRB (1983) 460 U.S. 693, 708, 103 S.Ct. 1467, 75 L.Ed.2d 387 (Metropolitan Edison Co.) and for waivers of public employee's rights conferred by California statute ( Oakland Unified Sch. Dist. v. Public Employee Relations Bd. (1981) 120 Cal.App.3d 1007, 1011, 175 Cal.Rptr. 105).

Against this backdrop, the totality of the circumstances standard proffered by Celite leads to absurd results. Because the totality of the circumstances standard looks to evidence (such as mutual understanding and past practices) beyond the collective bargaining agreement, this standard by definition empowers courts to infer a waiver when the agreement does not clearly and unmistakably memorialize one. Consequently, the totality of the circumstances standard would make it easier for unions to waive their members' substantive rights than members' procedural right to litigate those substantive rights in a judicial forum; easier to waive state statutory rights than federal statutory rights; and easier to waive private sector employees' rights than public employees' rights. Celite offers no justification for these counter-intuitive and irrational outcomes. Importantly, these outcomes are avoided entirely if the waiver of union members' statutory rights under state law—like the waivers of the other rights described above—must be clear and unambiguous.

Second, we construe ambiguities in labor statutes to be more (rather than less) protective of employees' rights. ( Kirby v. Immoos Fire...