Case Name: Ferdinand Batin, et al. v. McGee Air Services, Inc., et al.

Case No.: 19-CV-347733

This is a putative class and Private Attorneys General (“PAGA”) action alleging wage and hour violations by defendant McGee Air Services, Inc. Before the Court is McGee’s demurrer to the operative Third Amended Complaint (“TAC”), on the grounds that the Railway Labor Act (“RLA”) and/or the Airline Deregulation Act (“ADA”) preempt all of plaintiffs’ claims (Code Civ. Proc., § 430.10, subd. (a)), and their overtime claim fails to state a cause of action because their employment is exempt from California’s overtime laws under Industrial Welfare Commission Wage Order 9 and Labor Code section 514 (Code Civ. Proc., § 430.10, subd. (e)). Plaintiffs oppose the demurrer.

I. Allegations of the Operative Complaint

According to the TAC, McGee is an airline service provider and a wholly owned subsidiary of Alaska Airlines. (TAC, ¶ 2.) Plaintiff Ferdinand Batin was employed by defendant in California as a non-exempt employee from August to November of 2018, while plaintiff Nicolette Macleary has been employed in that capacity since January of 2019—in addition, each plaintiff has received non-discretionary incentive wages. (Id., ¶¶ 3-4.) Plaintiffs allege that McGee failed to include non-discretionary incentive pay in employees’ “regular rates of pay” for purposes of calculating overtime and missed meal period premiums. (Id., ¶¶ 9-11.) In addition, defendant failed to pay plaintiffs and putative class members for time spent travelling between a designated parking lot and their job sites before and after their shifts. (Id., ¶ 12.) Moreover, plaintiffs and other class members were unable to take off duty meal breaks due to their rigorous work schedules and thus forfeited meal breaks without receiving a premium. (Id., ¶ 14.) They were also denied proper rest periods. (Id., ¶ 15.) Due to these violations, McGee failed to provide employees with compliant itemized wage statements and violated the Unfair Competition Law (“UCL”). (Id., ¶¶ 16-17.)

Based on these allegations, plaintiffs bring this action on behalf of a putative class of all non-exempt California employees of McGee during the class period. They assert claims for (1) unlawful business practices in violation of the UCL, (2) failure to pay minimum wages in violation of Labor Code sections 1194, 1197, and 1197.1, (3) failure to pay overtime in violation of Labor Code sections 204,510, 1194, and 1198, (4) failure to provide meal period premium pay in violation of Labor Code sections 226.7 and 512, (5) failure to provide required rest periods in violation of Labor Code sections 226.7 and 512, (6) failure to provide accurate itemized wage statements in violation of Labor Code section 226, (7) failure to pay wages when due in violation of Labor Code sections 201-203, and (8) violations of PAGA.

II. Legal Standard

The function of a demurrer is to test the legal sufficiency of a pleading. (Trs. Of Capital Wholesale Elec. Etc. Fund v. Shearson Lehman Bros. (1990) 221 Cal.App.3d 617, 621.) Consequently, “[a] demurrer reaches only to the contents of the pleading and such matters as may be considered under the doctrine of judicial notice.” (South Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732, internal citations and quotations omitted; see also Code Civ. Proc., § 430.30, subd. (a).) “It is not the ordinary function of a demurrer to test the truth of the plaintiff’s allegations or the accuracy with which he describes the defendant’s conduct. … Thus, … the facts alleged in the pleading are deemed to be true, however improbable they may be.” (Align Technology, Inc. v. Tran (2009) 179 Cal.App.4th 949, 958, internal citations and quotations omitted.)

In ruling on a demurrer, the allegations of the complaint must be liberally construed, with a view to substantial justice between the parties. (Glennen v. Allergan, Inc. (2016) 247 Cal.App.4th 1, 6.) Nevertheless, while “[a] demurrer admits all facts properly pleaded, [it does] not [admit] contentions, deductions or conclusions of law or fact.” (George v. Automobile Club of Southern California (2011) 201 Cal.App.4th 1112, 1120.) A demurrer will lie where the allegations and matters subject to judicial notice clearly disclose a defense or bar to recovery. (Casterson v. Superior Court (Cardoso) (2002) 101 Cal.App.4th 177, 183.)

III. Request for Judicial Notice

Defendant’s arguments regarding RLA preemption and Wage Order 9/Labor Code section 514 are based on its assertion that a collective bargaining agreement governs plaintiffs’ employment. It asks the Court to take judicial notice of that agreement and an “extension” of it, pursuant to Evidence Code section 452, subdivision (h) and the incorporation by reference doctrine. Plaintiffs do not dispute that the agreement submitted by defendant governs their employment, but contend it would be improper take judicial notice of its truthfulness and proper interpretation. (See Apple Inc. v. Superior Court (Police Retirement System of St. Louis) (2017) 18 Cal.App.5th 222, 241 [stating “the general rule that judicial notice of a document does not extend to the truthfulness of its contents or the interpretation of statements contained therein, if those matters are reasonably disputable”].)

Here, the Court need only take judicial notice of the agreement’s existence and contents and of the fact that it governs plaintiffs’ employment to resolve most of the issues raised by defendant’s demurrer. These circumstances are not in dispute, and defendant’s request is properly GRANTED to this extent. (See Evid. Code § 452, subd. (e); Hendy v. Losse (1991) 54 Cal.3d 723, 728, 740 [taking judicial notice of employment contract to determine whether statutory immunity applied]; Angeles v. U.S. Airways, Inc. (N.D. Cal., Feb. 19, 2013, No. C 12-05860 CRB) 2013 WL 622032, at *3 [taking judicial notice of collective bargaining agreement under incorporation by reference doctrine where “the authenticity of the document is not contested and the complaint necessarily relies on the document”].) Still, plaintiff correctly urges that judicial notice does not extend to interpreting the agreement or relying on it to resolve disputed facts. (See Fremont Indem. Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 114-115 [“a court cannot by means of judicial notice convert a demurrer into an incomplete evidentiary hearing in which the demurring party can present documentary evidence and the opposing party is bound by what that evidence appears to show”]; Middlebrook-Anderson Co. v. Southwest Sav. & Loan Assn. (1971) 18 Cal.App.3d 1023, 1038 [“given the wide latitude of parol evidence admissible in interpreting a contract,” judicial notice of the existence of a document does not properly extend “to an interpretation of its meaning”].)

IV. The Third Cause of Action for Failure to Pay Overtime

McGee contends that plaintiffs’ third cause of action for failure to pay overtime fails to state a claim in light of the Railway Labor Act exemption in the applicable wage order and Labor Code section 514, which exempts employees covered by a collective bargaining agreement from overtime requirements under certain circumstances.

With regard to the first argument, the RLA, 45 U.S.C. § 151 et seq., “creates a comprehensive framework for resolving labor disputes in the rail and airline industries.” (Alaska Airlines Inc. v. Schurke (9th Cir. 2018) 898 F.3d 904, 916, cert. denied (2019) 139 S.Ct. 1445, internal citation and quotations omitted.) It provides that disputes concerning representation, such as “the scope of the bargaining unit and the identity of the bargaining representative,” must be resolved by the National Mediation Board. (Id. at p. 917.) “Major” disputes concerning rates of pay, rules, or working conditions—which arise where there is no collective bargaining agreement or parties seek to change the terms of an existing agreement—“must be resolved through an extensive bargaining, mediation, and noncompulsory arbitration process, in which both sides are subject to certain duties enforceable in federal court.” (Ibid.) “Minor” disputes, discussed below, involve the interpretation or application of a collective bargaining agreement and “must be addressed through the CBA’s established grievance mechanism, and then, if necessary, arbitrated before the appropriate adjustment board.” (Ibid.)

Industrial Welfare Commission Wage Order 9 is the California wage order governing the transportation industry. “IWC Order No. 9–2001, subdivision 1(E) contains an RLA exemption and provides that overtime wages do not have to be paid to “employees who have entered into a collective bargaining agreement under and in accordance with the [RLA] ….” (Fitz-Gerald v. SkyWest, Inc. (2007) 155 Cal.App.4th 411, 418-419, disapproved of on another ground by People ex rel. Harris v. Pac Anchor Transportation, Inc. (2014) 59 Cal.4th 772.)

Here, McGee submits a collective bargaining agreement stating that it is made in accordance with the RLA, with the International Association of Machinists & Aerospace Workers (“IAM”) “as the representative of the Company’s employees performing work of airport ground handling agents and/or passenger service agents, including (but not limited to) employees performing ramp services, gate services, check-in services, aircraft cabin cleaning, wheelchair services, and janitorial services.” The National Mediation Board certified IAM “to represent for the purposes of the RLA, as amended, the craft or class of Fleet and Passenger Service Employees, employees of McGee Air Services, Inc., its successors and assigns.” (In the Matter of the Representation of Employees of Mcgee Air Services, Inc. Fleet & Passenger Serv. Employees (Aug. 9, 2016) 43 NMB 159, 160.) Plaintiffs do not dispute that IAM represents them pursuant to the RLA or that the collective bargaining agreement presented by McGee governs their employment. As explained above, the Court can thus take judicial notice of these facts. (See Collins v. Overnite Transp. Co. (2003) 105 Cal.App.4th 171, 180 [trial court properly sustained demurrer without leave to amend where employees did not contest that their employer “is a motor carrier or that its drivers are subject to” certain regulations, where these circumstances established that the motor carrier exemption of Wage Order 9 applied]; see also Apple Inc. v. Superior Court, supra, 18 Cal.App.5th at pp. 241-242 [where composition of Apple’s board was not in dispute, judicial notice of the board’s composition as reflected in SEC filings was appropriate].) The federal cases cited by plaintiff, where these issues were disputed, are distinguishable.

As discussed below, plaintiffs contend that the RLA itself does not preempt their state law claims. However, they offer no response to McGee’s argument that Wage Order 9 independently exempts employees governed by a collective bargaining agreement under the RLA from overtime requirements. McGee’s argument is correct, and the demurrer to the third cause of action for failure to pay overtime is appropriately sustained on this ground. (See Fitz-Gerald v. SkyWest, Inc., supra, 155 Cal.App.4th at pp. 418-419 [affirming summary judgment on this ground]; Collins v. Overnite Transp. Co., supra, 105 Cal.App.4th at p. 180 [affirming order sustaining demurrer based on analogous exemption in Wage Order 9].) Still, if plaintiffs believe they can amend this claim to assert it on behalf of some group of employees that is not covered by the collective bargaining agreement submitted by McGee, leave to amend will be granted.

Because the RLA exemption established by Wage Order 9 applies, the Court need not address McGee’s argument regarding Labor Code section 514, which establishes a separate exemption from overtime laws for employees subject to a collective bargaining agreement.

V. RLA Preemption

Beyond its application to plaintiffs’ employment through Wage Order 9, defendant argues that the RLA itself preempts all of plaintiffs’ claims. As described above, the RLA “sets up a mandatory arbitral mechanism to handle disputes ‘growing out of grievances or out of the interpretation or application of agreements concerning rates of pay, rules, or working conditions,’ 45 U.S.C. § 153 First (i).” (Hawaiian Airlines, Inc. v. Norris (1994) 512 U.S. 246, 248.) Such disputes are known in labor law as “minor” disputes and “involve controversies over the meaning of an existing collective bargaining agreement in a particular fact situation.” (Id. at pp. 252-253, internal citations and quotations omitted.) They are “preempted” under the RLA not as in typical conflict preemption, which is driven by substantive conflicts in law, but through “a kind of ‘forum’ preemption, resembling … the reference of disputes to arbitration under the Federal Arbitration Act.” (Alaska Airlines Inc. v. Schurke, supra, 898 F.3d at p. 922.)

“[T]he RLA’s mechanism for resolving minor disputes does not pre-empt causes of action to enforce rights that are independent of the CBA.” (Hawaiian Airlines, Inc. v. Norris, supra, 512 U.S. at pp. 256-257.) It applies only “where the resolution of a state-law claim depends on an interpretation of the CBA.” (Id. at p. 261.) Courts have observed that “[t]he line between preempted claims and those that survive is not one that lends itself to analytical precision’ ”; however, the Ninth Circuit has distilled the large body of case law on this subject “into a two-part inquiry into the nature of a plaintiff’s claim.” (Alaska Airlines Inc. v. Schurke, supra, 898 F.3d at p. 920, internal citations and quotations omitted.)

First, courts in the Ninth Circuit “evaluate the legal character of the claim by asking whether it seeks purely to vindicate a right or duty created by the CBA itself.” (Alaska Airlines Inc. v. Schurke, supra, 898 F.3d at p. 921, internal citations and quotations omitted.) “If a claim arises entirely from a right or duty of the CBA—for example, a claim for violation of the labor agreement, whether sounding in contract or in tort—it is, in effect, a CBA dispute in state law garb, and is preempted.” (Ibid.) “By contrast, claims are not simply CBA disputes by another name, and so are not preempted under this first step, if they just refer to a CBA-defined right; rely in part on a CBA’s terms of employment; run parallel to a CBA violation; or invite use of the CBA as a defense.” (Ibid.)

If the first step of the analysis does not result in a finding of preemption, courts “ask whether litigating the state law claim nonetheless requires interpretation of a CBA, such that resolving the entire claim in court threatens the proper role of grievance and arbitration.” (Alaska Airlines Inc. v. Schurke, supra, 898 F.3d at p. 921.) Interpretation is construed narrowly in this context: “claims are only preempted to the extent there is an active dispute over the meaning of contract terms.” (Ibid., internal citation and quotations omitted.) It is insufficient “that resolving the state law claim requires a court to refer to the CBA and apply its plain or undisputed language—for example, to discern that none of its terms is reasonably in dispute; to identify bargained-for wage rates in computing a penalty; or to determine whether the CBA contains a clear and unmistakable waiver of state law rights.” (Id. at pp. 921-922, internal citations and quotations omitted.) Moreover, “the result of preemption at the second step is generally not the extinguishment of the state law claim,” but only a partial preemption: “for example, if addressing a state law claim first requires resolving a dispute over CBA interpretation, resolving that dispute—through grievance, through labor arbitration, or through settlement—should allow the state law claim to proceed.” (Id. at p. 922, fn. 14.)

Here, plaintiffs’ claims are not preempted under the first step of the Ninth Circuit’s framework. The minimum wage, meal, and rest period requirements at issue do not derive from plaintiffs’ collective bargaining agreement but from California law, and the other violations alleged are derivative of those claims.

With regard to the second step of the analysis, McGee contends that ruling on plaintiffs’ claims will require determining plaintiffs’ “regular rate of pay,” which in turn requires applying multiple provisions of the collective bargaining agreement. However, at this juncture, there is no indication that the interpretation of any of those provisions is disputed or necessarily will be. In this regard, the Court follows Lujan v. Southern California Gas Co. (2002) 96 Cal.App.4th 1200, which held that even where compensation “is computed according to a complex mathematical formula” under a collective bargaining agreement, there is no preemption where “the parties do not dispute how” that calculation is performed. (At p. 1211 [addressing Labor Management Relations Act preemption under the same standard that applies to RLA preemption].)

Defendant cites Blackwell v. SkyWest Airlines, Inc. (S.D. Cal., Dec. 3, 2008, No. 06CV0307DMSAJB) 2008 WL 5103195, which determined on summary adjudication that RLA preemption applied where an airline service provider’s collective bargaining agreement established “varying pay scales for straight time, overtime, supervisor override pay, and shift trades” that would have to be interpreted by the court to determine the “regular rate of pay” for purposes of assessing penalties. It also cites Fitz-Gerald v. SkyWest, Inc., supra, 155 Cal.App.4th 411, 421—on which Blackwell relied—which similarly reasoned on summary judgment that the regular rate of pay could not be calculated without determining whether an employee “was receiving flight play or block time play when [a meal or rest break] violation occurred” under the applicable collective bargaining agreement. These cases have been distinguished by subsequent opinions, and are distinguishable from this one. (See Angeles v. U.S. Airways, Inc., supra, 2013 WL 622032, at *7 [distinguishing Blackwell and Fitz-Gerald because “the CBAs in this case contain a simple compensation scheme that does not require interpretation, unlike the multi-category scheme in Blackwell, and the cases cited therein”]; Anguiano v. Mann Packing Co., Inc. (N.D. Cal., July 8, 2019, No. 19-CV-02133-VKD) 2019 WL 2929789, at *5 [“Blackwell is distinguishable …, as Mann Packing has not demonstrated that any terms of the CBA will require interpretation in order to resolve the dispute about calculation of Ms. Anguiano’s overtime pay”].) Here, there is no indication that applying the pay differentials defendant identifies—such as the one applicable to “Lead Agents”—will require the Court to interpret the agreement as opposed to simply applying it. As reasoned by Angeles v. U.S. Airways, Inc., supra, 2013 WL 622032, at *6, “whether a Lead Agent premium is applicable depends not on interpreting any part of the agreement, but on determining whether [employees] were classified as Lead Agents at the time of the hours worked. There is no dispute over the meaning of the term Lead Agent and application of this provision amounts to calculating wages,” which does not support a finding of preemption. (See also Alvarez v. Transitamerica Services, Inc. (N.D. Cal., Jan. 9, 2019, No. 5:18-CV-03106-EJD) 2019 WL 144592, at *6 [“At the pleading stage, Defendants’ argument is unpersuasive because Defendants have not identified any particular term within the CBAs that will require application or interpretation to decide whether Plaintiff was required to work off-the-clock. Instead, Defendants cite to provisions in the CBAs that may affect calculation of damages in the event Plaintiff prevails on the merits of the off-the-clock claim. The potential need to consult the CBAs for damages computation, however, does not mean the claim is preempted.”].)

McGee’s demurrer based on RLA preemption accordingly lacks merit.

VI. ADA Preemption

Finally, McGee contends that several of plaintiffs’ claims are preempted by the Airline Deregulation Act. The ADA was enacted following Congress’s determination “ that ‘maximum reliance on competitive market forces’ would best further ‘efficiency, innovation, and low prices’ as well as ‘variety [and] quality … of air transportation services.’ ” (Morales v. Trans World Airlines, Inc. (1992) 504 U.S. 374, 378, quoting ). 49 U.S.C.App. §§ 1302(a)(4), 1302(a)(9).) “To ensure that the States would not undo federal deregulation with regulation of their own, the ADA included a pre-emption provision, prohibiting the States from enforcing any law ‘relating to rates, routes, or services’ of any air carrier. § 1305(a)(1).” (Id. at pp. 378-379.) This provision broadly preempts “[s]tate enforcement actions having a connection with or reference to airline ‘rates, routes, or services.’ ” (Id. at p. 384.) It is not limited to direct regulation of rates, routes, or services or to laws specifically addressed to the airline industry, but may apply where laws indirectly impact the industry. (Id. at pp. 385-386 [holding airline advertising regulations were preempted].) In this regard, preemption occurs “where state laws have a ‘significant impact’ related to Congress’ deregulatory and pre-emption-related objectives,” but not where they affect rates, routes, or services “in only a ‘tenuous, remote, or peripheral … manner.’ ” (Rowe v. New Hampshire Motor Transport Ass’n (2008) 552 U.S. 364, 371 [delivery verification requirement was preempted because it would require carriers to offer services not provided by the market], quoting Morales.)

As urged by plaintiffs, opinions by the Ninth Circuit have held that the parallel preemption provision in the Federal Aviation Administration Authorization Act (“FAAAA”) (which, despite its name, applies to motor carriers) does not preempt California wage and hour laws. As explained by Dilts v. Penske Logistics, LLC (9th Cir. 2014) 769 F.3d 637, 642-643, there is a presumption against preemption of state police power regulations, including wage and hour laws. “[I]n borderline cases in which a law does not refer directly to rates, routes, or services, the proper inquiry is whether the provision, directly or indirectly, binds the carrier to a particular price, route or service and thereby interferes with the competitive market forces within the industry.” (Id. at p. 646, internal citation and quotations omitted; see also Air Transport Ass’n of America v. City and County of San Francisco (9th Cir. 2001) 266 F.3d 1064, 1072 [applying this standard in ADA case].) “Laws are more likely to be preempted when they operate at the point where carriers provide services to customers at specific prices,” such as restrictions on an airline’s frequent flyer program; “[o]n the other hand, generally applicable background regulations that are several steps removed from prices, routes, or services, such as prevailing wage laws or safety regulations, are not preempted, even if employers must factor those provisions into their decisions about the prices that they set, the routes that they use, or the services that they provide,” and “even if they raise the overall cost of doing business or require a carrier to re-direct or reroute some equipment.” (Ibid.) Applying these principles, Dilts held that the FAAAA does not preempt California’s meal and rest break laws.

McGee cites two unpublished district court opinions—both of which predate Dilts—for the proposition that wage and hour laws are preempted when applied to airline ground handling work. (See Blackwell v. SkyWest Airlines, Inc. (S.D. Cal., Dec. 3, 2008, No. 06CV0307DMSAJB) 2008 WL 5103195, at *15-18 [addressing the issue on summary judgment]; Angeles v. U.S. Airways, Inc. (N.D. Cal., Feb. 19, 2013, No. C 12-05860 CRB) 2013 WL 622032, at *8-9 [addressing the issue on a motion to dismiss, citing Blackwell].) The Court finds these cases unpersuasive. Moreover, they conflict with published California authorities, which have followed the Ninth Circuit in holding that “generally applicable employment laws that affect prices, routes, and services” are not preempted under the FAAAA/ADA. (People ex rel. Harris v. Pac Anchor Transportation, Inc. (2014) 59 Cal.4th 772, 783 [FAAAA did not preempt UCL action based on violations of California employment laws]; Valencia v. SCIS Air Security Corp. (2015) 241 Cal.App.4th 377, 385 [“Requiring SCIS to comply with California meal and rest break laws does not ‘relate to’ any airline’s ‘price, route, or service,’ and therefore Valencia’s meal and rest break claims are not preempted by the FADA.”]; see also Fitz-Gerald v. SkyWest, Inc. (2007) 155 Cal.App.4th 411, 423, fn. 7 [ADA does not preempt “actions to enforce state minimum wage laws or state laws governing meal/rest breaks”].) The Court follows the California and Ninth Circuit authorities that hold California wage and hour claims are not preempted by the ADA.

McGee’s demurrer based on ADA preemption thus fails.

VII. Conclusion and Order

McGee’s demurrer is SUSTAINED IN PART as to the third cause of action for failure to pay overtime, because the RLA exemption in Wage Order 9 applies to this claim. If plaintiffs believe they can amend this claim to assert it on behalf of some group of employees that is not covered by the collective bargaining agreement submitted by McGee, leave to amend this claim will be granted. The demurrer is otherwise OVERRULED.

The Court will prepare the order.