Cortes v. Mass Electric Construction Co.

Background

Craig Cortes sued Mass Electric Construction Co. in Contra Costa County Superior Court under California’s Private Attorneys General Act, known as PAGA. He asserted six California Labor Code claims: failure to pay minimum wages; failure to pay wages and overtime; failure to provide meal periods; failure to provide rest breaks; violations involving wage statements and payroll records under Labor Code sections 226(a) and 1174; and violations involving final wages under sections 201 and 203.

Mass Electric removed the case to federal court. It argued that the claims were completely preempted by Section 301 of the Labor Management Relations Act, or LMRA, because the claims were subject to California-law exemptions for employees covered by collective bargaining agreements and because resolving the claims would require interpreting those agreements. Mass Electric also cited the National Labor Relations Act in its notice of removal. Cortes moved to remand, asking the federal court to return the case to state court.

Legal Standard

Federal courts generally may hear a state-court case only when federal jurisdiction appears from the plaintiff’s properly pleaded complaint. A federal defense, including ordinary preemption, ordinarily does not create federal jurisdiction. Complete preemption is a limited jurisdictional doctrine under which federal law can convert a state-law claim into a federal claim.

The court applied the Ninth Circuit’s two-step framework from Burnside v. Kiewit Pacific Corp. First, it asked whether the asserted right existed only because of a collective bargaining agreement. If not, it asked whether resolving the state-law right substantially depended on interpreting the agreement. Interpretation requires more than consulting, applying, or referring to undisputed agreement language; there must be an active dispute about the meaning of agreement terms.

Reasons for Remand

The court held that Cortes’s second, third, and fourth causes of action did not support removal under the first step. Those claims relied on California statutes concerning overtime, meal periods, and rest breaks, so the rights asserted arose from state law rather than solely from a collective bargaining agreement.

Mass Electric relied on California Labor Code exemptions that can apply when an employee is covered by a qualifying collective bargaining agreement. The court held that those exemptions were affirmative defenses—defenses that the employer must plead and prove—not sources of federal jurisdiction. Because Cortes pleaded state-law claims and disclaimed claims under the collective bargaining agreements, the possible state-law exemptions did not make the claims completely preempted.

The court also rejected Mass Electric’s argument that the first cause of action, involving minimum wages, required interpretation of collective bargaining agreements. Mass Electric identified provisions concerning actual time worked, shutdowns, waiting time, overtime, and additional compensation. But the court found that Mass Electric had not identified an active dispute over the meaning of any agreement term. The complaint used state-law standards concerning compensable work time, and deciding when employees were under the company’s control would require factual findings, not interpretation of the agreements. The court stated that any agreement provisions consulted for damages calculations could be applied without interpreting disputed language.

Because the first four causes of action were not preempted, the court held that causes of action five and six, which were derivative of those claims, also did not provide federal-question jurisdiction.

Disposition

The court GRANTED Cortes’s motion to remand and remanded the case to the Superior Court of Contra Costa County. It held that Mass Electric had not met its burden of showing that Cortes’s claims were preempted by Section 301 of the LMRA and that the federal court lacked subject-matter jurisdiction over any of the causes of action. The order disposed of Docket No. 12. Judge Jacqueline Scott Corley signed the order.