Gunther v. North Coast Cooperative, Inc.

Background

Kenneth Gunther filed a class action in Humboldt County Superior Court against North Coast Cooperative, Inc. The complaint asserted ten causes of action: nine under California Labor Code provisions and one under California’s unfair-business-practices law. The claims concerned alleged unpaid overtime, meal-period and rest-break premiums, minimum wages, timely payment of final wages, wage statements, payroll records, unreimbursed business expenses, and related conduct. The complaint did not assert a federal claim or refer to the collective bargaining agreement (CBA).

During Gunther’s employment, North Coast and United Food and Commercial Workers Union, Local 5, were parties to a CBA. The agreement addressed employee membership, hours, breaks, wage rates, and a grievance process ending in arbitration. North Coast removed the case under federal-question jurisdiction, arguing that Section 301 of the Labor Management Relations Act completely preempted the state-law claims. Gunther moved to remand, meaning he asked the federal court to return the case to state court.

Section 301 Preemption

The court applied the Ninth Circuit’s two-part Burnside test. First, it asked whether the claimed rights existed only because of the CBA. If not, it asked whether resolving the claims nevertheless substantially depended on interpreting the CBA. Mere reference to or consideration of an agreement is not enough; preemption requires an active dispute about the meaning of contract terms.

The court first found that Gunther was covered by the CBA. The agreement required full- and part-time employees to become and remain union members in good standing after 30 days of employment or the agreement’s execution, whichever was later. Gunther worked for North Coast for nearly two years, so the court concluded that his employment was subject to the CBA.

Overtime Claim

California Labor Code section 510 generally requires overtime pay, but section 510 does not apply when a CBA meets the requirements of section 514. Among other requirements, section 514 requires the CBA to provide for wages, hours, and working conditions and to provide premium overtime rates and regular hourly pay of at least 30 percent more than the state minimum wage.

The court followed prior decisions interpreting section 514 to require the CBA to meet those requirements for all covered employees, not merely for a particular employee. The record showed that many covered employees earned less than the required premium rate. Gunther’s highest hourly wage was $12.97, while the court calculated that he would have needed to earn $13.65 in 2017 to meet the requirement. The court therefore concluded that Gunther’s overtime right existed independently of the CBA and was not preempted at the first step.

The court also found that North Coast had not shown that resolving the overtime claim would require interpreting the CBA. North Coast made general assertions that interpretation would be necessary but did not identify a specific disputed overtime term. At most, the court might need to refer to the CBA to determine a wage rate or job classification, which was insufficient for preemption.

Meal-Period and Rest-Break Claims

California Labor Code section 512 provides meal-period rights, subject to a statutory CBA exemption with several requirements, including a qualifying wage rate and specified types of employment. The court found that the CBA did not satisfy the wage requirement for Gunther and some other covered employees. It also found that the grocery-store employment described in the record was outside the categories of employment eligible for the exemption. Gunther’s meal-period rights therefore existed independently of the CBA.

For the second Burnside step, North Coast argued that the court would need to interpret Article 6, a time-and-attendance policy, and the parties’ past practices. But North Coast did not identify any specific undefined, disputed, or ambiguous terms or explain why the different language in those materials affected the claims. The court concluded that considering the CBA and past practices might be necessary, but interpreting disputed CBA terms was not. The meal-period and rest-break claims were therefore not preempted.

Grievance and Arbitration Provision

Gunther also argued that the CBA’s grievance and arbitration provision did not waive his right to pursue statutory claims in court. The court explained that such a waiver must be “clear and unmistakable.” The CBA defined a grievance as a dispute about interpreting or applying the agreement and did not identify the California Labor Code provisions at issue. Although a time-and-attendance policy referred once to California Labor Code section 226.7, that reference was not part of the grievance or arbitration procedures. The court held that this was not a clear and unmistakable waiver of the right to bring statutory claims in court.

Disposition

The court concluded that the overtime, meal-period, and rest-break claims were not preempted and that the grievance and arbitration provision did not establish preemption. Because North Coast’s removal depended solely on those arguments, the court granted Gunther’s Motion for Remand and remanded the action to Humboldt County Superior Court. The order did not decide the underlying wage-and-hour claims.