Johnson v. San Francisco Health Care and Rehab Inc.

Background

Jamie Johnson sued her former employer, San Francisco Health Care and Rehab Inc., in San Francisco Superior Court. She brought a putative class action alleging violations of California wage-and-hour laws and California’s unfair competition law. The allegations included failure to pay minimum wages and overtime, failure to provide meal and rest periods or compensation for them, failure to make timely final wage payments, failure to provide accurate itemized wage statements, and failure to make timely semimonthly payments.

The employer and the Service Employees International Union had a collective bargaining agreement. The employer removed the case to federal court, arguing that section 301 of the Labor Management Relations Act completely preempted some of Johnson’s state-law claims. Johnson moved to remand the case to state court, and the employer moved to dismiss.

Motion to Remand

The court denied Johnson’s motion to remand. It held that the employer consistently relied on federal-question jurisdiction based on Labor Management Relations Act section 301 preemption, so the employer’s amended removal notice and later briefing did not add a new jurisdictional basis.

The court applied the two-part preemption test. First, it asked whether each state-law right existed independently under state law or existed only because of the collective bargaining agreement. Second, it asked whether resolving the claim substantially depended on interpreting the agreement, rather than merely consulting or applying it.

The court held that the collective bargaining agreement did not satisfy California Labor Code section 514’s requirements for exempting employees from the state’s default overtime rules. In particular, the agreement’s lowest specified rate was $15 per hour, while the 2021 California minimum wage was $14 per hour and 130 percent of that amount was $18.20 per hour. The agreement’s savings clauses did not cure that deficiency. The court therefore held that the overtime claim was not preempted.

The court also held that the meal-and-rest-break and minimum-wage claims were not preempted. The employer had not shown that those rights existed solely because of the collective bargaining agreement or that interpreting the agreement was necessary to resolve the state-law claims.

The court reached a different conclusion for the claim under California Labor Code section 204. The collective bargaining agreement set paydays on the 10th and 25th of each month and addressed what happened when a payday fell on a Sunday. The court held that section 204(c) applied because the agreement provided different pay arrangements. As a result, the right asserted under section 204(a) arose from the agreement rather than state law, and the claim was preempted by Labor Management Relations Act section 301.

The court rejected the employer’s argument that section 204(c) also exempted claims under sections 201, 202, 203, and 226. It held that section 204(c) applies to section 204 and does not broadly exempt other wage-payment or wage-statement laws. Those claims were not preempted.

Motion to Dismiss

The court stated that an employee who brings a claim preempted by section 301 must generally use the collective bargaining agreement’s grievance and arbitration process, unless the employee alleges a valid reason for not doing so. Because Johnson had not alleged exhaustion of that process for her section 204 claim, the court dismissed the section 204 claim. It also dismissed the California unfair-competition claim to the extent it was based on the section 204 claim.

The court’s order states that the employer’s motion to dismiss was granted in part and denied in part: the Labor Code section 204 claim was dismissed as preempted, and the motion was denied in all other respects. The opinion does not state that this dismissal was with prejudice or without prejudice.

Supplemental Jurisdiction and Disposition

The court declined to exercise supplemental jurisdiction over the remaining state-law claims because it had not considered the merits of those allegations. The court therefore remanded the remaining claims to San Francisco Superior Court.

The court denied Johnson’s motion for remand, granted in part and denied in part the employer’s motion to dismiss, dismissed the Labor Code section 204 claim as preempted, declined supplemental jurisdiction over the remaining claims, and remanded the case to San Francisco Superior Court. Judge Jacquelyn Scott Corley signed the order.