CHARLES E. WARD, individually, and on behalf of all others similarly situated v. UNITED AIRLINES, INC.; FELICIA VIDRIO, individually, and on behalf of all others similarly situated; PAUL BRADLEY, individually, and on behalf of all others similarly situated v. UNITED AIRLINES, INC., and DOES, 1 through 50, inclusive
No. 16-16415, No. 17-55471
United States Court of Appeals for the Ninth Circuit
Filed February 2, 2021
D.C. No. 3:15-cv-02309-WHA, D.C. No. 2:15-cv-07985-PSG-MRW; OPINION
FOR PUBLICATION
Appeal from the United States District Court for the Northern District of California William Alsup, District Judge, Presiding
Appeal from the United States District Court for the Central District of California Philip S. Gutierrez, Chief District Judge, Presiding
Argued and Submitted October 30, 2020 San Francisco, California
Before: Paul J. Watford and Michelle T. Friedland, Circuit Judges, and Jed S. Rakoff,* District Judge.
Opinion by Judge Watford
SUMMARY**
California Labor Code / Preemption
The panel reversed the district courts’ summary judgment in favor of United Airlines, Inc. in two consolidated cases brought by certified classes of United pilots and flight attendants who reside in California, alleging that the wage statements they received from United failed to comply with
The panel certified to the California Supreme Court the question whether
The dormant Commerce Clause limits the States’ authority to enact or enforce laws that burden interstate commerce. Generally, state laws that discriminate against or directly regulate interstate commerce are virtually per se invalid, but non-discriminatory laws that have only incidental effects on interstate commerce will generally be
upheld. The panel held that
The panel held that the Airline Deregulation Act of 1978 did not preempt application of
The panel held that plaintiffs’ claims under
The panel declined to reach the merits of plaintiffs’ claims in the first instance, and remanded to the district courts to determine whether United complied with
COUNSEL
Kirk D. Hanson (argued) and Jeffrey C. Jackson, Jackson Hanson LLP, San Diego, California; Stuart B. Esner and Joseph S. Persoff, Esner Chang & Boyer, Pasadena, California; for Plaintiffs-Appellants.
Adam P. KohSweeney (argued) and Susannah K. Howard, O‘Melveny & Myers LLP, San Francisco, California; Robert Siegel, O‘Melveny & Myers LLP, Los Angeles, California; for Defendant-Appellee.
Douglas W. Hall, Shay Dvoretzky, and Vivek Suri, Jones Day, Washington, D.C., for Amicus Curiae Airlines for America.
WATFORD, Circuit Judge:
These consolidated cases involve pilots and flight attendants who allege that their employer, United Airlines, is violating a provision of California law regulating the wage statements that employees must receive with each paycheck. See
spend most of their time working outside of California. We reject that contention.
I. Background
These two consolidated cases were filed in different district courts but are founded on the same allegations. In one, plaintiff Charles Ward represents a certified class of United pilots who reside in California; in the other, plaintiffs Felicia Vidrio and Paul Bradley represent a certified class of United flight attendants who also reside in California. In both cases, plaintiffs allege that the wage statements they receive from United fail to comply with
Plaintiffs allege that United‘s wage statements fail to comply with
category. United provides its employees with online access to a separate “pay register,” which affords greater detail about the employee‘s work activities and potential compensation during the relevant pay period. The parties dispute whether the pay registers supply the information required by
In both cases, after the parties filed cross-motions for summary judgment, the district courts granted summary judgment for United. Both courts examined California case law and held that
As noted, we certified to the California Supreme Court the question whether
Supreme Court held that the statute applies “if the employee‘s principal place of work is in California.” Ward v. United Airlines, Inc., 466 P.3d 309, 325 (Cal. 2020). The court concluded that California qualifies as an employee‘s principal place of work if: (1) the employee works a majority of the time in California; or (2) with respect to interstate transportation workers who do not work a majority of the time in any one State, “the worker has his or her base of work operations in California.” Id. The court further stated that an employee is “based in” California for purposes of this test if the employee performs at least some work in California and “California serves as the physical location where the worker presents himself or herself to begin work.” Id. at 321; see also id. at 324 (“[I]f a pilot or flight attendant has a designated home-base airport, section 226 would apply if that airport is in California, and not if it is elsewhere.“). We will refer to this set of principles defining
Following the California Supreme Court‘s decision, we asked the parties to
United argues that, even though the California Supreme Court has now clarified that
in its favor. Although United does not challenge the validity of
II. Dormant Commerce Clause
The dormant Commerce Clause limits the States’ authority to enact or enforce laws that burden interstate commerce, even in the absence of legislative action by Congress. American Trucking Associations, Inc. v. Michigan Public Service Commission, 545 U.S. 429, 433 (2005); Raymond Motor Transportation, Inc. v. Rice, 434 U.S. 429, 440 (1978). Those limits are delineated by two general rules. On one hand, state laws that discriminate against or directly regulate interstate commerce are virtually per se invalid. Department of Revenue of Kentucky v. Davis, 553 U.S. 328, 338 (2008); Brown-Forman Distillers Corp. v. New York State Liquor Authority, 476 U.S. 573, 579 (1986). On the other hand, non-discriminatory laws that have only incidental effects on interstate commerce will
generally be upheld “unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits.” Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970).
A
The first question is whether
We can quickly dismiss any suggestion that application of the Ward test results in discrimination against interstate commerce. Discrimination in this context means treating similarly situated in-state and out-of-state economic interests differently in a way that favors the in-state interests. Rocky Mountain Farmers Union v. Corey, 730 F.3d 1070, 1087 (9th Cir. 2013). The Ward test is non-discriminatory because it imposes burdens on private employers evenhandedly, whether they are based in-state or out-of-state. See CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69, 87 (1987); Association des Eleveurs de Canards et d‘Oies du Quebec v. Harris, 729 F.3d 937, 948 (9th Cir. 2013). United is incorporated in Delaware and has its headquarters in Illinois, but it would be subject to the same burdens imposed under the Ward test even if it were based in California.
Nor do we find merit in United‘s argument that application of the Ward test results in direct regulation of interstate commerce. United‘s argument hinges on a line of Supreme Court cases invalidating state laws that had the practical effect of directly regulating commerce occurring wholly outside the enacting State‘s borders. See Healy v. Beer Institute, 491 U.S. 324, 336 (1989); Brown-Forman,
476 U.S. at 578–79, 582–83; Edgar v. MITE Corp., 457 U.S. 624, 641-43 (1982) (plurality opinion); Baldwin v. G. A. F. Seelig, Inc., 294 U.S. 511, 521–22 (1935). United contends that, by permitting application of
Our circuit‘s law casts doubt on the continued viability of the broad extraterritoriality principle on which United relies. In Pharmaceutical Research and Manufacturers of America v. Walsh, 538 U.S. 644 (2003), the Supreme Court suggested that the rule applied in Healy and Baldwin is limited to cases involving “price control or price affirmation statutes.” Id. at 669. We have read the Court‘s decision in Pharmaceutical Research as holding that the extraterritoriality principle derived from the Healy line of cases now applies only when state statutes have the practical effect of dictating the price of goods sold out-of-state or tying the price of in-state products to out-of-state prices. See Association des Eleveurs de Canards, 729 F.3d at 951. Under that narrow understanding, United‘s extraterritoriality challenge obviously fails.
But even under a broad understanding of the extraterritoriality principle, United‘s challenge lacks merit.
largely tracks the analysis that would be required under the Fourteenth Amendment‘s Due Process Clause. See South Dakota v. Wayfair, Inc., 138 S. Ct. 2080, 2093 (2018). The salient question, then, is whether California‘s ties to the employment relationship are sufficiently strong to justify its assertion of regulatory authority over the contents of an employee‘s wage statements. See Sam Francis Foundation v. Christies, Inc., 784 F.3d 1320, 1323 (9th Cir. 2015) (en banc) (holding that residency of the seller alone was an insufficient nexus to support regulation of out-of-state art sales and implying that a stronger connection could justify regulation); cf. Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 818 (1985) (concluding that, to assert legislative jurisdiction over a matter
Under the Ward test, California‘s ties to the employment relationship are sufficiently strong to justify application of
occurring wholly outside its borders—as to render application of California‘s wage-statement law arbitrary or unfair. Clay v. Sun Insurance Office, Ltd., 377 U.S. 179, 182 (1964).
Our decision in S.D. Myers, Inc. v. City and County of San Francisco, 253 F.3d 461 (9th Cir. 2001), supports this conclusion. There, we rejected a dormant Commerce Clause challenge to a San Francisco ordinance requiring city contractors to provide certain benefits to their employees, including employees who performed all of their work in another State. Id. at 469–71. We construed the ordinance to apply to out-of-state employees only if they worked directly on a city contract, and held that with respect to such employees the city had a sufficient nexus to the employment relationship to permit regulation of the employees’ benefits. Id. Here, the nexus between the employment relationship and California is at least as strong, since employees covered by the Ward test must perform some of their work in-state and be based for work purposes in California. As in S.D. Myers, the fact that most of the employees’ work is performed outside of California does not render regulation of an incident of their employment relationship with United violative of the dormant Commerce Clause.
B
United next contends that applying
exempt from
United‘s argument is flawed in at least two respects. First, while we do not doubt that United would incur additional costs if forced to track employee time in the way that it describes, it has offered no evidence of what the magnitude of those costs might be. See Pacific Northwest Venison Producers v. Smitch, 20 F.3d 1008, 1015 (9th Cir. 1994). The mere fact that a firm engaged in interstate commerce will face increased costs as a result of complying
United also contends that if we uphold application of the Ward test here, it will inevitably be subjected to a patchwork of inconsistent regulations imposed by other States. To prevail on this contention, United must show that
are aspects of the interstate transportation industry that require national uniformity, employee wage statements are not among them. State-by-state regulation of the wage statements provided to pilots and flight attendants may increase operating costs, but United has not demonstrated that such regulation will impair the free flow of commerce across state borders or impede operation of the national airline industry. For example, United has presented no evidence to support the conclusion that requiring it to comply with California law that differs from the wage-statement laws of other States will prove so cost-prohibitive as to disrupt the interstate service of its flights. Thus, as applied under the Ward test,
Since United has not shown that the Ward test regulates in an area that requires national uniformity, or that the cost of compliance otherwise impairs the free flow of goods or services across state borders, it has not shown a significant burden on interstate commerce. See National Association of Optometrists & Opticians v. Harris, 682 F.3d 1144, 1154-55 (9th Cir. 2012). As a result, any burden imposed by the Ward test cannot be deemed “clearly excessive” in relation
to the putative local benefits of applying
III. Airline Deregulation Act
United argues that application of
Although the ADA has a “broad pre-emptive purpose,” it does not preempt state laws that affect airline rates, routes, or services in only a “tenuous, remote, or peripheral” manner. Morales v. Trans World Airlines, Inc., 504 U.S. 374, 383, 390 (1992). Laws that apply to airline employees only as they apply to all members of the general public typically fall into this non-preempted category. See Rowe v. New Hampshire Motor Transport Association, 552 U.S. 364, 375–76 (2008).2
Our most on-point application of this preemption standard came in Dilts v. Penske Logistics, LLC, 769 F.3d 637 (9th Cir. 2014). There, we held that provisions of the California Labor Code that regulate rest and meal breaks were not “related to” prices, routes, or services—and thus were not preempted by the FAAAA—when applied to motor carriers. Id. at 640. Recounting the history of the Supreme Court‘s and our court‘s interpretations of ADA and FAAAA preemption, we noted that those laws preempt state regulations that bind carriers to specific prices, routes, or services, but they do not preempt “generally applicable background regulations that are several steps removed from prices, routes, or services.” Id. at 646. Wage laws and safety regulations are examples of these generally applicable regulations, and they are not preempted “even if employers must factor those provisions into their decisions about the prices that they set” or “if they raise the overall cost of doing business.” Id. The meal and rest break laws at issue in Dilts were the sort of background rules that apply to almost all employees. Even though those laws may have required employers to take their requirements into account when scheduling routes, they did not bind motor carriers to specific prices, routes, or services. Thus, they were not the sorts of laws that the FAAAA or ADA preempt. Id. at 647.
For the same reasons, the ADA does not preempt application of
Finally, United argues that the Railway Labor Act (RLA),
Both the pilots and flight attendants are covered by existing collective bargaining agreements (CBAs) that contain detailed provisions governing, among other things, the manner in which their pay is determined. United contends that the wage-statement dispute at issue here
constitutes a “minor” dispute under the RLA, thereby triggering RLA preemption.
Our court applies a two-step test to determine whether the RLA preempts a state-law claim. First, we determine whether the claim is “grounded in” a CBA by asking whether the claim “seeks purely to vindicate a right or duty created by the CBA itself.” Alaska Airlines Inc. v. Schurke, 898 F.3d 904, 920–21 (9th Cir. 2018) (en banc). The RLA preempts state-law claims under this first step if the CBA is the only source of the right the plaintiff asserts; claims that merely refer to a CBA-defined right or that rely only in part on a CBA‘s terms are not preempted. Id. at 921. Second, if a claim is not preempted under the first step, we ask whether adjudicating the state-law claim requires “interpretation of a CBA, such that resolving the entire claim in court threatens the proper role of grievance and arbitration.” Id. Interpretation in this context “means something more than ‘consider,’ ‘refer to,’ or ‘apply.‘” Id. State-law claims are preempted under this second step only “to the extent there is an active dispute over the meaning of contract terms.” Id.
Applying the Schurke test here, we conclude that plaintiffs’ claims under
CBAs to determine whether the wage statements include United‘s name and address or an itemized statement of the hours worked and the applicable hourly rates.
V. Remaining Issues
Given their rulings that
On remand, the class definitions in both cases will need to be modified to take account of the California Supreme Court‘s intervening decision in Ward. Under the Ward test, United‘s pilots and flight attendants are entitled to the protections of
they conform to the California Supreme Court‘s definition of
A further modification of the class definition in the Ward case is also warranted. The district court in that case denied without explanation plaintiffs’ request to modify the class period so that it will extend until the date that judgment is entered, rather than ending on the date that the complaint was filed. We see nothing in the record to support the court‘s refusal to grant plaintiffs’ request. Ending the class period on the date that the complaint was filed would thwart judicial efficiency by leaving open the potential need for a second lawsuit asserting identical claims covering the period between the complaint‘s filing and the date final judgment is entered in this litigation. We remand to the district court in the Ward case with instructions to modify the class period to extend to the date of judgment.
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We reverse the district courts’ entry of summary judgment in favor of United and hold that (1)
REVERSED and REMANDED.