LA Metro Transit Authority Cannot Avoid Minimum Wage, PAGA Claims

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The California Court of Appeal, Second Appellate District, recently partially reversed a key trial-court ruling that had been in favor of the Los Angeles Metropolitan Transportation Authority (MTA), thereby clearing the way for MTA employees to pursue claims for statutory minimum wages and under the Private Attorneys General Act (PAGA). The appellate court’s opinion was certified for publication on December 17, 2015. See Flowers v. Los Angeles Cnty. Metro. Transp. Auth., No. B256744 (Cal. Ct. App. Nov. 25, 2015) (slip op. available here).

In July 2013, former MTA bus driver Nathan Flowers filed a class, collective, and representative action on behalf of approximately 7,000 current and former MTA bus and train operator employees, asserting that the MTA failed to pay minimum wages, provide rest periods, or pay rest period premiums in violation of state labor laws. The MTA argued that Public Utilities Code sections 30257 and 30750 give it exclusive authority to set wages and working conditions for employees in a good-faith bargain with the designated union, and that it was therefore exempt from the requirements of Industrial Welfare Commission (IWC) Order 9, which governs wage-and-hour issues in the transportation industry. The trial court agreed with the MTA and dismissed three out of four of the plaintiff’s claims. Plaintiff Flowers voluntarily dismissed the only remaining claim, for violations of the Fair Labor Standards Act, and appealed the trial court’s order.

First, the Court of Appeal found the MTA to be exempt from the California law rest period requirements. Section 12(C) of IWC Order 9 states that California rest break requirements do not apply to public transit bus drivers covered by a valid collective bargaining agreement “if the agreement provides for (1) rest periods . . . , (2) final and binding arbitration of disputes concerning application of its rest period provisions, (3) ‘premium wage rates for all overtime hours worked,’ and (4) ‘regular hourly rate of pay of not less than 30 percent more than the State minimum wage.'” Slip op. at 15 (emphasis added). In his appeal, the plaintiff argued the rest period exemption did not apply because the agreement did not fulfill the third requirement, since it excluded certain tasks performed by operator employees, such as filling out accident reports, from overtime pay, and defining overtime in this way violated the requirement of “premium wage rates for all overtime hours worked.” The appellate court then analyzed the overtime compensation requirements in the collective bargaining agreement at issue and in federal and state law. California Labor Code section 514 exempts from section 510 overtime requirements employees covered by a valid collective bargaining agreement that provides “premium wage rates for all overtime hours worked” and a regular hourly rate of pay of not less than 30 percent more than the state minimum wage. Citing Vranish v. Exxon Mobil Corp., 223 Cal.App.4th 103 (2014), the panel found that Labor Code section 514 only required the MTA to pay a premium for all overtime worked as it’s defined in the collective bargaining agreement, and that this collective bargaining agreement indisputably did so. Thus, in light of the exemptions under Labor Code section 514 and in section 12(C) of IWC Order 9, the appellate court found the MTA met those requirements, and therefore affirmed the trial court’s dismissal of the rest break claim. 

However, the Court of Appeal reversed the trial court’s dismissal of the minimum wage claim and civil penalties under PAGA, rejecting the MTA’s contention that the Public Utilities Code immunizes it from state minimum wage requirements simply because it authorizes the MTA to adopt a general personnel system defined by a collective bargaining agreement. See Pub. Util. Code § 30257. The opinion, citing Grier v. Alameda-Contra Costa Transit Dist., 55 Cal. App. 3d 325, 332 (1976), unequivocally states that compliance with California’s statutory minimum wage requirement in no way limits or restricts the MTA’s ability to bargain in good faith and execute a written collective bargaining agreement. Because the MTA failed to show how complying with the applicable minimum wage requirement would prevent it from carrying out its obligations to its employees under the Public Utilities Code, it is now potentially liable for its failure to pay minimum wages for all hours worked, pursuant to Labor Code section 1194. The reversal of the trial court’s ruling also resuscitates the plaintiff’s PAGA claim for that alleged violation.

Authored by: 
Karen Wallace, Associate