Wage statement laws for airline workers not preempted

After receiving the California Supreme Court's answers to its certified questions, the 9th U.S. Circuit Court of Appeals held last week that airline employers must follow California's requirements when providing wage statements to pilots and flight attendants based out of California airports. In Ward v. United Airlines, Inc., 2021 DJDAR 1141, the 9th Circuit determined that federal law does not preclude California from applying its wage statement law to interstate transportation workers based in the state.

The consolidated cases in Ward were brought by United Airlines pilots and flight attendants alleging that the wage statements they received from United failed to comply with California Labor Code Section 226. Previously, the 9th Circuit certified to the California Supreme Court the question of whether Section 226 applied to plaintiffs who performed the majority of their work in airspace outside of California's borders. The Supreme Court held that Section 226 applied to workers whose "principal place of work" is California. To determine an employee's "principal place of work" courts first consider whether the employee works the majority of the time in California or in another state. When transportation employees do not perform a majority of their work in any one state, the test is satisfied if the employee's base of work operations is California, meaning California serves as the physical location where the worker presents themself to begin work.

Following the Supreme Court ruling, the parties both agreed that most of the class members satisfied the principal place of work test ("home base" test). However, United challenged the validity of applying Section 226 in this case, arguing that federal law preempted California law. United's argument was based on three sources of federal law: the dormant commerce clause, the Airline Deregulation Act, and the Railway Labor Act. The 9th Circuit rejected all three arguments.

In considering the dormant commerce clause argument, the court held that the home base test as applied to plaintiffs was not per se invalid because it did not discriminate against interstate commerce nor did it result in direct regulation of interstate commerce. United argued to extend a line of cases invalidating state laws that had the practical effect of directly regulating commerce occurring wholly outside state borders. The court dismissed these arguments because Section 226 did not have the effect of dictating the price of goods sold out of state, and moreover, California's ties to employment relationships were sufficiently strong to justify its assertion of regulatory authority over the contents of wage statements.

Similarly, the court was not persuaded by United's arguments that regulating wage statements would impair the free flow of commerce across state borders and impede the operation of the airline industry. United argued that even if the application of Section 226 was not per se invalid, it still violated the dormant commerce clause because the burden imposed on interstate commerce was "clearly excessive." The defendant argued application of the home base test would impose significant costs by requiring the company to track every employee's hours on a pay-period-by-pay-period basis to determine whether each employee spent more than 50% of their time working in another state and thus was exempt from Section 226. The court dismissed this argument, noting that United provided no evidence of these costs, and further, they could easily comply with the home base test by simply issuing Section 226 compliant statements to all employees based out of California airports.

The court also rejected United's argument that the application of Section 226 was preempted by the Airline Deregulation Act, which provides that a state "may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of an air carrier." The court noted that wage and safety laws are generally applicable regulations that are not preempted "even if employers must factor those provisions into their decisions about the prices they set" or "if they raise the overall cost of doing business." The court also reiterated that United had provided no evidence that the application of Section 226 would result in costs that would have a significant impact on prices, routes, or services.

Finally, the court determined that the Railway Labor Act also did not preempt the application of California law. The court noted that plaintiffs' claims were not based on a right or duty created by their collective bargaining agreements. Rather, their claims were grounded in California law. Further, adjudicating these claims would not require the court to interpret the CBA. Therefore, the act did not bar the application of Section 226 to plaintiffs' claims.

While the 9th Circuit decisively dispatched United's federal preemption claims, the court declined to rule on the merits of plaintiffs' Section 226 claims. The court stated that "the district courts are in the best position to decide" this matter, and accordingly remanded the case to the district courts to determine if United complied with Section 226, and if not, what relief should be rewarded.

The 9th Circuit issued a separate order also remanding a suit against Delta Air Lines from a proposed class of flight attendants that involved some overlapping questions. Oman v. Delta Air Lines, Inc., 17-15124. While affirming the trial court ruling in favor of Delta on the flight attendants' minimum wage claims, the court remanded the wage statement and timing-of pay claims to the lower court for a determination.

These rulings are part of series of significant victories for California based interstate transportation workers in the Ward and Oman cases. Through these most recent decisions, the 9th Circuit has clarified that federal law does not preempt California's wage statement requirements, and has further entrenched the home base test.