Barge Worker Not Required to Arbitrate California Wage Claims

San Francisco, CA On November 24, the Ninth Circuit held that Frank Miles, a deck engineer responsible for marine vessel maintenance, was not required to arbitrate his wage claims against his employer. While the decision acknowledges a federal policy favoring the enforcement of arbitration agreements, it balances that policy against the principle that employees must have knowingly and explicitly waived their right to a day in court. The dispositive fact in Miles v. Brusco Tug & Barge, Inc. appears to be that the arbitration agreement did not clearly and unmistakably cover claims brought under California labor law.

Employers have come to anticipate that the Ninth Circuit is generally inclined to limit arbitration as a tool for resolving employee disputes, including California wage and hour claims. Ominously, when those lawsuits reach the Supreme Court, they almost always go against the Ninth Circuit and the worker. The high court is quite consistent in ruling to enforce arbitration clauses and to limit employment rights that have been understood as protected by California law.

Violations of California labor law

Miles worked for Brusco Tug & Barge, Inc. from approximately 2010 to 2017. During his employment, he was also a union member with the International Organization of Masters, Mates, and Pilots, Pacific Maritime Region. Brusco and the union entered into a series of collective bargaining agreements. These agreements outline a multi-step arbitration process for unresolved disputes between union members and the barge company.

Miles brought a variety of wage claims, alleging that Brusco failed to:

• provide meal and rest breaks;
• pay reporting time wages, minimum wages, all wages owed and wages upon firing;
• reimburse expenses;
• provide accurate wage statements, and
• pay waiting time penalties.

These claims arise from alleged violations of the California Labor Code and California Business & Professions Code.

The relevant collective bargaining agreement provides that “all disputes, controversies or disagreements arising out of the interpretation or application of this Agreement, or because the Union or Employee feels aggrieved by the treatment of the Employer, shall be resolved in accordance with the provisions of this Article.” Nowhere, however, does it explicitly mention the wage and hour provisions of California labor law.

Perils of arbitration

All parties agree that the dispute and interpretation of the collective bargaining agreement is governed by the Federal Arbitration Act. On its face, arbitration seems like a good idea. Arbitration is generally cheaper and quicker than a judicial proceeding, and most agree that parties who have agreed to resolve disputes through the arbitration process should abide by their agreements.

The other side of the coin, however,  is that workers who are required to arbitrate employment disputes seldom prevail and when they do, often recover significantly less than jury awards in comparable situations. For a variety of reasons, including the fact that employers often hire the arbitrator, arbitration proceedings tend to be very employer-friendly.

Clear and unmistakable waiver

California courts have consistently held that an arbitration provision that does not include a clear and unmistakable statement that arbitration is the sole remedy for statutory claims will not prevent a worker from suing an employer in court.

The Ninth Circuit’s decision in Miles is even more specific, requiring statutory citations:

“In determining whether there has been a sufficiently explicit waiver of a judicial forum, courts look to the generality of the arbitration clause; the explicit incorporation of statutory requirements; and inclusion of specific statutes, identified by name or citation.” 

Further, the court continues:
“an agreement that includes broad, general, unspecific arbitration clauses requiring arbitration of ‘all disputes, controversies or disagreements arising out of the interpretation of this Agreement’ is insufficient to constitute clear and unmistakable waiver of a judicial forum.”

The example cited in the decision tracks the language of the actual collective bargaining agreement very closely, and the decision has an internally consistent logic that makes it seem unassailable. But is it really?

What next?

Employers have a considerable financial stake in protecting the enforceability of arbitration clauses, whether included in collective bargaining agreements or employment contracts. Further, they have had recent successes in seeking to overturn or limit the effect of Ninth Circuit decisions limiting their enforceability.

The Miles decision highlights what may turn out to be a point of vulnerability, when the court acknowledges that “there plainly is overlap between the subjects covered by the Labor Code and the collective bargaining agreement.” If the decision reaches the Supreme Court, this point of ambiguity may prove to be its undoing.