Preemptions: State vs. Federal Labor Law

Pursuant to the Supremacy Clause of the Constitution, the laws of the United States “shall be the supreme Law of the Land.” (U.S. Const., Art. VI.) Thus, state law that conflicts with federal law is “without effect” and preempted.  Cipollone v. Liggett Group, Inc. (1992) 505 U.S. 504, 516.  Federal law can preempt state law either by express provision, by implication, or by a conflict between federal and state law.  New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Insurance Company (1995) 514 U.S. 645, 654 (“Travelers”).  However, where the possibility of preemption arises from an express statutory provision, there is no need to consider any possible implied preemptive effect, since, “Congress’ enactment of a provision defining the preemptive reach of a statute implies that matters beyond that reach are not preempted.”  Cipollone, supra, 505 U.S. at 517.

In construing federal preemption, there is a “presumption that Congress does not intend to supplant state law.”  Travelers, supra, 514 U.S. at 654.  This is especially true in areas of traditional state concern such as employment regulation.  Travelers, 514 U.S. at 655 (“in fields of traditional state regulation . . . we have worked on the ‘assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.’”) (quoting Rice v. Santa Fe Elevator Corp. (1947) 331 U.S. 218, 230).  Laws governing minimum labor standards and the employment relationship generally fall within the states’ broad police powers.  Metropolitan Life Ins. Co. v. Massachusetts (1985) 471 U.S. 724, 756.

California Labor Code section 226.7 prohibits employers from requiring its employees to work during any rest period mandated by the Industrial Welfare Commission (“IWC”) Wage Orders.  “[I]n light of the remedial nature of the legislative enactments authorizing the regulation of wages, hours and working conditions for the protection and benefit of employees, the statutory provisions are to be liberally construed with an eye to promoting such protection.”  Industrial Welfare Com. v. Superior Court (1980) 27 Cal.3d 690, 702.  “[T]he IWC’s wage orders are entitled to ‘extraordinary deference, both in upholding their validity and in enforcing their specific terms.’”  Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1027 (quoting Martinez v. Combs (2010) 49 Cal.4th 35, 61).  Rest break requirements “have long been viewed as part of the remedial worker protection framework.”  Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1105.

The Federal Aviation Administration Authorization Act of 1994 (“FAAAA”), provides:

Except as provided in paragraphs (2) and (3), a State, political subdivision of a State, or political authority of 2 or more States 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 any motor carrier (other than a carrier affiliated with a direct air carrier covered by section 41713(b)(4)) or any motor private carrier, broker, or freight forwarder with respect to the transportation of property.

49 U.S.C. § 14501(c)(1). 

The provision was enacted to preempt state trucking regulations and allow free market forces to shape prices, routes, and services in the trucking industry.  Rowe v. New Hampshire Motor Transport Association (2008) 552 U.S. 364, 367–68.  The statute was also intended to “level the playing field” between motor carriers and air transport companies, since the air carrier industry had previously been deregulated by the Airline Deregulation Act (“ADA”).  See H.R.Conf. Rep. No. 103-677 (1994) (purpose of preemption provisions is to apply to both air and motor carriers “the identical intrastate preemption”).  Indeed, because the express preemption provision of the ADA employs language identical to that found in the FAAAA, cases construing the ADA provision are considered precedential authority for cases involving FAAAA preemption.  Rowe, supra, 552 U.S. at 370 (following ADA precedent in construing FAAAA preemption, noting identical language of 49 U.S.C. §§ 41713(b)(4)(A) (ADA) and 14501(c)(1) (FAAAA)).

For a law to be “related to” a price, route, or service and subject to preemption, the law must have “a connection with or refer to” a price, route, or service.  Morales v. Trans World Airlines, Inc. (1992) 504 U.S. 374, 384 (citing Shaw v. Delta Air Lines, Inc. (1983) 463 U.S. 85, 97).  A law has “a connection with” a price, route, or service if it “binds the [company] to a particular price, route or service and thereby interferes with competitive market forces within the . . . industry.”  Air Transport Ass’n of America v. City and County of San Francisco (9th Cir. 2001) 266 F.3d 1064, 1072; Reinhardt v. Gemini Motor Transport (E.D.Cal. 2012) 869 F.Supp.2d 1158, 1165.  In any case, the effect of the law on a company’s price, route, or service must be more than indirect, remote, and tenuous.  Californians For Safe & Competitive Dump Truck Transp. v. Mendonca (9th Cir. 1998) 152 F.3d 1184, 1189 (“Mendonca”) (citing California Div. of Labor Standards Enforcement v. Dillingham Const., N.A., Inc. (1997) 519 U.S. 316, 334 (“Dillingham”)); Morales v. Trans World Airlines, Inc. (1992) 504 U.S. 374, 390.

For the purposes of preemption, the ostensibly broad “relate to” language “is meant, not to set forth a test for preemption, but rather to identify the field in which ordinary field preemption applies . . . .  [A]pplying the ‘relate to’ provision according to its terms [is] doomed to failure, since . . . everything is related to everything else.  . . .  The statutory text provides an illusory test, unless the Court is willing to decree a degree of pre-emption that no sensible person could have intended—which it is not.”  Dillingham, 519 U.S. at 335 (Scalia, J. concurring).

Various courts have found that the FAAAA does not preempt the enforcement of generally applicable employment regulations that do not directly affect prices, routes, or services.  For instance, in Mendonca, the Ninth Circuit examined whether the FAAAA preempted California’s Prevailing Wage Law (“CPWL”), which requires government contractors to pay its employees at a set wage.  The court recognized that, in order to comply with the CPWL, the company would have to increase its prices by 25%, utilize independent owner-operators, and re-direct and re-route equipment to compensate for lost revenue.  The court held:

“While CPWL in a certain sense is ‘related to’ [the company’s] prices, routes and services . . . the effect is no more than indirect, remote, and tenuous.  . . .  We do not believe that CPWL frustrates the purpose of deregulation by acutely interfering with the forces of competition.  . . .  Nor can it be said . . . that CPWL falls into the ‘field of laws’ regulating prices, routes, or services.”

Mendonca, supra, 152 F.3d at 1189.

In Renteria v. K&R Transportation, Inc. (C.D. Cal. 1999) 1999 WL 33268638, *4, the Central District held that the effect of state wage and workers’ compensation laws was merely “incidental” and insufficient to “relate to” prices, routes, or services.

The Ninth Circuit has not yet ruled on the specific question of whether California’s meal and rest break requirements are preempted by the FAAAA, but the analysis here is no different than with respect to state wage and workers’ compensation laws.

In most of the cases, the issue of preemption is a factual one.  Mendez v. R+L Carriers, Inc. (N.D.Cal. Nov. 19, 2012) 11-cv-2478, 2012 WL 5868973, *5–7 (denying summary judgment because “it is unlikely that California’s meal and rest break provisions would rigidly ‘bind’ motor carriers to particular prices, routes, or services”); Cardenas v. McLane FoodServices, Inc. (C.D. Cal. 2011) 796 F.Supp.2d 1246, 1253–1256 (agreeing with California state cases that hold no preemption); Reinhardt v. Gemini Motor Transport (E.D.Cal. 2012) 869 F.Supp.2d 1158, 1163–1167 (denying motion to dismiss of break claims).

In some cases, like Dunbar Armored, Inc. v. Rea (S.D. Cal. July 8, 2004) 04-cv-00602, Doc. # 29, the issue of preemption has been decided as a legal, rather than a factual, question in favor of enforcement of California’s break laws.  In Dunbar a company sought an injunction against the application of California’s break laws on the grounds that the laws were preempted by the Interstate Commerce Commission Termination Act (“ICCTA”), 49 U.S.C. § 14501(c), whose preemption provision is essentially identical to the FAAAA.  The court dismissed the company’s claim, holding that:

As in Mendonca, it is possible for [the company] to comply with the Regulations by seeking employee waivers and a DLSE exemption and paying the premium, and the resulting increase in operating cost does not directly interfere with [the company’s] prices, routes or services.  [The company’s] alternative—changing routes and shift lengths and thereby increasing its operating costs—does not acutely interfere with the forces of competition between air and motor carriers, which was Congress’s focus in enacting the ICCTA.  Further, the Court finds that the Regulations do not fall within the field of laws intended to regulate prices, routes and services.  Rather, the Regulations are directed at employee health and welfare.  [The company’s] preemption argument fails.

Id. at p. 10.

Even though there is a split of authority at the federal district court level, the state court decisions on this issue are unanimously against preemption.  A state court is not bound by federal circuit or district court decisions even on federal questions.   People v. Bradley (1969) 1 Cal.3d 80.  See also San Diego Unified Port Dist. v. Superior Court (1977) 67 Cal.App.3d 361.  In Fitz-Gerald v. Skywest Airlines, Inc. (2007) 155 Cal.App.4th 411, the California Court of Appeal reversed summary judgment and held that the ADA did not preempt minimum wage and break claims even though such laws might ultimately result in higher fares, fewer routes, and less service:

Although the ADA has been broadly interpreted as preempting state “enforcement actions having a connection with, or reflect to, airline ‘rates, routes or services,’” it has its limits.  (Morales v. Trans World Airlines (1992) 504 U.S. at p. 384, 112 S.Ct. at p. 2037, 119 L.Ed.2d at pp. 167–168.)  If the rule was otherwise, “any string of contingencies is sufficient to establish a connection with price, route, or service, [and] there will be no end to ADA preemption. [Citations.]” (Air Transport Assn. of America v. City and County of San Francisco (N.D.Cal.1998) 992 F.Supp. 1149, 1183.)… SkyWest argues that application of state minimum wage law will result in higher fares, fewer routes, and less service, but the connection is tenuous.  A state or local law is “related to” a price route or service if it has “‘a connection with, or reference to’” a price, route, or service.  (American Airlines, Inc. v. Wolens, supra, 513 U.S. at p. 223, 115 S.Ct. at p. 821, 130 L.Ed.2d at pp. 722–723.)  “Airlines’ ‘rates’ and ‘routes’ generally refer to the point-to-point transport of passengers.  ‘Rates’ indicates price; ‘routes’ refers to courses of travel. It therefore follows that ‘service,’ when juxtaposed to ‘rates’ and ‘routes,’ refers to such things as the frequency and scheduling of transportation, and to the selection of markets to or from which transportation is provided (as in, ‘This airline provides service from Tucson to New York twice a day.’)  To interpret ‘service’ more broadly is to ignore the context of its use; and, it effectively would result in the preemption of virtually everything an airline does.  It seems clear to us that that is not what Congress intended.”  (Charas v. Trans World Airlines, Inc. (9th Cir.1998) 160 F.3d 1259, 1265–1266.)

Id. at 423, fn. 7. 

However, the court in Fitz-Gerald held that claims under California’s Unfair Competition Law (“UCL”) were preempted.  In a subsequent case, People ex rel. Harris v. Pac Anchor Transp., Inc. (2011) 125 Cal.Rptr.3d 709 (“Harris”), the Court of Appeal held that even UCL claims based on minimum wage and meal and rest break claims were not preempted by the FAAAA.  Id. at 716.  The California Supreme Court granted certiorari of Harris, but the scope of review is limited to whether the FAAAA preempts the UCL.  The California Supreme Court apparently does not question whether the FAAAA preempts the underlying state meal and rest break claims.  The issue presented before the Court is:

Is an action under the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) that is based on a trucking company’s alleged violation of state labor and insurance laws “related to the price, route, or service” of the company and, therefore, preempted by the Federal Aviation Administration Authorization Act of 1994 (49 U.S.C. § 14501)?

Harris v. Pac Anchor Trans., California Supreme Court Case No. S194388 (cert. granted Aug. 10, 2011).

Thus, the rule expressed in the Harris Court of Appeal decision—that the FAAAA does not preempt California’s break laws—is left undisturbed.  That same rule expressed in Fitz-Gerald is also undisturbed and remains precedential authority.