California Court Upholds Construction Industry Exemption from PAGA

​The California Court of Appeal for the Second Appellate District recently upheld the construction industry's collective bargaining agreement exemption from the Private Attorneys General Act (PAGA) in Oswald v. Murray Plumbing and Heating Corporation.

Under Labor Code section 2699.6, construction employees who perform work under a valid collective bargaining agreement (CBA) in effect any time before Jan. 1, 2025 are not covered under PAGA.

To be exempted from PAGA, the CBA must expressly provide for the wages, hours of work, working conditions, premium wage rates for all overtime hours worked, and for employees to receive a regular hourly pay rate of no less than 30 percent more than the state minimum wage.

The agreement must do all of the following:

• Prohibit all of the violations of this code that would be redressable pursuant to this section, and provide for a grievance and binding arbitration procedure to redress those violations.
• Expressly waive the requirements of PAGA in unambiguous terms.
• Authorize the arbitrator to award any and all remedies otherwise available under PAGA.
  

Background

In the underlying case, Murray Plumbing and Heating employed Jerome Oswald as a journeyman pipefitter from 2019 to 2020.

In 2020, Oswald sued Murray, alleging various wage and hour violations.

Murray and Oswald's employment relationship was governed by a master agreement between Oswald's union and Murray's contractor association, effective from 2017 to 2026. The master agreement required arbitration of disputes, including PAGA claims.

The trial court denied Murray's motion to compel arbitration, finding that Labor Code section 2699.6 did not apply.

Decision of the Court of Appeal

The state Court of Appeal discussed the public policy in favor of contractual arbitration, but also the rule under Iskanian v. CLS Transportation Los Angeles, which found an employee's right to bring a PAGA action to be "unwaivable."

The Court of Appeal then turned to Section 2699.6, which was a carve-out from PAGA put in place by the state legislature in 2018, which exempts employees in the construction industry from PAGA if their CBA meets the criteria discussed above.

In reviewing the CBA, the Court of Appeal also considered a retroactive memorandum of understanding waiver of PAGA and class-action claims, put in place after the decision of the trial court.

While Oswald argued that the memorandum of understanding did not apply to him because it was put in place after his employment ended, the Court of Appeal disagreed, finding that as a union member, Oswald "enjoyed the benefits of the union's bargaining power, but he is also subject to the burdens imposed by the CBA, which limit his remedy."

The court also reviewed the CBA and found it satisfied the elements of Section 2699.6. Based on the appellate court's review, the trial court's denial of the motion to compel arbitration was reversed on Sept. 2.

Cary G. Palmer is an attorney with Jackson Lewis in Sacramento, Calif. © 2022. All rights reserved. Reprinted with permission.