California Court of Appeals upholds CBA construction industry exemption from PAGA

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

Labor code section 2699.6

Under section 2699.6 of the Labor Code, construction employees who perform work under a valid collective agreement in effect at any time before January 1, 2025, that meets specific requirements, are not covered by PAGA. To be exempt from PAGA, the CBA must expressly provide for wages, hours of work, and working conditions for employees, premium rates of pay for all overtime hours worked, and for the employee to receive an hourly rate of pay pay at least 30 percent above the state minimum wage rate, and the agreement must do all of the following:

(1) Prohibit all violations of this Code that would be recoverable under this Part and provide a binding grievance and arbitration procedure to remedy such violations;

(2) expressly waive the requirements of the PAGA in unambiguous terms; and

(3) Authorize the arbitrator to grant all remedies otherwise available under the PAGA.

Background

In the underlying case, Murray Plumbing and Heating Corporation (Murray) employed Oswald as a journeyman pipe fitter 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 framework agreement between Oswald’s union and Murray’s contractors association, effective from 2017 to 2026. The framework agreement required arbitration of disputes, including including PAGA.

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

Court of Appeal decision

The Court of Appeal discussed public policy in favor of contractual arbitration, but also the rule under Iskanian vs. CLS Transportation Los Angeles LLCagainst an employee’s right to bring a PAGA action as “irrevocable”.

The Court of Appeal then turned to Section 2699.6, which was a PAGA exclusion put in place by the legislature in 2018which exempts employees in the construction sector from the PAGA if their CCT meets the criteria mentioned above.

In reviewing the CBA, the Court of Appeals also considered a retroactive Memorandum of Understanding to Waive PAGA and Class Actions (MOU) put in place after the trial court’s decision.

Although 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 Appeals disagreed in finding that as a member of the union, Oswald “enjoys[ed] benefits from the bargaining power of the union, but it is also subject to the burdens imposed by the CTC, which limit its recourse…”.

The court also reviewed the ABC and concluded that it satisfied the elements of section 2699.6.

Based on the Court’s review, the trial court’s dismissal of the motion for compulsory arbitration was reversed.