Ward v. United Airlines, Inc.

986 F.3d 1234

Charles E. WARD, individually, and on behalf of all others similarly situated, Plaintiff-Appellant,

v.UNITED AIRLINES, INC., Defendant-Appellee.

Felicia Vidrio, individually, and on behalf of all others similarly situated; Paul Bradley, individually, and on behalf of all others similarly situated, Plaintiffs-Appellants,

v.United Airlines, Inc., Defendant-Appellee,andDoes, 1 through 50, inclusive, Defendant.

No. 16-16415

No. 17-55471

United States Court of Appeals, Ninth Circuit.

Argued and Submitted October 30, 2020 San Francisco, California

Filed February 2, 2021

Kirk D. Hanson (argued) and Jeffrey C. Jackson, Jackson Hanson LLP, San Diego, California; Stuart B. Esner and Joseph S. Persoff, Esner Chang & Boyer, Pasadena, California; for Plaintiffs-Appellants.

Adam P. KohSweeney (argued) and Susannah K. Howard, O'Melveny & Myers LLP, San Francisco, California; Robert Siegel, O'Melveny & Myers LLP, Los Angeles, California; for Defendant-Appellee.

Douglas W. Hall, Shay Dvoretzky, and Vivek Suri, Jones Day, Washington, D.C., for Amicus Curiae Airlines for America.

Before: Paul J. Watford and Michelle T. Friedland, Circuit Judges, and Jed S. Rakoff,^* District Judge.

WATFORD, Circuit Judge:

These consolidated cases involve pilots and flight attendants who allege that their employer, United Airlines, is violating a provision of California law regulating the wage statements that employees must receive with each paycheck. See Cal. Labor Code § 226. When we first heard this appeal, we were uncertain whether California Labor Code § 226 applies to United's pilots and flight attendants, given that they spend most of their time working outside of California. The California Supreme Court accepted our request for clarification of this issue and held that § 226 applies to these employees because they are based in California for work purposes. Now that the cases are back before us, United contends that federal law precludes California from applying its wage-statement law to pilots and flight attendants who spend most of their time working outside of California. We reject that contention.

I. Background

These two consolidated cases were filed in different district courts but are founded on the same allegations. In one, plaintiff Charles Ward represents a certified class of United pilots who reside in California; in the other, plaintiffs Felicia Vidrio and Paul Bradley represent a certified class of United flight attendants who also reside in California. In both cases, plaintiffs allege that the wage statements they receive from United fail to comply with California Labor Code § 226. That statute requires an employer to provide its employees with a wage statement containing nine items of information, including, as relevant here, "the name and address of the legal entity that is the employer," and "all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee." Cal. Labor Code § 226(a)(8)–(9). Section 226 further provides that an employee must be able to "promptly and easily determine" these items of information "from the wage statement alone," which means that "a reasonable person would be able to readily ascertain the information without reference to other documents or information." § 226(e)(2)(B)–(C).

Plaintiffs allege that United's wage statements fail to comply with § 226 ’s requirements. According to plaintiffs, the wage statements do not provide the required address for United because the statements list only a post office box rather than the actual street address where United's offices are located. As for the hourly rates and hours worked, the statements include the wages earned in general pay categories such as "Regular Pay" and "Sick Pay," but they do not list the pay rates and number of hours worked in each category. United provides its employees with online access to a separate "pay register," which affords greater detail about the employee's work activities and potential compensation during the relevant pay period. The parties dispute whether the pay registers supply the information required by California Labor Code § 226, but we need not resolve that dispute here. Plaintiffs contend that, even if the pay registers adequately describe the number of hours worked at each applicable hourly rate, United's wage statements still violate § 226 because that information cannot be readily ascertained by consulting the wage statements alone.

In both cases, after the parties filed cross-motions for summary judgment, the district courts granted summary judgment for United. Both courts examined California case law and held that California Labor Code § 226 applies only to employees who work "principally" in California, which is not true of either the pilots or the flight attendants. For example, in 2014 and 2015, the pilots spent on average less than 12% of their flight time within California, and in 2015 and 2016, the flight attendants spent on average less than 17% of their flight time within California. The nature of their flight schedules is such that the pilots and flight attendants typically do not work a majority of their time in any State, let alone in California. In view of those facts, the district court in the Ward case also held that applying § 226 to United's pilots would violate the dormant Commerce Clause of the United States Constitution. The plaintiffs in both cases appealed.

As noted, we certified to the California Supreme Court the question whether California Labor Code § 226 applies in these circumstances. See Ward v. United Airlines, Inc. , 889 F.3d 1068 (9th Cir. 2018). In response, the California Supreme Court held that the statute applies "if the employee's principal place of work is in California." Ward v. United Airlines, Inc. , 9 Cal.5th 732, 264 Cal.Rptr.3d 1, 466 P.3d 309, 325 (2020). The court concluded that California qualifies as an employee's principal place of work if: (1) the employee works a majority of the time in California; or (2) with respect to interstate transportation workers who do not work a majority of the time in any one State, "the worker has his or her base of work operations in California." Id. The court further stated that an employee is "based in" California for purposes of this test if the employee performs at least some work in California and "California serves as the physical location where the worker presents himself or herself to begin work." Id. , 264 Cal.Rptr.3d 1, 466 P.3d at 321 ; see also id. , 264 Cal.Rptr.3d 1, 466 P.3d at 324 ("[I]f a pilot or flight attendant has a designated home-base airport, section 226 would apply if that airport is in California, and not if it is elsewhere."). We will refer to this set of principles defining § 226 ’s permissible reach as the " Ward test" for short.

Following the California Supreme Court's decision, we asked the parties to submit supplemental briefs assessing its impact on the outcome of this appeal. The parties in both cases agree that most of the class members satisfy the Ward test, as they do not perform a majority of their work in any one State and they have their "base of work operations" in California. United's pilots and flight attendants are assigned to a designated home-base airport, which is where they are based for purposes of bidding on assignments and where they begin and end their assignments in each bid period. Most, if not all, of the class members are assigned to a home-base airport in California.

United argues that, even though the California Supreme Court has now clarified that California Labor Code § 226 applies in these cases, we should still affirm the judgments in its favor. Although United does not challenge the validity of § 226 itself, it does challenge the validity of applying § 226 to these plaintiffs under the Ward test. In United's view, federal law precludes California from applying its wage-statement law to interstate transportation workers who are based in California and do not perform a majority of their work in any one State. United's argument rests on three sources of federal law: the dormant Commerce Clause, the Airline Deregulation Act, and the Railway Labor Act. We reject United's reliance on each of these potentially preemptive sources of federal law, before turning to several issues that will need to be addressed on remand.¹

II. Dormant Commerce Clause

The dormant Commerce Clause limits the States’ authority to enact or enforce laws that burden interstate commerce, even in the absence of legislative action by Congress. American Trucking Associations, Inc. v. Michigan Public Service Commission , 545 U.S. 429, 433, 125 S.Ct. 2419, 162 L.Ed.2d 407 (2005) ; Raymond Motor Transportation, Inc. v. Rice , 434 U.S. 429, 440, 98 S.Ct. 787, 54 L.Ed.2d 664 (1978). Those limits are delineated by two general rules. On one hand, state laws that discriminate against or directly regulate interstate commerce are virtually per se invalid. Department of Revenue of Kentucky v. Davis , 553 U.S. 328, 338, 128 S.Ct. 1801, 170 L.Ed.2d 685 (2008) ; Brown-Forman Distillers Corp. v. New York State Liquor Authority , 476 U.S. 573, 579, 106 S.Ct. 2080, 90 L.Ed.2d 552 (1986). On the other hand, non-discriminatory laws that have only incidental effects on interstate commerce will generally be upheld "unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits." Pike v. Bruce Church, Inc. , 397 U.S. 137, 142, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970).

A

The first question is whether California Labor Code § 226, as applied to these plaintiffs under the Ward test, falls within either of the categories of state laws that are virtually per se invalid.

We can quickly dismiss any suggestion that application of the Ward test results in discrimination against interstate commerce. Discrimination in this context means treating similarly situated in-state and out-of-state economic interests differently in a way...