The U.S. Court of Appeals for the Ninth Circuit (“Ninth Circuit”) recently provided much needed clarification of the standard for when a unionized employee’s claim may be preempted under § 301 of the Labor Management Relations Act (“LMRA”) in Matson v. United Parcel Service, Inc., No. 13-36174.  In addition to the claim wholly arising under the collective bargaining agreement (“CBA”) (as opposed to state law), true interpretation of the CBA is necessary before preemption may occur.  Simply “looking to” or “referring to” the CBA, even as a basis for the defense, is insufficient to sustain preemption.  This high standard will likely decrease the number of unionized employee claims that are preempted or arbitrated, potentially leading to more liability for employers because state law, rather than federal law, will apply to the employee’s claims.

In Matson, the plaintiff worked for UPS and frequently complained UPS subjected her to unfair and demeaning treatment. She filed numerous grievances of hostile work environment, alleging that, among other things: (1) UPS managers disregarded her complaints of workplace hostility and threatened to file charges against her if she continued to make these statements; (2) a male coworker screamed at her and choked her after she playfully tapped his knee; (3) her supervisors assigned her a less desirable package car rather than vans that were assigned to less senior male employees; (4) UPS failed to discipline other men when accused of falsified delivery records; (5) her supervisors favored male employees when assigning extra work, which are deliveries not previously assigned to a particular route. Notably, the term “extra work” was not defined in the CBA; however, it was merely mentioned, but not defined, in an addendum to the CBA that did not apply to her position. UPS responded to these grievances, sometimes entering settlements with her agreeing it would consider her seniority when assigning future extra work.

After Matson exhausted her administrative remedies, UPS fired Matson for falsifying delivery records. After contesting her termination, she filed suit against UPS asserting, among other things, gender discrimination, gender-based hostile work environment and discrimination on the basis of opposition to lawful labor practices. At trial, UPS focused on Matson’s extra work claim and argued additional package deliveries did not constitute extra work, but even if it did, her claims were preempted under the LMRA because the court must “look to” the CBA to define when “extra work” would be assigned. The district court initially denied UPS’ motion for judgment in its favor because “preemption is not mandated simply because defendant refers to the CBA in mounting its defense” and Matson’s claims, including the diversion of extra work, support a hostile work environment without reference to the CBA. The jury found for UPS on certain discrimination and retaliation claims but awarded her $500,000 in damages for the hostile work environment claim. However, the district court granted UPS’ motion for a new judgment as a matter of law or new trial due to Matson’s rebuttal testimony stating the term “extra work” was not clearly defined, and it held her hostile work environment claim based on extra work “is substantially dependent on the analysis of the CBA because the court would have to interpret the meaning of the ‘extra work’” from the CBA. After the new trial, the jury returned a verdict for UPS.

On appeal, the Ninth Circuit reiterated and clarified the two-part test to determine preemption under § 301 of the LMRA. At the first step, the court determines whether a particular right inheres in state law or is grounded in the CBA. “Only if the claim is ‘founded directly on rights created by collective-bargaining agreement’ is preemption warranted” at this step. On the second step, the district court determines whether the state law is substantially dependent on the terms of the CBA. At this step, the court evaluates “whether the claim can be resolved by ‘looking to’ rather than interpreting the CBA.” If the latter, then the claim is preempted; otherwise, the claim is not. The Ninth Circuit, however, defines “interpret” narrowly meaning “something more than ‘consider,’ ‘refer to,’ or ‘apply.’”

After clarifying the standard, the Ninth Circuit quickly disagreed with UPS’ claim that Matson’s hostile work environment is grounded in the CBA. The appellate court analyzed that Matson did not solely base her hostile work environment claim on “extra work”; rather Matson assembled a number of allegations to support her hostile work environment claim, including the dissemination of extra work to less senior male employees. More important, her hostile work environment claim was based on a nonnegotiable state law right, independent of any contract right.

Moving to the second step, the Ninth Circuit held Matson’s claim required no interpretation of the CBA. The elements to prove Matson’s hostile work environment claim did not require any analysis whether Matson held any right to extra work under the CBA; rather, it focused on whether offensive conduct occurred because of her gender and altered her work environment. Even if her hostile work environment claim solely rested on the extra work or a seniority-based right to the same under the CBA, the Ninth Circuit again held her claim required no interpretation of the CBA. UPS’ argument that the court must construe the CBA to determine whether Matson held a right to the extra work is insufficient in and of itself to preempt the claim. The CBA failed to define the term “extra work,” and the reference therein did not apply to Matson’s position. Thus, no interpretation of the CBA was required. UPS’ systematic favoritism toward men in making its work assignments merely supported evidence of her hostile work environment claim. Although UPS entered into settlements of Matson’s grievances about her entitlement to extra work, even if construed to be extensions of the CBA, these documents required no further interpretation or analysis; the grievance settlements need only be looked to or applied, both of which are insufficient to evoke preemption. In sum, no preemption should have occurred because the jury did not have to decide what any provision of the CBA requires.

In sum, the Ninth Circuit clarified that preemption requires more than mere “looking to” or “referring to” the CBA. Not only must the claim wholly arise under the CBA, true interpretation of the CBA is necessary before preemption may occur. Additionally, simply utilizing the CBA as a basis for defense is insufficient to warrant preemption. This high standard will likely decrease the number of unionized employee claims that are preempted or arbitrated under the LMRA, which means state law, rather than federal law, would be applied to these claims, likely resulting in greater liability and damages for the employer.