Filed 5/2/13

                               CERTIFIED FOR PUBLICATION

               IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                SECOND APPELLATE DISTRICT

                                           DIVISION SIX


HOWARD CHOATE et al.,                                         2d Civil No. B239160
                                                            (Super. Ct. No. 1336975)
     Plaintiffs and Respondents,                             (Santa Barbara County)

v.

CELITE CORPORATION,

     Defendant and Appellant.




                 An employer in California must immediately pay a terminated employee
for all of his "vested vacation time" unless the union representing that employee has
negotiated a collective bargaining agreement that "otherwise provide[s]." (Labor Code,
§§ 227.3, 201.)1 We hold that a collective bargaining agreement "otherwise provide[s]"
and thereby abrogates an employee's statutory right under section 227.3 to immediate
payment for vested vacation time only if the agreement clearly and unmistakably waives
that right. Because the agreement in this case lacked this clarity, Celite Corporation
(Celite) was required to immediately pay terminated employees for all their vested
vacation time. We nevertheless reverse the trial court's judgment imposing waiting time
penalties because Celite's nonpayment was not "willful."



                 1
                     Unless otherwise indicated, all statutory references are to the Labor Code.
                         FACTS AND PROCEDURAL HISTORY
              Celite mines and manufactures diatomaceous earth in Lompoc,
California. International Chemical Workers Union/C-UFCW Local 146-C (Union)
represents Celite's employees. Under the collective bargaining agreements in effect
between 2003-2007 and 2007-2010 (the Agreements), Celite granted its employees
between one and five weeks of vacation annually. Each January, Celite calculated a
yearly "vacation allotment" based on each employee's length of employment and the
number of hours they worked the year before.
              Under the Agreements, employees terminated from Celite were entitled to
"receive whatever vacation allotment is due them upon separation."2 For 25 years, both
Celite and the Union understood this provision to refer to the "vacation allotment" as
defined above. Accordingly, Celite paid terminated employees for the vacation time
already allotted to them for the year of their termination, but did not pay them the
vacation time they had accrued toward the next year's allotment.
              Howard Choate (Choate), Billy Henry (Henry), and Leroy Stricklin
(Stricklin) (collectively, Plaintiffs) worked for Celite until they were laid off on March 1,
2007. Celite immediately paid Plaintiffs their "vacation allotment" for 2007, but did not
pay them for vacation time they had accrued toward January 2008's allotment between
January 1 and March 1, 2007.
              Plaintiffs thereafter filed a class action against Celite seeking (1) the pro
rata portion of the January 2008 "vacation allotment" they had earned while employed
between January 1 and March 1, 2007, pursuant to section 227.3 (pro rata vacation time);
(2) thirty days of salary, as waiting time penalties pursuant to section 203, because Celite
had "willfully" refused to pay them immediately for the pro rata vacation time; and




              2
               This is the language from the 2007-2010 Agreement. The 2003-2007
Agreement entitled separated employees to "receive whatever vacation allotment due
within the calendar year." The difference in language was not substantive.


                                              2
(3) damages arising from these violations, which they allege violated the unfair
competition law, Business and Professions Code section 17200.3
              The parties made cross-motions for summary adjudication based on
stipulated facts. The trial court denied summary adjudication of Plaintiffs' vacation pay
and unfair competition claims.
              The court granted summary adjudication to Plaintiffs on their waiting time
penalties claim. The court concluded that section 227.3 obligated Celite to pay Plaintiffs
for their pro rata vacation time immediately upon their termination unless the Agreements
"otherwise provided." The court ruled that the Agreements did not waive Plaintiffs'
rights to the pro rata vacation time in clear and unmistakable terms. The court further
determined that Celite had acted willfully in refusing to pay Plaintiffs because Celite's
legal duty to do so was clear and because Celite acted unreasonably in believing that the
Agreements' implicit waiver of these rights was valid. The court also rejected Celite's
argument that Plaintiffs' claims were preempted by the Labor Management Relations Act
(LMRA). The court accordingly concluded that Celite owed waiting time penalties.
              Plaintiffs dismissed their unpaid vacation claim because Celite eventually
paid them for the pro rata vacation time, and dismissed their unfair competition claim to
expedite appellate review. The parties also stipulated to class certification for the waiting
time penalties claim. The court subsequently entered judgment for Plaintiffs.
                                        DISCUSSION
              Celite argues that it should not be held liable for waiting time penalties
because (1) it never owed Plaintiffs the pro rata vacation time in the first place; (2) even
if it did, it did not "willfully" refuse to pay Plaintiffs because it reasonably believed the
Agreements had waived Plaintiffs' right to that pay; and (3) Plaintiffs' claims are
preempted by the LMRA in any event.



              3
                The complaint included a second group of plaintiffs, but the parties agreed
to sever and stay those plaintiffs’ claims pending this appeal.


                                               3
                      I. Celite Owed Plaintiffs Pro Rata Vacation Time
              Celite contends that the Union waived Plaintiffs' statutory right under
section 227.3 to the pro rata vacation time. As evidence of this waiver, Celite notes that
(1) the Agreements discuss what vacation pay terminated employees are to receive and
limit that pay to the "vacation allotment" for the year of termination; and (2) consistent
with the Agreements, Celite had for decades paid terminated employees only the
"vacation allotment" without any objection from the Union. Because section 227.3
empowers a union to waive its members' rights to "vested vacation time" by entering into
a collective bargaining agreement that "otherwise provide[s]" (§ 227.3), Celite's
arguments present two questions for review: How clearly must a waiver of rights under
section 227.3 be, and do the Agreements here meet that standard? We review both
questions de novo. (Coito v. Super. Ct. (2012) 54 Cal.4th 480, 488 [issues statutory
construction reviewed de novo]; Roybal v. Governing Bd. of Salinas City Elem. Sch.
(2008) 159 Cal.App.4th 1143, 1148 [application of law to undisputed facts reviewed de
novo].)
              A. A waiver of rights under section 227.3 must be clearly and
unmistakably stated in the collective bargaining agreement
              Once an employer makes vacation pay a term of employment, section 227.3
entitles terminated employees to immediate payment for any "vested vacation time"
unless a collective bargaining agreement "otherwise provide[s]." (§ 227.3, 201; cf.
Suastez v. Plastic Dress-Up Co. (1982) 31 Cal.3d 774, 784 (Suastez) [if employer does
not offer vacation time, § 227.3 does not apply]; Boothby v. Atlas Mechanical, Inc.
(1992) 6 Cal.App.4th 1595, 1602 [if employer "caps" vacation accrual, § 227.3 does not
override that cap].)4 The parties disagree on what our Legislature meant when it required
collective bargaining agreements to "otherwise provide[]": Celite contends that a waiver
of the right to payment under section 227.3 may be inferred from the totality of the
circumstances, while Plaintiffs defend the trial court's ruling that any waiver must be

              4
                  If the employee quits, the employer must pay within 72 hours. (§ 202.)


                                              4
clearly and unmistakably stated in the collective bargaining agreement. We agree with
the trial court that section 227.3 requires any union waiver of its members' statutory right
to payment under section 227.3 be made clearly and unmistakably.
              Three canons of statutory construction dictate this conclusion. First, we are
required to construe statutes to avoid absurd consequences. (In re Greg F. (2012) 55
Cal.4th 393, 406.) As it stands now, a collective bargaining agreement validly waives a
union member's right to litigate federal or state claims in a judicial forum only if the
waiver is clear and unmistakable. (Vasquez v. Super. Ct. (2000) 80 Cal.App.4th 430,
434-435 (Vasquez) [under state law]); 14 Penn Plaza v. Pyett (2009) 556 U.S. 247, 272,
274 [under federal law].) The same is true for waivers of substantive rights conferred by
federal statute (Metropolitan Edison Co. v. NLRB (1983) 460 U.S. 692, 708
(Metropolitan Edison Co.) and for waivers of public employee's rights conferred by
California statute (Oakland Unified Sch. Dist. v. Public Employee Relations Bd. (1981)
120 Cal.App.3d 1007, 1011).
              Against this backdrop, the totality of the circumstances standard
proffered by Celite leads to absurd results. Because the totality of the circumstances
standard looks to evidence (such as mutual understanding and past practices) beyond the
collective bargaining agreement, this standard by definition empowers courts to infer a
waiver when the agreement does not clearly and unmistakably memorialize one.
Consequently, the totality of the circumstances standard would make it easier for unions
to waive their members' substantive rights than members' procedural right to litigate
those substantive rights in a judicial forum; easier to waive state statutory rights than
federal statutory rights; and easier to waive private sector employees' rights than public
employees' rights. Celite offers no justification for these counter-intuitive and irrational
outcomes. Importantly, these outcomes are avoided entirely if the waiver of union
members' statutory rights under state law—like the waivers of the other rights described
above—must be clear and unambiguous.
              Second, we construe ambiguities in labor statutes to be more (rather than
less) protective of employees' rights. (Kirby v. Immoos Fire Protection, Inc. (2012) 53


                                              5
Cal.4th 1244, 1250.) Requiring greater clarity to effect a waiver of employees' rights is
more protective of those rights.
              Lastly, we try to harmonize state and federal law. (Independent Union of
Public Serv. Employees v. County of Sacramento (1983) 147 Cal.App.3d 482, 488.) As
noted above, waiver of federal statutory rights must be clear and unambiguous.
(Metropolitan Edison Co., supra, 460 U.S. at p. 708.) This counsels in favor of requiring
the same degree of clarity for waivers of state statutory rights.
              Celite proffers three reasons why implied waivers suffice under section
227.3. First, Celite relies on precedent. Celite contends that language in Livadas v.
Bradshaw (1994) 512 U.S. 107 (Livadas) draws a distinction between waiving the right
to waiting time penalties under sections 201 and 203 and the right to vested vacation pay
under section 227.3, and only requires clear and unmistakable waivers for the former.
(Livadas, supra, at p. 128.) Livadas contrasted sections 201 and 203 from section 227.3,
but did so to illustrate that section 227.3's plain language empowers a union to waive its
protections whereas section 219 prohibits waiving the protections of sections 201 and
203. Livadas said nothing about what the waiver standard under section 227.3 should be.
Indeed, the court only mentioned the clear and unmistakable waiver standard with regard
to sections 201 and 203 while commenting on the clarity of the waiver the court would
require before it would consider whether federal common law preempted section 219's
prohibition of such a waiver. (Livadas, supra, at p. 125, citing Lingle v. Norge Div. of
Magic Chef (1988) 486 U.S. 399, 409-410, fn. 9 (Lingle).)
              Celite also cites Firestone v. Southern California Gas Company (9th Cir.
2000) 219 F.3d 1063 (Firestone) and Rawson v. Torso Refining Co. (1997) 57
Cal.App.4th 1520 (Rawson). Although Firestone could be read to support an implied
waiver standard, both Firestone and Rawson addressed the waiver of a right conferred by
wage order (Firestone, supra, at p. 1066; Rawson, supra, at p. 1525)—not a waiver of
statutory rights.
              Second, Celite contends that the plain language of section 227.3 mandates
an implied waiver standard because it requires only that a collective bargaining


                                              6
agreement "otherwise provide[]." Requiring a clear and unmistakable waiver, Celite
reasons, rewrites the statute to require that an agreement "otherwise expressly provide[]."
We disagree. By their very nature, waivers may be express or implied. In determining
which type of waiver the Legislature intended to codify in section 227.3, we are not
rewriting the statute; we are construing it. (Accord, Simmons v. Ghaderi (2008) 44
Cal.4th 570, 585 ["whether or not implied waiver [rather than express waiver] applies to
mediation confidentiality is ultimately an issue of statutory interpretation"].)
              Third, Celite suggests that section 227.3 was designed to give the parties to
a collective bargaining agreement a freer hand to negotiate because section 227.3—unlike
sections 512, 514, 554, 750.5 and 2810.5—does not condition a waiver of employee's
rights upon the mandatory adoption of alternative contractual protections. From this,
Celite extrapolates that section 227.3 must also give the parties greater flexibility in
effectuating a waiver in the first place. This extrapolation is flawed. That section 227.3
grants employers and unions greater latitude in defining alternative protections says
nothing about the degree of clarity with which they must invoke that latitude.
              B. The Agreements do not waive Plaintiffs' rights under section 227.3 in
clear and unmistakable terms
              To be clear and unmistakable, a waiver must do more than speak in
"'[b]road, general language." (Vasquez, supra, 80 Cal.App.4th at p. 435.) It must be
specific, and mention either the statutory protection being waived or, at a minimum, the
statute itself. (Accord, Hoover v. American Income Life Ins. Co. (2012) 206 Cal.App.4th
1193, 1208.) The Agreements here neither mention pro rata vacation pay nor cite section
227.3. Celite points out that the Agreements "affirmatively address" vacation payments
upon termination. But discussing a topic while at the same time saying nothing about the
statutory right at issue does not affect a clear and unmistakable waiver of that right. The
trial court correctly concluded that this was insufficient to constitute a waiver in clear and
unmistakable terms.




                                              7
                      II. Celite Did Not Act "Willfully" In Not Paying
                         Plaintiffs For Their Accrued Vacation Time
               Celite argues that the trial court erred in concluding that Celite willfully
refused to pay Plaintiffs for their pro rata vacation time. We review the trial court's
ruling for substantial evidence. (Amaral v. Cintas Corp. No. 2 (2008) 163 Cal.App.4th
1157, 1202.)
               Section 203 entitles a terminated employee to "waiting time penalties" of
up to 30 days' wages if the employer "willfully fails to pay" the employee any
outstanding wages immediately upon termination. (§ 201.) To act "willfully," an
employer need not act with a "deliberate evil purpose." (Barnhill v. Robert Sanders &
Co. (1981) 125 Cal.App.3d 1, 7.) Rather, the employer need only "intentionally fail[] or
refuse[] to perform an act which was required to be done. [Citation.]" (Ibid., emphasis
removed.) However, an employer's reasonable, good faith belief that wages are not owed
may negate a finding of willfulness. (8 Cal. Code Regs., § 13520, subd. (a); Road
Sprinkler Fitters Local Union No. 669 v. G & G Fire Sprinklers, Inc. (2002) 102
Cal.App.4th 765, 782.)
               The trial court's ruling that Celite acted willfully was based in part on the
premise that Celite's misunderstanding of the law governing waiver—even though shared
by the Union—was unreasonable. This premise necessarily assumes that section 227.3
requires any waiver to be clear and unmistakable. Although we agree with the trial court
that this is the appropriate standard, this is the first case to define the standard for waiver
under section 227.3. Plaintiffs argue that Saustez decided this issue, but it did not.
(Saustez, supra, 31 Cal.3d 774.) Celite's good faith reliance on a different waiver
standard was accordingly reasonable, particularly in light of the language in Firestone
supporting that standard. (Armenta v. Osmose, Inc. (2005) 135 Cal.App.4th 314, 325-326
[position taken where law is undecided can be reasonable].) That Celite's position did not
prevail does not mean that its position was unreasonable. (8 Cal. Code Regs., § 13520.)
               By itself, our ruling would ordinarily call for a remand for further
proceedings. However, the parties have stipulated that they had a longstanding practice


                                               8
of not paying pro rata vacation time to terminated employees. The parties further
stipulated that Celite otherwise acted in good faith. Bound as we are by these
stipulations, the outcome of a remand is a foregone conclusion. Accordingly, we order
that summary adjudication be entered for Celite on the waiting time penalties claim.
                III. Plaintiffs' Claims Are Not Preempted By Federal Law
              Celite alternatively argues that Plaintiffs' claims are preempted by
section 301 of the LMRA, 29 United States Code section 158(a). Whether a state cause
of action is preempted by section 301 is a question of federal law we review de novo.
(Allis-Chalmers Corp. v. Lueck (1985) 471 U.S. 202, 214, abrogated on other grounds in
14 Penn Plaza LLC v. Pyett, supra, 556 U.S. 247.)
              The LMRA preempts state actions when they are (1) based upon a right
conferred by a collective bargaining agreement; or (2) otherwise "substantially dependent
[upon an] analysis" of such an agreement. (Lingle, supra, 486 U.S. at p. 413, fn. 10;
Caterpillar, Inc. v. Williams (1987) 482 U.S. 386, 394; Firestone, supra, 219 F.3d at p.
1066.) A claim is "substantially dependent [upon an] analysis" of an agreement if it
"requires . . . interpretation" of the agreement. (Lingle, supra, at p. 413; Firestone, supra,
at p. 1066.) Due in part to the presumption against federal preemption (Fort Halifax
Packing Co. v. Coyne (1987) 482 U.S. 1, 21), the term "interpret" is "defined narrowly"
(Balcorta v. Twentieth Century-Fox Film Corp. (9th Cir. 2000) 208 F.3d 1102, 1108).
An action will not be preempted just because the court, to resolve the state claim, needs
to "consider," "refer to," or "apply" one or more terms of a collective bargaining
agreement. (Ibid.; Soremekun v. Thrifty Payless, Inc. (9th Cir. 2007) 509 F.3d 978, 991;
Burnside v. Kiewit Pac. Corp. (9th Cir. 2007) 491 F.3d 1053, 1060.) Only if the court
must "construe" disputed terms of the agreement will the claim be preempted. This rule
of preemption empowers the federal courts to develop and apply a uniform body of
federal common law governing the interpretation of collective bargaining agreements,
which is thought to encourage collective bargaining. (Lingle, supra, at pp. 403-404, fn.
3, 407; Lividas, supra, 512 U.S. at p. 122; Allis-Chalmers Corp., supra, 471 U.S. at pp.
210-211.)


                                              9
              Plaintiffs' claim for working time penalties under sections 227.3 and 203 is
not preempted. That claim is based solely on state law. More to the point, resolving that
claim only requires a court to ascertain whether the Agreements contain clear and
unmistakable language waiving Plaintiffs' rights to "vested vacation time." Checking to
see whether the Agreements affirmatively mention section 227.3 or its protections does
not entail interpretation. (Accord, Burnside, supra, 491 F.3d at p. 1060 [assessing
whether collective bargaining agreement contained a waiver in clear and unmistakable
terms; no "interpretation" and no preemption].) Celite argues that a more in-depth
inquiry into the parties' mutual intent and past practices would require interpretation, but
the clear and unmistakable waiver standard we have adopted makes such probing inquiry
irrelevant and hence unnecessary.
                                      DISPOSITION
              The judgment is reversed and remanded. The trial court is ordered to grant
summary adjudication to Celite on the waiting time penalties count (count 2). Costs on
appeal are awarded to Celite.
              CERTIFIED FOR PUBLICATION.



                                           HOFFSTADT, J.*

We concur:


              GILBERT, P. J.



              PERREN, J.




              *
               (Judge of the Superior Court of Los Angeles County, assigned by the
Chief Justice pursuant to art. 6, § 6 of the Cal. Const.)


                                             10
                                 James W. Brown, Judge
                                  Donna D. Geck, Judge
                         Superior Court County of Santa Barbara
                        __________________________________


               Sheppard, Mullin, Richter & Hampton LLP, Jeffrey A. Dinkin and Karin
Dougan Vogel for Defendant and Appellant.
               Gilbert & Sackman, Robert A. Cantore and Adrian Barnes for Plaintiffs and
Respondents.
