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October 27, 2011

California drivers and installers who transported and installed home appliances cannot pursue state law allegations that Penske Logistics LLC denied them meal and rest breaks because the claims are preempted by federal transportation law, a federal court in California held Oct. 19 (Dilts v. Penske Logistics LLC, S.D. Cal., No. 08-cv-318, 10/19/11).

Granting partial summary judgment to the employer in a class action covering about 350 drivers and installers of Whirlpool appliances, Judge Janis L. Sammartino of the U.S. District Court for the Southern District of California held that the meal and rest break claims under state law are preempted by the Federal Aviation Administration Authorization Act, which includes language preempting some state law regulation of motor carrier operations.

Sammartino found that although the Penske employees performed all of their work inside California, the California Labor Code provisions they cited relate to “a price, route, or service” of a motor carrier and are therefore preempted by federal transportation law.

According to the decision and court records, Mickey Lee Dilts and other employees worked for Penske, which provided transportation and warehouse management services to Whirlpool Corp. in California.

Penske employees received customer orders and arranged for the required appliances to be manufactured at various locations and then had them delivered to Whirlpool’s California regional distribution centers by third-party motor carriers.

After the appliances arrived in California, Penske workers inventoried the appliances and loaded them on trucks for shipment to local distribution centers or directly to customers. Penske driver/installers, accompanied by nondriving installers, drove the appliances to their final destinations and installed them for customers.

In January 2008, Dilts and several other employees filed a state court action asserting that Penske failed to compensate them in accordance with the minimum wage and overtime provisions of the California Labor Code. The employees also alleged that the company routinely deducted 30 minutes from their payroll records to account for meal periods, but failed to insure they were actually relieved from duty and able to eat without interruption.

The employees also complained that the company violated state law by not affording employees a rest period of 10 minutes for every four hours worked, which was required by a state Industrial Welfare Commission order. The employees’ complaint also included an allegation that by conducting its business in violation of the Labor Code, Penske engaged in unfair business practices prohibited by the California Business and Professions Code.

Penske filed a motion for partial summary judgment, and Sammartino said the issue before her was not the merit of the California Labor Code allegations but whether the state claims were preempted by federal law.

The court said the Federal Aviation Administration Authorization Act of 1994 regulates several modes of transportation, and one provision, found at 49 U.S.C. § 14501(c)(1), provides that with certain exceptions a state “may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier … or any motor private carrier, broker, or freight forwarder with respect to the transportation of property.”

Sammartino acknowledged that the language of the statutory provision “does not, on its face, explicitly encompass state regulation of meal and rest breaks,” but she said Congress intended for the FAAA Act to eliminate nonuniform state regulation of motor carriers that was considered to have caused inefficiencies and other problems in the transportation industry.

The court said Congress used preemption language in the FAAA Act that was “copied” from the Airline Deregulation Act, a statute the U.S. Supreme Court held preempted the authority of states to apply consumer protection laws to regulated air carriers.

The preemptive scope of the airline deregulation legislation and the FAAA Act has “never been fully resolved,” Sammartino wrote, calling the preemption of the California Labor Code provisions “a close question.”

The court found that by imposing requirements for the meal and rest breaks of Penske employees, the state labor laws “directly and significantly related to such things as the frequency and scheduling of transportation.”

Penske did not show that the meal and rest break laws would prevent the company from serving particular markets, but Sammartino said “the laws bind Penske to a schedule and frequency of routes that ensures many off-duty breaks at specific times throughout the workday.” Such restrictions would interfere with market forces in the industry, she said.

Sammartino said complying with the California statutes would also have a “significant impact on prices.” Penske produced evidence that it would have to add drivers, helpers, tractors, and trailers in order to maintain the same level of service to Whirlpool while providing the required meal and rest breaks for all of the Penske employees.

The employees argued that the California statutes are “wage laws” that are not preempted by the Fair Labor Standards Act. Finding them preempted by the FAAA Act would create an “unnecessary conflict” between federal law, according to the employees.

But Sammartino said it is a mischaracterization to call the California statutes “wage laws.” In order to comply with the state laws, the court observed, Penske could not simply pay higher wages; the company would have to provide the required breaks. One of the penalties for failing to give an employee a required break is to compensate the employee with additional wages, but Sammartino said that does not make the California statutes “wage laws” or save them from preemption.

“A wage law, which essentially increases the price of labor, impacts a motor carrier’s prices, routes, or services in a tenuous way,” Sammartino said. “If the cost of labor goes up, then prices, routes, and services are more expensive.”

But she said, “In the instant case, however, the impact is not derived from the increased cost of labor and is not tenuous. Rather, the impact is derived from the imposition of substantive restrictions upon the breaks taken by motor carrier drivers and drivers’ helpers, which binds the motor carriers to a set of routes, services, schedules, origins, and destinations that it otherwise would not be bound to—thereby interfering with the competitive market forces in the industry.”

Finding that Congress intended to avoid such state interference, Sammartino wrote “the Court finds these laws are ‘related to the motor carrier’s prices, routes, or services,’ and thus preempted by the FAAA Act.”

Section 14501(c)(2)(A) of the federal law provides that the preemption clause does not “restrict the safety regulatory authority of a State.” The Penske employees argued that the state meal and rest period laws have a direct connection to the health and safety of workers. Their effort to remedy meal and rest period violations should not be blocked by federal law, the drivers and installers argued.

Sammartino agreed that “[t]he safety of employees working long hours without breaks is an issue of unquestionable importance to employees operating dangerous motor vehicles.” But she said the state laws address “public health concerns” that “are not directly connected to motor vehicle safety.”

The judge said if she held the meal and rest break legislation is directly related to motor vehicle safety, “then any law impacting the health and safety of an employee would fall within the motor vehicle safety exception simply because the employee is the driver of a potentially dangerous motor vehicle.”

Finding “the motor vehicle safety exception to the FAAA Act’s preemptive scope does not apply here,” Sammartino granted Penske’s request for partial summary judgment on the meal and rest break claims. 10.27.2011.

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