Court of Appeal: Union Contracts Must Clearly and Unmistakably Waive Rights Under California Vacation Law

It's California employment law 101 that employers must pay out all "vested" vacation time when an employee's employment ends.  No "use it or lose it" and no limits on "carry over" are allowed under Labor Code Section 227.3.  There's an exception in the statute though, which says the statute applies "[u]nless otherwise provided by a collective-bargaining agreement."

What does "otherwise provided" mean?  Well employer Celite had a collective bargaining relationship, and their agreement provided as follows, according to the Court of Appeal:

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. [The] employees terminated from Celite were entitled to "receive whatever vacation allotment is due them upon separation."[fn] 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.

The description above suggests that the contract required payment of whatever vacation balance the employee had, but did not take into account "accrual" of vacation during the current year.  Pretty clear to me.

 

Not clear enough for the Court of Appeal, though, and I don't get a vote.  The Court decided that because vacation pay is a significant state-law right, any waiver of 227.3's requirements had to be "clear and unmistakable." Here's what the Court said:

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.

So, please check your union contracts and either negotiate a clear provision that waives Section 227.3 expressly and, preferably, quotes the statute.  This is why California release agreements quote Civil Code Section 1542, in case you've ever wondered about that.

On the bright side, the Court of Appeal decided the employer did not act "willfully" by following the collective bargaining agreement and, therefore, was not on the hook for "waiting time" penalties.  The court said that this was the first opinion deciding the standard for waivers under Section 227.3, and so the employer's mistake of law was not "willful."

Some times I wonder what all those class action plaintiff lawyers are doing after Brinker and Dukes v. Walmart put a damper on things.  (Ok, not really).  Well, here is the Court of Appeal riding to the rescue. 

It may be that the California or even U.S. Supreme Court may review this case, but the odds are long. If this case stays on the books, all union contracts prescribing a vacation payout provision that is less generous than Section 227.3 are subject to attack.  Make with the bargaining, employers.

The case is Choate v. Celite Corporation, and the opinion is here.