Court of Appeals Upholds Federal Law Overrides California Sick Leave Rules for Railroad Workers: Takeaways for Employers

Transportation industry employers won a rare victory when an appeals court ruled that a federal law covering railroad employees overrides sick leave provisions under California law. In short, this means you don’t have to follow California’s sick leave laws for railroad workers and just follow the Federal Railroad Unemployment Insurance Act (RUIA). The July 26 decision of the U.S. 9th Circuit Court of Appeal relies heavily on the plain language of the RUIA and blatantly rejects the California Commissioner of Labor’s attempts to draw distinctions between the benefits provided by the RUIA and California sick leave laws. The ruling simplifies furlough conditions for railroad employers and paves the way for additional favorable rulings in situations where Congress has made it clear that federal rules and regulations prevail over state law. What do you need to know about the decision and its wider implications?

The debate focuses on the intersection of two laws

At the heart of this case are two laws: the RUIA and the California Healthy Workplaces and Healthy Families Act (HWHFA).

The RUIA was enacted in 1938 to provide unemployment benefits to railway employees. In 1946, Congress changed the law to also provide railroad employees with “sick pay”. These benefits – which amount to 60% of the daily wage – are available “for each day of illness after the 4th consecutive day of illness in a period of continuous illness”. The RUIA also contains an express pre-emptive provision that prevents railroad employees from being entitled to “sick pay under any state sickness law”.

By contrast, the HWHFA — which was enacted in 2014 — requires California employers to provide affected employees with at least three paid sick days each year, among other things. Effective July 1, 2015, employees who worked 30 or more days in California within one year of employment began accumulating paid sick leave that they could legally use on the 90th day of employment. By law, California employees can take paid sick leave for themselves or a family member; for preventive care or diagnosis; care or treatment of an existing medical condition; or for specific purposes if they are victims of domestic violence, sexual assault or harassment.

As a result, the RUIA and HWHFA provided California railroad employees with sickness benefits. Although applied differently and in varying circumstances, the cross-section of these two laws for railroad workers became the focal point of the 9th Circuit’s decision.

Railway companies take legal action

After the HWHFA took effect in 2014, six railroad companies sued the California labor commissioner. They alleged that the California law was invalid as it applied to their employees because it had been preempted by RUIA and the Employee Retirement Income Security Act (ERISA). The railroad companies sought to prohibit the labor commissioner from enforcing the law against them.

The district court ruled in favor of the railroads, finding that the RUIA partially preempted the California law and that the rest of the law was invalid because it unduly burdened interstate commerce. The commissioner appealed.

9th Circuit agrees RUIA is ahead of California sick leave law

After a briefing and argument, the 9th Circuit agreed with the underlying court and ruled that, for railroad employees, RUIA prevails over California’s HWHFA.

The Commissioner of Labor and affected stakeholders argued that the RUIA does not override California law because the benefits offered by the HWHFA were different from those of the RUIA. Moreover, they argued, the RUIA simply provided a kind of “short-term disability insurance” for long-term leaves, whereas California law covered actual absences due to illness, which could be medical conditions. occasional and common short-term. In drawing these distinctions, the labor commissioner argued that the RUIA did not replace California’s sick leave laws.

In rejecting the labor commissioners’ arguments, the 9th Circuit relied heavily on the plain text and structure of the RUIA and California law. Specifically, the appeals court panel noted that using its own definitions, California law is a “sickness law” that provides “sickness benefits.” The court upheld that because the RUIA states that federal law confers “exclusive” “sick pay” on railroad employees, California law violates the RUIA.

The court went further, noting that nothing in the RUIA limited the scope of its “exclusive” nature to state benefit plans providing short-term disability insurance. In doing so, the court said that implying such a limitation would be inconsistent with Congress’ stated purpose of preventing multiple sick pay plans for railroad companies, which Congress said “would constitute an undue burden and undue interference in the effective regulation of, interstate commerce.For the same reasons, the 9th Circuit also rejected the Commissioner’s contention that the RUIA should only prevail over the type of state laws that existed. when the RUIA was amended to provide sickness benefits.

In short, the 9th Circuit ruled that California’s HWHFA was inapplicable to railroad employees and that their sick leave would be governed by the RUIA.

What it means moving forward

Viewed in a vacuum, the ruling is extremely narrow, as it only applies to California railroad workers. However, the court’s reasoning is more pervasive.

The decision makes it clear that employers of railroad workers won’t have to worry about states implementing more aggressive sick leave laws and can, instead, rely on the exclusive nature of the RUIA. This, more than likely, goes beyond California and its sick leave law and can be applied to other states and their specific leave provisions.

Additionally, this decision may serve as a model for other decisions in the transportation industry where federal and state laws appear to conflict, particularly where there are strong “exclusivity” provisions in the federal language. Based on the language of the court, we could see the federal government exercising more control over employees in the transportation industry, despite states implementing local rules and regulations. However, these events will be very fact-specific.

Conclusion

Before making decisions about whether your employees must comply with state law, be sure to consult with an attorney. Your Fisher Phillips attorneys are ready to help you identify and assess the issues that may have the greatest impact on your workplace. Be sure to subscribe to the Fisher Phillips Alert System for the most up-to-date information. If you have any questions, please contact your Fisher Phillips attorney, the author of this overview, or any attorney on our Transportation and Supply Chain team.

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