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Cox v. The Kroger Co.

Court of Appeals of Washington, Division 1

February 5, 2018

RONALD COX, an individual, and on behalf of others similarly situated, Respondent,
THE KROGER COMPANY, an Ohio corporation, FRED MEYER STORES, INC., doing business as QUALITY FOOD CENTERS (aka QFC), Appellants.

          Verellen, C.J.

         Ronald Cox, a former Quality Food Centers Inc. (QFC) employee, filed this class action challenging QFC's policy of rounding hourly employees' clocked-in time to the nearest quarter hour. Specifically, he contends QFC intentionally manipulated the application of this policy to result in underpayment of wages.

         QFC appeals the trial court's denial of the motion to compel arbitration. Because the collective bargaining agreements (CBAs) governing Cox's employment do not clearly and unmistakably waive his right to a judicial forum for statutory wage claims, the arbitration provision does not encompass his claims, and the trial court did not err in denying QFC's motion to compel arbitration.

         QFC also seeks review of the trial court's earlier determination that Cox's claims were not preempted by section 301 of the Labor Management Relations Act of 1947 (LMRA).[1] Because the interlocutory partial summary judgment order concerning preemption does not prejudicially affect the arbitration order designated in QFC's notice of appeal, the merits of the undesignated preemption ruling are not before us.

         We also deny QFC's motion to take judicial notice because the documents at issue relate solely to the question of waiver of the right to arbitrate, and we need not reach waiver. We deny Cox's motion to dismiss this appeal as moot because the appeal presents debatable issues. For the same reason, we deny Cox's request for fees based on the argument that QFC's appeal is frivolous.

         Therefore, we affirm.


         Cox was employed by QFC between October 2011 and February 2014. He worked at the QFC in Camas, Washington, and later transferred to the Moreland QFC in Portland, Oregon.

         QFC is a supermarket chain with locations in Washington and Oregon. Between 2000 and 2014, QFC required hourly employees to use a time card to clock in and out at the beginning and end of their shifts. QFC employed a rounding policy that provided:

• Time is credited by the quarter hour. There is a seven minute grace period which rounds the eighth minute to the quarter hour. (Example: An employee is scheduled to work at 7:00 o'clock. The employee punches in at 7:08. The 7:08 punch will round to 7:15. If the employee punches in at 7:07 the punch will round to 7:00.).
• It is the employee's responsibility to follow these procedures, as it will ensure they are paid accurately and on a timely basis.![2]'

         The rounding policy is not contained in or referred to by the CBAs.

         In July 2014, Cox and another former QFC employee, Sue Jin Yi, filed the current class action challenging QFC's rounding policy.[3] The proposed class included hourly QFC employees in Washington and Oregon.

         United Food and Commercial Workers Union Local 555 represents QFC employees in Washington and Oregon. Cox's employment with QFC was covered by one CBA while he worked at the QFC in Camas, Washington, [4] and another while he worked at the Moreland QFC in Portland, Oregon.[5] The two CBAs are identical as to all the relevant provisions for this appeal.

         In May 2015, the trial court denied QFC's motion to dismiss Cox's second and third causes of action based on chapter 49.52 RCW and Oregon Revised Statutes section 652.120 (ORS) as preempted under section 301 of the LMRA. In November 2016, the court denied QFC's motion to compel arbitration of these same claims.

         QFC appeals.


         I. Nature of Claims

         As a preliminary matter, it is critical to our analysis to understand the claims actually asserted by Cox. The first amended complaint specifically alleges QFC's rounding policy "deprives [hourly] employees of regular and overtime pay they have earned."[6] This appeal concerns only Cox's second cause of action, based on chapter 49.52 RCW, and his third cause of action, based on ORS section 652.120. The core issue of this appeal is whether these claims are statutory or contractual.

         RCW 49.52.050(2) provides that "[a]ny employer or officer... who ... [w]ilfully and with intent to deprive the employee of any part of his or her wages, shall pay any employee a lower wage than the wage such employer is obligated to pay such employee by any statute, ordinance, or contract" is in violation of the statute. The purpose of the statute is to "ensure that the employee realizes the full amount of his or her wages and that the employer does not evade his or her obligation to pay wages . .. calculated to effect a rebate of part of them."[7]

         Pursuant to ORS section 652.120(1), "[e]very employer shall establish and maintain a regular payday, at which date the employer shall pay all employees the wages due and owing to them." The essence of a claim under this statute is "an assertion that one has not received payment from one's employer of 'wages due and owing.'"[8]

         Cox contends the claims are statutory wage claims. Cox asserts the rounding policy in conjunction with QFC's other policies and procedures resulted in employees being "consistently and systematically deprived of pay for all straight time and overtime hours they actually work."[9] Specifically, Cox contends QFC's various policies concerning timekeeping and attendance have the impact of inhibiting conduct that would cause the employee to benefit from the rounding policy and promoting conditions that allow the employer to benefit. Commentators have analogized this wage dispute theory challenging unfair rounding policies to casinos where the odds of winning are skewed to favor the "house."[10]

         QFC takes a diametrically opposed view, that despite being labeled as statutory wage claims, the claims are contractual because Cox seeks damages only available under the CBAs. A claim for unpaid wages necessarily requires a computation of the regular rate of pay multiplied by the amount of compensable time worked. QFC argues Cox's claims are contractual because the CBA is the source of Cox's regular rate of pay and the definition of "compensable time."

         Specifically, as to the Washington law claim, QFC points to an interrogatory answer by Cox referring to claimed damages at a rate of $12 per hour. Because Cox's standard rate when working in Washington was less than $12 per hour, QFC infers that he must be depending on some form of premium wage rate contained in the CBAs. But the interrogatory answer does not constitute a binding admission by Cox that his Washington claim depends on the application of a premium wage rate contained in the CBAs. In fact, he denies his claims include any such rates.[11]

         QFC also contends that Cox's wage claims under Oregon and Washington law necessarily require a determination of the definition of "compensable time." Although the rounding policy is not contained in the CBAs, QFC argues the policy controls the calculation of wages. Specifically, QFC relies on Cox's acknowledgement of the rounding policy, declarations from human resource executives about the lack of complaints concerning the rounding policy, and general declarations from QFC executive employees regarding QFC's historical practice of compensating employees based on the rounded time. But under a claim for unpaid wages due to the alleged manipulation of the facially neutral rounding policy, the question is not whether the rounding policy exists, the question is whether QFC's policies and practices have the impact of undercompensating the employees.

         If an employer intentionally used "bad math" to manipulate the computation of wages owed to employees, an employee would possess a statutory claim for the withholding of wages. Similarly, intentionally manipulating the application of a facially neutral rounding policy used to compute wages owed, resulting in underpayment, runs afoul of Washington's and Oregon's wage and hour statutes. Cox's claims qualify as statutory wage claims.

         II. Motion To Compel Arbitration

         QFC first challenges the trial court's denial of the motion to compel arbitration.

         We review a trial court's denial of a motion to compel arbitration de novo.[12]

         Generally, the Federal Arbitration Act (FAA)[13] applies to collective bargaining agreements.[14] "The purpose of the [FAA] is to overcome the courts' historical reluctance to enforce agreements to arbitrate."[15] This court must apply federal substantive law to any arbitration agreement within the coverage of the FAA.[16] In determining whether to enforce an arbitration provision, this court must consider (1) "whether the arbitration agreement is valid" and (2) "whether the agreement encompasses the claims asserted."[17]

         An arbitration agreement does not encompass statutory claims unless the waiver of an employee's right to judicial forum for such claims is "clear and unmistakable."[18] A clear and unmistakable waiver can occur if the CBA contains "a general clause requiring arbitration under the employment agreement, coupled with a provision that makes it unmistakably clear that the ...

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