Professional Engineers v. Department of Transportation

• Decision Date: 15 May 1997
• Docket Number: No. S042591,S042591
• Citation: 15 Cal.4th 543,936 P.2d 473,63 Cal.Rptr.2d 467
• Parties: , 936 P.2d 473, 97 Cal. Daily Op. Serv. 3644, 97 Daily Journal D.A.R. 6201 PROFESSIONAL ENGINEERS IN CALIFORNIA GOVERNMENT et al., Plaintiffs and Respondents, v. DEPARTMENT OF TRANSPORTATION et al., Defendants and Appellants.
• Court: California Supreme Court

Page 467

63 Cal.Rptr.2d 467

15 Cal.4th 543, 936 P.2d 473, 97 Cal. Daily Op. Serv. 3644,

97 Daily Journal D.A.R. 6201

PROFESSIONAL ENGINEERS IN CALIFORNIA GOVERNMENT et al., Plaintiffs and Respondents, v. DEPARTMENT OF TRANSPORTATION et al., Defendants and Appellants.

No. S042591.

Supreme Court of California.

May 15, 1997.

Rehearing Denied July 16, 1997.

Daniel E. Lungren, Attorney General, Floyd D. Shimomura, Assistant Attorney General, Linda A. Cabatic and Daniel G. Stone, Deputy Attorneys General, William M. McMillan, Richard W. Bower, O.J. Solander, Stephanie G. Sakai, Sacramento, Irell & Manella, Gregory R. Smith, Joanna Moore and David Z. Moss, Los Angeles, for Defendants and Appellants.

David I. Kelly, Douglas L. Kendrick, Anthony T. Caso, Sharon L. Browne, Sacramento, Francis F. Chin, Oakland, Nossaman, Guthner, Knox & Elliott, Stephen N. Roberts, Stanley S. Taylor, San Francisco, Patricia Lee Connors, Sacramento, Robert D. Thornton, Irvine, Kennedy & Wasserman, Wendel, Rosen, Black, Dean & Levitan, R. Zachary Wasserman, Oakland, Bertha Ontiveros, Best, Best & Krieger, Steven C. DeBaun, Zumbrun & Findley, Ronald A. Zumbrum, John H. Findley, Sacramento, Woodruff, Spradlin & Smart, Kennard R. Smart, Jr., M. Lois Bobak and Jason E. Resnick, Orange, as Amici Curiae on behalf of Defendants and Appellants.

Loren E. McMaster, Sacramento, for Plaintiffs and Respondents.

Dennis F. Moss, Gary P. Reynolds, Harry J. Gibbons, Sam A. McCall, Jr., Neil Robertson, Sacramento, Williams, Romanski, Polverari & Skelton and Anthony M. Santana, Redwood City, as Amici Curiae on behalf of Plaintiffs and Respondents.

CHIN, Justice.

We consider here important questions of law and policy arising under the state Constitution's civil service provision (Cal. Const., art. VII, § 1 (article VII)) and its implied mandate limiting the state's authority to contract with private entities to perform services the state has historically or customarily performed. (See, e.g., State Compensation Ins. Fund v. Riley (1937) 9 Cal.2d 126, 134-136, 69 P.2d 985 (Riley ); California State Employees' Assn. v. State of California (1988) 199 Cal.App.3d 840, 844, 245 Cal.Rptr. 232 (CSEA ).) As we explain, the civil service mandate forbids private contracts for work that the state itself can perform "adequately and competently." (Riley, supra, 9 Cal.2d at p. 135, 69 P.2d 985.)

In April 1990, the trial court enjoined defendant state Department of Transportation (Caltrans) from privately contracting for engineering and inspection services that state civil service employees had traditionally performed on state highway projects. The trial court found Caltrans failed to show that these contracts were more cost-effective or that state workers could not adequately perform the work. The primary question we must decide is whether intervening legislation (Stats.1993, ch. 433) (Chapter 433), reflecting broad legislative approval of private contracting by Caltrans, authorizes these contracts under the conditions set forth in that legislation and so affords a proper ground for dissolving or modifying the injunction.

Although the Court of Appeal majority concluded that Chapter 433 alone justified dissolution of the 1990 injunction, we disagree, believing the principles announced in prior case law require a contrary holding. If the constitutional civil service mandate is to retain any vitality as a protective device against the deterioration of the civil service system through private contracting, we must hold that Chapter 433 represents an invalid or ineffectual attempt to circumvent that constitutional mandate. As we explain, however, nothing prevents Caltrans from seeking modification of the 1990 injunction based on a showing that particular contracts are justified because state workers cannot perform the work "adequately and competently."

Because the discussion of the prior and current litigation would be largely meaningless without knowledge of the underlying legal principles, we will outline the general constitutional and statutory principles before discussing their application to the facts of this case.

BACKGROUND

I. The Civil Service Mandate

Article VII, like its predecessor, former article XXIV of the state Constitution, defines the state civil service as including "every officer and employee" of the state, with exceptions not pertinent here. (Art. VII, § 1, subd. (a); see Cal. Const., former art. XXIV, § 4, subd. (a).) The article further provides that "[i]n the civil service permanent appointment and promotion shall be made under a general system based on merit ascertained by competitive examination." (Art. VII, § 1, subd. (b); see Cal. Const., former art. XXIV, § 1.)

Article VII also creates the State Personnel Board (§ 2), to which enforcement and administration of the civil service laws are delegated (§ 3), and exempts from the civil service certain positions that are not pertinent here (§ 4). The state Civil Service Act (Gov.Code, § 18500 et seq.) ¹ implements article VII. (See California State Employees' Assn. v. Williams (1970) 7 Cal.App.3d 390, 394-395, 86 Cal.Rptr. 305 (Williams ).)

The ballot argument to the voters at the time California Constitution, former article XXIV was adopted in 1934 stressed the purpose of the civil service provision was " 'to promote efficiency and economy' " in state government by " 'prohibit[ing] appointments and promotion in the service except on the basis of merit, efficiency, and fitness ascertained by competitive examination....' " (Riley, supra, 9 Cal.2d at p. 134, 69 P.2d 985.) Other than the general civil service provisions previously described, neither present article VII nor former article XXIV expressly prohibits or restricts private contracting. As one appellate decision has observed, "Decisional law interprets article VII as a restriction on the 'contracting out' of state activities or tasks to the private sector. [Citations.] The restriction does not arise from the express language of article VII. [Citation.] 'Rather, it emanates from an implicit necessity for protecting the policy of the organic civil service mandate against dissolution and destruction.' [Citation.]" (CSEA, supra, 199 Cal.App.3d at p. 844, 245 Cal.Rptr. 232.)

II. Decisional Law

Because of the largely implicit nature of the private contracting restriction, we must discern its scope from judicial decisions applying it in particular cases. Early appellate decisions held that the civil service mandate forbids private contracting, whether for permanent or temporary services, skilled or unskilled, if those services are of a kind that persons selected through civil service could perform "adequately and competently." (Riley, supra, 9 Cal.2d at p. 135, 69 P.2d 985 [enjoining state agency from retaining private attorney]; see also Burum v. State Compensation Ins. Fund (1947) 30 Cal.2d 575, 579-582, 184 P.2d 505; Stockburger v. Riley (1937) 21 Cal.App.2d 165, 170, 68 P.2d 741 (Stockburger ) [enjoining state from hiring private independent contractors to clean state building].) Riley rejected the argument that the services independent contractors perform are beyond the civil service mandate's reach, stating that "[a]ny other construction of the constitutional provision Later cases have affirmed the "nature of the services" restriction declared in Riley, but have also indicated that the restriction is inapplicable if the state seeks to contract for private assistance to perform new functions not previously undertaken by the state or covered by an existing department or agency. (See Kennedy v. Ross (1946) 28 Cal.2d 569, 571-574, 170 P.2d 904, [interpreting analogous civil service provision in city charter]; San Francisco v. Boyd (1941) 17 Cal.2d 606, 618-620, 110 P.2d 1036 [same]; Williams, supra, 7 Cal.App.3d at pp. 397-400, 86 Cal.Rptr. 305 [permitting state to hire private insurance carriers to administer state Medi-Cal program].) As Williams observed, "... if the services cannot be adequately rendered by an existing agency of the public entity or if they do not duplicate functions of an existing agency, the contract is permissible." (Williams, supra, 7 Cal.App.3d at p. 397, 86 Cal.Rptr. 305, italics added.) According to Williams, the civil service mandate is aimed at protecting "the existing civil service structure," and does not compel the state "to fulfill every new state function through its own agency." (Ibid.)

[936 P.2d 476] would have the effect of weakening, if not destroying, the purpose and effect of the [civil service] provision." (Riley, supra, 9 Cal.2d at pp. 135-136, 69 P.2d 985.)

In CSEA, the appellate court upheld the facial constitutionality of legislation (§ 19130, subd. (a)) that allows the state to contract for "personal services" to obtain cost savings, if it can achieve these savings without ignoring other applicable civil service requirements (e.g., use of publicized, competitive bidding, no undercutting of state pay rates, no displacement of state workers or infringement of affirmative action plans, and no overriding public interest in having the state perform the function). (See CSEA, supra, 199 Cal.App.3d at pp. 844-846, 245 Cal.Rptr. 232.) The court observed that allowing the state to consider cost savings in determining the propriety of private contracting would be consistent with the two main purposes of article VII, namely, " 'to promote efficiency and economy' " in state government, and "to eliminate the 'spoils system' of political patronage." (CSEA, supra, 199 Cal.App.3d at p. 847, 245 Cal.Rptr. 232.) CSEA opined that the voters who enacted the constitutional civil service provision did not intend to impose a system devoid of all considerations of fiscal responsibility and economy in favor of "an infinitely expanding public payroll," and agreed that "[t]he goal of maintaining the civil service must be balanced with the goal of a fiscally responsible state government." (Id. at p. 853, 245...