Corrales v. Bradstreet, C051407.

• Decision Date: 10 July 2007
• Docket Number: No. C051407.,C051407.
• Citation: 153 Cal.App.4th 33,62 Cal.Rptr.3d 440
• Court: California Court of Appeals Court of Appeals
• Parties: Fausto CORRALES et al. Plaintiffs and Appellants, v. Angela BRADSTREET, As Labor Commissioner, etc. Defendant and Respondent.

62 Cal.Rptr.3d 440

153 Cal.App.4th 33

Fausto CORRALES et al. Plaintiffs and Appellants, v. Angela BRADSTREET, As Labor Commissioner, etc. Defendant and Respondent.

No. C051407.

Court of Appeal, Third District.

July 10, 2007.

APPEAL from a judgment of the Superior Court of Sacramento County, Connelly, Lloyd G., J. Affirmed in part and reversed in part.

California Rural Legal Assistance, Michael M. Meuter, Melissa Barrios, Alegria De La Cruz and Cynthia L. Rice for Plaintiffs and Appellants.

Neighborhood Legal Services of Los Angeles County, Joshua Stehlik and José O. Tello; The Legal Aid Society-Employment Law Center and Matthew D. Goldberg for Asian Law Caucus, Inc., Asian Pacific American Legal Center of Southern California, Bet Tzedek Legal Services, Garment Worker Center, Koreatown Immigrant Workers Alliance, La Raza Centro Legal, Legal Aid Foundation of Los Angeles, The Legal Aid Society-Employment Law Center, Neighborhood Legal Services of Los Angeles County, Women's Employment Rights Clinic, Young Workers United, Amici Curiae for Plaintiffs and Appellants.

Division of Labor Standards Enforcement, Anne P. Stevason and Anne Hipshman for Defendant and Respondent.

SIMS, Acting P.J.

Fausto Corrales and Ramiro Estrada (appellants) appeal from a judgment denying their petition for a writ of mandate (Code Civ. Proc, § 1085) and complaint for declaratory relief against Angela Bradstreet, as Labor Commissioner for the State of California (the Commissioner).¹ Appellants complain then Commissioner Donna Dell² (1) violated statutory duties relating to timely processing of employee claims under Labor Code section 98,³ and (2) improperly issued a precedent decision purporting to be binding in all section 98 hearings, in circumvention of rulemaking requirements of the Administrative Procedure Act (Gov.Code, § 11340 et seq. (APA).)

The underlying substantive issue is whether payments for missed meal/rest periods ordered pursuant to section 226.7⁴ constitute wages or penalties. The precedent decision characterized such payments as penalties, with the apparent result of smaller potential recoveries due to a shorter limitations period and unavailability of other statutory penalties. While this appeal was pending, the California Supreme Court issued an opinion holding section 226.7 payments are wages, not penalties. (Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 56 Cal.Rptr.3d 880, 155 P.3d 284 (Murphy).) We explain in our discussion, post, why we have decided to proceed with this appeal despite any mootness resulting from the recent filing of Murphy.

We shall conclude appellants show reversible error because the Commissioner's attempt to issue a binding precedent decision was an invalid circumvention of the APA's rulemaking requirements. However, we shall conclude appellants fail to show reversible error with respect to the untimely processing of claims. We shall affirm in part and reverse in part.⁵

FACTUAL AND PROCEDURAL BACKGROUND

On July 8, 2005, appellants and others (Alfredo Perez, Jose Reynoso, Jose Luis Pina, and Northern California Carpenters Regional Council, a labor organization suing on behalf of itself and its members (NCCRC))⁶ filed in the trial court the operative pleading, a first amended petition for writ of mandate and complaint for declaratory relief. Appellants alleged they are agricultural workers who filed with the Commissioner claims for unpaid wages and waiting time penalties. (§ 98 [employee claims], § 226.7 [employer shall pay for failure to provide employee with meal/rest period].) The Commissioner, acting for the Division of Labor Standards Enforcement (DLSE), at the direction of the Labor and Workforce Development Agency (LWDA), held these claims in abeyance as part of an effort to reverse the enforcement policy pertaining to meal/rest periods reflected in opinion letters since early 2001. The pleading alleged that NCCRC relied on these letters in advising field representatives about workers' rights. The NCCRC was concerned that if the DLSE abeyance policy was allowed to stand, hundreds of workers in the construction and building trades would suffer irremediable deprivation of their rights and remedies under the Labor Code and wage orders promulgated by the Industrial Welfare Commission (IWC).

The pleading complained the abeyance policy constituted an unlawful delay in the processing of employee claims. The pleading also complained the Commissioner issued a precedent decision which directed local labor commissioner offices to apply an interpretation of section 226.7 that would reduce recovery for employees (by characterizing the payments due under the statute as penalties rather than wages, thus triggering a shorter limitations period). The precedent decision directed local labor commissioner offices to apply that decision to all claims involving section 226.7, which will reduce or eliminate appellants' recovery by limiting it to one year prior to the date of filing, eliminating the payment of interest, and eliminating any award of penalties under another statute (§ 203).

As to appellants, the pleading alleged Corrales filed a section 226.7 claim on July 15, 2003. On October 15, 2003, the Commissioner, through the Fresno district office, determined to hold a hearing and issued a complaint for Corrales to sign. On July 28, 2004, a one-day hearing was held before a deputy labor commissioner. No order, decision, or award (ODA) issued until May 4, 2005. Estrada filed his initial claim on August 26, 2003. A determination to hold a hearing was made on November 20, 2003, but no date was set until April 27, 2005, when a hearing was set for June 20, 2005.

The pleading designated "WRIT OF MANDATE (C.C.P. § 1085)" as a "FIRST CAUSE OF ACTION" and was broken down into four counts. Count One, labeled, "HOLDING IN ABEYANCE LBOR CODE § 226.7 CLAIMS FOR COMPENSATION," alleged on information and belief that, as early as March 2004, the Commission implemented a general policy and practice of holding in abeyance any section 226.7 claims. A March 1, 2004, email from LWDA Deputy Secretary Jose Millan instructed DLSE Acting Deputy Chief Greg Rupp to hold in abeyance all matters regarding meal/rest breaks. A February 3, 2005, letter from the Commissioner to Assembly Member Paul Koretz confirmed the abeyance practice. The pleading alleged on information and belief that the Commissioner implemented this abeyance policy so that ODAs issued by the Commissioner's local offices would treat section 226.7 compensation as penalties rather than wages. The abeyance policy/practice was in effect from at least March 2004 through April 26, 2005. As a result of this policy/practice, the Commissioner was routinely violating the statutory time requirements of section 98, which required hearings to be scheduled within 90 days of the determination to hold a hearing, and which required decisions to be issued within 15 days after the hearing. As a result of the abeyance policy/practice, appellants were deprived of the timely proceeding of their administrative wage claims.

Count Two, labeled, "IMPLEMENTATION OF AN UNDERGROUND REGULATION," alleged on information and belief that the Commissioner had advised the staff to follow a particular construction of section 226.7 when processing claims. On December 20, 2004, DLSE Acting Deputy Chief Greg Rupp, at the Commissioner's direction, wrote a notice to all deputy labor commissioners, advising them that a select number of prior legal opinions and constructions of various labor laws were to be removed from the DLSE Web site and were to be disregarded— including those relating to section 226.7. Rupp advised the staff of pending regulations construing section 226.7 and said these regulations represented DLSE's interpretation of the law. As alleged in the pleading, the result of this directive was to change the Commissioner's interpretation from characterizing section 226.7 compensation as wages to characterizing them as penalties. Under this construction, terminated employees who had been denied this compensation would be subjected to a one-year statute of limitations and could not recover waiting time penalties afforded under section 203 (which requires employers to pay posttermination wages as a penalty for failure to pay wages due to a discharged employee). The pleading alleged the Commissioner has thus caused to be implemented a rule of general application as to construction and application of a statute, without following the rulemaking requirements of the APA.

Count Three, labeled, "FAILURE TO SCHEDULE HEARINGS AND ISSUE ORDERS, DECISIONS AND AWARDS AFTER HEARING IN A TIMELY MANNER," complained of the failure to hold hearings within 90 days after a determination to hold a hearing is made, and the failure to issue decisions within 15 days of the hearing. The Commissioner had a clear and present ministerial duty to comply with the time limits of section 98. As a direct and proximate result of the abeyance policy/practice, Corrales (and others) were deprived of the timely processing of their claims to which they are statutorily entitled.

Count Four, labeled, "IMPLEMENTATION OF A FURTHER UNDERGROUND REGULATION—THE JUNE 17, 2005 `PRECEDENT DECISION,'" alleged that on June 17, 2005, the Commissioner issued a directive characterized as a precedent decision to all DLSE staff. The precedent decision (which was in the case of Hartwig v. Orchard Commercial, Inc. (Cal. Dept. of Industrial Relations, DLSE, May 11, 2005, No. 12-56901RB) (Hartwig)), characterized section 226.7 relief as a penalty instead of a wage, which reduced the statute of limitations from three years to one and prohibited additional penalties. The Commissioner's directive stated the precedent decision was "binding on any case before the Division's Deputy Labor Commissioners and Hearing Officers." The pleading alleged the Commissioner lacks authority to issue precedent decisions, since section 98...