Craib v. Bulmash

• Decision Date: 28 August 1989
• Docket Number: Nos. S004682,B026267,s. S004682
• Court: California Supreme Court
• Parties: , 777 P.2d 1120, 29 Wage & Hour Cas. (BNA) 705, 114 Lab.Cas. P 56,172 Donald C. CRAIB, as Deputy Labor Commissioner, etc., Plaintiff and Respondent, v. Jay S. BULMASH, as Trustee, etc., Defendant and Appellant.

Page 686

261 Cal.Rptr. 686

49 Cal.3d 475, 777 P.2d 1120, 29 Wage & Hour Cas. (BNA) 705,

114 Lab.Cas. P 56,172

Donald C. CRAIB, as Deputy Labor Commissioner, etc., Plaintiff and Respondent, v. Jay S. BULMASH, as Trustee, etc., Defendant and Appellant.

Nos. S004682, B026267.

Supreme Court of California In Bank.

Aug. 28, 1989.

[777 P.2d 1121] Hugh J. Haferkamp, Santa Barbara and Jay S. Bulmash, pro se, and for defendant and appellant

H. Thomas Cadell, Jr., Dept. of Indus. Relations, San Francisco, and Marjorie J. Weinzweig, for plaintiff and respondent.

EAGLESON, Justice.

This case concerns the circumstances under which an employer may assert the Fourth and Fifth Amendments to the United States Constitution as defenses to judicial enforcement of an administrative agency's subpena duces tecum for records of a kind which all employers are required by law to maintain.

We first reject the employer's claim that a court order compelling compliance with the agency's subpoena is an "unreasonable search and seizure" under the Fourth Amendment unless supported by "probable cause." Forty years of United States Supreme Court decisions establish that the subpoenaed records need only be relevant to an authorized regulatory purpose and described with reasonable specificity. While this approach traditionally has been applied in the context of subpoenaed corporate records, we see no reasoned basis for departing from precedent solely because the instant employer is an individual, rather than a corporation. Further, there is no reasonable expectation of privacy against judicially compelled disclosure of records required to be kept, and subject to Also, consistent with the traditional exemption of "required records" from the Fifth Amendment privilege against compulsory self-incrimination, an employer must unconditionally respond to a court order enforcing an agency's subpoena for wage and hour records which the employer is statutorily required to maintain. The privilege does not apply where, as here, the reporting requirement is intended to promote a legitimate regulatory aim, is not directed at activities or persons that are inherently "criminal," and only requires minimal disclosure of information of a kind customarily kept in the ordinary course of business.

administrative[777 P.2d 1122] subpoena, under a lawful regulatory scheme.

The Court of Appeal therefore erred in relying on the Fourth and Fifth Amendments to reverse a court order compelling the employer to comply with the instant administrative subpoena. We will reverse the judgment of the Court of Appeal.

BACKGROUND

The Division of Labor Standards Enforcement (Division) is charged with enforcing Labor Code provisions ( § 1171 et seq.) ¹ and Industrial Welfare Commission (Commission) orders governing wage, hour, and working conditions of California employees. ( § 61.) The Division has broad investigatory powers ( § 1193.5) and duties ( §§ 1195, 1195.5), including the power to issue subpoenas compelling the attendance of witnesses and production of records. ( §§ 7, 74.) ² The statutory scheme requires "[e]very person employing labor in this state" to maintain certain employee identification and payroll records. ( § 1174, subds. (c), (d).) ³ An employer who fails or refuses to maintain and furnish these records is guilty of a misdemeanor. ( § 1175, subds. (a), (d).) ⁴ The Division also has a variety of means by which to enforce the substantive wage and hour provisions, including civil actions to recover unpaid wages ( §§ 1193.6, 1194), actions for injunctive relief ( § 1194.5), "civil" monetary penalties ( § 1197.1), and misdemeanor sanctions ( § 1199). ⁵

Here, Jay S. Bulmash (Bulmash) was appointed trustee for his sister, Serena Gluck (Gluck), and employed attendants to care for her. In February 1986, Deputy Labor Commissioner Donald C. Craib (Commissioner) issued and served ⁶ a subpoena duces tecum directing Bulmash to appear at the Division's Santa Barbara offices one month later and to produce time and wage records, and names and addresses, for all persons employed by the trust over the previous three-year period. In an attached declaration, the Commissioner stated that the documents were needed to "verify wages and compute unpaid overtime pay for private household employees covered under Industrial Welfare Commission Order 15-80 and employed by Jay S. Bulmash as trustee for Ser[e]na B. Gluck." Order 15-80 ⁷ requires that such records be maintained for a minimum of three years.

After Bulmash failed to appear as requested, the Commissioner filed an unverified petition ⁸ in the superior court seeking to enforce the subpoena. The petition alleged that the subpoena and investigation were authorized under the statutory provisions cited above. According to the petition, the investigation began after a "former employee" of the trust lodged a complaint against Bulmash for "failure to pay overtime wages as required by Industrial Welfare Commission Order 15-80." In points and authorities supporting the petition, the Commissioner argued there was "probable cause" to suspect that Bulmash was "in violation of certain sections of the Labor Code [concerning] payment of wages for hours worked." The petition itself further averred that the subpoenaed records were necessary to determine whether the alleged violation had occurred. No affidavits by the complaining trust employee or by Division staff members supported the foregoing statements.

In written opposition to the petition, Bulmash argued that the subpoena was "overbroad," that compliance would be "burdensome," and that the records were not "relevant" to any matter pending before the Division. Bulmash also insisted that because the subpoena was issued without "probable cause," court-ordered compliance would amount to an "unlawful search and seizure." After a brief hearing, the court ordered Bulmash to appear before the Commissioner and produce the subpoenaed records.

On appeal, Bulmash reiterated his claim that the Fourth Amendment precluded enforcement of the subpoena because no sworn factual statement establishing probable cause accompanied the Commissioner's petition. The Court of Appeal agreed and reversed the order. The court reasoned that, because "criminal" sanctions could be imposed for certain wage and hour violations, the subpoena was a "search" for criminal "evidence" which must meet the standards applicable to search warrants. At the urging of both parties, the court also addressed the question whether enforcement of the subpoena would violate Bulmash's Fifth Amendment privilege against compulsory self-incrimination. ⁹ The court answered this question in the affirmative, apparently concluding that both the contents of the records and the compulsory act of production amounted to incriminating testimony of Bulmash's failure to pay the appropriate wage.

DISCUSSION

A. Fourth Amendment

The Commissioner essentially concedes that the instant subpoena fails to comply with literal Fourth Amendment requirements for a criminal warrant issued only "upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized." He insists, however, that judicial enforcement of the subpoena is constitutionally permissible under a standard which is less exacting than that required for a search in a criminal prosecution. Based on a recent line of cases by the United States Supreme Court, we agree.

As Bulmash suggests, it was once assumed that the compulsory production of records was a "search and seizure" in the literal Fourth Amendment sense (see, e.g., Boyd v. United States (1886) 116 U.S. 616, 622, 6 S.Ct. 524, 527, 29 L.Ed. 746), and that subpoenas, like warrants, were enforceable only if issued pursuant to a formal "complaint" or at least upon probable cause to suspect "a specific breach of the law." (Harriman v. Interstate Commerce Com. (1908) 211 U.S. 407, 419-420, 29 S.Ct. 115, 118-119, 53 L.Ed. 253; see also, Jones v. Securities Commission (1936) 298 U.S. 1, 25-28, 56 S.Ct. 654, 661-663, 80 L.Ed. 1015; Fed. Trade Comm. v. Amer. Tobacco Co. (1924) 264 U.S. 298, 305-306, 44 S.Ct. 336, 337, 68 L.Ed. 696.)

However, it is now clear that such a restrictive view of the administrative process is not constitutionally compelled. As regulatory schemes have become increasingly important in enforcing laws designed to protect the public's health and welfare, reliance on "probable cause" as a means of restraining agency subpoena power has all but disappeared. (See United States v. Morton Salt Co. (1950) 338 U.S. 632, 641-643, 70 S.Ct. 357, 363-364, 94 L.Ed. 401; see also 1 Davis, Administrative Law Treatise (2d ed. 1978) Investigation, § 4.2, pp. 228-232.)

The Commissioner correctly argues that the leading case is Okla. Press Pub. Co. v. Walling (1946) 327 U.S. 186, 66 S.Ct. 494, 90 L.Ed. 614 (hereafter Oklahoma Press ). There, the United States Supreme Court rejected a Fourth Amendment challenge to judicial orders enforcing administrative subpoenas for payroll and sales records. The subpoenas were issued by the federal wage and hour administrator to determine whether certain publishing corporations were covered under, and had violated, the Fair Labor Standards Act of 1938 (FLSA). ¹⁰ At the outset, the court observed that "no question of actual search and seizure" is raised where the agency has not sought "to enter [the subpenaed parties'] premises against their will, to search them, or to seize or examine their books, records or papers without their assent, otherwise than pursuant to orders of court authorized by law and made after adequate opportunity to present objections...." (327 U.S. at p. 195, 66 S.Ct. at p. 498.) The court further questioned whether the Fourth Amendment applied at all to the subpoenas at bar, noting that corporate records historically had been subject to the government's "broad visitorial power." (Id. at pp. 204, 208,...