Henning v. Industrial Welfare Com.

• Decision Date: 31 October 1988
• Docket Number: No. S005119,S005119
• Citation: 46 Cal.3d 1262,252 Cal.Rptr. 278,762 P.2d 442
• Court: California Supreme Court
• Parties: , 762 P.2d 442, 28 Wage & Hour Cas. (BNA) 1619, 110 Lab.Cas. P 55,965 John F. HENNING, Individually and as Executive Secretary-Treasurer, etc., et al., Petitioners, v. INDUSTRIAL WELFARE COMMISSION et al., Respondents; California Restaurant Association et al., Interveners.

Page 278

252 Cal.Rptr. 278

46 Cal.3d 1262, 762 P.2d 442, 28 Wage & Hour Cas. (BNA) 1619,

110 Lab.Cas. P 55,965

John F. HENNING, Individually and as Executive Secretary-Treasurer, etc., et al., Petitioners, v. INDUSTRIAL WELFARE COMMISSION et al., Respondents California Restaurant Association et al., Interveners.

No. S005119.

Supreme Court of California In Bank.

Oct. 31, 1988.

Charles P. Scully II, Donald C. Carroll, San Francisco, Mark Rosenbaum, Kathryn Grannis, Fran Bernstein, Carmen Estrada, Mark Greenberg, Los Angeles, Dennis W. Hayashi, John True, Patricia Shiu, Christopher Ho, Shauna Marshall, San Francisco, Patrick O. Patterson, Julius L. Chambers, James M. Nabrit III, John Charles Boger, New York City, and Jon C. Dugan, for petitioners.

William Genego and Lucy White as amici curiae on behalf of petitioners.

Jan T. Chilton, Donald J. Querio, John H. Feldmann III, Severson, Werson, Berke & Melchior, San Francisco, and H. Thomas Cadell, Jr., San Diego, for respondents.

Stephen W. Solomon, Ralph B. Saltsman and Solomon, Saltsman & Jamieson, Playa Del Rey, as amici curiae on behalf of respondents.

Alan S. Levins, Michele J. Silak, Jeffrey M. Tanenbaum and Littler, Mendelson, Fastiff & Tichy, San Francisco, for interveners.

Mark Greenberg, Western Center on Law & Poverty, Los Angeles, for petitioner Olson et al.

Charles P. Scully, San Francisco, for petitioner Henning.

MOSK, Justice.

We granted review in this proceeding to answer a question that is urgent and of statewide importance: whether Order No. MW-88 of the Industrial Welfare Commission (hereinafter the IWC or Commission), which established, effective July 1, 1988, a so-called "two-tier" minimum wage system containing a lower, "alternative minimum wage" for certain employees who customarily receive tips, is barred by Labor Code section 351 (hereinafter section 351). As we shall explain, we conclude that the question must be answered in the affirmative.

I. THE FACTS

On December 18, 1987, the IWC adopted Order No. MW-88, effective July 1, 1988, raising the minimum wage from $3.35 to $4.25 per hour for employees generally and from $3.35 to $3.50 per hour for employees who customarily receive tips of not less than $60 per month (hereinafter tipped employees).

On January 22, 1988, the IWC adopted its Statement as to the Basis upon which Industrial Welfare Commission Order No. MW-88 Regulating the Minimum Wage, is Predicated (hereinafter the Statement of Basis for Order No. MW-88 ). Although the Commission had formerly construed section 351 to prohibit a lower, "alternative minimum wage" for tipped employees, it now rejected that interpretation: "creating a tipped classification did not violate Labor Code Section 351" (Statement of Basis for Order No. MW-88, supra, at p. 11).

On March 23 petitioners initiated this proceeding in mandate in the Court of Appeal against the IWC, the Division of Labor Standards Enforcement, and the Department of Industrial Relations. They contended that the Commission was generally required to establish a single minimum wage for all employees and hence could not set a lower, "alternative minimum wage" for some. They also contended that section 351 barred the "two-tier" minimum wage system at issue here: the Commission had formerly construed section 351 to prohibit a lower, "alternative minimum wage" for tipped employees; in Industrial Welfare Com. v. Superior Court (1980) 27 Cal.3d 690, 166 Cal.Rptr. 331, 613 P.2d 579 (hereinafter sometimes the Industrial Welfare Commission case), this court definitively adopted that construction of the statute as its own; accordingly, section 351 as construed barred the system under review. Petitioners sought a writ of mandate (1) compelling the Commission "to vacate and treat as void so much of its Order MW-88 as purports to fix or allow a different minimum wage for tipped employees" and (2) compelling the Division of Labor Standards Enforcement and the Department of Industrial Relations "to give effect to Order MW-88 for all employees without regard to the purported exception for tipped employees...."

On May 18 the Court of Appeal granted an application to intervene brought by the California Restaurant Association (hereinafter the Restaurant Association) and the California Hotel and Motel Association (hereinafter the Hotel Association).

On June 16 the Court of Appeal filed its decision. It found meritorious the second contention presented by petitioners--viz., section 351 barred the "two-tier" minimum wage system at issue here. Evidently because of its resolution of this claim, it did not address the first--viz., whether the Commission was generally required to establish a single minimum wage for all employees. It ordered that the peremptory writ of mandate sought by petitioners should issue. Pursuant to California Rules of Court, rule 24(d), it declared its decision to be final as to itself forthwith.

On June 21 the IWC submitted a petition for review with requests for expedited consideration and for a stay of the peremptory writ. On June 23 and 24 respectively, the Restaurant and Hotel Associations submitted a stay request and a petition for review with a request for expedited consideration.

On June 24 we denied the stay requests as premature: under Palma v. U.S. Industrial Fasteners, Inc. (1984) 36 Cal.3d 171, 181, 203 Cal.Rptr. 626, 681 P.2d 893, it is only when the decision of the Court of Appeal becomes final as to this court as well as the Court of Appeal that the peremptory writ actually issues.

On July 1 Order No. MW-88 became effective in accordance with its terms.

On July 27, because of the urgency and importance of the underlying issue, we granted review and ordered expedited consideration.

II. THE ISSUE

The IWC and the Restaurant and Hotel Associations each make what is in substance the following single contention: the Commission is generally not required to establish a single minimum wage for all employees and hence may set a lower, "alternative minimum wage" for some; moreover, section 351 does not bar the "two-tier" minimum wage system at issue here: as it is currently construed by the Commission the provision does not prohibit a lower, "alternative minimum wage" for tipped employees; this construction is reasonable and hence should be given effect; it is true the Commission's former construction barred such an "alternative minimum wage," but it is not true this court definitively adopted that construction in the Industrial Welfare Commission case.

Before addressing the claim we believe it would be helpful to present a brief summary of the historical background of the IWC's jurisdiction and the established legal principles that govern judicial review of its orders. We also think it is essential to survey in some detail the words and legislative history of section 351 in its current and previous forms. Finally, we believe it would be useful to review the Commission's construction, over the years, of the provision as it now stands.

A. Background and General Principles of Review

To describe the historical background of the IWC's jurisdiction and explain the applicable principles of review, we shall begin by quoting from our summary in the Industrial Welfare Commission case.

"The IWC is a five-member appointive board initially established by the Legislature in 1913. For the first 60 years of its existence, the IWC's mission was to regulate the wages, hours and conditions of employment of women and children employed in this state, in furtherance of such employees' 'health and welfare.' To this end, the commission--beginning in 1916--promulgated a series of industry- and occupation-wide 'wage orders,' prescribing various minimum requirements with respect to wages, hours, and working conditions to protect the health and welfare of women and child laborers....

"In the early 1970s, a number of federal judicial decisions invalidated a substantial portion of the then-prevailing IWC wage orders on the ground that the limited application of such orders to women workers (and children) violated the prohibition on sex discrimination embodied in title VII of the federal Civil Rights Act of 1964. [Citations.] In response to these federal decisions, the California Legislature in 1972 and 1973 amended the applicable provisions of the Labor Code to authorize the IWC to establish minimum wages, maximum hours and standard conditions of employment for all employees in the state, men as well as women. [Citations.] The constitutionality of this legislative expansion of the IWC's jurisdiction to all California workers is explicitly confirmed by article XIV[,] section 1 of the California Constitution which declares: 'The Legislature may provide for minimum wages and for the general welfare of employees and for those purposes may confer on a commission legislative, executive and judicial powers.'

"Although the 1973 modification of the IWC's jurisdiction to encompass men as well as women and minors clearly worked a substantial expansion in the number of workers affected by the commission's orders, ... the 1973 legislation did not alter the basic nature of the IWC's decision-making authority or the basic principles governing judicial review of the commission's exercise of that authority. From its inception in 1913 to the present, the commission has been vested with broad statutory authority to investigate 'the comfort, health, safety, and welfare' of the California employees under its aegis [citation] and to establish (1) '[a] minimum wage ... which shall not be less than a wage adequate to supply ... the necessary cost of proper living and to maintain the health and welfare of such [employees],' (2) '[t]he maximum hours of work consistent with the health and welfare of [such employees]' and (3) '[t]he standard conditions of labor demanded by the health and welfare of [such employees] ... [.]' [Citation.]

"Indeed, the 1973 act--while retaining the authorizing...