Kerr's Catering Service v. Department of Indus. Relations

• Decision Date: 19 February 1962
• Citation: 19 Cal.Rptr. 492,369 P.2d 20,57 Cal.2d 319
• Parties: , 369 P.2d 20, 44 Lab.Cas. P 50,466 KERR'S CATERING SERVICE, Plaintiff and Respondent, v. The DEPARTMENT OF INDUSTRIAL RELATIONS of the State of California, et al., Defendants and Appellants. S. F. 20617
• Court: California Supreme Court

Page 492

19 Cal.Rptr. 492

57 Cal.2d 319, 369 P.2d 20, 44 Lab.Cas. P 50,466

KERR'S CATERING SERVICE, Plaintiff and Respondent, v. The DEPARTMENT OF INDUSTRIAL RELATIONS of the State of California, et al., Defendants and Appellants.

S. F. 20617.

Feb. 19, 1962.

As Modified on Denial of Rehearing March 21, 1962.

Stanley Mosk, Atty. Gen., and Preble Stolz, Deputy Atty. Gen., for defendants and appellants.

Leon E. Gold, Pauline Nightingale, Samuel S. Berman, San Francisco, Harold G. Stearn, Oakland, and Charles P. Scully, San Francisco, as amici curiae on behalf of defendants and appellants.

Spruance, Simonian & Pretzer, and Arthur L. Pretzer, San Leandro, for plaintiff and respondent.

Borbeck, Phleger & Harrison, and Alvin J. Rockwell, San Francisco, as amici curiae on behalf of plaintiff and respondent.

WHITE, Justice.

Defendants appeal from a summary judgment in favor of plaintiff Kerr Catering Service holding a certain order of defendant Industrial Welfare Commission unconstitutional and void.

Plaintiff is in the industrial catering business. It maintains a fleet of trucks which are sent out on regular routes to various business and industrial establishments. Each truck is driven by a woman employee who also sells sandwiches, coffee and other food items which are carried on the truck. Plaintiff's employees are organized into a union and pursuant to a collective bargaining agreement, they receive a wage which equals or exceeds the minimum specified in the applicable order of the Industrial Welfare Commission. After completing a probationary period of three months, the driver-salesgirls receive a 15 per cent commission on all sales in excess of $475 a week.

This percentage commission, payable monthly, is subject to reduction in the amount of any 'cash shortage' attributable to the salesgirl during the month. The shortages are computed in the following manner: The driver-salesgirl is required to inventory the goods on her truck prior to going out each day, receives a small amount of cash to make change, and upon returning at the end of the working day she counts the cash and again takes an inventory of the goods. In theory, the total of the closing inventory plus cash sales should equal the initial morning inventory, but in practice this seldom occurs. The extent of the difference is the amount of overage or shortage for that day. The net shortage for the month is deducted from the employee's commission, but not from her base wage in the event the net shortage exceeds her commissions.

Plaintiff was notified by the Division of Industrial Welfare that this deduction for cash shortages was unlawful under section 8 of Order No. 5-57 of the Industrial Welfare Commission (8 Cal.Admin. Code, § 11380), which provides: 'No employer shall make any deduction from the wage of an employee for any cash shortage, breakage, or loss of equipment, notwithstanding any contract or arrangement to the contrary, unless it can be shown that the shortage, breakage, or loss is caused by a dishonest or wilful act, or by the culpable negligence of the employee.'

Following receipt of the aforesaid notice, plaintiff instituted this action for an injunction and declaratory relief, alleging that section 8 of the foregoing order was in excess of the statutory authority of the commission and unconstitutional. The Industrial Welfare Commission of the Department of Industrial Relations filed an answer and moved for summary judgment. Plaintiff filed a cross-motion for summary judgment. The trial court, acting on such motions, rendered judgment in favor of plaintiff.

Under the statutory definition found in Labor Code, section 200, "Wages' includes all amounts for labor performed by employees of every description, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation.' (Emphasis added.) Plaintiff does not urge, therefore, that section 8 of the instant order is inapplicable because the deductions are made from commissions as opposed to basic pay.

The parties agree that if statutory authority for section 8 of the commission's order exists, it is to be found in Labor Code, section 1182 which grants to the Industrial Welfare Commission the power to issue orders which 'fix:

'(a) A minimum wage to be paid to women and minors engaged in any occupation, trade, or industry in the State, which shall not be less than a wage adequate to supply the necessary costs of proper living to, and maintain the health and welfare of such women and minors.

'(b) The maximum hours of work consistent with the health and welfare of women and minors engaged in any occupation, trade, or industry in this State. The hours so fixed shall not be more than the maximum now or hereafter fixed by law.

'(c) The standard conditions of labor demanded by the health and welfare of the women and minors engaged in any occupation, trade, or industry in this State. * * *'

The narrow question presented, then, is whether the commission has power to prohibit deductions for cash shortages from employees' commission even though the affected employees are earning more than the minimum wage. The question is composed of two parts: 1) Do subdivisions (a) and (b) of section 1182 of the Labor Code limit the commission's power to fix, under subdivision (c), only those 'standard conditions of labor' which do not affect either the wage or hours? 2) If the commission's power under subsection (c) is not so limited, can such deductions for cash shortages not due to the employee's dishonest or wilful act or culpable negligence be characterized as standard conditions of labor?

Plaintiff construes this statute as giving the commission three separate and distinct powers which are mutually exclusive. Thus, according to this view, after fixing the minimum wage, the commission had no power to make any further provision whatsoever affecting the wage. Accordingly, since the plaintiff's employees were admittedly receiving more than the minimum wage, the commission had no power to prohibit deductions which did not reduce the net wage below the minimum. That, by similar reasoning, the commission's power over the hours of work is limited to fixing the maximum hours, and anything further relating to hours would be beyond the power of the commission. This construction would confine subdivision (c) to empowering the commission to regulate nothing which incidentally affects minimum wages or maximum hours.

Defendants, to the contrary, urge that subdivision (c) of section 1182 gives the commission general power to fix 'the standard conditions of labor,' except insofar as this general grant of power is expressly limited by subdivisions (a) and (b). That while wages and hours are certainly 'conditions of labor,' the commission cannot fix the wage paid or the hours worked because subdivisions (a) and (b) limit the commission's power in those respects to fixing the minimum wage and the maximum hours. The commission is free, defendants continue, to make regulations which relate to wages and hours but which do not attempt to prescribe them.

One such provision, first introduced into the commission's orders in 1947, and not challenged since, requires that employers pay for all necessary protective garments. This provision has never been limited to employees receiving the minimum wage. Although the protection of the health and safety of women and minors is the obvious purpose of this provision, it also affects watges, as the employer may not deduct the cost of protective garments from the employee's compensation. Under plaintiff's construction of section 1182, and the one adopted by the trial court, this provision concerning protective garments would come under question because of its effect on wages. Other provisions of the order now engaging our attention, namely Order No. 5-57, which regulates only the Public Housekeeping Industry which would also be subject to question under this construction are the prohibition on deductions for uniforms, for tools and equipment, the requirement of time and one-half the regular rate of pay for overtime, one dollar per day extra for split shift workers, and two dollars for reporting for work if work is not available. All of these provisions have in common the fact that they 'affect the wage,' but apply regardless of whether or not the employee is making the minimum wage, and are for the purpose of prohibiting or discouraging working conditions prejudicial to the welfare of women and minor employees.

Defendants state that the commission has long exercised such general powers which have not heretofore been challenged in any court action. That its position has been sustained by the Attorney General, who in 1944 advised the commission that it had the power to prohibit employers from requiring women and minors to furnish their own equipment and uniforms regardless of whether the employees were earning more than the minimum wage (3 Ops.Cal.Atty.Gen. 353), and this interpretation was reaffirmed recently with regard to sections 8 and 9 of this series of orders (33 Ops.Cal.Atty.Gen. 27 (1959). Defendants earnestly urge that such a longstanding and established administrative construction of their powers should be accorded considerable weight, and adhered to 'if not clearly erroneous.' (Adoption of Parker, 31 Cal.2d 608, 615, 191 P.2d 420; Los Angeles County v. Superior Court, 17 Cal.2d 707, 712, 112 P.2d 10.) We are persuaded that the construction placed upon section 1182 of the Labor Code by the defendants is the reasonable and proper one, i. e., that the authority conferred upon the commission by subdivision (c) is not limited to the issuance of orders which do not affect wages or hours.

We turn now to the second part of the question: may deductions for cash shortages not due to an employee's dishonest or wilful act or culpable negligence be characterized as affecting 'standard conditions of labor?'

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