Stone v. Alameda Health Sys.

• Docket Number: S279137
• Decision Date: 15 August 2024
• Citation: 553 P.3d 783,324 Cal.Rptr.3d 220
• Parties: Tamelin STONE et al., Plaintiffs and Appellants, v. ALAMEDA HEALTH SYSTEM, Defendant and Respondent.
• Court: California Supreme Court

553 P.3d 783

324 Cal.Rptr.3d 220

Tamelin STONE et al., Plaintiffs and Appellants,

v.ALAMEDA HEALTH SYSTEM, Defendant and Respondent.

S279137

Supreme Court of California.

August 15, 2024

First Appellate District, Division Five, A164021, Alameda County Superior Court, RG21092734, Noel Wise, Judge

Law Offices of David Y. Imai and David Y. Imai for Plaintiffs and Appellants.

Stiller Law Firm, Ari J. Stiller; Collier Socks, Dustin L. Collier; Pine Tillett and Scott Tillett for California Employment Lawyers Association as Amicus Curiae on behalf of Plaintiffs and Appellants.

Teague Patterson and Gillian Santos for the American Federation of State, County and Municipal Employees as Amicus Curiae on behalf of Plaintiffs and Appellants.

Renne Public Law Group, Ryan P. McGinley-Stempel, Amy Ackerman, Arthur A. Hartinger, Geoffrey Spellberg, Sam Wheeler, M. Abigail West and Anastasia Bondarchuk for Defendant and Respondent.

Complex Appellate Litigation Group and Jens B. Koepke for the Board of Trustees of the California State University as Amicus Curiae on behalf of Defendant and Respondent.

Colantuono, Highsmith & Whatley, Michael G. Colantuono and Pamela K. Graham for the California Association of Joint Powers Authorities, California Special Districts Association, California State Association of Counties and the League of California Cities as Amici Curiae on behalf of Defendant and Respondent.

Liebert Cassidy Whitmore, Brian P. Walter and Alex Y. Wong for Kern County Hospital Authority as Amicus Curiae on behalf of Defendant and Respondent.

Opinion of the Court by Corrigan, J.

This case concerns whether a hospital authority created by a county Board of Supervisors and authorized by the Legislature to manage the county’s public health facilities may be held liable for wage and hour violations and civil penalties under the Labor Code Private Attorneys General Act of 2004 (Lab. Code, § 2698 et seq.; PAGA).¹ We conclude the Legislature intended to exempt public employers such as the hospital authority from Labor Code provisions governing meal and rest breaks (§§ 226.7, 512) and related statutes governing the full and timely payment of wages (see § 220, subd. (b)).² We further conclude public entities are not subject to PAGA penalties for the violations alleged here. Because the Court of Appeal reached different conclusions, we reverse its judgment.

I. BACKGROUND

All California counties have a mandatory duty to provide medical care for their indigent residents. (Welf. & Inst. Code, § 17000; Hunt v. Superior Court (1999) 21 Cal.4th 984, 991, 90 Cal.Rptr.2d 236, 987 P.2d 705; County of San Diego v. State of California (1997) 15 Cal.4th 68, 104–105, 61 Cal.Rptr.2d 134, 931 P.2d 312.) After years of managing a medical center for this purpose, the Alameda County Board of Supervisors (Board of Supervisors) determined that transferring governance of the center to a hospital authority would "improve the efficiency, effectiveness, and economy of the community health services provided" and would be "the best way to fulfill its commitment to the medically indigent, special needs, and general populations of" the county. (Health & Saf. Code, § 101850, subd. (a).) The Board of Supervisors sought the legislative authorization to do so. In 1996 the Legislature enacted Health and Safety Code, section 101850 (hereafter sometimes referred to as "the enabling statute"). (Stats. 1996, ch. 816, § 1, p. 4277.)³ This statute authorized the establishment of defendant Alameda Health System (AHS) as a "separate public agency" (Health & Saf. Code, § 101850, subd. (a)(2)(C); see id., subd. (a)(2)(D)) "strictly and exclusively dedicated to the management, administration, and control of the medical center" (id., subd. (b)).

Plaintiffs worked at Highland Hospital, a facility operated by AHS. Tamelin Stone was a medical assistant and Amanda Kunwar was a licensed vocational nurse. In their wage and hour suit against AHS, plaintiffs alleged these positions were subject to requirements of the Labor Code and wage orders, in particular Industrial Wage Commission (IWC) wage order No. 5-2001 (Cal. Code Regs., tit. 8, § 11050; hereafter Wage Order No. 5). The operative complaint alleged that AHS frequently denied or discouraged the taking of meal and rest breaks and "automatically deducted Vû hour from each workday" even when meal periods were not taken. Plaintiffs asserted seven class action claims: (1) failure to provide off-duty meal periods (§§ 226.7, 512); (2) failure to provide off-duty rest breaks (§ 226.7); (3) failure to keep accurate payroll records (§§ 1174, 1174.5, 1175); (4) failure to provide accurate itemized wage statements (§§ 226, 226.3); (5) unlawful failure to pay wages (§§ 204, 222, 223, 225.5, 218.6, 218.5, 510, 1194, 1194.2, 1198); (6) failure to timely pay wages (§§ 204, 210, 222, 223, 225.5, 218.6, 218.5); and (7) civil penalties for these violations under PAGA (§ 2698 et seq.).⁴

AHS demurred on the ground that it was a public entity not subject to suit for the Labor Code violations asserted. The demurrer was sustained without leave to amend. Based on Johnson v. Arvin-Edison Water Storage Dist. (2009) 174 Cal.App.4th 729, 95 Cal. Rptr.3d 53 (Johnson), the court held that "provisions of the Labor Code apply only to private sector employees unless they are specifically made applicable to public employees." Because it found AHS was a public agency, and because the statutes and wage order provisions at issue do not mention public employment, the court concluded AHS had no liability. The court also dismissed the PAGA claim. It reasoned that public entities like AHS are not " ‘person[s]’ " subject to PAGA penalties (§§ 18, 2699, subd. (b)); the PAGA claim here derived from Labor Code violations that had been rejected; and, because PAGA penalties are punitive in nature, they are not available against public entities (Gov. Code, § 818).

The Court of Appeal reversed in part, reasoning as follows. Construing the enabling statute, rather than the Labor Code provisions themselves, the court discerned no legislative intent to exempt AHS from the meal and rest period and payroll requirements underlying plaintiffs’ first three causes of action. (Stone v. Alameda Health System. (2023) 88 Cal.App.5th 84, 93-94, 304 Cal. Rptr.3d 502 (Stone).) It distinguished contrary authority as involving state agency defendants, whereas the enabling statute indicates that AHS "shall not be considered to be an agency, division, or department of the county." (Health & Saf. Code, § 101850, subd. (j); see Stone, at pp. 93-94, 304 Cal.Rptr.3d 502.) Subjecting AHS to Labor Code requirements would not infringe any sovereign gov- emmental powers, the court reasoned, because AHS possessed no powers that could not as easily be wielded by a private institution. (Stone, at pp. 94-95, 304 Cal. Rptr.3d 502.) The court held the fourth cause of action was properly dismissed under an exemption in the wage statements statute because AHS "is a 'governmental entity' of some kind" (id. at p. 97, 304 Cal.Rptr.3d 502; see § 226, subd. (a)),⁵ but it concluded AHS was subject to liability under the wage payment statutes referenced in the fifth and sixth causes of action (Stone, at pp. 95-96, 304 Cal.Rptr.3d 502). Relying on a similar analysis in Gateway Community Charters v. Spiess (2017) 9 Cal.App.5th 499, 215 Cal. Rptr.3d 133 (Gateway), the court reasoned AHS was not exempt from these obligations as a "municipal corporation" (§ 220, subd. (b)) because it lacked such governmental authority as the power to impose taxes or to acquire property through eminent domain. (Stone, at pp. 95–96, 304 Cal.Rptr.3d 502.) Finally, the court determined AHS was subject to PAGA penalties as alleged in the seventh cause of action. Although it agreed AHS is not a "person" subject to default penalties where no statutory penalty is specified (see § 2699, subds. (b), (f); see also § 18), the court held AHS was nevertheless subject to penalties for violating statutes that do provide for specific penalties. (Stone, at pp. 98-99, 304 Cal. Rptr.3d 502.) Having concluded such penalties are not punitive in nature, the court determined Government Code section 818 posed no obstacle to their imposition on a public entity. (Stone, at p. 99, 304 Cal.Rptr.3d 502.)

[1] Because this appeal was taken from a dismissal on demurrer, and involves questions of statutory interpretation, our review is de novo. (Segal v. ASICS America Corp. (2022) 12 Cal.5th 651, 658, 288 Cal.Rptr.3d 742, 502 P.3d 389; Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc. (2017) 2 Cal.5th 505, 512, 213 Cal.Rptr.3d 568, 388 P.3d 800.)

II. DISCUSSION

A. Analytical Framework

[2–7] Statutory interpretation questions are guided by familiar principles. "Our fundamental task is to ascertain the Legislature's intent and effectuate the law's purpose, giving the statutory language its plain and commonsense meaning. [Citation.] We examine that language in the context of the entire statutory framework to discern its scope and purpose and to harmonize the various parts of the enactment." (Kaanaana v. Barrett Business Services, Inc. (2021) 11 Cal.5th 158, 168, 276 Cal.Rptr.3d 417, 483 P.3d 144.) If the language is clear, " ‘its plain meaning controls. If, however, the language supports more than one reasonable construction, then we may look to extrinsic aids, including the ostensible objects to be achieved and the legislative history.' " (Skidgel v. California Unemployment Ins. Appeals Bd. (2021) 12 Cal.5th 1, 14, 282 Cal. Rptr.3d 639, 493 P.3d 196.) An administrative agency's "interpretation of a statute ‘it enforces is entitled to great weight unless clearly erroneous or unauthorized.'" (Ibid.) Considering the remedial nature of statutes governing employees' wages, hours, and working conditions, these provisions are liberally construed to promote worker protection. (McLean v. State of California (2016) 1 Cal.5th 615, 622, 206 Cal.Rptr.3d 545, 377 P.3d 796 (McLe...