Tidewater Marine Western, Inc. v. Bradshaw, No. S048739

• Court: United States State Supreme Court (California)
• Writing for the Court: CHIN; GEORGE
• Citation: 927 P.2d 296,14 Cal.4th 557,59 Cal.Rptr.2d 186
• Parties: , 927 P.2d 296, 1997 A.M.C. 316, 3 Wage & Hour Cas.2d (BNA) 1094, 96 Cal. Daily Op. Serv. 9232, 96 Daily Journal D.A.R. 15,186 TIDEWATER MARINE WESTERN, INC., et al., Plaintiffs and Respondents, v. Victoria L. BRADSHAW, as Labor Commissioner, etc., et al., Defendants and Appellants.
• Decision Date: 19 December 1996
• Docket Number: No. S048739

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59 Cal.Rptr.2d 186 14 Cal.4th 557, 927 P.2d 296, 1997 A.M.C. 316, 3 Wage & Hour Cas.2d (BNA) 1094, 96 Cal. Daily Op. Serv. 9232, 96 Daily Journal D.A.R. 15,186 TIDEWATER MARINE WESTERN, INC., et al., Plaintiffs and Respondents,
v.
Victoria L. BRADSHAW, as Labor Commissioner, etc., et al., Defendants and Appellants. No. S048739. Supreme Court of California. Dec. 19, 1996.

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[14 Cal.4th 560] [927 P.2d 297] Daniel E. Lungren, Attorrney General, Edmond B. Mamer, Carol H. Rehm, Jr., and David S. Chaney, Deputy Attorneys General, H. Thomas Cadell, Jr., San Diego, Michael S. Villeneuve, Encino, William A. Reich, Ventura, Miles E. Locker, San Francisco, Anticouni & Anticouni, Anticouni & Associates,

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[927 P.2d 298] Bruce N. Anticouni, Curtis Heeter, Santa Barbara, Henry Bongiovi, Los Angeles, and Caroline M. Weeks, for Defendants and Appellants.

Michael Asimow, Los Angeles, as Amicus Curiae on behalf of Defendants and Appellants.

[14 Cal.4th 561] Baker & Hostetler, Michael M. Johnson, Ralph Zarefsky and Lisa F. Hinchliffe, Los Angeles, for Plaintiffs and Respondents.

Laurie A. Frost, Carlsmith, Ball, Wichman, Case & Ichiki, Los Angeles, Barry R. Ogilby, San Francisco, Musick, Peeler & Garrett and Charles E. Slyngstad, Los Angeles, as Amici Curiae on behalf of Plaintiffs and Respondents.

CHIN, Justice.

In this case, we decide whether the wage orders of the Industrial Welfare Commission (IWC) govern employment in the Santa Barbara Channel. To decide that question, we must decide, among other things, whether written interpretive policies of the state agency charged with enforcing IWC wage orders constitute regulations within the meaning of the Administrative Procedure Act (APA) (Gov.Code, § 11340 et seq.). We conclude that these interpretive policies do constitute regulations and therefore are void because they were not adopted in accordance with the APA. Nevertheless, we conclude that the agency properly exercised its enforcement jurisdiction and that the trial court erred in granting a permanent injunction barring enforcement. Accordingly, we affirm the judgment of the Court of Appeal.

I. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs Tidewater Marine Western, Inc. (Tidewater), and Zapata Gulf Pacific, Inc. (Zapata), are maritime firms that transport (or transported) workers and supplies from the California coast to oil-drilling platforms located in the Santa Barbara Channel. Plaintiff Offshore Marine Service Association (OMSA) is a trade association representing the owners and operators of vessels engaged in offshore marine services. The crew members who work for Tidewater and Zapata in the Santa Barbara Channel reside in California. They are on duty 12 hours during a 24-hour period, but the demands of work are inconstant, and crew members may spend part of this duty period engaged in leisure activities. Zapata and Tidewater compensate their crew members at a flat daily rate of pay without special compensation for "overtime."

Defendant IWC is the state agency empowered to formulate regulations (known as wage orders) governing employment in the State of California. (Lab.Code, §§ 1173, 1178.5, 1182.) Defendant Division of Labor Standards Enforcement (DLSE), headed by defendant Victoria L. Bradshaw, as Labor Commissioner, is the state agency empowered to enforce California's labor [14 Cal.4th 562] laws, including IWC wage orders. (Lab.Code, §§ 21, 61, 95, 98-98.7, 1193.5.) IWC wage order No. 4-89 governs employees "in professional, technical, clerical, mechanical, and similar occupations ... unless such occupation is performed in an industry covered by an industry order of this Commission." (Cal.Code Regs., tit. 8, § 11040, subd. 1, italics added.) IWC wage order No. 9-90 governs employees in the transportation industry, which includes "any industry, business, or establishment operated for the purpose of conveying persons or property from one place to another whether by rail, highway, air, or water, and all operations and services in connection therewith...." (Cal.Code Regs., tit. 8, § 11090, subd. 2(C), italics added.) Wage orders Nos. 4-89 and 9-90 both bar work in excess of eight hours in any twenty-four-hour period unless the employer pays "overtime," which is generally "[o]ne and one-half (1 1/2) times the employee's regular rate of pay," increasing to "[d]ouble the employee's regular rate of pay for all hours worked in excess of twelve (12) hours." (Cal.Code Regs., tit. 8, §§ 11040, subd. (1), (2), 11090, subd. (1), (2).)

Starting about 1978, employees in the maritime industry began filing claims with the DLSE. The DLSE determined on a case-by-case basis whether state labor laws applied to these employees, considering such factors as the type of vessel, the nature of its activities, how far it traveled from the California coast, how long it was at sea, and whether it left from and returned to the same port. The DLSE also considered contacts,

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[927 P.2d 299] , if any, between the employees and California, such as whether the employees entered into their employment contracts in California, resided in California, owned property in California, paid taxes in California, made regular purchases in California, sent their children to California schools, or spent significant time in California. The DLSE eventually replaced this case-by-case adjudication with a written enforcement policy, which provides: "IWC standards apply to crews of fishing boats, cruise boats, and similar vessels operating exclusively between California ports, or returning to the same port, if the employees in question entered into employment contracts in California and are residents of California." In the early 1980's, this written policy existed only in a draft policy manual the DLSE prepared for the guidance of deputy labor commissioners. In 1989, however, the DLSE prepared a formal "Operations and Procedures Manual" incorporating the same policy and made that manual available to the public on request. The manual reflected "an effort to organize ... interpretive and enforcement policies" of the agency and "achieve some measure of uniformity from one office to the next." The DLSE prepared its policy manuals internally, without input from affected employers, employees, or the public generally.

In 1987, the DLSE began applying IWC wage order No. 4-80, the predecessor to wage order No. 4-89, to maritime employees working in the [14 Cal.4th 563] Santa Barbara Channel. Various shipping associations, including OMSA, brought an action in federal court, seeking an injunction curtailing enforcement of California's labor laws, and Tidewater intervened in that action. (Pacific Merchant Shipping Ass'n v. Aubry (C.D.Cal.1989) 709 F.Supp. 1516.) Among other things, the plaintiffs asserted that the Fair Labor Standards Act of 1938 (FLSA) (29 U.S.C. § 201 et seq.) preempted California's attempt to regulate the overtime pay of certain maritime employees. The FLSA requires employers engaged in "commerce" to pay overtime wages to their employees (29 U.S.C. § 207), but the FLSA includes an express exception for seamen. (29 U.S.C. § 213(b)(6).) This exception covers Tidewater's and Zapata's crew members. The plaintiffs asserted that the exception evidenced congressional intent to preempt state laws mandating overtime pay for seamen. The plaintiffs also argued that federal law and Coast Guard regulations provided seamen with ample protection. (See, e.g., 46 U.S.C. §§ 8101, 8104; 46 C.F.R. § 15.101 et seq. (1995).)

The federal district court issued an injunction, but the Ninth Circuit Court of Appeals reversed. (Pacific Merchant Shipping Ass'n v. Aubry (9th Cir.1990) 918 F.2d 1409, cert. den. (1992) 504 U.S. 979, 112 S.Ct. 2956, 119 L.Ed.2d 578.) The Ninth Circuit held that federal law did not preempt the IWC wage orders governing overtime wages, but the court expressly did not decide whether the IWC wage orders were enforceable against maritime employers under state law. (918 F.2d at p. 1425.)

Starting in 1992, various employees of Tidewater and Zapata working aboard boats operating in the Santa Barbara Channel filed suits in Santa Barbara Superior Court, seeking retroactive overtime pay. Plaintiffs responded by filing this action, again asking for an injunction curtailing enforcement of the IWC wage orders governing overtime pay.

Plaintiffs argue that the Legislature did not intend the IWC's jurisdiction to extend beyond California's federal law boundaries. Plaintiffs also renew their argument that federal law preempts state law. Finally, plaintiffs assert that the provision in the DLSE's "Operations and Procedures Manual" that interprets the IWC wage orders as applying to Tidewater's and Zapata's operations in the Santa Barbara Channel is an "underground regulation" that was not issued in accordance with the APA and is therefore void.

The superior court granted an injunction barring application of IWC wage orders to Tidewater's and Zapata's employees working more than three miles off the coast, but the Court of Appeal reversed. The Court of Appeal held, among other things, that the relevant provision of the DLSE's Operations and Procedures Manual was not a regulation subject to the rulemaking [14 Cal.4th 564] procedures of the APA, but merely an "interpretation" that "applies the wage order to a specific group of employers." We granted review, and,

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[927 P.2d 300] though we disagree with some of the Court of Appeal's reasoning, we affirm.

II. DISCUSSION

Though the superior court's injunction covered Tidewater's and Zapata's employees working anywhere more than three miles from the California coast, the Court of Appeal focused on those employees who are named defendants in this action and who work in the Santa Barbara Channel. Because we are reviewing the decision of the Court of Appeal, our focus is also on Tidewater's and Zapata's operations in the Santa Barbara Channel. At issue, of course, is...