Issue 136 – June 2023
NEWS: WORTHY

Still Clear As Mud: Revisiting California Wage and Hour Laws in the Public Sector
By Katy A. Suttorp, Partner, Burke, Williams & Sorensen, LLP
In 2016, the Authority published “Clear as Mud: California Wage and Hour Laws in the Public Sector.” In the seven years since then, despite scores of new legislation and court decisions, our understanding of which sections of California’s Labor Code or IWC Wage Orders apply to public agencies has not improved appreciably. As before, clarification regarding which sections apply or not to various types of agencies has developed on a case-by-case basis from California’s lower appellate courts.
In the years since California employers have continued to deal with new developments in California wage and hour law that have resulted in significant changes to their personnel policies and practices. Although the language of some of the new legislation has expressly addressed whether public agencies are within the scope of “employers” who are subject to the new laws, the California Legislature has not always been so clear regarding its intent.
As in the initial article from 2016, this update will briefly address some of the most common questions public employers have continued to ask regarding which California wage and hour laws do (or do not) apply to public agencies (and if so, which ones) and will provide a brief overview of the analytical framework that California courts typically apply in evaluating claims by public employees who are seeking the benefit of provisions that apply to employees in the private sector. This update also briefly mentions the Court of Appeal’s decision in Stone v. Alameda Health System,[1] for which the California Supreme Court granted review last month.
Wait, Don’t We Only Have to Worry About the Fair Labor Standards Act in the Public Sector?!
While the federal Fair Labor Standards Act (“FLSA”) is often the primary source regulating wage and hour requirements for public employers, it is clear that at least some California wage and hour laws, whether by their express terms or because of the judicial ruling, also apply to certain public employers and employees.
What Are Some of the California Wage and Hour Statutes That Expressly Apply to Public Employers, and Are There Any That Expressly Exclude Public Employers?
Some California wage and hour laws that expressly apply to public employers include:
- The Healthy Workplaces, Healthy Families Act of 2014, which requires employers to provide paid sick leave to their employees[2] and defines “employers” to include “any person employing another under any appointment or contract of hire and includes the state, political subdivisions of the state, and municipalities.”[3]
- Section 1030 of the Labor Code, which requires accommodation of reasonable lactation breaks, specifies that “employer” includes “the state and any political subdivision.”[4]
- Revisions to Section 1182.12 of the Labor Code implementing the schedule of minimum wage increases (currently $15.50 per hour as of January 1, 2023) and specifying that its provisions apply to “the state, political subdivisions of the state, and municipalities.”[5]
- Sections 550, 551, 553, and 554 of the Labor Code imposing a “one day’s rest in seven” rule upon “cities which are cities and counties and the officers and employees thereof.”[6]
Some California laws that expressly exclude some local public employers from their scope include:
- Section 220 of the Labor Code, which provides: “Sections 200 to 211, inclusive, and Sections 215 to 219, inclusive, do not apply to the payment of wages of employees directly employed by any county, incorporated city, or town or other municipal corporation. All other employments are subject to these provisions.”
- This means that California rules, such as the timing of final paychecks and paydays[7] and waiting time penalties, do not apply to the types of entities specified in Section 220.
- Section 226 of the Labor Code, which contains numerous payroll-related requirements such as itemized wage statements but specifies:
This section does not apply to the state, to any city, county, city and county, district, or any other governmental entity, except that if the state or a city, county, city and county, district, or other governmental entity furnishes its employees with a check, draft, or voucher paying the employee’s wages, the state or a city, county, city and county, district, or other governmental entity shall use no more than the last four digits of the employee’s social security number or shall use an employee identification number other than the social security number on the itemized statement provided with the check, draft, or voucher.[8]
However, many sections of the Labor Code are silent regarding the types of “employers” they apply to. As one court noted, “Our review of the Labor Code revealed that it is not a model of uniformity in its references to public employees.”[9]
Have the Courts Provided Any Recent Guidance as to Which Other Labor Code Provisions Apply or Not to Public Sector Employers?
Yes, in recent years, the California Courts have ruled on several claims by employees of various types of public agencies, resulting in the following determinations:
- Labor Code sections 510 [daily overtime] and 512 [meal periods] are not applicable to water storage districts.[10]
- Labor Code sections 512 and 226.7 [cool down recovery periods] are not applicable to corrections officers with the California Department of Corrections and Rehabilitation.[11]
- Labor Code section 226.8 [willful mis-classification of independent contractors] is not applicable to water districts.[12]
- Labor Code section 203 applies to employees of a non-profit public benefit corporation that operates charter schools.[13]
- Labor Code sections 223, 226, 226.7, 227.3, 246, 510, 512, and 2802 are all part of the “same statutory scheme” and are not applicable to the San Diego Convention Center Corporation because it is a “public entity” due to various factors showing the Corporation “is an extension of the City of San Diego.”[14]
What About the Industrial Welfare Commission (“IWC”) Wage Orders – Do They Apply to Public Agencies? Are There Any Relevant Court Rulings?
As was the case at the time of the 2016 article, the answer varies. Please see the discussion in that article for details on the wage orders. In sum, to say that the current status of the law interpreting the applicability of the Labor Code and IWC Wage Orders to various public employers is unclear continues to be an understatement.
How Would a Court Decide Whether My Agency Has to Comply with Other California Wage And Hour Laws?
In 2016, this article identified several steps courts typically proceed through while analyzing whether a given wage and hour provision applies to a particular public agency. As before, public agencies may wish to apply a similar sequence of analysis in evaluating which requirements under California law could arguably apply to them. However, as explained further below, agencies may wish to exercise some caution in relying solely upon the general maxim that public employers are excluded from the application of a statute unless expressly included until the California Supreme Court issues a ruling in Stone.
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- Check whether the statute or wage order at issue includes a definition of “employer” or other terms regarding applicability that expressly includes or excludes public agencies.
- If so, determine which types of public agencies are included/excluded.
- Express identification: If a statute or wage order expressly applies to your type of public agency, whether a city, county, special district, Joint Powers Authority, or otherwise, then the analysis will likely end there, and if included, your agency may wish to take steps to comply.[15]
- Categorical identification: As noted above, it is important to bear in mind that the Legislature is not always consistent in identifying which agencies are subject to or excluded from a given requirement. Instead, the Legislature may use broad, categorical terms such as “municipal corporation,” “quasi-municipal corporation or “political subdivision.” These terms, in turn, can be open to judicial interpretation concerning particular types of agencies or even individual entities.
- For example, in Gateway, the Court of Appeal examined the meanings of “other municipal corporation” and “quasi-municipal corporation” as used in Section 220(b) of the Labor Code to exempt certain public employers from complying with waiting time penalties. According to the Court there, relevant factors included whether the agency “perform[s] an essential government function for a public purpose; . . . . whether an elected board of directors governs the entity, whether the entity has regulatory or police powers; whether it has the power to impose taxes, assessments, or tolls; whether it is subject to open meeting laws and public disclosure of records; and whether it may take property through eminent domain.”[16]
- If not, consider relevant case law (if any). Even if a provision does not expressly apply to public employers, a court may have previously issued an opinion as to whether that provision or an analogous one applies to your type of public agency (or possibly, to your actual agency.)
- If so, determine which types of public agencies are included/excluded.
- Apply rules of statutory construction or consider other indicators of Legislative Intent. Courts often use rules of statutory construction to analyze legislative intent behind ambiguous statutory language.[17] In recent years, and most notably in Stone v. Alameda Health System, the Courts of Appeal have focused particularly on maxims, such as the “general rule” and “sovereign powers,” in an effort to discern specifically whether the Legislature intended particular Labor Code or wage order provisions to apply to certain public employers.
- Check whether the statute or wage order at issue includes a definition of “employer” or other terms regarding applicability that expressly includes or excludes public agencies.
General Rule: Requirement of Express Applicability to Public Employers
Many agencies are familiar with the quote from Johnson that “absent express words to the contrary, government agencies are not included within the general words of a statute.”[18] In discussing this “rule,” the Johnson court cited a prior California Supreme Court decision and explained:
In the context of reviewing the legislative history of [a prior version of § 1102.5], the court in Campbell v. Regents of University of California . . . quoted the Senate Committee on Industrial Relations as follows: ‘These provisions are silent as to their applicability to public employees. Generally, however, provisions of the Labor Code apply only to employees in the private sector unless they are specifically made applicable to public employees.’ . . . . The Legislature’s iteration of this rule is an indication that the Legislature follows it. . . .[19]
The Johnson court also briefly considered and dismissed the employee’s argument under the “sovereign powers” doctrine, as explained by the Court. “[U]nder the “sovereign powers” maxim, government agencies are excluded only if their inclusion would result in an infringement upon sovereign governmental powers.” The Court stated, “[W]hile the ‘sovereign powers’ principle can help resolve an unclear legislative intent, it cannot override positive indicia of a contrary legislative intent.” The Court pointed generally to its earlier discussion of statutory construction, including the “general rule,” as sufficient “positive indicia.” In addition, the Court concluded that requiring the District there to comply with the challenged overtime and meal period sections would infringe upon its right under its enabling statute to set employee compensation.
The courts have continued to articulate a version of these principles to date. However, since Johnson, some courts have not used consistent terminology in explaining the applicability of this rule to particular agencies or consistent approaches in applying the framework that Johnson appeared to articulate.
For example, in addressing potential eligibility for exemption from Labor Code under the “general rule,” the court in Allen used phrases such as “governmental actors,” “public employer,” “public entities,” and “government entity,” seemingly interchangeably in one opinion and did not consider the presence or absence of “sovereign powers.”[20]
Most recently, the Court of Appeal in Stone relied primarily on the enabling statute for the Alameda Hospital Authority to find that there was no “indicia of legislative intent” of exclusion from certain Labor Code requirements and to find that the Authority “conspicuously lacks many of the hallmarks of sovereignty.”[21] Under this approach, the Court ruled that even though the Authority is a “government entity,” the absence of evidence of “sovereign power” meant that it is not a “public agency.” In turn, this meant that the Authority was not entitled to the benefit of the “general rule” of inapplicability of Labor Code requirements, and so was not exempt as a matter of law from many of the claims by two former employees pertaining to meal and rest breaks, overtime, and payroll records.
Conclusion
As the discussion above demonstrates, although some additional guidance is available from the Legislature, IWC, and courts, much remains unresolved regarding the extent to which many aspects of California wage and hour law apply to public employers, whether due to ambiguity regarding the scope of certain exclusions, differing standards for establishing legislative intent, or varying opinions by courts regarding sufficient forms of sovereign power.
As noted above, the California Supreme Court granted review of Stone last month. Among the issues the California Supreme Court is expected to address are whether possession of “sovereign powers” is determinative of whether the “general rule” can apply to a public employer and whether the definition of “other municipal corporation” for purposes of exemption under Labor Code section 220(b) should be based on the factors identified in Gateway Community Charters or determined under a broader standard.
For now, agencies continue to face a complex, confusing, and shifting statutory and regulatory scheme that offers few clear answers and under which a provision that does not mention public employers might nonetheless be found to apply to some or all public employers.
Accordingly, while the federal FLSA continues to be the primary source of wage and hour requirements for public employers in many respects, prudent agencies should also evaluate on a case-by-case basis whether a particular California wage and hour law might apply to some or all of that agency’s employees.
Overall, given the nuanced and fact-specific nature of the legal issues involved, employers are reminded to raise concerns regarding specific state or federal wage and hour issues with legal counsel.
[1] Stone v. Alameda Health System (Cal. Ct. App. 2023) 88 Cal.App.5th 84 (rev. granted May 17, 2023).
[2] Cal. Lab. Code §§ 245-249.
[3] Cal. Lab. Code § 245.5(b).
[4] Cal. Lab. Code § 1030.
[5] See Senate Bill No. 3, Section 3, signed by the Governor and filed with the Secretary of State on April 4, 2016. Because it was not urgency legislation, the revisions did not take effect until January 1, 2017.
[6] Cal. Lab. Code § 555.
[7] Cal. Lab. Code § 201(a) (discharged employee) and § 202(a)(voluntary quit).
[8] Cal. Lab. Code § 226(i).
[9] Sheppard v. North Orange County Regional Occupational Program (2010) 191 Cal.App.4th 289, 307.
[10] Johnson v. Arvin-Edison Water Storage District (2009) 174 Cal.App.4th 729.
[11] California Correctional Peace Officers’ Association v. State of California (2010) 188 Cal.App.4th 646, 651-652.
[12] Bennett v. Rancho California Water District 2015 WL 3814458, at *7 (unpublished).
[13] Gateway Cmty. Charters v. Spiess (Cal. Ct. App. 2017) 9 Cal.App.4th 499, 502.
[14] Allen v. San Diego Convention Ctr. Corp., (Cal. Ct. App. 2022) 86 Cal.App.5th 589, 599.
[15] Note, however, that there is usually an argument to be made that a statute that regulates the wages of public employees, even one made expressly applicable to public employers, infringes on the sovereign power of public entities.
[16] Gateway Cmty. Charters v. Spiess (Cal. Ct. App. 2017) 9 Cal.App.4th 499, 506
[17] Other common rules include the following: “[W]hen the Legislature has employed a term or phrase in one place and excluded it in another, it should not be implied where excluded” Pasadena Police Officers Assn. v. City of Pasadena (1990) 51 Cal.3d 564, 576. “When two statutes touch upon a common subject, they are to be construed in reference to each other, so as to harmonize the two in such a way that no part of either becomes surplusage.” DeVita v. County of Napa (1995) 9 Cal.4th 763, 778.
“[A] word may be defined by its accompanying words and phrases, since ‘ordinarily the coupling of words denotes an intention that they should be understood in the same general sense..” Gateway Cmty. Charters, 9 Cal.App.4th 499 at 504. In Latin, this principle is called noscitur a sociis. “[W]here general words follow specific words, or specific words follow general words in statutory enumeration, the general words are construed to embrace only things similar in nature to those enumerated by the specific words. Id. In Latin, this principle is called ejusdem generis.
[18] Johnson, 174 Cal.App.4th 729 at 736.
[19] Id.
[20] Allen, 86 Cal.App.5th 589
[21] Stone, 88 Cal.App.5th at 89.
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