SHEPPARD v. NORTH ORANGE COUNTY REGIONAL OCCUPATIONAL PROGRAM










Filed 12/23/10







CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

JAMES SHEPPARD, Plaintiff and Appellant, v. NORTH ORANGE COUNTY REGIONAL OCCUPATIONAL PROGRAM, Defendant and Respondent.

G041956 (Super. Ct. No. 04CC11086) O P I N I O N

Appeal from a judgment of the Superior Court of Orange County, David C. Velasquez, Judge. Affirmed in part and reversed in part.
Law Office of David J. Duchrow, David J. Duchrow, Jill A. Piano; Spencer Rice, The Spencer Law Firm, Marilynn Mika Spencer and Wayne J. Rice for Plaintiff and Appellant.
Atkinson, Andelson, Loya, Ruud & Romo, Warren S. Kinsler, Nate J. Kowalski, Anthony P. De Marco, Sharon J. Ormond, and Jennifer D. Cantrell for Defendant and Respondent.
Liebert Cassidy Whitmore, Brian P. Walter and David A. Urban for California School Boards Association and its Educational Legal Alliance, the League of California Cities, and the California State Association of Counties as Amici Curiae on behalf of Defendant and Respondent.
* * *

INTRODUCTION
Plaintiff James Sheppard was a part‑time instructor employed by defendant North Orange County Regional Occupational Program (NOCROP). NOCROP was created by four public school districts. During his employment, Sheppard was required to spend 20 minutes of unpaid time preparing for every hour he spent teaching. Sheppard sued NOCROP and sought compensation for his unpaid preparation time by asserting claims for violation of the minimum wage law, pursuant to the Industrial Welfare Commission’s (IWC) wage order No. 4‑2001 (Wage Order No. 4‑2001)[1] and Labor Code section 218, breach of contract, and quantum meruit. (All further statutory references are to the Labor Code unless otherwise specified.)
Following a series of challenges to Sheppard’s pleadings, judgment was entered in favor of NOCROP. Sheppard contends the trial court erred by (1) ordering judgment on the pleadings as to the violation of the minimum wage law claim contained in the first amended complaint; (2) sustaining, without leave to amend, NOCROP’s demurrer to Sheppard’s breach of contract claim as contained in the original complaint; and (3) sustaining, without leave to amend, NOCROP’s demurrer to his quantum meruit claim as contained in the third amended complaint.
We reverse in part and affirm in part. We reverse the trial court’s order granting judgment on the pleadings as to the violation of the minimum wage law claim. Sheppard alleged he was employed by a regional occupational program which was the creation of one or more public school districts through Education Code section 52301. We conclude the minimum wage provision in Wage Order No. 4‑2001 applies to Sheppard’s employment with NOCROP. We hold the Legislature has plenary authority over public school districts and was constitutionally authorized to vest in the IWC, through section 1173, the power to impose the minimum wage law provision contained in Wage Order No. 4‑2001 as to employees of such public school districts. (For the reasons we explain, this holding is limited to employees of public school districts.) We therefore reverse the trial court’s order granting judgment on the pleadings as to the violation of the minimum wage law claim.
We also reverse the order sustaining NOCROP’s demurrer to Sheppard’s breach of contract claim. California Supreme Court precedent establishes that a public employee has a contractual right to earned but unpaid compensation, which is protected by the state Constitution.
We affirm the order sustaining the demurrer to the quantum meruit claim because the Government Claims Act (Gov. Code, § 810 et seq.) bars the assertion of such a claim against a public entity.

BACKGROUND
In November 2004, Sheppard filed a complaint against NOCROP for failure to pay wages in violation of Wage Order No. 4‑2001, failure to pay wages in breach of a written contract, and unfair competition. The complaint alleged that “[b]etween approximately January 1, 2000 and the present,” Sheppard was employed “as a full‑time and/or part‑time instructor” by NOCROP which “was and is a governmental entity doing business in Orange County, California.” The complaint further alleged that before Sheppard began his employment with NOCROP and each school year after that, he was required to sign a document entitled “North Orange County Regional Occupational Program Notice of Offer [o]f Employment‑Certificated Employee” (notice of offer), which stated in part: “[F]ull‑time work and salary schedules are based upon an 8 hour day/40 hour week. A full‑time classroom/lab schedule is 30 hours per week with 10 hours per week of preparation time. Part‑time assignments require 20 minutes of unpaid preparation time for each hour of classroom/lab instruction.” (Boldface omitted.) The complaint stated that “as a part‑time instructor, [Sheppard] has not [been] and is not paid for 20 minutes of required preparation time” and that “he is seeking all unpaid wages owed between approximately January 2000 and the present based upon the fact that he has not been paid for 20 minutes of required preparation time for each hour of classroom/lab instruction.” The complaint further alleged that on September 27, 2004, Sheppard submitted a claim for damages to NOCROP, pursuant to Government Code section 910, and NOCROP rejected his claim on October 26, 2004. All three claims of the complaint were based on the applicability of the minimum wage requirement contained in Wage Order No. 4‑2001 to the 20 minutes of unpaid preparation work Sheppard performed for NOCROP under the notice of offer.
The trial court sustained NOCROP’s demurrer, without leave to amend, as to Sheppard’s breach of contract and unfair competition claims “for lack of opposition,”[2] but overruled the demurrer as to the violation of the Wage Order No. 4‑2001 claim.
Sheppard filed a first amended complaint which contained a single cause of action for violation of Wage Order No. 4‑2001. The first amended complaint alleged that although Wage Order No. 4‑2001 requires that all employees be paid at least $6.75 per hour for all hours worked, NOCROP required its part‑time instructors, including Sheppard, who were paid between $31.35 and $36.15 per hour, to spend 20 minutes of unpaid time to prepare for every hour of classroom or laboratory instruction they performed. The first amended complaint also contained class action allegations.
NOCROP filed a motion for summary judgment to the first amended complaint. The trial court treated the motion for summary judgment as a motion for judgment on the pleadings, which it granted. The court also granted Sheppard “leave to amend the complaint to state a cause of action for an alleged violation of Education Code section 45025.” [3] The trial court denied Sheppard’s motion requesting the court’s reconsideration of the order granting judgment on the pleadings.
Sheppard filed a second amended complaint which contained a claim for violation of Education Code section 45025, based on the allegation he was not paid for all hours he worked on a part-time basis. The trial court overruled NOCROP’s demurrer to the second amended complaint.
Sheppard filed a third amended complaint in which he added a claim for quantum meruit, seeking recovery of the “reasonable value” of unpaid preparation time. The trial court sustained NOCROP’s demurrer to the quantum meruit claim, without leave to amend, on the ground such a claim may not be maintained against a public entity.
Pursuant to Sheppard’s request to voluntarily dismiss his claim for violation of Education Code section 45025 and the trial court’s order granting his request, the court clerk entered dismissal of the action with prejudice. Sheppard appealed.

DISCUSSION
I.
Standard of Review
This appeal involves issues arising from an order granting judgment on the pleadings and orders sustaining demurrers. A judgment on the pleadings and a judgment following the sustaining of a demurrer are reviewed under the same de novo standard. (McCutchen v. City of Montclair (1999) 73 Cal.App.4th 1138, 1144; Boccato v. City of Hermosa Beach (1994) 29 Cal.App.4th 1797, 1803‑1804.) Accordingly, we treat the properly pleaded allegations of a challenged complaint as true, and liberally construe them to achieve “‘“substantial justice”’” among the parties. (American Airlines, Inc. v. County of San Mateo (1996) 12 Cal.4th 1110, 1118.)
We consider only the allegations of a challenged complaint and matters subject to judicial notice to determine whether the facts alleged state a cause of action under any theory. (American Airlines, Inc. v. County of San Mateo, supra, 12 Cal.4th at p. 1118.) “‘Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.]’” (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126.)
II.
The Trial Court Erred by Granting Judgment on the Pleadings As to Sheppard’s Claim for Violation of the Minimum Wage Law.[4]
In support of Sheppard’s claim that NOCROP violated the minimum wage law, the first amended complaint alleged that although Wage Order No. 4‑2001 requires all employees be paid minimum wage for all hours worked, NOCROP required its part‑time instructors, including Sheppard, to spend 20 minutes of unpaid time to prepare for every hour of classroom or laboratory instruction they performed. NOCROP filed a motion for summary judgment on the ground that Sheppard is a public employee and thus Wage Order No. 4‑2001 does not and cannot apply to him.[5]
The trial court’s order granting judgment on the pleadings in favor of NOCROP stated in pertinent part: “Defendant has met its burden of showing the action, which is based solely on alleged violation of a wage order promulgated by the Industrial Welfare Commission, has no merit and that Defendant has a complete defense. . . . [¶] . . . It is undisputed the Defendant was created by a Joint Powers agreement between four school districts. As a public school entity, the State Legislature has plenary power over wage and hour disputes between the school districts and certificated teachers. (Wilson v. State Bd. Of Education (1999) 75 Cal.App.4th 1125, 1134‑1135.) Public agencies are not bound by general words of a statute absent express language or necessary implication. (Wells v. One2One Learning Foundation (2006) 39 Cal.4th 1164; Campbell v. Regents of the University of California (2005) 35 Cal.4th 311; see also Kistler v. Redwoods Community College Dist. (1993) 15 Cal.App.4th 1326, 1331‑1332.) Neither the wage order relied upon by the Plaintiff nor the implementing Labor Code sections expressly, or by necessary implication, obligate Defendant to pay Plaintiff hourly wages for ‘preparation time’ beyond the hourly wages mandated by Education Code section 45025. Thus, the wage order is not applicable to Defendant.”
Although the trial court stated it found that NOCROP met its burden in moving for summary judgment and that Sheppard failed to carry his burden of demonstrating the existence of a triable issue of material fact, the court did not grant summary judgment in favor of NOCROP. Instead, the court stated it “will treat the matter as a motion for judgment on the pleadings and grant [Sheppard] leave to amend the complaint to state a cause of action for an alleged violation of Education Code section 45025.” The court added it assumed all the facts pleaded were true for purposes of the motion only and explained it concluded the first amended complaint failed to allege facts sufficient to state a cause of action.
As explained in detail post, we conclude the trial court erred by ruling that Sheppard failed to allege facts sufficient to state a claim for violation of the minimum wage law. For the reasons we will explain, we conclude (1) by its terms, the minimum wage provision contained in Wage Order No. 4‑2001 applies to Sheppard’s employment with NOCROP; (2) the Legislature authorized the IWC to so extend the application of the minimum wage law to apply to certain public employees; and (3) the Legislature has plenary authority over public school districts in California and was not otherwise barred by the state Constitution from requiring school districts to comply with the minimum wage provision of Wage Order No. 4‑2001. We begin our analysis by reviewing applicable rules of statutory interpretation.
A.
Applicable Rules of Statutory Interpretation
Our analysis of the trial court’s order granting judgment on the pleadings as to the violation of the minimum wage law claim primarily depends on our interpretation of Wage Order No. 4‑2001 and section 1173. We therefore begin our discussion by reviewing the applicable rules of statutory interpretation.
In Martinez v. Combs (2010) 49 Cal.4th 35, 51 (Martinez), the California Supreme Court stated: “‘[O]ur fundamental task in construing a statute is to ascertain the intent of the lawmakers so as to effectuate the purpose of the statute.’ [Citation.] In search for what the Legislature meant, ‘[t]he statutory language itself is the most reliable indicator, so we start with the statute’s words, assigning them their usual and ordinary meanings, and construing them in context. If the words themselves are not ambiguous, we presume the Legislature meant what it said, and the statute’s plain meaning governs. On the other hand, if the language allows more than one reasonable construction, we may look to such aids as the legislative history of the measure and maxims of statutory construction. In cases of uncertain meaning, we may also consider the consequences of a particular interpretation, including its impact on public policy.’”
In Wells v. One2One Learning Foundation (2006) 39 Cal.4th 1164, 1192, the Supreme Court explained: “A traditional rule of statutory construction is that, absent express words to the contrary, governmental agencies are not included within the general words of a statute.” (See Campbell v. Regents of University of California, supra, 35 Cal.4th at p. 330 [“‘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 Supreme Court pointed out an exception to this principle that “government agencies are excluded from the operation of general statutory provisions ‘only if their inclusion would result in an infringement upon sovereign governmental powers. . . . Pursuant to this principle, governmental agencies have been held subject to legislation which, by its terms, applies simply to any “person.”’” (Ibid.) The Supreme Court explained, “the premise that public entities are statutory ‘persons’ unless their sovereign powers would be infringed is simply a maxim of statutory construction. While the ‘sovereign powers’ principle can help resolve an unclear legislative intent, it cannot override positive indicia of a contrary legislative intent.” (Id. at p. 1193.)
In addition, “‘[s]tatutes governing conditions of employment are construed broadly in favor of protecting employees.’ [Citations.] We construe wage orders, as quasi‑legislative regulations, in accordance with the standard rules of statutory interpretation.” (Bearden v. U.S. Borax, Inc. (2006) 138 Cal.App.4th 429, 435.)
B.
Wage Order No. 4‑2001 Provides Its Minimum Wage Provision Applies to “All Persons” Directly Employed by the State or Any of Its Political Subdivisions Which the First Amended Complaint Sufficiently Alleged Included Sheppard.
Wage Order No. 4‑2001 generally applies to “all persons employed in professional, technical, clerical, mechanical, and similar occupations whether paid on a time, piece rate, commission, or other basis.”[6] (Cal. Code Regs., tit. 8, § 11040, subd. 1.) In section 11040, subdivision 1(B) of the California Code of Regulations, entitled “Applicability of Order,” Wage Order No. 4‑2001 states: “Except as provided in Sections 1 [‘Applicability of Order’], 2 [‘Definitions’], 4 [‘Minimum Wages’], 10 [‘Meals and Lodging’], and 20 [‘Penalties’], the provisions of this order shall not apply to any employees directly employed by the State or any political subdivision thereof, including any city, county, or special district.”[7] Applying the applicable rules of statutory construction discussed ante, we interpret the language of Wage Order No. 4‑2001, by its terms, to impose the minimum wage provision as to all employees in the occupations described therein, including employees directly employed by the state or any political subdivision of the state. We do so because Wage Order No. 4‑2001 refers to “Section[] . . . 4 [minimum wages]” as an express exception to its general statement that Wage Order No. 4‑2001 does not apply to state employees or employees of political subdivisions of the state. (Cal. Code Regs., tit. 8, § 11040, subd. 1(B).)
We further conclude the first amended complaint alleged Sheppard was directly employed by a political subdivision of the state. NOCROP is a regional occupational program established by one or more public school districts under Education Code section 52301.[8] A public school district is a political subdivision of the State of California. (See Hi‑Voltage Wire Works, Inc. v. City of San Jose (2000) 24 Cal.4th 537, 570 (conc. opn. of Mosk, J.) [article I, section 31, subdivision (f) of the California Constitution “defines the ‘State’ to ‘include, but not necessarily be limited to, the State itself, any city, county, city and county, public university system, including the University of California, community college district, school district, special district, or any other political subdivision or governmental instrumentality of or within the State’” (italics added)].) We are satisfied Sheppard has pleaded sufficient facts to show his employment as an instructor by a regional occupational program constituted direct employment by a political subdivision of the state.
Thus, the first amended complaint sufficiently alleged facts showing that, based on the terms of Wage Order No. 4‑2001, NOCROP was required to comply with the minimum wage provision contained therein.
C.
The IWC Was Authorized to Apply the Minimum Wage Requirement to Certain Public Employees.
NOCROP argues that even if Wage Order No. 4‑2001, by its terms, appears to impose the minimum wage requirement as to Sheppard, the IWC exceeded its authority in doing so. For the reasons we discuss post, we disagree. We reach our conclusion by reviewing the history of the IWC; its enabling statute, section 1173; the Legislature’s plenary authority over public school districts; and other pertinent legal authorities.
1.
The History of the IWC and the Minimum Wage Laws Show the Legislature Has Conferred Broad Authority on the IWC.
In Martinez, supra, 49 Cal.4th 35, 53, the Supreme Court provided a comprehensive overview of the history of the IWC and minimum wage legislation in California. The Supreme Court stated: “In California specifically, calls to enact a minimum wage followed 1911 legislation prohibiting some child labor and regulating the hours women and children could be required to work [citation], and a comprehensive 1912 report by the State Bureau of Labor Statistics on wages, hours and labor conditions throughout the state. The report showed, among other things, that approximately 40 percent of working women earned less than $9 per week. [Citation.] ‘Although interpretations of this evidence varied widely, most experts thought that these wages were unreasonably low. The bureau itself considered them below a decent standard of living—“many women were living below any normal standard, and . . . such subnormal living was having a most disastrous effect on the health and morals of the women workers.”’” (Ibid.)
“The 1913 Legislature addressed these continuing problems by creating the IWC and delegating to it broad authority to regulate the hours, wages and labor conditions of women and minors [citation], and by proposing to the voters a successful constitutional amendment confirming the Legislature’s authority to proceed in that manner.”[9] (Martinez, supra, 49 Cal.4th at p. 54.) Voters in the November 1914 general election approved of former article XX, section 17 1/2 of the California Constitution, which provided: “‘The legislature may, by appropriate legislation, provide for the establishment of a minimum wage for women and minors and may provide for the comfort, health, safety and general welfare of any and all employees. No provision of this constitution shall be construed as a limitation upon the authority of the legislature to confer upon any commission now or hereafter created, such power and authority as the legislature may deem requisite to carry out the provisions of this section.’” (Martinez, supra, at p. 54, fn. 20.) The current version of the California Constitution “declares on the same point” at article XIV, section 1, as approved by the voters on June 8, 1976. (Martinez, supra, at p. 54, fn. 20.) Article XIV, section 1 states: “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.” (Cal. Const., art. XIV, § 1.)
In Martinez, supra, 49 Cal.4th at page 54, the Supreme Court further explained: “The IWC’s initial statutory duty under the 1913 act was to ‘ascertain the wages paid, the hours and conditions of labor and employment in the various occupations, trades, and industries in which women and minors are employed in the State of California, and to make investigations into the comfort, health, safety and welfare of such women and minors.’ [Citation.] To assist the IWC in this work, the Legislature gave the commission broad investigatory powers, including free access to places of business and employment [citation], as well as the authority to demand reports and information under oath [citation], to inspect records [citation], and to issue subpoenas requiring the appearance and sworn testimony of witnesses [citation].”
“Today, the laws defining the IWC’s powers and duties remain essentially the same as in 1913, with a few important exceptions: First, the voters have amended the state Constitution to confirm the Legislature’s authority to confer on the IWC ‘legislative, executive, and judicial powers.’ [Citations.] Second, the Legislature has expanded the IWC’s jurisdiction to include all employees, male and female, in response to federal legislation barring employment discrimination because of sex [citation]. [Citations.] Third, ‘while retaining the authorizing language of [the 1913 act],’ the Legislature has ‘restated the commission’s responsibility in even broader terms’ [citation], charging the IWC with the ‘continuing duty’ to ascertain the wages, hours and labor conditions of ‘all employees in this state,’ to ‘investigate [their] health, safety, and welfare,’ to ‘conduct a full review of the adequacy of the minimum wage at least once every two years’ (Lab. Code, § 1173), and to convene wage boards and adopt new wage orders if the commission finds ‘that wages paid to employees may be inadequate to supply the cost of proper living’ [citations]. Finally, while the amount of the minimum wage has in recent years been set by statute [citation], specific employers and employees still become subject to the minimum wage only through, and under the terms of, the IWC’s applicable wage orders [citation].” (Martinez, supra, 49 Cal.4th at p. 55, fn. omitted, second italics added.) “Virtually the same statutory and regulatory structure remains in place today. . . . Accordingly, today, as under the 1913 act, specific employers and employees become subject to the minimum wage only under the terms of an applicable wage order, and an employee who sues to recover unpaid minimum wages actually and necessarily sues to enforce the wage order.” (Id. at pp. 56‑57.)[10]
“Although the IWC was defunded effective July 1, 2004, its wage orders remain in effect. [Citation.] [¶] Effective January 1, 1998, the IWC eliminated daily overtime from five of the then existing 15 wage orders. [Citation.] . . . In response, the Legislature passed, and the Governor signed, Assembly Bill No. 60 (1999‑2000 Reg. Sess.), the Eight‑Hour‑Day Restoration and Workplace Flexibility Act of 1999. [Citation.] Among other things, this legislation restored the eight-hour workday in section 510 and mandated meal periods in section 512.” (Johnson v. Arvin‑Edison Water Storage Dist. (2009) 174 Cal.App.4th 729, 735, fn. omitted (Johnson).) Wage Order No. 4‑2001, as thereafter amended effective January 1, 2001, imposes certain provisions, including a minimum wage obligation, as to employees directly employed by the state or any of its political subdivisions. (Cal. Code Regs., tit. 8, § 11040, subds. 1(B), 4.)
The Supreme Court in Martinez, supra, 49 Cal.4th at page 60, stated: “The Legislature and the voters have repeatedly demanded the courts’ deference to the IWC’s authority and orders.” The Martinez court further stated: “Obeying these formal expressions of legislative and voter intent, the courts have shown the IWC’s wage orders extraordinary deference, both in upholding their validity and in enforcing their specific terms. . . . ‘Moreover, past decisions . . . teach that in light of the remedial nature of the legislative enactments authorizing the regulation of wages, hours and working conditions for the protection and benefit of employees, the statutory provisions are to be liberally construed with an eye to promoting such protection.’” (Id. at p. 61.)

TO BE CONTINUED AS PART II….

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