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

STORY CONTINUE FROM PART I….


2.
Section 1173 Enables the IWC to Regulate Wages of “All Employees” in the State.
The current IWC legislative enabling authority is codified at section 1173, which provides the IWC a “broad statutory mandate” to regulate the working conditions of employees in California, including setting standards for minimum wages and maximum hours. (Industrial Welfare Com. v. Superior Court (1980) 27 Cal.3d 690, 701‑702.) Section 1173 provides: “It is the continuing duty of the Industrial Welfare Commission, hereinafter referred to in this chapter as the commission, to ascertain the wages paid to all employees in this state, to ascertain the hours and conditions of labor and employment in the various occupations, trades, and industries in which employees are employed in this state, and to investigate the health, safety, and welfare of those employees. [¶] The commission shall conduct a full review of the adequacy of the minimum wage at least once every two years. The commission may, upon its own motion or upon petition, amend or rescind any order or portion of any order or adopt an order covering any occupation, trade, or industry not covered by an existing order pursuant to this chapter. [¶] Before adopting any new rules, regulations, or policies, the commission shall consult with the Occupational Safety and Health Standards Board to determine those areas and subject matters where the respective jurisdictions of the commission and the Occupational Safety and Health Standards Board overlap. This consultation need not take the form of a joint meeting. In the case of such overlapping jurisdiction, the Occupational Safety and Health Standards Board shall have exclusive jurisdiction, and rules, regulations, or policies of the commission on the same subject have no force or effect.” (Italics added.) Section 1173 is contained in chapter 1 of part 4, division 2 of the Labor Code. Section 1171 (part of the same chapter) provides in part: “The provisions of this chapter shall apply to and include men, women and minors employed in any occupation, trade, or industry, whether compensation is measured by time, piece, or otherwise, but shall not include any individual employed as an outside salesman or any individual participating in a national service program carried out using assistance provided under Section 12571 of Title 42 of the United States Code.”
NOCROP argues that section 1173 does not confer on the IWC authority to regulate any public employees. Citing Wells v. One2One Learning Foundation, supra, 39 Cal.4th at page 1190, and Johnson, supra, 174 Cal.App.4th at page 736, NOCROP argues section 1173 fails to expressly state the IWC has authority over the public sector and thus it must be presumed no such authority has been provided to it. But section 1173 broadly refers to “all employees in this state,” which necessarily includes employees working in the public sector. The history of the IWC, ante, establishes the Legislature’s consistent intent to provide the IWC ever‑broadening authority.
Furthermore, no party has cited any legal authority establishing that the IWC lacks authority to impose the minimum wage law on any portion of the public sector. That the IWC has not exercised its authority until Wage Order No. 4‑2001 does not establish it lacked authority to do so.[1]
On the other hand, several appellate decisions assume the IWC’s authority to regulate the public sector in determining whether a particular wage order applied. For example, in Johnson, supra, 174 Cal.App.4th at pages 739‑740, the appellate court assumed the existence of IWC authority to regulate the public sector in its discussion whether IWC wage order No. 17, on its terms, applied to a public water storage district. In Kettenring v. Los Angeles Unified School Dist. (2008) 167 Cal.App.4th 507, 514, the appellate court concluded certain teachers in a public school district qualified for the application of the professional exemption set forth in Wage Order No. 4‑2001. In California Correctional Peace Officers’ Assn. v. State of California (2010) 188 Cal.App.4th 646, 655, the appellate court concluded wage order No. 17 did not apply to peace officers because, by its terms, that wage order does not apply to any employee who was specifically exempted in the wage orders in effect in 1997 and the employees at issue had been specifically exempted in the relevant 1997 wage orders.
Our interpretation of section 1173 is also consistent with legislation passed in 2003, which reveals an assumption by the Legislature itself that the IWC has authority to regulate the public sector. Section 512.5 provides: “(a) Notwithstanding any provision of this chapter, if the Industrial Welfare Commission adopts or amends an order that applies to an employee of a public agency who operates a commercial motor vehicle, it may exempt that employee from the application of the provisions of that order which relate to meal periods or rest periods, consistent with the health and welfare of that employee, if he or she is covered by a valid collective bargaining agreement. [¶] (b) ‘Commercial motor vehicle’ for the purposes of this section has the same meaning as provided in subdivision (b) of Section 15210 of the Vehicle Code. [¶] (c) ‘Public agency’ for the purposes of this section means the state and any political subdivision of the state, including any city, county, city and county, or special district.” (Italics added.)
The Legislative Counsel’s Digest of Assembly Bill No. 98 (2003‑2004 Reg. Sess.), enacted as chapter 327 on September 8, 2003, page 1, through which section 512.5 was enacted, further explained: “Existing law authorizes the Industrial Welfare Commission to adopt or amend working condition orders with respect to break periods, meal periods, and days of rest for any workers in this state consistent with the health and welfare of those workers. Existing law prohibits an employer, with certain exceptions, from employing an employee for more than 5 hours per day without a meal period of not less than 30 minutes, or for more than 10 hours per day without a 2nd meal period of not less than 30 minutes. [¶] This bill would provide that if the Industrial Welfare Commission adopts or amends an order that applies to an employee of a public agency who operates a commercial motor vehicle, it may exempt an employee covered by a valid collective bargaining agreement from provisions that relate to meal periods or rest periods.”
3.
NOCROP’s Additional Arguments Challenging the IWC’s Authority As to the Public Sector Fail.
In its appellate brief, NOCROP asserts additional arguments challenging the conclusion that the IWC had the authority to impose the minimum wage requirement on NOCROP. First, NOCROP argues section 1173 should not be construed to include authority as to any part of the public sector because “the Legislature specifically referenced public agencies in other parts of the Labor Code when it intended for those provisions to apply to them.” Our review of the Labor Code revealed that is it not a model of uniformity in its references to public employees. Some sections expressly include public entities. (See, e.g., §§ 432.7, subd. (a) [“No employer, whether a public agency or private individual or corporation”], 2808, subd. (a) [“It is the responsibility of all employers, whether public or private, to provide to all eligible employees an outline of coverage”], 2809, subd. (a) [“Any employer, whether private or public”].) Other sections expressly exclude public employees. (See, e.g., §§ 220, subd. (a) [“Sections 201.3, 201.5, 201.7, 203.1, 203.5, 204, 204a, 204b, 204c, 204.1, 205, and 205.5 do not apply to the payment of wages of employees directly employed by the State of California”], 432.2, subd. (a) [“The prohibition of this section does not apply to the federal government . . . or the state government or any agency or local subdivision thereof”].) While the statutory language of section 1173 could be more express, we consider it sufficiently clear to reflect the Legislature’s intent to provide the IWC authority to regulate certain public employees. We respectfully invite the Legislature to clarify its intent in this regard.
Second, NOCROP argues we should interpret section 1173 as excluding all public employees because “[t]he Legislature incorporated provisions of the Labor Code into the Education Code when it intended to apply the Labor Code to school districts.” That the Education Code incorporates portions of the Labor Code does not undermine the IWC’s authority. NOCROP has not cited any provision in the Education Code providing that the Education Code is the exclusive source of regulation regarding wages and conditions of employment for public school teachers. Furthermore, NOCROP has failed to show how imposing the minimum wage law as to its part‑time instructors would be inconsistent with or otherwise create a conflict with any existing provision of the Education Code, whether dealing with compensation or otherwise.
Finally, NOCROP argues section 218, which the first amended complaint cited as Sheppard’s authority for bringing a private right of action to enforce the minimum wage law against NOCROP, is inapplicable under section 220, subdivision (b) because NOCROP is a municipal corporation to which section 218 is inapplicable and thus expressly excluded. We do not need to decide section 218’s applicability here because section 1194, subdivision (a) expressly provides in part: “Notwithstanding any agreement to work for a lesser wage, any employee receiving less than the legal minimum wage or the legal overtime compensation applicable to the employee is entitled to recover in a civil action the unpaid balance.”
D.
The Legislature Has Plenary Authority over Public School Districts.
NOCROP argues that even assuming the IWC was legislatively authorized to impose the minimum wage law as to certain public employees, any such application of the wage orders to public employees would “unlawfully infringe on the plenary powers of cities, counties, school districts, and other local entities to determine the compensation of their own employees.” The California Supreme Court has repeatedly held, however, that the Legislature has plenary authority over public school districts, not vice versa.
In Butt v. State v. California (1992) 4 Cal.4th 668, 680‑681, the California Supreme Court stated: “California courts have adhered to the following principles: Public education is an obligation which the State assumed by the adoption of the Constitution. [Citations.] The system of public schools, although administered through local districts created by the Legislature, is ‘one system . . . applicable to all the common schools . . . .’ [Citation.] ‘. . . In view of the importance of education to society and to the individual child, the opportunity to receive the schooling furnished by the state must be made available to all on an equal basis. . . .’ [Citation.] ‘[M]anagement and control of the public schools [is] a matter of state[, not local,] care and supervision. . . .’ [Citations.] The Legislature’s ‘plenary’ power over public education is subject only to constitutional restrictions. [Citations.] Local districts are the State’s agents for local operation of the common school system [citations], and the State’s ultimate responsibility for public education cannot be delegated to any other entity [citations]. [¶] It is true that the Legislature has assigned much of the governance of the public schools to the local districts [citations], which operate under officials who are locally elected and appointed [citations]. . . . [¶] Yet the existence of this local-district system has not prevented recognition that the State itself has broad responsibility to ensure basic educational equality under the California Constitution.” (Second italics added.)
Significantly, article IX, section 14 of the California Constitution provides: “The Legislature shall have power, by general law, to provide for the incorporation and organization of school districts, high school districts, and community college districts, of every kind and class, and may classify such districts. [¶] The Legislature may authorize the governing boards of all school districts to initiate and carry on any programs, activities, or to otherwise act in any manner which is not in conflict with the laws and purposes for which school districts are established.”
In California Teachers Assn. v. Hayes (1992) 5 Cal.App.4th 1513, 1524‑1525, the court stated: “[A] school district is not a distinct and independent body politic and is not free and independent of legislative control. [Citation.] [¶] The Legislature’s power over the public school system has been variously described as exclusive, plenary, absolute, entire, and comprehensive, subject only to constitutional constraints. [Citations.] Indeed, it is said that the Legislature cannot delegate ultimate responsibility over education to other public or private entities. [Citations.] Consequently, regulation of the education system by the Legislature will be held to be controlling over any inconsistent local attempts at regulation or administration of the schools. [Citations.] And no one may obtain rights vested against state control by virtue of local provisions, ordinances or regulations. [Citation.] [¶] . . . ‘School moneys belong to the state, and the apportionment of funds to a school district does not give that district a proprietary right therein.’ [Citations.]”
In Wells v. One2One Learning Foundation, supra, 39 Cal.4th at page 1195, citing Butt v. State of California, the California Supreme Court reiterated, “[t]he Legislature has chosen to implement this ‘fundamental’ guarantee through local school districts with a considerable degree of local autonomy, but it is well settled that the state retains plenary power over public education. [Citation.] [¶] Hence, there can be no doubt that public education is among the state’s most basic sovereign powers.”
Article IX, section 6 of the California Constitution places a limitation on the Legislature’s authority over public school districts as it prohibits a full‑time teacher employed by a school district from being paid an annual salary less than $2,400 per year.[2] We have found no constitutional authority limiting the Legislature’s ability to authorize the IWC to apply the minimum wage law provision contained in Wage Order No. 4‑2001 to public school districts such as those which formed NOCROP.[3]
NOCROP argues the application of the minimum wage law provision contained in Wage Order No. 4‑2001 is nevertheless unconstitutional as it would “violate[] the home rule doctrine because it infringes on the powers of local cities, counties, and special districts to determine the compensation of their own workers.” NOCROP cites several cases in support of its argument, including County of Riverside v. Superior Court (2003) 30 Cal.4th 278, 282, 285 (as article XI, section 1, subdivision (b) of the California Constitution provides that “the county, not the state, not someone else, shall provide for the compensation of its employees,” legislation requiring counties and local agencies to submit to binding arbitration of financial issue arising during negotiation with unions representing firefighters or law enforcement officers is unconstitutional);[4] Dimon v. County of Los Angeles (2008) 166 Cal.App.4th 1276, 1279, 1281 (charter county has exclusive authority to provide for compensation of deputy probation officers as “the determination of wages to be paid to employees of charter counties ‘is a matter of local rather than statewide concern’”; and Curcini v. County of Alameda (2008) 164 Cal.App.4th 629, 643 (Labor Code sections relating to overtime pay “address matters of ‘compensation’ within the county’s exclusive constitutional purview pursuant to article XI, sections 1, subdivision (b), and 4” of the California Constitution).
NOCROP’s authorities are inapplicable because Sheppard is not employed by a city or county, but, as discussed ante, by a regional occupational program formed by multiple public school districts, over which the Legislature has plenary authority.
In light of our conclusion Wage Order No. 4‑2001 effectively imposed the minimum wage law on NOCROP, based on the allegations of the first amended complaint, the trial court erred by granting judgment on the pleadings as to Sheppard’s claim for NOCROP’s violation of the minimum wage law.
III.
The Trial Court Erred by Sustaining NOCROP’s Demurrer to the Breach of Contract Claim.
Similar to the violation of the minimum wage law claim, Sheppard’s breach of contract claim sought compensation for the 20 minutes of “unpaid” preparation time NOCROP required for each hour Sheppard taught. The complaint sought to reform the contract by omitting the express term “unpaid” in connection with the 20 minutes of required preparation time as invalid, and then deeming the contract breached. Hence, Sheppard alleged NOCROP breached its alleged contract with Sheppard by requiring he spend 20 minutes preparing without compensation for every hour of instruction. (The complaint did not state the alleged contract contained a severability provision.)
We do not decide whether the complaint alleged facts sufficient to constitute a breach of contract cause of action within the meaning of Code of Civil Procedure section 430.10, subdivision (e), because that issue is not before us. NOCROP did not demur on this ground but instead on the very narrow ground that the claim “is barred because public employees hold their positions by statute and are prohibited from maintaining a cause of action for breach of contract or breach of the implied covenant of good faith and fair dealing.” We therefore consider whether all breach of contract claims by public employees against their employers are prohibited as a matter of law.
In White v. Davis (2003) 30 Cal.4th 528, 564, the California Supreme Court reiterated the well‑established precedent “that the terms and conditions of public employment, unlike those of private employment, generally are established by statute or other comparable enactment . . . rather than by contract.” In Miller v. State of California (1977) 18 Cal.3d 808, 813 (Miller), the Supreme Court explained, “insofar as the duration of such employment is concerned, no employee has a vested contractual right to continue in employment beyond the time or contrary to the terms and conditions fixed by law.” The Miller court held: “In view of these long and well settled principles, we conclude that the power of the Legislature to reduce the tenure of plaintiff’s civil service position and thereby to shorten his state service, by changing the mandatory retirement age was not and could not be limited by any contractual obligation.” (Id. at p. 814; see, e.g., Hill v. City of Long Beach (1995) 33 Cal.App.4th 1684, 1690 [appellate court applied Miller and held “as a matter of law, [the plaintiff] was not entitled to contract remedies against the City for his removal from the position of managing director”].)
But in Miller, supra, 18 Cal.3d at page 814, the Supreme Court explained that it has “distinguished decisions containing language, ‘to the general effect that public employment is not held by contract’ because of the fact that ‘[t]hese cases involve the right to remain in an office or employment, or to the continuation of civil service status.’ [Citation.] Pension rights, unlike tenure of civil service employment, are deferred compensation earned immediately upon the performance of services for a public employer ‘[and] cannot be destroyed . . . without impairing a contractual obligation. Thus the courts of this state have refused to hold, in the absence of special provision, that public employment establishes tenure rights, but have uniformly held that pension laws . . . establish contractual rights.’” Citing Kern v. City of Long Beach (1947) 29 Cal.2d 848, 853, the Miller court further stated: “Although the tenure of a public employee is not ordinarily based on contract, it is well established that ‘public employment gives rise to certain obligations which are protected by the contract clause of the Constitution,^[[5]] including the right to the payment of salary which has been earned.’ [Citation.] Accordingly, this court has repeatedly held that ‘[s]ince a pension right is “an integral portion of contemplated compensation” [citation] it cannot be destroyed, once it has vested, without impairing a contractual obligation.’” (Miller, supra, at p. 815.)
In White v. Davis, supra, 30 Cal.4th at page 566, the Supreme Court reiterated this precedent, stating: “[P]ast California cases clearly establish that although the conditions of public employment generally are established by statute rather than by the terms of an ordinary contract, once a public employee has accepted employment and performed work for a public employer, the employee obtains certain rights arising from the legislative provisions that establish the terms of the employment relationship—rights that are protected by the contract clause of the state Constitution from elimination or repudiation by the state. As noted, a number of cases have stated broadly that among the rights protected by the contract clause is ‘the right to the payment of salary which has been earned.’”
Here, the breach of contract claim was solely focused on recovering earned but unpaid wages.[6] Pursuant to Supreme Court authority, discussed ante, Sheppard has a contractual right to such wages, which is protected by the contract clause of the state Constitution. Thus, Sheppard’s breach of contract claim is not simply defeated by his status as a public employee, as argued by NOCROP in its demurrer, and NOCROP’s demurrer should have been overruled on this point. We do not comment on whether Sheppard’s claim is otherwise viable or provable.[7]
IV.
The Trial Court Did Not Err by Sustaining NOCROP’s Demurrer to the Quantum Meruit Claim.
The trial court sustained NOCROP’s demurrer to Sheppard’s quantum meruit claim which alleged (1) Sheppard “provided valuable services to [NOCROP] in the form of time spent preparing for each hour of classroom/lab instruction, but received no compensation for rendering those services”; (2) “these services were required as part of [Sheppard]’s duties as a part‑time Instructor”; and (3) he “is entitled to payment from [NOCROP] for the reasonable value of those services.”
NOCROP demurred to the quantum meruit claim on the ground that “as a matter of law, common law claims, including quantum meruit, do not lie against public entities, including [NOCROP].” (Underscoring omitted.) The trial court sustained NOCROP’s demurrer to that claim, stating: “‘[G]enerally a private party cannot sue a public entity on an implied‑in‑law or quasi‑contract theory, because such a theory is based on quantum meruit or restitution considerations which are outweighed by the need to protect and limit a public entity’s contractual obligations.[’] (Janis v. California State Lottery Com. (1998) 68 Cal.App.4th 824, 830; and Katsura v. City of San Buenaventura (2007) 155 Cal.App.4th 104, 109‑110.) [Sheppard]’s claim against the school district for unpaid wages is limited to the cause of action for breach of an express contract for wages.” (Italics added.)
The trial court properly sustained the demurrer to the quantum meruit claim because such a claim cannot be asserted against a public entity. Government Code section 815 states: “Except as otherwise provided by statute: [¶] (a) A public entity is not liable for an injury, whether such injury arises out of an act or omission of the public entity or a public employee or any other person.” The Legislative Committee Comment to section 815 states: “This section abolishes all common law or judicially declared forms of liability for public entities, except for such liability as may be required by the state or federal constitution . . . .” (Legis. Com. com., 32 West’s Ann. Gov. Code (1995) foll. § 815, p. 167, italics added.) In Miklosy v. Regents of University of California (2008) 44 Cal.4th 876, 900, the Supreme Court held the public employees’ claim against their employer for wrongful termination in violation of public policy was barred by Government Code section 815. (See also Janis v. California State Lottery Com. (1998) 68 Cal.App.4th 824, 830.)
In addition, “[a] quantum meruit or quasi-contractual recovery rests upon the equitable theory that a contract to pay for services rendered is implied by law for reasons of justice. [Citation.] However, it is well settled that there is no equitable basis for an implied-in-law promise to pay reasonable value when the parties have an actual agreement covering compensation.” (Hedging Concepts, Inc. v. First Alliance Mortgage Co. (1996) 41 Cal.App.4th 1410, 1419.) As discussed ante, if Sheppard has any right to alleged earned but unpaid wages, it is a contractual right. His quantum meruit claim therefore fails on this ground as well. We find no error.

DISPOSITION
The judgment is reversed as to the order granting judgment on the pleadings pertaining to the claim for violation of the minimum wage law and the order sustaining the demurrer as to the claim for breach of contract. The judgment is affirmed pertaining to the order sustaining the demurrer as to the claim for quantum meruit. Because each party prevailed in part, the parties shall bear their own costs on appeal.



FYBEL, J.

WE CONCUR:



ARONSON, ACTING P. J.



IKOLA, J.



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