Aguiar v. Superior Court

Opinion

In 1997 the City of Los Angeles adopted a living wage ordinance (LWO) prescribing a minimum level of compensation for employees of private firms who work on service contracts benefiting the city. (L.A. Admin. Code, § 10.37 et seq.) The ordinance provides an employee is eligible for LWO wages and benefits if he or she “expends any of his or her time” on a city service contract. (L.A. Admin. Code, § 10.37.1, subd. (f).) Former regulation No. 5 (Regulation 5), promulgated by the city agency entrusted with implementing the LWO, provided, prior to its rescission in 2006, if an employee of a private contractor works at least 20 hours during the month on a city service contract, he or she must be paid the appropriate wages mandated by the LWO for each hour worked on the subject agreement. If, however, the employee works less than 20 hours per month on a city service contract, he or she is not eligible for any LWO wages. Do Regulation 5’s 20-hour rule and hours-worked component limiting LWO wages to the time actually spent on a city service contract conflict with the LWO?

The plain language of the LWO, coupled with its legislative history, reflect an unmistakable intent to afford a living wage to employees of city service contractors who spend any time working on city service contracts, no matter how much or how little that participation may be. By limiting LWO eligibility to those who work 20 hours a month or more on city contracts and the amount of LWO wages to the hours actually spent on the city contract, Regulation 5 directly conflicts with the LWO’s articulated remedial purpose of raising wages for low wage service workers and ameliorating the burden placed on city social services caused by payment of inadequate compensation. Because the trial court erred in concluding Regulation 5 was a valid and enforceable clarification of the LWO, we grant the petition for writ of mandate filed in this class action lawsuit by Hermelinda Aguiar, Alicia Maria Aldrete, Aurora Banuelos, Maria Alicia Gonzalez and Josefina Contreras on behalf of themselves and all others similarly situated (collectively plaintiffs) and direct respondent Los Angeles Superior Court to vacate its order upholding Regulation 5 and to enter a new and different order invalidating Regulation 5 on the ground it conflicts with the LWO.

FACTUAL AND PROCEDURAL BACKGROUND^[1]

1. Cintas Corporation’s Contract with the City

Cintas Corporation No. 2 and Cintas Corporation No. 3 (collectively Cintas) lease and launder garments and other goods for their customers. In

1999 and again in 2003 the city awarded Cintas a contract to lease and launder flame-retardant uniforms and other items for use by employees of the Los Angeles Department of Water and Power (DWP). Under each contract Cintas was required to pick up soiled uniforms and materials, such as dustrags, towels and blankets, used by DWP employees from numerous DWP locations, launder the items, make any necessary repairs and return them to their respective DWP site. Items generally were picked up from DWP sites each business day and returned clean within a week of receipt. Cintas used its Whittier, Pico Rivera and Ontario facilities at various times to process the DWP items. Each contract required Cintas to comply with the LWO for all covered employees, including the salary, vacation and sick time and notification provisions. For each contract Cintas signed a declaration of compliance, certifying it would comply with the LWO. The city terminated its contract with Cintas for cause on January 28, 2004.^[2]

2. The Class Action Lawsuit by Cintas ’s Employees

In 2004 a group of Cintas employees sued Cintas alleging it had failed to properly compensate them under the LWO and the Labor Code. The complaint was amended in March 2004 to name the current plaintiffs and include allegations that plaintiffs represented not only themselves individually, but also “a class of [Cintas’s] current and former employees [of its Whittier, Pico Rivera and Ontario facilities] who have worked at least 20 hours per month on [Cintas’s] contracts to provide rental, uniform and laundry services to the DWP.” On January 24, 2005 plaintiffs filed a second amended complaint in which they reiterated most of their class action allegations, but eliminated the allegation restricting the proposed class to workers who had spent at least 20 hours per month performing services on the DWP contracts. In conjunction with the second amended complaint, plaintiffs also filed a motion to certify the proposed class, consisting of more than 300 production and stockroom workers at Cintas’s Whittier, Pico Rivera and Ontario facilities during the period from May 1, 2000 (the effective date of Cintas’s original contract with the DWP) to January 29, 2004 (the date the city terminated its contract with Cintas).

Cintas opposed the motion for class certification, arguing the named plaintiffs were not adequate class representatives and common issues of law and fact did not predominate over the individual determinations that would be required to determine who was a member of the putative class. Specifically, to demonstrate applicability of the LWO, Cintas maintained each named plaintiff and putative class member would be required to demonstrate he or she had worked at least 20 hours per month on the DWP contracts.

The trial court agreed with Cintas and denied the motion, finding the proposed class was not ascertainable, the putative class members lacked a well-defined community of interest and class adjudication was not the superior means of resolving the litigation because plaintiffs’ evidence did not demonstrate substantial benefits would accrue to either the litigants or the court if the lawsuit were maintained as a class action.

3. The Appeal from the Denial of Class Certification

Plaintiffs appealed, contending the trial court had implicitly assumed the validity of Regulation 5’s 20-hour rule and then used it to determine class treatment was not the appropriate means to resolve the litigation. We reversed the order denying class certification in Aguiar v. Cintas Corp. No. 2, supra, 144 Cal.App.4th 121 (Aguiar I), holding any perceived barriers to class certification identified by Cintas could easily be resolved by dividing the putative class into two subclasses; those employees who worked at least 20 hours per month on the DWP contracts and those who did not. Accordingly, we did not reach the validity of Regulation 5’s 20-hour rule. (See id. at p. 135 [“the validity of the 20-hour rule need not be resolved at this stage of the litigation and is not a bar to class certification because the putative class can be divided into subclasses of those employees who worked at least 20 hours per month on the DWP contracts and those who did not”].)

4. Repeal of Regulation 5

In August 2006, shortly before our decision in Aguiar I, supra, 144 Cal.App.4th 121 , the Los Angeles City Council revoked the 20-hour rule, finding it inconsistent with its earlier intent to have the LWO apply to all employees who had worked on any city contract. Regulation 5 was recinded in its entirety.^[3] At the same time language in regulation No. 4 that cross-referenced both the 20-hour rule and the hours-worked limitation in Regulation 5 was deleted from the regulation.

5. The Third Amended Complaint and Pretrial Motions

Following our decision in Aguiar I, supra, 144 Cal.App.4th 121 , the trial court certified two subclasses consisting of Cintas employees who had worked at least 20 hours a month on DWP contracts and those who did not. Class notice was sent on October 23, 2007. On August 10, 2007, pursuant to a stipulation of all parties, plaintiffs filed the third amended complaint, which included an additional cause of action seeking a declaratory judgment concerning the validity of Regulation 5.

On November 9, 2007 plaintiffs moved for summary judgment or, in the alternative, summary adjudication, seeking, among other things, a judicial declaration that Regulation 5 was invalid. Cintas opposed the motion and filed its own motion for summary judgment and/or summary adjudication. The court heard and denied both motions in January 2008. With respect to the declaratory relief claim, the court found there were “factual issues that must be determined” before the validity of Regulation 5 could be resolved.

In February 2008 plaintiffs moved in limine to exclude Cintas from submitting any evidence or argument that Regulation 5 was enforceable or applicable. Cintas filed a cross-motion in limine to exclude plaintiffs from submitting any evidence or argument that the regulation was not enforceable. Both sides acknowledged the validity of the regulation was exclusively a legal issue for the court.

At a pretrial status conference the court agreed certain legal issues disputed by the parties could be resolved prior to trial, but suggested in limine motions were not the proper vehicle to present those issues. The parties then entered into a stipulation identifying the questions to be decided by the court on a jointly submitted record. Pursuant to the parties’ stipulation, the trial court vacated the February 25, 2008 trial date and scheduled a hearing to decide the legal issues identified in the stipulation, including the threshold issue of Regulation 5’s validity.^[4]

To achieve the goals outlined in its legislative findings, the LWO provides that all nonexempt employers who are recipients of a service contract^[5] with the city must pay covered employees a specified minimum hourly rate: The initial 1997 rates were $7.25 per hour with health benefits (defined as the payment of at least $1.25 per hour toward the provision of health care benefits for employees and their dependents) or otherwise $8.50 per hour; and the ordinance provides for annual rate increases. (L.A. Admin. Code, §§ 10.37.2, subd. (a), 10.37.3.) Employers must also provide employees with 12 compensated days off per year for sick leave, vacation or personal necessity at the employee’s request and, if that time is exhausted, an additional 10 days per year of uncompensated time for sick leave for the illness of the employee or a member of his or her immediate family. (Id., § 10.37.2, subd. (b).) In addition, employers are required to notify employees who earn less than $12 per hour of their potential right to the federal earned income credit and make available related forms. (Id., § 10.37.4.)

2. Regulations Implementing the Living Wage Ordinance

At its inception the LWO required the Los Angeles City Council by resolution to designate a department or office (the “designated administrative agency”) to promulgate rules for its implementation and to otherwise coordinate administration of its requirements. (L.A. Admin. Code, § 10.37.7.) As the recipient of that designation, the Department of Public Works, Bureau of Contract Administration, Office of Contract Compliance promulgated “Rules and Regulations Implementing the Living Wage Ordinance.” Regulation 5, entitled “the 20-hour rule,” was one of those regulations.

By its terms, former Regulation 5 limits the situations in which an employee is entitled to the benefits of the LWO: “For purposes of the LWO and unless otherwise exempt, an employee of a service contractor . . . will be covered by the LWO if he or she works at least 20 hours during the month (a) on a service contract. ... [jt] If an employee has worked at least 20 hours on the subject agreement during the month, the employee must be paid the appropriate LWO wage rate for each hour worked on the subject agreement during that month. The employee must also accrue compensated and uncompensated time off during that month, [f] If the employee does not work at

Other language in the LWO supports the conclusion the city council did not intend to limit LWO wages to those who met specific time mínimums. (See DuBois v. Workers’ Comp. Appeals Bd. (1993) 5 Cal.4th 382 , 388 [ 20 Cal.Rptr.2d 523 , 853 P.2d 978 ] [“ ‘various parts of a statutory enactment must be harmonized by considering the particular clause or section in the context of the statutory framework as a whole’ ”].) Specifically, in the same paragraph authorizing payment of LWO wages to employees who spend “any time” on city service contracts, the city expressly limited LWO eligibility for employees of “City financial assistance recipient[s]” — private companies receiving economic development or job growth funding from the city— authorizing LWO wages for those employees only if they “expend[] at least half [their] time on the premises of the City financial assistance recipient directly involved with the activities funded by the City.” (L.A. Admin. Code, § 10.37.1, subd. (f)(4).)^[6] Plainly, the city knew how to, and did, limit LWO coverage based on minimum time requirements, but elected not to impose any such restriction on employees of private companies who were awarded city service contracts. (See, e.g., Simmons v. Ghaderi (2008) 44 Cal.4th 570 , 583 [ 80 Cal.Rptr.3d 83 , 187 P.3d 934 ] [inclusion of a good cause exception in the work product privilege statutes shows “the Legislature clearly knew how to enact a statutory good cause exception,” but it “chose not to do so” in the mediation confidentiality statutes]; see also Rojas v. Superior Court (2004) 33 Cal.4th 407 , 414 [ 15 Cal.Rptr.3d 643 , 93 P.3d 260 ].)

Cintas insists Regulation 5’s 20-hour rule does not conflict with the LWO, but merely serves as a “gap-filler” to “fill in the details” of the authorizing legislation. (See Yamaha, supra, 19 Cal.4th at p. 19 (conc. opn. of Mosk, J.) [statutory scheme may “explicitly or implicitly delegate this interpretive or ‘gap-filling’ authority to an administrative agency”]; Ford Dealers Assn. v. Department of Motor Vehicles (1982) 32 Cal.3d 347 , 362 [ 185 Cal.Rptr. 453 , 650 P.2d 328 ] [“An administrative agency is not limited to the exact provisions of a statute in adopting regulations to enforce its mandate. ‘[T]he absence of any specific [statutory] provisions regarding the regulation of [an issue] does not mean that such a regulation exceeds statutory authority . . . .’ [Citations.] The DMV is authorized to ‘ “fill up the details” ’ of the statutory scheme.”].) Yet, Cintas fails to identify where in the ordinance the purported gap exists. At best, Cintas observes that, absent a specific hour minimum in the LWO itself, there can be no conflict between the LWO and the minimum

time requirements in Regulation 5. Not only is this argument circular, but also it wholly disregards the term “any time” in the statute itself that denotes an express legislative intent not to impose a minimum time requirement.

Our conclusion the LWO was intended to apply to any employee of a private company who works on city service contracts without regard to minimum time requirements is reinforced by the legislative history of the LWO. (See California School Employees Assn. v. Governing Board (1994) 8 Cal.4th 333 , 340 [ 33 Cal.Rptr.2d 109 , 878 P.2d 1321 ] [“Ordinarily, if the statutory language is clear and unambiguous, there is no need for judicial construction. [Citation.] Nonetheless, a court may determine whether the literal meaning of a statute comports with its purpose. [Citation.] We need not follow the plain meaning of a statute when to do so would ‘frustrate[] the manifest purposes of the legislation as a whole or [lead] to absurd results.’ ”]; see also Day v. City of Fontana, supra, 25 Cal.4th at p. 274 [“legislative history materials reinforce our conclusion that the statute applies to plaintiff’s action”].) Prior to its enactment, the proposed draft of the LWO included a 50 percent minimum time eligibility requirement that would have limited LWO eligibility to those employees of city service contractors who expended “at least half’ their time on a city service contract. At the request of the city council committee entrusted with creating the ordinance, the city attorney removed that limitation from the proposed legislation (retaining it only for employees of city financial assistance recipients) and replaced it with language authorizing coverage if the employee spent “any time” on the designated contract.^[7] The codified version of the LWO approved by the city council

preserves that intended distinction between employees of city service contractors and city financial assistance recipients, reinforcing the city council’s intent not to impose time limitations in connection with LWO eligibility for employees of service contractors. (See, e.g., Varian Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180 , 194-195 [ 25 Cal.Rptr.3d 298 , 106 P.3d 958 ] [citing Legislature’s deletion of conditional stay provision in anti-SLAPP (strategic lawsuit against public participation) statutes as supporting interpretation of statutes to mandate automatic stay on appeal]; In re Mehdizadeh (2003) 105 Cal.App.4th 995 , 1004, fn. 23 [ 130 Cal.Rptr.2d 98 ] [“ ‘[t]he rejection of a specific provision contained in an act as originally introduced is “most persuasive” that the act should not be interpreted to include what was left out’ ”]; Wilson v. City of Laguna Beach (1992) 6 Cal.App.4th 543 , 555 [ 7 Cal.Rptr.2d 848 ]; but cf. Graham v. DaimlerChrysler Corp. (2004) 34 Cal.4th 553 , 573, fn. 5 [ 21 Cal.Rptr.3d 331 , 101 P.3d 140 ] [“ ‘[u]npassed bills, as evidence!] of legislative intent, have little value’ ”].)^[8]

The city council’s subsequent repeal of the 20-hour rule to, in its words, “reaffirm [the] Council’s intent to have a minimum living wage paid to all employees who work on City service contracts” is also powerful evidence of the city’s intent in adopting the LWO. (See Eu v. Chacon (1976) 16 Cal.3d 465 , 470 [ 128 Cal.Rptr. 1 , 546 P.2d 289 ] [“[although a legislative expression of the intent of an earlier act is not binding upon the courts in their construction of the prior act,” subsequent expressions of intent “may properly be considered together with other factors in arriving at the true legislative intent existing when the prior act was passed”]; accord, People v. Cruz (1996) 13 Cal.4th 764 , 781 [ 55 Cal.Rptr.2d 117 , 919 P.2d 731 ]; cf. Peralta Community College Dist. v. Fair Employment & Housing Com. (1990) 52 Cal.3d 40 , 52 [ 276 Cal.Rptr. 114 , 801 P.2d 357 ] [“[t]he declaration of a later Legislature is of little weight in determining the relevant intent of the Legislature that enacted the law . . . when, as here, such declared intent is without objective support in either the language or history of the legislation and (until recently) is contrary as well to the practice of the affected agency”].)

Faced with the plain language and legislative history of the LWO, Cintas nonetheless contends interpreting the LWO to authorize a living wage to employees for “any time” spent on a city service contract would lead to absurd results. According to Cintas, “it would require a city contractor to pay employees higher hourly rates” even if they only “touched a DWP garment

was invalidated. To the contrary, although the LWO itself contains a severance clause,^[9] there is no similar provision in any of the regulations implementing the LWO. (See, e.g., Schenley Affiliated Brands Corp. v. Kirby (1971) 21 Cal.App.3d 177 , 199 [ 98 Cal.Rptr. 609 ] [“a declaration of severability, although not conclusive, is persuasive evidence of the enacting body’s intent”]; cf. Legislature v. Eu (1991) 54 Cal.3d 492 , 535 [ 286 Cal.Rptr. 283 , 816 P.2d 1309 ] [severance of particular provisions is permissible despite absence of a formal severance clause if, among other things, the Legislature or voters intended the clause to stand independently had they foreseen that part of the legislation would be declared invalid].) In fact, the two portions of the regulation appear inextricably linked, with the 20-hour rule serving as the hours-worked component’s necessary predicate. That is, if the employee works 20 hours or more a month on a city service contract, then the employee is entitled to LWO wages for each hour worked on the city contract. That conclusion is reinforced by the parallel language that had existed in regulation No. 4. The rescission of Regulation 5 in its entirety — without preserving the hours-worked component of the regulation — and the contemporaneous deletion of language in regulation No. 4 containing the hours-worked limitation further suggest the hours-worked component is inseparable from the 20-hour rule.

In any event, even if the hours worked component of Regulation 5 could be severed from the regulation’s 20-hour rule, we would still find the former provision in conflict with the LWO itself. The LWO provides, “Employers shall pay employees a wage of no less than the hourly rates set [forth in] this article.” (L.A. Admin. Code, § 10.37.2, subd. (a).) This language imposes a minimum hourly wage for the hours worked by the employee, not one for each hour worked by the employee on the city contract. The same is true for other compensation benefits authorized by the LWO. For example, the LWO authorizes 12 compensated days off per year as part of the LWO benefits for any covered employee. It does not require that an employee spend full time working on a city service contract to earn the compensated day off and does not reduce the compensated days off to a percentage of the time spent on the city contract. It is the employee’s status as a covered employee that is determinative.

Cintas asserts, if the term “any of his or her time” in the section defining “employee” means anything, it must limit LWO payments to the amount of time spent on the city’s contract. Yet, as we have explained, the term “any of his or her time” defines when an employee is LWO eligible, not the manner

in which his or her wages are to be calculated. The amount of wages, authorized in a separate section of the LWO entitled “Payment of Minimum Compensation to Employees,” contains no link between the amount of time actually worked on city service contracts and the LWO wages earned. (See L.A. Admin. Code, § 10.37.2.) To be sure, the city could have limited LWO wages to the hours an employee of a private contractor actually worked on city contracts or the city could have chosen to afford LWO eligibility to all employees of private contractors who receive city contracts without regard to whether the employee ever actually worked on the city contract (see, e.g., Rubalcava v. Martinez (2007) 158 Cal.App.4th 563 , 568 [ 70 Cal.Rptr.3d 225 ] [city zoning ordinance setting minimum wage requirements for all city hotel workers in exchange for city financing street improvements and job training]). It did neither. Instead, the LWO provides for a living wage based on an employee’s status — whether he or she worked on the city contract — without limiting those wages to the hours actually worked. (See Amaral, supra, 163 Cal.App.4th at p. 1186 [had city intended to include nexus between the amount of time worked on a city contract and the wages earned, it could have easily included it in the ordinance itself].)

Cintas made a similar argument in Amaral, supra, 163 Cal.App.4th 1157 , asserting a living wage ordinance adopted by the City of Hayward dictated a minimum level of pay only for those hours the eligible employee actually worked on a city contract.^[10] The First District rejected Cintas’s construction of the Hayward living wage ordinance (Hayward LWO) explaining, “[N]o provision of the [Hayward] LWO limits the contractor’s obligation ... by mandating a living wage only for the time an employee spends performing tasks related to the service contract with Hayward. If the City [of Hayward] had intended to restrict the application of the [Hayward] LWO in this manner, it could have easily inserted the phrase ‘for hours worked on the contract’ in the subdivision describing the ordinance’s ‘Living Wage Requirements’ [citation]. [Citation.] It did not.” (Amaral, at p. 1186.) The Court of Appeal also observed the Hayward LWO also included compensated days off, but did not link those benefits to the time spent on a Hayward city contract: “If the City had intended to impose the limitation Cintas now urges, it could have stated that employees not fully engaged in work on or under a service contract would also accrue compensated days off at a proportional rate. It did not.” (Ibid.) Although the Hayward LWO and the instant LWO are not