Department of Corrections & Rehabilitation v. State Personnel Board

and Sphar backpay and benefits under Government Code section 19584,^[1] including merit salary adjustments and physical fitness incentive pay (PFIP), and offset that award with the amount of money they had earned from other employers, not including overtime pay, during the four-year period between their dismissals and their reinstatements. The Board also ruled that Sphar should be compensated at salary range K, which he had not yet qualified for at the time of his dismissal.

CDCR petitioned the superior court for a writ of mandate overturning the Board’s decision to include merit salary adjustments and PFIP, and it claimed that the offset should have included overtime pay. The CDCR also challenged the Board’s decision that Sphar would be compensated at salary range K.^[2] The superior court granted the petition in part by mandating that the offset include overtime pay. It denied the remainder of the petition. Martin and Sphar challenge the superior court’s decision on the overtime issue. CDCR challenges the superior court’s denial of its other challenges. We conclude that section 19584 authorized the inclusion of merit salary adjustments and PFIP in the Board’s award and authorized Sphar to be compensated at salary range K. In addition, we agree with the superior court that section 19584 required the inclusion of overtime pay in the offset. Accordingly, we affirm the judgment.

Martin began working for CDCR in 2000, and Sphar began working for CDCR in 2002. They were dismissed by CDCR in 2004. Sphar and Martin challenged their dismissals. In October 2008, an administrative law judge (ALJ) found that the dismissals had been unjustified and revoked them. The ALJ’s decision provided that a hearing would be set if the parties were “unable to agree as to salary, benefits and interests [sic], if any, due [Martin and Sphar] under the provisions of Government Code section 19584.” In December 2008, the Board adopted the ALJ’s decision. Martin and Sphar returned to work for CDCR in 2009.

In July 2010, an ALJ held hearings on the amount of salary, benefits, and interest due Sphar and Martin. Throughout the period between their dismissals and their reinstatements, the terms of Sphar’s and Martin’s employment were governed by a memorandum of understanding (MOU) between the State of California and the California Correctional Peace Officers Association (CCPOA). The MOU provided for PFIP and annual merit salary adjustments.

Sphar testified that he received annual merit salary adjustments throughout his CDCR service, and the merit salary adjustments were not associated with any evaluation of his job performance. He also received PFIP throughout his service, and the only requirement to receive PFIP was that each year he have his doctor sign a document declaring that he was physically fit. Sphar worked overtime hours for his substitute employers during the period between his dismissal and his reinstatement. One of his substitute employers required him to have a physical every two years and to obtain a certification that he was physically fit for his employment. Martin testified that he usually worked one or two hours a week of overtime when he was employed by CDCR. He received PFIP and annual merit salary adjustments throughout his CDCR service. The only requirement to receive PFIP was that he get a physical each year. During the period between his dismissal and his reinstatement, Martin worked substantial amounts of overtime for his substitute employers.

The ALJ ruled (1) Sphar and Martin were entitled to recover merit salary adjustments and PFIP throughout the period from their dismissals to their reinstatements; (2) the setoff against their recovery should not include overtime worked for their substitute employers; and (3) Sphar’s salary recovery should reflect a pay range “K” as of March 2005, when Sphar would have qualified for it had he not been dismissed. In 2010, the Board adopted the ATI’s decision.

In 2011, CDCR filed a petition for a writ of mandate in the superior court challenging the Board’s decision regarding merit salary adjustments, PFIP, the offset for overtime, and the application of salary range K.^[3] The court found that the merit salary adjustments, PFIP, and range K amounts were “sufficiently predictable” and therefore recoverable. The court found that section 19584 mandated that the offset include overtime. Thus, it granted the petition solely as to the offset for overtime. Sphar and Martin timely filed a notice of appeal, and CDCR filed a cross-appeal.

Our primary task in both the appeal and the cross-appeal is to construe section 19584. “Whenever the board revokes or modifies an adverse action and orders that the employee be returned to his or her position, it shall direct the payment of salary and all interest accrued thereto, and the reinstatement of all benefits that otherwise would have normally accrued. ‘Salary’ shall include salary, as defined in Section 18000, salary adjustments and shift

differential, and other special salary compensations, if sufficiently predictable. Benefits shall include, but shall not be limited to, retirement, medical, dental, and seniority benefits pursuant to memoranda of understanding for that classification of employee to the employee for that period of time as the board finds the adverse action was improperly in effect. ['[[]... [f] From any such salary due there shall be deducted compensation that the employee earned, or might reasonably have earned, during any period commencing more than six months after the initial date of the suspension.”^[4] (§ 19584.)

“ ‘Statutory construction is a question of law which requires the exercise of our independent judgment.’ [Citation.]” (Abernathy Valley, Inc. v. County of Solano (2009) 173 Cal.App.4th 42 , 46 [ 92 Cal.Rptr.3d 459 ].) “We apply well-settled principles of statutory construction. Our task is to discern the Legislature’s intent. The 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.” (Wells v. One2One Learning Foundation (2006) 39 Cal.4th 1164 , 1190 [ 48 Cal.Rptr.3d 108 , 141 P.3d 225 ].) “ ‘If possible, significance should be given to every word, phrase, sentence and part of an act in pursuance of the legislative purpose.’ [Citation.] ... ‘a construction making some words surplusage is to be avoided.’ [Citation.] ‘When used in a statute [words] must be construed in context, keeping in mind the nature and obvious purpose of the statute where they appear.’ [Citations.] Moreover, the 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.” (Moyer v. Workmen’s Comp. Appeals Bd. (1973) 10 Cal.3d 222 , 230 [ 110 Cal.Rptr. 144 , 514 P.2d 1224 ].)

“[W]e give great deference to the agency’s interpretation of statutes affecting issues within its administrative sphere.” (Camarena v. State Personnel Bd. (1997) 54 Cal.App.4th 698 , 701 [ 62 Cal.Rptr.2d 775 ].) However, we “do not necessarily defer to SPB’s interpretations of the governing statutes. [Citation.] The judiciary takes ultimate responsibility for the construction of statutes, although according great weight and respect to the administrative construction such as is appropriate under the circumstances.”

We find nothing in this legislative history to indicate that the Legislature intended to exclude merit salary adjustments from the definition of salary in section 19584. Senate Bill 846 originally explicitly referenced “merit salary adjustments” and later eliminated this explicit reference while retaining the general reference to “salary adjustments ... if sufficiently predictable.” The legislative history provides no clues as to the reason for this change in the bill. “California courts have frequently noted, however, the very limited guidance that can generally be drawn from the fact that the Legislature has not enacted a particular proposed amendment to an existing statutory scheme.” (Marina Point, Ltd. v. Wolfson (1982) 30 Cal.3d 721 , 735, fn. 7 [ 180 Cal.Rptr. 496 , 640 P.2d 115 ].) “Unpassed bills, as evidences of legislative intent, have little value.” (Dyna-Med, Inc. v. Fair Employment & Housing Com. (1987) 43 Cal.3d 1379 , 1396 [ 241 Cal.Rptr. 67 , 743 P.2d 1323 ].) “A former version of a bill which differs significantly from the version which is enacted is of little value on the issue of legislative intent.” (Samantha C. v. State Dept. of Developmental Services (2010) 185 Cal.App.4th 1462 , 1489 [ 112 Cal.Rptr.3d 415 ]; see Conrad v. Medical Bd. of California (1996) 48 Cal.App.4th 1038 , 1050, fn. 6 [ 55 Cal.Rptr.2d 901 ] [rejected provisions treated the same as unpassed bills].)

CDCR posits that the simple fact that a prior version of Senate Bill 846 expressly included “merit salary adjustments” and the final version did not demonstrates that the Legislature wished to exclude “merit salary adjustments” from the statute’s definition of salary. Not so. That is but one of the possible inferences that may be drawn from the legislative history, and it is not the most reasonable one. The enacted version of Senate Bill 846 included “salary adjustments ... if sufficiently predictable” within the statute’s salary definition. On its face, “salary adjustments” includes, rather than excludes, merit salary adjustments. Had the Legislature-actually intended to exclude merit salary adjustments, it could have explicitly done so rather than expressly including “salary adjustments” generally. We find that the legislative history of Senate Bill 846 provides no support for CDCR’s contention that the Legislature intended to exclude merit salary adjustments from the scope of the “salary adjustments” the Legislature explicitly and generally included in section 19584.

CDCR’s reliance on California Code of Regulations, title 2, section 599.687 is misplaced.^[5] This regulation concerns “[p]eriods of absence from State service” and provides that where such periods are the result of “a permanent separation,” those periods “shall not be counted as qualifying service for merit salary adjustments and special in-grade salary adjustments.”

(Regs., § 599.687.) This regulation is plainly inapplicable here. If it applied, portions of section 19584 would be rendered nugatory. While the “absence” of Sphar and Martin from state service was intended by CDCR to be permanent, it was neither permanent nor lawful because it was wrongful, and they were properly reinstated. Section 19584 expressly entitles Sphar and Martin to recover “salary adjustments ... if sufficiently predictable.” If this regulation had the effect that CDCR claims, no person wrongfully dismissed from state service would be able to recover “salary adjustments” even if those salary adjustments were “sufficiently predictable.” A regulation may not render a statute nugatory. (Cooper v. Swoap (1974) 11 Cal.3d 856 , 864 [ 115 Cal.Rptr. 1 , 524 P.2d 97 ].)

CDCR claims that section 19832 and DPA rules prohibited the Board from awarding Sphar and Martin merit salary adjustments for the period between their dismissals and their reinstatements. Section 19832 provides; “(a) After completion of the first year in a position, each employee shall receive a merit salary adjustment equivalent to one of the intermediate steps during each year when he or she meets the standards of efficiency as the department by rule shall prescribe. [][] (b) If the provisions of this section are in conflict with the provisions of a memorandum of understanding reached pursuant to Section 3517.5, the memorandum of understanding shall be controlling without further legislative action, except that if the provisions of a memorandum of understanding require the expenditure of funds, the provisions shall not become effective unless approved by the Legislature in the annual Budget Act.”

CDCR asserts that the Board could not have found that Sphar and Martin met the “standards of efficiency” during this period because they were not working for CDCR and therefore their “efficiency” could not be evaluated. CDCR contends that without a finding that Sphar and Martin met the standards of efficiency, they were ineligible for merit salary adjustments. Sphar and Martin argue that section 19832’s “standards of efficiency” requirement conflicted with the MOU and therefore the MOU was controlling.^[6]

The MOU provided that employees “shall receive annual Merit Salary Adjustments (MSA) in accordance with Government Code Section 19832 and applicable Department of Personnel Administration (DPA) rules.” If that were all it said, the MOU clearly would not conflict with section 19832. However, it also provided; “Employees who are certified as successful job performers shall receive their Merit Salary Adjustment (MSA). Successful job performance shall be based on the latest performance evaluation on file as of the

date of the pay increase. If no performance report is on file, the employee shall be deemed to have been performing successfully and shall receive his/her MSA.”^[7] Thus, under the MOU, it was not necessary for there to be a certification that the employee met “standards of efficiency” during the requisite period. If the latest evaluation showed successful job performance or there was no evaluation on file, the employee was entitled to receive a merit salary adjustment. Here, it was undisputed that the only evaluations on file showed successful job performance, as both Sphar and Martin had always received their annual merit salary adjustments. Consequently, under the MOU, Sphar and Martin were entitled to receive merit salary adjustments.

CDCR claims that allowing Sphar and Martin to recover merit salary adjustments conflicts with DPA rules. DPA rules require a performance evaluation of each employee at least once a year (Regs., § 599.798, subd. (c)) and require a certification that the employee has met “the standards of efficiency required for the position” for the employee to be entitled to a merit salary adjustment (Regs., § 599.683). However, as noted above, the MOU conflicted with these regulations, and section 19832 provided that the MOU controlled. Therefore, compliance with the DPA rules was not required.

CDCR’s reliance on State Bd. of Equalization v. Superior Ct. (1942) 20 Cal.2d 467 [ 127 P.2d 4 ] is misplaced since, as CDCR admits, that case did not involve section 19584. Equally misplaced is CDCR’s reliance on the Board’s precedential decision in In re R.M. State Personnel Board (1994) SPB Precedential Decision No. 94-23. In re R.M. did not involve the current version of section 19584, nor did the MOU in In re R.M. contain the provisions that are dispositive here. Since CDCR concedes that the language in the MOU is “critical,” we can see no reason to discuss In re R.M.

“We apply the substantial evidence test in reviewing a decision of the board. [Citation.] We do not reweigh the evidence; we indulge all presumptions and resolve all conflicts in favor of the board’s decision. Its findings come before us ‘with a strong presumption as to their correctness and regularity.’ [Citation.] We do not substitute our own judgment if the board’s decision ‘ “ ‘is one which could have been made by reasonable people. . . .’ [Citation.]” ’ [Citation.]” (Camarena v. State Personnel Bd., supra, 54 Cal.App.4th at p. 701.)

The evidence before the Board established that Sphar and Martin had always received annual merit salary adjustments even though they had not received regular performance evaluations and that CDCR routinely awarded merit salary adjustments to each employee unless the employee’s supervisor expressly denied the employee a merit salary adjustment. Since Sphar and Martin had always been given annual merit salary adjustments and had never been .denied one, it was “sufficiently predictable” that they would have received annual merit salary adjustments if they had not been wrongfully dismissed.^[8] We reject CDCR’s challenge to the Board’s award of merit salary adjustments to Sphar and Martin.

2. Salary Range

CDCR challenges the Board’s decision that Sphar was entitled to be compensated at salary range K as of March 2005, three months after his dismissal. In order to reach salary range K an employee must complete 24 monthly CDCR form 403’s. Sphar had completed 21 before his dismissal. The trial court rejected CDCR’s challenge. It found that there was evidence that it was “sufficiently predictable” that Sphar would have completed the remaining three monthly CDCR form 403’s in the three months following his dismissal had he not been dismissed, so he was entitled to be at salary range K. CDCR relies on the same arguments that it makes regarding the merit salary adjustments. As we have already rejected those arguments with respect to the merit salary adjustments, we reject them here. Since, but for his improper dismissal, it was sufficiently predictable that Sphar would have been at salary range K as of March 2005, the Board’s decision must be upheld.

3. PFIP

CDCR challenges the inclusion of PFIP on the same grounds that it challenges the inclusion of merit salary adjustments. Sphar and Martin testified that they were doing hard physical labor for their substitute employers between their dismissals and their reinstatements. The Board reasonably could have concluded from this evidence that it was sufficiently predictable that they would have qualified for PFIP if they had not been wrongfully dismissed from their CDCR employment. The trial court upheld the Board’s decision on this point, and we can find no basis for a contrary conclusion.