Heritage Residential Care, Inc. v. Division of Labor Standards Enforcement
120 Cal. Rptr. 3d 363
Cal. Ct. App.2011Background
- Heritage Residential Care, Inc. allegedly failed to provide itemized wage statements to 16 workers who lacked Social Security numbers, treating them as independent contractors and issuing 1099s instead of wage statements.
- DLSE issued a citation for 226(a) violations with a $72,000 penalty (288 violations at $250 each).
- Subsequent payroll records showed 504 violations, but the citation was not amended.
- Administrative hearing in January 2009; DLSE testimony and appellant’s defense argued misclassification was based on a good faith belief about the law.
- Hearing officer rejected inadvertence and declined to reduce or eliminate the penalty; petition for mandamus and related proceedings followed; judgment in favor of DLSE.
- Appellant challenges the statute’s meaning of “inadvertent” and argues for a mitigated penalty based on inadvertence or clerical error.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Meaning of inadvertent under §226.3 | Heritage argues inadvertence requires a mental state like ignorance of the law. | DLSE contends inadvertent means unintentional, not deliberate; mental state is not required. | Inadvertent means unintentional; no mental-state inquiry required. |
| Application of §226.3 to facts | Noncompliance resulted from a good faith misinterpretation of law. | The noncompliance was intentional or not inadvertent; no discretion to reduce penalty. | Noncompliance not inadvertent; no mitigated penalty rule applies. |
| Judicial review of DLSE’s interpretation | DLSE misapplied the statute by focusing on conduct rather than inadvertence. | DLSE correctly applied the statute; court should defer to DLSE’s interpretation but not bind it. | DLSE’s interpretation of §226.3 proper; court independently confirms ordinary-meaning reading. |
Key Cases Cited
- Amaral v. Cintas Corp. No. 2, 163 Cal.App.4th 1157 (Cal. Ct. App. 2008) (penalties context; discusses willfulness vs inadvertence and related standards)
- Goodhew v. Industrial Accident Comm., 157 Cal.App.2d 252 (Cal. Ct. App. 1958) (inadvertence contrasted with deliberate conduct; clerical error concept)
- Murphy v. Kenneth Cole Productions, Inc., 40 Cal.4th 1094 (Cal. 2007) (statutory construction; plain meaning and employee protections)
- Van Horn v. Watson, 45 Cal.4th 322 (Cal. 2008) (statutory interpretation; de novo review; context matters)
- Pagarigan v. Aetna U.S. Healthcare of California, Inc., 158 Cal.App.4th 38 (Cal. Ct. App. 2007) (mistake of law; inadvertence distinctions in relief contexts)
- Wright v. Issak, 149 Cal.App.4th 1116 (Cal. Ct. App. 2007) (inadvertence vs pattern of conduct in workers’ compensation context)