CALIFORNIA STATE EMPLOYEES’ ASSOCIATION, Plaintiff and Respondent, v. STATE PERSONNEL BOARD et al., Defendants and Appellants; UNIVERSAL SERVICE CONTRACTORS, Defendant and Respondent.
Civ. No. 25503
Third Dist.
Mar. 4, 1986.
178 Cal. App. 3d 372
John K. Van de Kamp, Attorney General, N. Eugene Hill, Assistant Attorney General, and Faith J. Geoghegan, Deputy Attorney General, for Defendants and Appellants.
Gary P. Reynolds and Jeffrey Fine for Plaintiff and Respondent.
Donald D. Harmata for Defendant and Respondent.
SIMS, J.-In this case, we construe subdivision (a)(2) of
Defendants and appellants, California State Personnel Board (Board), Department of General Services (General Services), and Teale Data Center (Teale) appeal from a judgment granting a writ of mandate compelling appellants (a) to refrain from entering into a contract between Teale and respondent Universаl Service Contractors (Universal) providing for security guard services for Teale, or (b) to regard the contract as void if the contract has been executed. We agree with the trial court that the proposed contract violated subdivision (a)(2) of
FACTS
General Services has historically supplied state civil service security guards to protect the state‘s Teale data processing center.
In April 1985, pursuant to a statutory mandate,2 the Board informed respondent California State Employees’ Association (CSEA) that Teale in-
CSEA submitted written objections to the Board. As relevant here, CSEA contended the proposed contract violated subdivision (a)(2) оf
The state‘s security guards were paid $6.94 per hour, exclusive of benefits. Universal‘s guards were paid $5 per hour, exclusive of benefits. It is undisputed that Universal‘s wages were at the industry‘s level. It is further undisputed in this action that the public and private security guards had the same training and qualifications and would perform the same duties at the data center.
The Board rejected CSEA‘s objections and approved the contract. However, the trial court concluded Universal‘s wages significantly undercut the state pay rate and issued the previously described writ.
DISCUSSION
The dispute between appellants and respondent CSEA concerns the proper interpretation of subdivision (a)(2).4
The parties first focus on the word “undercut.” Appellants contend “undercut” requires an intentional pricing down to pay below the state pay
We first note that courts are bound to give effect to statutes according to the usual, ordinary import of their language. (California Teachers Assn. v. San Diego Community College Dist. (1981) 28 Cal.3d 692, 698 [170 Cal.Rptr. 817, 621 P.2d 856].) As pertinent here, Webster defines “undercut” as follows: “to offer to sell at lower prices than or to work for lower wages or serve for lower fees than (a competitor).” (Webster‘s Third New Internat. Dict. (1981) p. 2488.) The ordinary use of “undercut” does not include “intentional pricing down.” The trial court‘s interpretation thus gives the language its usual ordinary meaning.
Moreover, in the absence of an absurd result, we are not free to disregard ordinary rules of grammar and syntax in the interpretation of a statute. (See Watson v. Superior Court (1972) 24 Cal.App.3d 53, 60 [100 Cal.Rptr. 684].) In subdivision (a)(2), the operative noun is “wages” which “do not significantly undercut state pay rates.” Unlike contractors, “wages” have no “intention.” They are simply higher or lower than some other number. Appellants’ construction of the statute is thus at odds with its syntax.
We are also mindful that an interpretation which would render terms of a statute surplusage should be avoided, and every word should be given some significance, leaving no part useless or devoid of meaning. (City and County of San Francisco v. Farrell (1982) 32 Cal.3d 47, 54 [184 Cal.Rptr. 713, 648 P.2d 935].) Appellants expressly argue that, by their interpretation, a contractor paying the prevailing wage cannot “undercut” state pay rates. However, the statute imposes conjunctive conditions of eligibility for approval of a proposal: (1) the contractor‘s wages must be at the industry‘s level, and (2) the wages do not significantly undercut state pay rates.5
In support of their position, appellants cite Curtiss-Wright Corporation v. McLucas (D.N.J. 1973) 364 F.Supp. 750 and Altemose Const. v. Bldg. & Const. Trades Council (E.D.Pa. 1977) 443 F.Supp. 492. However, we fail to discern how these cases help appellants. In Curtiss-Wright, the court, in a footnote, simply cited remarks by a single senator respecting amendments to the federal Service Contract Act (
Similarly, in Altemose Const. v. Bldg. & Const. Trades Council, supra, the court held that defendants’ counterclaims should survive summary judgment under the Sherman Act where defendants claimed plaintiffs had conspired to depress wages. (443 F.Supp. at p. 499.) We cannot see how this case aids appellants. Indeed, both Curtiss-Wright and Altemose suggest the trial court properly construed the California statute at issue. In both cases, the intentional depression of wages was treated as unlawful and opprobrious. The statute at hand proscribes proposals where wages “significantly undercut” state pay rates. It would be odd for the Legislature to proscribe opprobrious and possibly unlawful conduct only in the event its effects were “significant.”
Appellants also assert the trial court failed to give proper deference to a contemporaneous administrative construction of subdivision (a)(2). When an administrative agency is charged with enforcing a particular stat-
The rule is applied with most vigor to administrative regulations promulgated by an administrative body authorized to promote a statute‘s purposes. (See, e.g., Norman v. Unemployment Ins. Appeals Bd. (1983) 34 Cal.3d 1, 8 [192 Cal.Rptr. 134, 663 P.2d 904]; In re Kelly (1983) 33 Cal.3d 267, 277 [188 Cal.Rptr. 447, 655 P.2d 1282].) Conversely, where an “administrative interpretation” of a statute is found in an informal memorandum prepared fоr use in litigation, rather than in a regulation, the usual deference to administrative interpretation is inappropriate. (Jones v. Tracy School Dist. (1980) 27 Cal.3d 99, 107 [165 Cal. Rptr. 100, 611 P.2d 441].) In the instant case, the “administrative interpretation” cited by appellants is found in a declaration submitted in the trial court by the section manager in the Employment Services Division of the State Personnel Board who had responsibility for providing staff analysis for the review of the contract at issue here. The declarant asserts, “The contractor is not intentionally pricing down to undercut state pay rates.” However, the declarant does not purport to speak for the Board itself. So far as the declaration indicates, the interpretation of the statute is that of the declarant, submitted in the instant litigation. As such, the usual deference given to a formal agency interpretation of a statute is inappropriate. (Ibid.)
“In any event, administrative construction of a statute, while entitled to weight, cannot prevail when a contrary legislative purpose is apparent. [Citations.]” (Pacific Legal Foundation v. Unemployment Ins. Appeals Bd. (1981) 29 Cal.3d 101, 117 [172 Cal.Rptr. 194, 624 P.2d 244].) Such is the case here.
Appellants also argue we must disregard the apparent meaning of the language of the statute because the trial court‘s interpretation wrongfully “renders [
We must disagree with appellants’ argument at the threshold. When
To be sure, cost efficiencies would be increased if private sector contractors could lower wages without limitation. However, no evidence suggests—and we are not prepared to assume—that the trial court‘s interpretation of the statute will eliminate private sector cost savings and therefore render
The first is set forth in section 900 of the Board‘s Personnel Management Policy and Procedures Manual: “The cost advantages of contracting should typically result from efficiency-related factors, such as economies of scale, superior technology or lower overhead costs that cannot be offset by reasonable improvements in the State‘s equipment and operating procedures.”7
The second is that contractors’ wages may be lower than state pay rates; a proposal is disqualified only in the event of a “significant” disparity. We therefore conclude the trial court‘s interpretation results in no absurdity allowing us to disregard the plain and ordinary meaning of the language of the statute. The trial court correctly concluded a contractor‘s wages “significantly undercut” state pay rates under subdivision (a)(2) when the wages were “significantly lower than” state pay rates.
The parties also dispute whether thе comparison of wages and pay rates in subdivision (a)(2) should include or exclude fringe benefits. However, since the second sentence of subdivision (a)(2) requires a comparison of the contractor‘s “wages” and state “pay rates,” “wages” and “pay rates” must mean the same thing, because we will not assume the Legislature intended a comparison of apples and oranges. The parties agree with this truism. The first sentence of subdivision (a)(2) refers disjunctively to “pay rates or benefits.” Upon the assumption “benefits” is not surplusage (City and County of San Francisco v. Farrell, supra, 32 Cal.3d at p. 54), then “benefits” means something other than “pay rates.” (See Gonzales & Co. v. Department of Alcoholic Bev. Control (1984) 151 Cal.App.3d 172, 178 [198 Cal.Rptr. 479].) Since “wages” and “pay rates” mean the same
The trial court determined that Universal‘s wage (exclusive of benefits) of $5 per hour significantly undercut the state pay rate for state security guards of $6.94 per hour because the contractor‘s wages were approximately 28 percent lower that the state hourly pay rate. We are not called upon in this case to draw a precise line for all cases with respect to whether disparities will or will not be considered significant. Appellants concede that if the trial court‘s interpretation of subdivision (a)(2) is correct, 28 percent constitutes a “significant” disparity. We agree.
Therefore, the contract did not comply with subdivision (a)(2) and it was the duty of the Board to disаpprove the contract. (See
DISPOSITION
The judgment is affirmed. Plaintiffs and respondents shall recover their costs on appeal from appellants. Defendant and respondent Universal Service Contractors shall bear its own costs on appeal.
EVANS, Acting P. J.—I dissent.
The factual background set forth in the majority opinion does not adequately establish a sufficient basis to appropriately construe
Prior to May 24, 1985, Department of General Services (General Services) provided security guard service to the Stephen P. Teale Data Center in Sacramento. Prior to that date, the State Personnel Board had been advised by General Services of its decision to phase out use of the security guard class of personnel. As a result, all appropriate agencies were notified that by virtue of General Services’ decision, Teale Data Center had elected to contract for its needed security services, and that defendant Universal Service Contractors had been the low responsible bidder.
As required by
“The following is an analysis of the standards that must be met in a cost-based contract, as required by
“1. ‘The proposed contract will result in an actual overall cost savings to State Government.’ [§ 19130, subd. (a)(1).] The proposed contractor will provide the required service for a cost to the department of $127,020 per year, for three years. For Teale Data Center to hire its own security staff, it would cost $183,944.60 per year (see Chart A below). The savings from contracting out to the proposed vendor would be $56,924.60 per year, or $170,773.80 over the three-year period of the contract. This is a 31% savings. (See Chart B.)
| Cost for Teale to Hire Security Staff | Annual Cost |
| 1 Full-time supervising security guard* at $1323 per month salary plus $437 per month benefits × 12 months | $ 21,120.00 |
| Security Guards—$6.94 per hour salary plus $2.19 per hour benefits × 17,520 hours per year | 159,957.60 |
| Equipment—one-time costs | |
| 3 radios at $900 each $2,700 | |
| 1 battery charger 200 | |
| Total one-time cost: $2,900 divided by 3 yrs. | 967.00 |
| Uniform allowance—10 staff at $190 per year for each staff | 1,900.00 |
| Total Cost Per Year | $183,944.60 |
*A new class would need to be established. The salary used here for comparison purposes is 10% above the rate for Security Guard.
“Chart B
Cost Comparison
| Total cost per hour (17,520 hrs) | Cost per year to Teale | Amount and % saved by contracting out | |
| Teale hire of security staff | $10.50** | $183,944.60 | |
| Proposed contract | 7.25 | 127,020.00 | |
| $56,924.60 (31%) |
**Includes all costs listed in Chart A ($183,944.60) divided by 17,520 hours of service.
“2. ‘The savings must be large enough to ensure that they will not be eliminated by private sector and State cost fluctuations that could normally be expected during the contracting period.’ [§ 19130, subd. (a)(5).] The State Personnel Board policy on review of cost-based contracts indicates that a savings margin of at least 10% annually will meet this criteria. The proposed contraсt represents an annual savings of 31%, so this criteria is met.
“3. ‘The potential for future economic risk to the State from potential contractor rate increases must be minimal.’ [§ 19130, subd. (a)(9).] The proposed contractor has agreed to a set rate for the full three-year period covered by the proposed contract. Since there will be no rate increases during the life of the contract, the risk of rate increase is ‘minimal‘.
“5. ‘The contract may not cause the displacement of civil service employees.’ [§ 19130, subd. (a)(3).] No State employees will be laid off, demoted, involuntarily transferred to a new class, or reduced in time base. The Department of General Services plans to place all Security Guards who are currently at Teale Data Center in other classes and locations on a voluntary basis. General Services has obtained special permission from the Department of Personnel Administration to place their Security Guards on SROA lists to assist in the voluntary placement of their employees. Employees who do not want a change in classification will be retained in the State Police Division as Security Guards.
“6. ‘Proposals to contract out work will not be approved solely on the basis that savings will result from lower contractor pay rates or benefits. Proposals to contract out work shall be eligible for approval if the contractor‘s wages are at the industry‘s level and do not significantly undercut State pay rates.’ [§ 19130, subd. (a)(2).] The Bureau of Labor Statistics’ report of December 1984 shows that security guards in the Sacramento area are paid an average of $5.58 per hour in wages. This study did not differentiate between armed and unarmed guards; however, in past years, the difference between armed and unarmed guard salaries was $.50 per hour more for armed guards. Therefore, the average wage for unarmed guards in the Sacramento area is assumed to be approximately $5.08 per hour. The wage under the proposed contract is $5.00 per hour and considered to be at industry‘s level. The State‘s second step pay rate for Security Guards is $6.94 per hour. (The second step would be approximately the average salary during the three-year period of the contract.) Although the proposed contractor‘s wage is lower than the State‘s wage, savings from this lower wage is not the sole basis for approval of this contract. Approval of the proposed contract is warranted by: (a) the inability of the department to continue to obtain service from the State Police after May 24, 1985; (b) the overall cost savings of 31% to the State by contracting out to the proposed vendor; (c) the proposed vendor‘s wage being at industry‘s level; and (d) the ability of the proposed vendor to provide more efficient service than the department could provide. Should any of the proposed vendor‘s security staff be unable to work, coverage can be provided from the pool of reservе staff. On the other hand, if a State employee cannot come to work, there is no reserve staff to cover; other Security Guards must cover at the overtime rate of pay. In addition, the proposed vendor can provide supervision more efficiently
“Chart C
| Proposed Vendor Cost for Supervision | vs. | State Cost for Supervision |
| Up to 5 hours per day of supervision at approximately $7.25 per hour (available 24 hours a day) | 1 supervisor 8 hours a day | |
| $ 7.25 Per hour salary × 5 Hours per day $ 36.25 Per day supv. cost × 365 Days per year $13,231.25 Per year supv. cost divided by 17,520 Hours per year in contract .76 Cost for supv. per hour of service provided | $21,120 Per year (see Chart A) divided by 17,520 Hours coverage per year $ 1.21 Cost for supv. per hour of service provided |
“7. ‘The contract must not adversely impact the State‘s affirmative action efforts.’ [§ 19130, subd. (a)(4).] Sincе no employees will be displaced and General Services will no longer be hiring Security Guards, there will be no adverse impact on protected groups.
“8. ‘All contracts approved based on cost savings must be with firms; contracting with individuals based on cost savings is not permissible.’ [§ 19130, subd. (a)(10).] The proposed contractor is a firm.
“9. ‘Cost-based contracts must be awarded through a well-publicized, competitive bidding process.’ [§ 19130, subd. (a)(7).] The request for bids was advertised through the State Contract register. Bids were received from eight firms, four of which submitted all the required information. The proposed contractor is the low bidder of the four responsive bidders.
“10. ‘Cost-based contracts shall include specific provisions pertaining to the qualifications of the staff that will perform the work under the contract, as well as assurances that the contractor‘s hiring practices meet applicable nondiscrimination/affirmative action standards.’ [§ 19130, subd. (a)(8).] The proposed contract contains provisions concerning both the qualifications of staff and equal employment opportunity practices.
With this background, the statute may be examined pursuant to existing judicial standards for construing statutes and their application. “The fundamental rule of statutory construction is that the court should ascertain the intent of the Legislature so as to effectuate the purpose of the law. (California Toll Bridge Authority v. Kuchel, 40 Cal.2d 43, 53 [251 P.2d 4]; County of Alameda v. Kuchel, 32 Cal.2d 193, 199 [195 P.2d 17]; Dickey v. Raisin Proration Zone No. 1, 24 Cal.2d 796, 802 [151 P.2d 505, 157 A.L.R. 324]; 82 C.J.S., Statutes, § 321, p. 560; 45 Cal.Jur.2d, Statutes, § 126, p. 634.) Moreover, ‘every statute should be construed with reference to the whole system of law of which it is a part so that all may be harmonized and have effect.’ (Stafford v. Los Angeles etc. Retirement Board, 42 Cal.2d 795, 799 [270 P.2d 12].) If possible, significance should be given to every word, phrase, sentence and part of an act in pursuance of the legislative purpose. (People v. Western Air Lines, Inc. 42 Cal.2d 621, 638 [268 P.2d 723].) Such purpose will not be sacrificed to a literal construction of any part of the act. . . .” (Select Base Materials v. Board of Equal. (1959) 51 Cal.2d 640, 645 [335 P.2d 672].)
As I apply these principlеs to the facts presented, I am forced to the conclusion that the trial court was wrong. Its decision was apparently the result of judicial tunnel vision. It focused on but one part of one of the eleven factual criteria and gave that one fact more than a literal construction. As a consequence, the trial court effectually rendered nugatory the total purpose of the statutory enactment.
Just as importantly, the trial court totally ignored the administrative analysis of the factual circumstances, the purpose of the statute, and the board‘s interpretation of each. I recognize that while an administrative construction of a statute does not acquire legal sanction merely by reason of usage, it should be accorded great respect by the courts and upheld if not obviously erroneous. (Los Angeles v. Superior Court (1941) 17 Cal.2d 707, 712 [112 P.2d 10]; see also Los Angeles City School Dist. v. Simpson (1952) 112 Cal.App.2d 70, 75 [245 P.2d 629].)
The administrative decision in this instance was thorough, thoughtful, factual, and reasonable, not capricious or arbitrary.
Another fundamental rule of statutory interpretation requires that where a statute is susceptible of different interpretations, the one that leads to the more reasonable result should be followed. (Metropolitan Water Dist. v. Adams (1948) 32 Cal.2d 620, 630 [197 P.2d 543].) In addition to all of the factual criteria which precipitated the need to contract for security services, the agency carefully analyzed the wage differential in the total factual environment; the trial court did not do so. The SPB on the facts concluded the wage differential did not warrant rejection of the contract. Its conclusion was that the salaries to be paid by the successful bidder met the industry level and although the contractor‘s wage rate was lower than the state‘s wage, that fact did not warrant rejection of the contract and concluded “Approval of the proposed contract is warranted by: (a) the inability of the department to continue to obtain service from the State Police after May 24, 1985; (b) the overall cost savings of 31% to the State by contracting out to the proposed vendor; (c) the proposed vendor‘s wage being at industry‘s level; and (d) the ability of the proposed vendor to provide more efficient service than the department could provide. Should any of the proposed vendor‘s security staff be unable to work, coverage can be provided from the pool of reserve staff. On the other hand, if a State employee cannot
Such an interpretation and application obviously carries out the intent and purpose of the Legislature and effectuates the purpose of the law. (Select Base Materials v. Board of Equal., supra, 51 Cal.2d at p. 645.) It is fundamental in such cases that a statutory construction which sensibly resolves an apparent controversy is preferred to one which renders statutory purpose or language meaningless. (Wells v. Marina City Properties, Inc. (1981) 29 Cal.3d 781, 788 [176 Cal.Rptr. 104, 632 P.2d 217].)
In the context of the needs presented by virtue of General Services’ decision and Teale Data Center‘s requirement of security service, the statute required a broad rather than literal interpretation in order to uphold the usefulness оf the statute and give its purpose meaning and effect and avoid an absurd result. (Herbert Hawkins Realtors, Inc. v. Milheiser (1983) 140 Cal.App.3d 334, 338 [189 Cal.Rptr. 450].)
Moreover, I consider the trial court‘s interpretation of the term “undercut” as used in
The trial court decision seems to ignore the semantics involved in the consideration of the term “undercut” as used in
I would reverse the judgment.
“The purpose of this article is to establish standards for the use of personal services contracts.
“(a) Personal services contracting is permissible to achieve cost savings when all the following conditions are met:
“(1) The contracting agency clearly demonstrates that the proposed contract will result in actual overall cost savings to the state, provided that:
“(A) In comparing сosts, there shall be included the state‘s additional cost of providing the same service as proposed by a contractor. These additional costs shall include the salaries and benefits of additional staff that would be needed and the cost of additional space, equipment, and materials needed to perform the function.
“(B) In comparing costs, there shall not be included the state‘s indirect overhead costs unless these costs can be attributed solely to the function in question and would not exist if that function was not performed in state service. Indirect overhead costs shall mean the pro rata share of existing administrative salaries and benefits, rent, equipment costs, utilities and materials.
“(C) In comparing costs, there shall be included in the cost of a contractor providing a service аny continuing state costs that would be directly associated with the contracted function. These continuing state costs shall include, but not be limited to, those for inspection, supervision, and monitoring.
“(2) Proposals to contract out work shall not be approved solely on the basis that savings will result from lower contractor pay rates or benefits. Proposals to contract out work shall be eligible for approval if the contractor‘s wages are at the industry‘s level and do not significantly undercut state pay rates.
“(3) The contract does not cause the displacement of civil service employees. The term ‘displacement’ includes layoff, demotion, involuntary transfer to a new class, involuntary transfer to a new location requiring a change of residence, and time base reductions. Displаcement does not include changes in shifts or days off, nor does it include reassignment to other positions within the same class and general location.
“(4) The contract does not adversely affect the state‘s affirmative action efforts.
“(5) The savings shall be large enough to ensure that they will not be eliminated by private sector and state cost fluctuations that could normally be expected during the contracting period.
“(6) The amount of savings clearly justify the size and duration of the contracting agreement.
“(7) The contract is awarded through a publicized, competitive bidding process.
“(8) The contract includes specific provisions pertaining to the qualifications of the staff that will perform the work under the contract, as well as assurance that the contractor‘s hiring practices meet applicable nondiscrimination, affirmative action standards.
“(9) The potential for future economic risk to the state from potential contractor rate increases is minimal.
“(10) The contract is with a firm. A ‘firm’ means a corporation, partnership, nonprofit organization, or sole proprietorship.
“(11) The potential economic advantage of contracting is not outweighed by the public‘s interest in having a particular function performed directly by state government.
“(b) Personal services contracting also shall be permissible when any of the following conditions can be met:
“(1) The functions contracted are exempted from civil service by Section 4 of Article VII of the California Constitution, which describes exempt appointments.
“(2) The contract is for a new state function and the Legislature has specifically mandated or authorized the performance of the work by independent contractors.
“(3) The services contracted are not available within civil service, cannot be performed satisfactorily by civil service employees, or are of such a highly specialized or technical
“(4) The services are incidental to a contract for the purchase or lease of real or personal property. Contracts under this criterion, known as ‘service agreements,’ shall include, but not be limited to, agreements to service or maintain office equipment or computers that are leased or rented.
“(5) The legislative, аdministrative, or legal goals and purposes cannot be accomplished through the utilization of persons selected pursuant to the regular civil service system. Contracts are permissible under this criterion to protect against a conflict of interest or to insure independent and unbiased findings in cases where there is a clear need for a different, outside perspective. These contracts shall include, but not be limited to, obtaining expert witnesses in litigation.
“(6) The nature of the work is such that the Government Code standards for emergency appointments apply. These contracts shall conform with Article 8 (commencing with Section 19888) of Chapter 2.5 of Part 2.6.
“(7) State agencies need private counsel because a conflict of interest on the part of the Attorney General‘s office рrevents it from representing the agency without compromising its position. These contracts shall require the written consent of the Attorney General, pursuant to section 11040.
“(8) The contractor will provide equipment, materials, facilities, or support services that could not feasibly be provided by the state in the location where the services are to be performed.
“(9) The contractor will conduct training courses for which appropriately qualified civil service instructors are not available, provided that permanent instructor positions in academies or similar settings shall be filled through civil service appointment.
“(10) The services are of such an urgent, temporary, or occasional nature that the delay incumbent in the implementation under civil service would frustrate their very purpоse.
“(c) All persons who provide services to the state under conditions the board determines constitute an employment relationship shall, unless excepted from civil service by Section 4 of Article VII of the California Constitution, be retained under an appropriate civil service appointment.”