Opinion
I. INTRODUCTION
Appellant Los Angeles Unified School District (LAUSD or the District) sought a judicial declaration that Labor Code section 1776, subdivision (e)
II. FACTUAL AND PROCEDURAL BACKGROUND
A. The LAUSD Project Stabilization Agreement and California’s Certified Payroll Record Requirements
1. The LAUSD Project Stabilization Agreement
The LAUSD and numerous unions are signatories to the “Project Stabilization Agreement” (PSA), which is a construction labor agreement that is intended to promote the timely completion of LAUSD public works projects. The agreement is binding on contractors who enter into construction contracts with the LAUSD and mandates that they pay their laborers the prevailing wage rate set by the Department of Industrial Relations. In addition, contractors are required to provide contributions for employee fringe benefits, which are paid directly to various trusts that administer the employee benefits programs. The trusts, in turn, are responsible for allocating the benefits to the contractors’ employees.
2. California’s Certified Payroll Records Requirements
Labor Code section 1776, subdivision (a) 1 requires contractors who enter into public works contracts to maintain certified payroll records (CPR’s) that show, among other things, the name, address, Social Security number, work classification and hours worked for each employee. (§ 1776, subd. (a).) Contractors are required to make copies of CPR’s available to their employees, the body that awarded the public works project (the awarding agency) and various California labor agencies. (§ 1776, subd. (b)(1) & (2).) Section 1776 further provides that “the public” may inspect the awarding agency’s copies of contractor CPR’s (§ 1776, subd. (b)(3)), but directs that such copies “shall be marked or obliterated to prevent disclosure of an individual’s name, address, and social security number.” (§ 1776, subd. (e).)
On April 23, 2008, the trustees of the Southern California IBEW-NECA Pension Plan and various other parties 2 (collectively, Trustees) filed a complaint against the LAUSD and Integrated/TEC (Integrated). The complaint alleged that Integrated, which was a construction contractor working for the District, violated the terms of the PSA by failing to pay the Trustees approximately $20,000 in employee fringe benefits. The complaint also sought an order directing the LAUSD to withhold funds from Integrated in an amount equal to the unpaid fringe benefits.
Shortly thereafter, on June 6, 2008, the LAUSD filed a cross-complaint for declaratory relief against the Trustees seeking a declaration that section 1776, subdivision (e) prohibited the LAUSD from producing personal employee information contained in Integrated’s CPR’s, including the employees’ names, Social Security numbers and addresses (personal employee information). The declaratory relief claim was intended to resolve an ongoing dispute with the Trustees regarding the effect of section 1776, subdivision (e). In numerous prior lawsuits involving unpaid fringe benefits, the Trustees had filed document subpoenas against the LAUSD requesting unredacted contractor CPR’s that showed the personal employee information. The Trustees contended that this information was needed to properly allocate fringe benefits to the contractors’ employees. In each case, the LAUSD unsuccessfully argued that, pursuant to section 1776, subdivision (e), the personal employee information was privileged and could not be produced. The LAUSD’s declaratory relief claim in the current litigation was brought to clarify whether the personal employee information contained within its CPR’s was privileged pursuant to section 1776, subdivision (e), and therefore not subject to discovery.
After the LAUSD filed its cross-complaint, the Trustees obtained payroll information that enabled them to determine the specific amount that Integrated owed for unpaid employee fringe benefits. Integrated subsequently agreed to pay the outstanding benefits contributions and the Trustees dismissed their complaint against both the LAUSD and Integrated. The LAUSD, however, declined to dismiss its declaratory relief action, arguing that the parties needed to determine the effect of section 1776, subdivision (e) to
The only witness called to testify at trial was Joanne Keller, who was responsible for overseeing the collection and allocation of employee fringe benefits for the Southern California IBEW-NECA Pension Plan (Pension Plan). Keller began her testimony by explaining that contractors would typically submit contribution reports to the Pension Plan that included the name, Social Security number, and hours worked for each of the contractors’ employees. The Pension Plan used those reports for two purposes: (1) to calculate the amount the contractor owed for employee fringe benefits, and (2) to allocate those benefits to plan participants.
If a contractor failed to provide a contribution report, the Pension Plan would attempt to collect the employee information by requesting CPR’s directly from the contractor. If a contractor refused or was otherwise unable to provide copies of its CPR’s, the Pension Plan would typically seek unredacted versions of the records from the awarding agency. However, as a result of section 1776, subdivision (e), in many cases, the awarding agency would only agree to produce redacted CPR’s that withheld the personal employee information. Keller stated that although the Pension Plan could use redacted CPR’s to calculate the amount that a contractor owed for fringe benefits, the redacted records did not provide sufficient information to allocate the benefits to plan participants.
Keller further testified that if a contractor could not produce payroll records, it was possible for the Pension Plan to collect the personal employee information without acquiring the awarding agency’s unredacted CPR’s. Specifically, Keller explained that the Pension Plan had the authority to audit contractors, which enabled it to review pay stubs, paychecks and other documents containing the employees’ personal information.
3
According to Keller, the Pension Plan generally tried to avoid conducting audits, explaining that: “In most instances . . . you try to use the most expeditious manner in
Following the trial, the court issued a statement of decision ruling that “[i]f Section 1776(e) is enforceable in accordance with the plain meaning and legislative intent of the statute, the District would be compelled to redact certified payroll records produced to the Trustees such that the names and social security numbers of the individual workers would be deleted.” The court further concluded, however, that the Trustees’ “need for unredacted certified payroll records from the District outweighs the workers constitutional privacy interests” in the personal information contained in the CPR’s. As a result, the court ruled that, despite the language of section 1776, subdivision (e), the LAUSD was required to produce unredacted versions of third party CPR’s. 4
in. DISCUSSION
A. Personal Employee Information Contained Within an Awarding Agency’s Copies of Certified Payroll Records Is Subject to a Conditional Privilege
The purpose of this appeal is to resolve a recurring discovery dispute regarding the effect of section 1776, subdivision (e). The LAUSD contends that subdivision (e), in conjunction with Evidence Code section 1040, creates an absolute privilege that permits the District to redact personal employee information contained in contractor CPR’s. The Trustees, on the other hand, argue that the California Discovery Act requires awarding agencies such as the LAUSD to produce unredacted CPR’s in cases where a trust demonstrates that it needs the information to allocate benefits to its plan participants. For the reasons that follow, we conclude that Evidence Code section 1040 and section 1776, subdivision (e) establish only a conditional privilege.
1. Section 1776, Subdivision (e) Does Not Establish an Absolute Privilege
Under California’s discovery statutes, “information is discoverable
if
it is unprivileged and is either relevant to the subject matter of the action or
The LAUSD argues that personal employee information contained within its copies of third party CPR’s is absolutely privileged pursuant to Evidence Code section 1040, which states;
“(a) . . . ‘official information’ means information acquired in confidence by a public employee in the course of his or her duty and not open, or officially disclosed, to the public prior to the time the claim of privilege is made.
“(b) A public entity has a privilege to refuse to disclose official information ... if the privilege is claimed by a person authorized by the public entity to do so and:
“(1) Disclosure is forbidden by an act of the Congress of the United States or a statute of this state; or
“(2) Disclosure of the information is against the public interest because there is a necessity for preserving the confidentiality of the information that outweighs the necessity for disclosure in the interest of justice . . . .”
Section 1040 “ ‘establishes two different privileges [for “official information”] — an absolute privilege if disclosure is forbidden by a federal or state statute (subd. (b)(1)), and a conditional privilege in all other cases pursuant to which privilege attaches when the court determines . . . that disclosure is against the public interest (subd. (b)(2)). [Citation.]’ ”
(County of San Diego v. Superior Court
(1986)
Section 1776, subdivision (b)(3) states that an awarding agency’s copies of third party CPR’s “shall be made available upon request by the public for inspection or for copies thereof.” Section 1776, subdivision (e), in turn, requires that “Any copy of records made available for inspection as copies and furnished upon request to the public or any public agency by the awarding body . . . shall be marked or obliterated to prevent disclosure of an individual’s name, address, and social security number.” Thus, the statute gives the public the right to inspect an awarding agency’s copies of third party CPR’s, but requires that personal employee information contained within those records remain confidential.
California courts have repeatedly held that statutes which simply characterize information as “confidential” or otherwise limit its public disclosure do not create an absolute privilege within the meaning of Evidence Code section 1040, subdivision (b)(1). For example, in
DMV, supra,
In contrast to
DMV
and
White,
appellate courts have found an absolute privilege to exist in cases where a statute not only restricts disclosure, but includes some additional indicia that the Legislature intended to restrict disclosure even in the context of litigation. For example, in
Richards
v.
Superior Court
(1968)
In
Kleitman v. Superior Court
(1999)
The holdings in
White, DMV, Richards
and
Kleitman
demonstrate that, to qualify for absolute privilege within the meaning of Evidence Code section 1040, a statute must do more than merely make information confidential or limit its disclosure to the public. Rather, the language or structure of the statute must evince a legislative intent to bar disclosure even in the context of litigation. These holdings are consistent with the general rule that privileges are to be “narrowly construed . . . because they operate to prevent the admission of relevant evidence and impede the correct determination of
In this case, section 1776, subdivision (e) states that, when providing copies of third party CPR’s to the public, an awarding agency must redact personal employee information that is imbedded within those records. The statute does not include any language stating that the information is not discoverable or is inadmissible at trial. The language and structure of the statute give no indication that the Legislature intended to limit the circumstances in which personal employee information may be disclosed for the purposes of litigation. Therefore, we conclude that section 1776, subdivision (e) does not forbid disclosure of unredacted CPR’s within the meaning of Evidence Code section 1040, subdivision (b)(1). 7
2. Conditional Privilege Under Evidence Code Section 1040, Subdivision (b)(2)
As explained above, the parties do not dispute that personal employee information contained in an awarding agency’s copies of CPR’s is “official information” within the meaning of Evidence Code section 1040. Therefore, although the information is not absolutely privileged, it is subject to the conditional privilege described in Evidence Code section 1040, subdivision (b)(2). (See generally
Marylander v. Superior Court
(2000)
The question of whether an awarding agency must disclose unredacted CPR’s in response to a discovery subpoena cannot be decided in the abstract. However, the Trustees have identified numerous factors that will normally weigh in favor of disclosure when the requesting party is a benefits trust seeking unredacted CPR’s for the purpose of allocating fringe benefits to plan participants. First, unlike the general public, the Trustees are entitled to collect the employees’ personal information directly from the contractor. Therefore, as noted by the trial court, it is difficult to understand how the employees’ privacy interests are compromised when the Trustees obtain this same information through the awarding agency’s copies of CPR’s. Second, the evidence at trial demonstrated that the Trustees and the entities they do business with are required to protect the employees’ personal information from public disclosure. As a result, the Trustees have adopted safeguards to ensure that the personal employee information remains confidential. 8 Third, the Trustees, who have a fiduciary relationship with their plan participants, are usually seeking the personal employee information for the benefit of the employees. Specifically, the Trustees need unredacted CPR’s to make certain that employees receive their allotted share of fringe benefits.
We expect that, in cases where these or similar factors are present, the Trustees (and other benefits trusts) will normally be able to demonstrate that their “interest in obtaining [unredacted CPR’s]” outweighs “the need for confidentiality.” 9 (White, supra, 102 Cal.App.4th at p. Supp. 7.)
B. ERISA Preemption *
We affirm, but because the Trustees complaint has been dismissed with prejudice, no further action in this matter is required. Respondent is to recover its costs on appeal.
Woods, Acting P. J., and Jackson, J., concurred.
Notes
All further statutory references are to the Labor Code unless otherwise indicated.
The additional parties include the trustees of the Southern California IBEW-NECA Health Trust Fund, trustees of the Los Angeles County Electrical Education and Training Trust Fund, Trustees of the National Electrical Benefit Fund, trustees of the Southern California IBEW-NECA Labor-Management Cooperation Committee, the Los Angeles Electrical Workers Credit Union and the Contract Compliance Fund.
The PSA requires that contractors submit to the written terms of the applicable trust agreement that details the manner in which contractors are to pay employment hinge benefits into the trust. In this case, the applicable trust agreement contains a clause that authorizes the trust to audit contractors.
Because the Trustees dismissed their complaint against the LAUSD and Integrated before the bench trial began, the LAUSD was not actually ordered or required to produce anything.
In the proceedings below, the parties framed the relevant issue as a recurring discovery dispute. Therefore, we consider only whether the redacted personal employee information is privileged under California’s discovery statutes and do not decide how section 1776, subdivision (e) would apply in the event that the Trustees requested to inspect an awarding agency’s CPR’s outside the discovery context.
Specifically, the Brown Act provides that (1) minutes from a closed session are subject to in camera review by a trial court when it is alleged that a violation of the Brown Act has occurred during a closed session, and (2) tape recordings of a closed session are subject to disclosure where “there exists a prior judgment that the legislative body held unlawful closed sessions, a court order to make tape recordings, and a factual showing that another violation has occurred . . . .”
(Kleitman,
supra,
To the extent the LAUSD is arguing that section 1776, subdivision (e) establishes an absolute privilege separate and apart from Evidence Code section 1040, we disagree. The statute does not contain any language indicating that the Legislature intended to create a privilege. It merely requires that an agency keep personal employee information confidential when providing copies of CPR’s to the public. Simply put, confidentiality does not equate with privilege. (DMV, supra, 100 Cal.App.4th at pp. 371, 373 [rejecting contention that Veh. Code, § 1808.5 created independent privilege because it “does not use the term ‘privilege’ nor does it invoke the concept of privilege as that term is used in the Evidence Code or discovery statutes”].)
Presumably, personal employee information provided in unredacted CPR’s can also be safeguarded through a protective order.
That does not mean that a trust will always be entitled to unredacted CPR’s or that a trial court may forego the balancing process when the requesting party is a benefits trust.
(Marylander v. Superior Court, supra,
See footnote, ante, page 621.