The trial court found the authority to determine employee compensation was reserved to the City as a charter city under
This case pits article XI, section 5 of the state Constitution, which grants to charter cities authority over municipal affairs, including
We conclude legislation setting a statewide minimum wage, generally applicable to both private and public employees, addresses the state's interest in protecting the health and welfare of workers by ensuring they can afford the necessities of life for themselves and their families. Thus, the Legislature may constitutionally exercise authority over minimum wages, despite the constitutional reservation of authority in charter cities to legislate as to their municipal affairs. We reverse.
FACTUAL AND PROCEDURAL BACKGROUND
A. The Complaint
On June 9, 2016 plaintiffs filed their putative class action complaint asserting causes of action under Labor Code sections 1182.12 and 1194,
B. The City's Demurrer
In its demurrer, the City argued the plaintiffs' claims were barred under the home rule doctrine because wages set by charter cities are municipal affairs, not subject to state regulation. The City also asserted in its reply that charter cities did not come within the statutory definition of employers subject to the minimum wage requirement. Further, the wages to be paid to the City's pages and recreation leadership specialists were set by a memorandum of understanding (MOU) between the union representing those employees and the City, ratified by the City Council.
After sustaining the City's demurrer without leave to amend, on March 2, 2017 the trial court entered a judgment dismissing the action with prejudice. Plaintiffs timely appealed.
DISCUSSION
A. Standard of Review
"In reviewing an order sustaining a demurrer, we examine the operative complaint de novo to determine whether it alleges facts sufficient to state a cause of action under any legal theory. [Citation.] Where the demurrer was sustained without leave to amend, we consider whether the plaintiff could cure the dеfect by an amendment." ( T.H. v. Novartis Pharmaceuticals Corp. (2017)
"We independently review the construction of statutes [citation] and begin with the text. If it 'is clear and unambiguous our inquiry ends.' [Citation.] Wage and hour laws are 'to be construed so as to promote employee protеction.' [Citations.] These principles apply equally to the construction of wage orders." ( Mendiola v. CPS Security Solutions, Inc. (2015)
B. The Trial Court Erred in Sustaining the City's Demurrer
1. California's minimum wage law
"Over a century ago, the Legislature responded to the problem of inadequate wages and poor working conditions by establishing the IWC, giving it authority to investigate various industries and promulgate wage orders establishing minimum wages, maximum work hours, and conditions of labor." ( Kilby v. CVS Pharmacy, Inc., supra ,
The IWC set the first statewide minimum wage in 1916 by issuing industry- and occupation-wide wage orders, applicable to women and children. ( Brinker Restaurant Corp. v. Superior Court (2012)
Following this enlarged mandate, the voters "amended the state Constitution to confirm the Legislature's authority to confer on the IWC 'legislative, executive, and judicial powers.' " ( Martinez, supra ,
" 'The IWC's wage orders are to be accorded the same dignity as statutes. They are "presumptively valid" legislative regulations of the employment relationship [citation], regulations that must be given "independent effect" separate and apart from any statutory enactments [citation]. To the extent a wage order and a statute overlap, we will seek to harmonize them, as we would with any two statutes.' " (
"The Legislature defunded the IWC in 2004, however its wage orders remain in effect." ( Murphy v. Kenneth Cole Productions, Inc. (2007)
In 2013 the Legislature аgain enacted graduated increases in the minimum wage, effective July 1, 2014 ($9.00 per hour) and January 1, 2016 ($10.00 per hour). (Stats. 2013, ch. 351, § 1 [Assem. Bill No. 10].) Most recently, effective January 1, 2017 the Legislature set a series of graduated increases in the minimum wage to take effect each year on January 1, culminating in a $15.00 per hour minimum wage for all covered employees effective January 1, 2023, with limited exceptions. (See § 1182.12, subd. (b)(1)-(2).) Section 1182.12, subdivision (b)(3), also provides that "[f]or purposes of this subdivision [setting the minimum wage], 'employer' includes the state, political subdivisions of the state, and municipalities."
2. The home rule doctrine and state regulation of charter city and county wages and other employment relations
The Government Code classifies cities as either charter cities, organized under a charter ( Gov. Code, § 34101 ), or general law cities, organized under
"Charter cities are specifically authorized by our state Constitution to govern themselves, free of state legislative
"However, a charter city's authority to enact legislation is not unlimited." ( Jauregui, supra ,
In areas considered "municipal affairs," the general law of the state prevails over local law only where the general law is " 'reasonably related' "
The Supreme Court has considered the extent to which the state may regulate charter city employee compensation and other employment issues many times. In Popper, the Supreme Court addressed the constitutionality of two 1897 state statutes specifying the salaries for various ranks of police officers and firefighters employed
In City of Pasadena v. Charleville (1932)
In Healy v. Industrial Acc. Com. (1953)
The Supreme Court again considered the home rule doctrine in Professional Fire Fighters . There, a union representing firefighters working for the City of Los Angeles sued to establish members' right to join a labor union under the Labor and Government Codes. ( Professional Fire Fighters, supra , 60 Cal.2d at pp. 279-280 & fn. 1,
The Supreme Court returned to the question of state regulation of public employee wages in Sonoma County Organization of Public Employees v. County of Sonoma (1979)
In County of Riverside , the Supreme Court invalidated a statute requiring certain public entities to submit disputes over firefighter and law enforcement officer wages to binding arbitration, rejecting the legislative findings that avoidance of strikes in thеse sectors was a matter of statewide concern. ( County of Riverside, supra , 30 Cal.4th at pp. 282, 286,
Most recently, the Supreme Court in City of Vista revisited the issue of the constitutionality of state prevailing wage laws for public works projects. ( City of Vista, supra ,
" 'If ... the court is persuaded that the subject of the state statute is one of statewide concern and that the statute is reasonably related to its resolution [and not unduly broad in its sweep], then the conflicting charter city measure ceases to be a "municipal affair" pro tanto and the Legislature is not prohibited by article XI, section 5(a), from addressing the statewide dimension by its own tailored enactments.' " ( City of Vista, supra ,
After finding an actual conflict between the state statute and the city's prohibition on payment of prevailing wages in public works contracts, the court turned to the issue of whether the construction of public works was a statewide concern, considering whether there was " 'a convincing basis' for the state's action-a basis that 'justif[ies]' the state's interference in what would otherwise be a merely local affair." ( City of Vista, supra ,
The City of Vista court added, "our cases have suggested that a state law of broad general application is more likely to address a statewide concern than one that is narrow and particularized in its application." ( City of Vista, supra ,
The court concluded, "Here, the state law at issue is not a minimum wage law of
We take from these cases that article XI, section 5, of the state Constitution limits the Legislature's authority to determine the wages of charter city employees, to cap those wages, and to outsource to a third party the authority to determine employee wages. However, the Legislature may enact laws of broad general application that impact charter city compensation where the state law's infringement on local authority is reasonably related to an important statewide concern.
3. The state minimum wage law is designed to address a statewide concern for the health and welfare of workers and is reasonably related to its purpose
To determine whether the state's minimum wage law may be applied to the City, as a charter сity, we apply the four-part analysis set forth by the Supreme Court in City of Vista, supra ,
a. Compensation of charter city employees is a municipal affair under section 5 of article XI of the California Constitution
" '[T]here is no question that "salaries of local employees of a charter city constitute municipal affairs ...." ' " ( City of Vista, supra ,
b. The minimum wage requirement is in conflict with the City's resolution and MOU setting wages
We must first determine the existence of an actual conflict between the state and local laws at issue "before proceeding to the difficult state
Plaintiffs and the City contend there is no conflict, but for different reasons. They are both incorrect.
(i) The wage orders' minimum wage provisions apply to the City
The City contends sections 1182.12 and 1194 do not by their terms apply to charter cities, thus obviating any conflict. We disagree. "[W]age and hour claims are today governed by two complementary and ocсasionally overlapping sources of authority: the provisions of the Labor Code, enacted by the Legislature, and a series of 18 wage orders, adopted by the IWC." ( Brinker, supra ,
"In actions under section 1194 to recover unpaid minimum wages, the IWC's wage orders do generally define the employment relationship, and thus who may be liable." ( Martinez, supra ,
As the court explained in Sheppard v. North Orange County Regional Occupational Program (2010)
The City seeks to distinguish Sheppard by noting it predates the amendment to section 1197, effective January 1, 2016, which the City asserts altered the applicability of the wage orders. However, that amendment had no effect on the applicability of the wage orders, but instead confirms their continuing operation. (See § 1197 ["The minimum wage for employees fixed by the commission or by any applicable state or local law, is the minimum wage to be paid to employees ...." (Italics added.) ].) The amendment to section 1197 was intended to authorize the Labor Commissioner to investigate and enforce violations of local minimum wage laws, not to abrogate the applicability of IWC wage orders to specific entities. (See Legis. Counsel's Dig., Assem. Bill No. 970 (2015-2016 Reg. Sess.) Stats. 2015, ch. 783, Summary Dig. ["This bill ... authorize[s] the Labor Commissioner to investigate and, upon a request from the local entity, to enforce local laws regarding overtime hours or minimum wage provisions ...."].)
We agree with Sheppard and Stoetzl , and likewise conclude the minimum wage provisions of IWC Wage Order Nos. 4-2001 and 10-2001 apply to public employees. Further, their application to "any city" under section 1 necessarily includes both charter and general law cities.
Plaintiffs contend there is no conflict between the state minimum wage law and the City Charter because the City is free to determine the wages of its employees, so long as those wages are at or above the state minimum. However, the City's charter provides that wages for the City's employees are to be set by the City Council. (Long Beach City Charter, art. V, § 503.) And the MOU setting plaintiffs' wages was adopted by a City Council resolution.
Thus, the City's enactment setting subminimum wages conflicts with the state's minimum wage requirements. (See City of Vista, supra , 54 Cal.4th at pp. 553, 559-560,
Because there is an actual conflict between the state minimum wage law and the City Charter, we consider whether the minimum wage is a matter of statewide concern.
"When, as here, state law and the ordinances of a charter city actually conflict and we must decide which controls, 'the hinge of the decision is the identification of a convincing basis for legislative action originating in extramunicipal concerns, one justifying legislative supersession based on sensible, pragmatic considerations.' [Citation.] In other words, for state law to control there must be something more than an abstract state interest, as it is always possible to articulate some state interest in even the most local of matters." ( City of Vista, supra ,
"The minimum wage represents the Legislature's and the [IWC's] best estimate of the minimum an employee working a full-time job must be paid
As discussed above, in 1913 the Legislature proposed a constitutional amendment, later adopted by the voters, confirming the Legislature's authority to regulate the minimum wage and to delegate authority to the IWC. The amendment reflected the concern that workers " 'should be certain of a living wage-a wage that insures for them the necessary shelter, wholesome food and sufficient clothing,' " and "that substandard wages frequently led to ill health and moral degeneracy." ( Martinez, supra ,
Legislative reports accompanying the Legislature's statutory increases to the minimum wage in recent years have consistently stated the purpose to provide California workers with a living wage to address poverty in the state. (See, e.g., Assem. Com. on Labor and Employment, Off. of Assem. Floor Analyses, 3d reading analysis of Assem. Bill No. 1835 (2005-2006 Reg. Sess.) as amendеd April 5, 2006, p. 3 [minimum wage increase was part of the "solution to the growing problem of poverty-level wages in our state"]; Assem. Com. on Labor and Employment, Analysis on Assem. Bill No. 10 (2013-2014 Reg. Sess.) September 12, 2013, p. 1 [legislation setting the $9.00 and $10.00 per hour minimum wages reflects a concern that workers " 'at the bottom of the wage scale [are] mired in poverty, [and] over recent decades the real value of their earnings has collapsed' "]; Sen. Rules Com., Off. of Sen.
As the Supreme Court observed in Johnson v. Bradley (1992)
While the views of the Legislature are not binding on this court, they are relevant and entitled to "great weight." ( City of Vista, supra ,
Our conclusion is bolstered by the scope of the state's minimum wage mandate. "[A] state law of broad general application is more likely to address a statewide concern than one that is narrow and particularized in its application." ( City of Vista, supra ,
As pointed out by the City, it is true the Supreme Court has countenanced procedural laws encroaching on local authority more readily than substantive measures like the minimum wage law at issue here. (See Seal Beach, supra , 36 Cal.3d at pp. 600-601 & fn. 11,
Like the workers' compensation law in Healy , minimum wage requirements are substantive regulations that directly implicate municipal interests in compensation of their employees. But also like the statewide workers' compensation scheme, the statewide minimum wage requirement serves the fundamental purpose of protecting the health and welfare of workers. (See § 3202 [Workers' compensation provisions of the Labor Code "shall be liberally construed by the courts with the purpose of extending their benefits for the protection of persons injured in the course of their employment."]; Andersen v. Workers' Comp. Appeals Bd. (2007)
The City attempts to distinguish Healy by reference to the constitutional provision granting the Legislature its workers' compensation authority. ( Cal. Const., art. XIV, § 4 ["The Legislature is hereby expressly vested with plenary power, unlimited by any provision of this Constitution, to create, and enforce a complete system of workers' compensation ...."].) However, the Constitution also provides express authority to the Legislature to set a minimum wage. (Id. , § 1 ["The Legislature may provide for minimum wages and for the general welfare of employees ...."].)
Indeed, a prevailing wage law has a greater impact on local control than the minimum wage law because by requiring payment of wages prevailing in an industry locally, the law is "effectively a salary setting statute." ( San Francisco Labor Council , supra ,
The Court of Appeal opinions relied on by the trial court, analyzing whether counties are required to comply with state labor laws governing overtime pay and meal and rest periods, do not address whether the minimum wage law relates to a matter of statewide concern. In Curcini , the First
In Dimon , our colleagues in Division Four addressed a deputy probation officer's claim against the County of Los Angeles for failure to provide her meal periods or premium pay for missed meals, as required by state labor laws. ( Dimon, supra ,
Finally, any doubt in this area " 'must be resolved in favor of the legislative authority of the state.' " ( City of Vista, supra ,
d. The minimum wage is appropriately tailored to address the statewide concern in the health and welfare of workers
Under the fourth and final inquiry, we "determine whether the law is 'reasonably related to ... resolution' of [the statewide] concern [citation] and 'narrowly tailored' to avoid unnecessary interference in local governance [citation]." ( City of Vista, supra ,
Here, the statewide concern in worker health and welfare is reasonably related to
The City contends the minimum wage requirement is not tailored to the state's interest because it does not exclude charter cities from its ambit. But this merely restates the City's argument that the state interest in the minimum wage should not prevail over the City's local interest in setting its own employees' wages. Further, the statewide concern that workers earn a living wage implicates the wages of the City's employees, who, like other employees in the state, must provide sustenance for themselves and their fаmilies. The City has not offered any alternative regulation that would address this statewide concern without applying the minimum wage to its employees.
The City contends in the alternative that enforcement of the state minimum wage against it would unconstitutionally impair the negotiated MOU between the City and plaintiffs. This argument lacks merit. Both the United States and California Constitutions prohibit laws impairing the obligation of contracts under certain circumstances. (See U.S. Const., art. I, § 10, cl. 1 ["No State shall ... pass any ... Law impairing the obligation of Contracts ...."]; Cal. Const., art. I, § 9 ["A ... law impairing the obligation of contracts may not be passed."].) "It has long been settled, however, that the contract clause does not absolutely bar all impairments." ( Chorn v. Workers' Comp. Appeals Bd. (2016)
The City's claim fails because it has identified no valid contract existing at the time of the legislative action at issue. When the relevant MOU was enacted by resolution of the City Council in September 2015, the statute setting the minimum wage at $10.00 per hour effective January 1, 2016 had already been enacted by the
The City relies solely on Sonoma County , which invalidated a state law that "declared null and void any provision of 'a contract, agreement, or [MOU] between a local public agency and an employee organization or an individual employee which provides for a cost of living wage or salary increase' in excess of the increase prоvided for state employees." ( Sonoma County, supra , 23 Cal.3d at pp. 305, 314,
We recognize the MOU between plaintiffs and the City is a binding contract. Nonetheless, as plaintiffs contend, they are entitled to be paid at or
DISPOSITION
The judgment is reversed. The trial court is directed to vacate the order sustaining the City's demurrer and to enter an order overruling the demurrer. Appellants are to recover their costs on appeal.
WE CONCUR:
PERLUSS, P. J.
SEGAL, J.
Notes
All further undesignated references are to the Labor Code.
Section 1182.12 establishes the applicable state minimum wage effective in each calendar year. Wage Order No. 4-2001 governs employees in the professional, technical, clerical, mechanical, and "similar" occupations; Wage Order No. 10-2001 governs employees in the amusement and recreation industry. The City does not dispute that section 1182.12 and Wage Order Nos. 4-2001 and 10-2001 аpply to plaintiffs' work classifications. Section 1194, subdivision (a), provides that "any employee receiving less than the legal minimum wage ... applicable to the employee is entitled to recover in a civil action the unpaid balance of the full amount of this minimum wage or overtime compensation, including interest thereon, reasonable attorney's fees, and costs of suit."
On February 25, 2018 we granted the City's request for judicial notice of the relevant MOU and related City Council resolutions.
The wage orders are phrased in the negative to read that, except as to specified sections, including the minimum wage provisions in section 4, the wage orders do not apply to employees of the state, cities, counties, or special districts. (See, e.g., Cal. Code Regs., tit. 8, §§ 11040, subd. 1(B) & 11100, subd. 1(C).)
Article XI, section 1, subdivision (b), of the California Constitution, provides that counties "shall provide for the number, compensation, tenure, and appointment of employees." Article XI, section 5, subdivision (b), similarly provides that charter cities have plenary authority over the "compensation, method of appointment, qualifications, tenure of office and removal of [their] deputies, clerks and other employees." The cases addressing the home rule doctrine have applied the same analysis to the authority of charter counties under article XI, section 1, and charter cities under article XI, section 5, to set the compensation for their employees. (See City of Vista, supra , 54 Cal.4th at pp. 555-556,
At the time of Popper , a municipality of the first class "include[d] 'all municipal corporations ... having a population of more than one hundred thousand' (Stats. 1883, p. 24)." (Denman v. Broderick (1896)
The Sonoma County court also invalidated the legislation as an unconstitutional impairment of public agencies' binding contracts with their employees. (Sonoma County, supra ,
Addressing plaintiffs' claims for prospective relief, the City also argues we should not rely on the 2016 amendments to section 1182.12, effective January 1, 2017, that define "employer[s]" subject to the section to include "the state, political subdivisions of the state, and municipalities," to conclude thе minimum wage law applies to charter cities. (§ 1182.12, subd. (b)(3).) Because we conclude IWC Wage Order Nos. 4-2001 and 10-2001 make the state minimum wage applicable to charter cities, we do not reach this contention.
The City also cites to similar dicta in Kirby v. Immoos Fire Protection, Inc . (2012)
That the minimum wage requirement would not function as a salary setting statute for the City is illustrated by the record. The salary schedule attached to the City's 2015 salary resolution reveals that out of hundreds of employee classifications just six classifications were scheduled to be paid an hourly rate less than the $10.00 minimum wage during the subject period. The City later enacted a resolution mandating that as of September 13, 2016 its employees be paid no less than the statewide minimum wage, and setting a range of salaries above this level.
Dimon was decided four years before the Supreme Court in City of Vista clarified the analysis under the home rule doctrine is a legal, not a factual determination. (City of Vista, supra ,