Appellate Opinion Could Limit Labor Commissioner's Ability to Harmonize Rulings on Employee Claims.
The California Labor Commissioner may not harmonize divergent rulings by local labor commissioners concerning employee claims made under Labor Code § 98 by issuing “precedent decisions.” In Corrales v. Bradstreet (2007) ____ Cal. App. 4th ____, the Court ruled that then Labor Commissioner Donna Dell, overstepped her bounds by issuing a precedent decision declaring money paid on account of Labor Code § 226.7 violations for missed meal or rest periods a penalty rather than wages. If money paid for Labor Code § 226.7 violations constituted a penalty, then employees could recover for violations going back one year. If the money paid constituted wages, then employees could recover for violations for the preceding three years.
Despite the fact that the California Supreme Court had earlier ruled that Labor Code § 226.7 payments were wages and not penalties, thus rendering the issue in Corrales v. Bradstreet effectively moot, the Corrales court issued an opinion anyway. The Corrales court held that an opinion was necessary because the question of whether the Labor Commissioner could issue a precedent decision harmonizing inconsistent rulings of local Labor Commissioners’ Offices under Labor Code § 98 was of general public interest and likely to recur.
On the merits, the court ruled that the Labor Commissioner’s precedent decision violated the Administrative Procedures Act. The APA allows the designation of a precedent decision if “an evidentiary hearing for the determination of facts is required for formulation and issuance of the decision.” Gov. Code § 11410.10. Although the court noted that certain precedent decisions were consistent with the requirements of the APA, the court concluded that a precedent decision regarding an employee claim made pursuant to Labor Code § 98 was not consistent with the APA because no evidentiary hearing was required under that section. In doing so, the court rejected the Labor Commissioner’s argument that it could only render a formal decision (ODA) after holding an evidentiary hearing for section 98 claims. The court noted that, in evaluating a section 98 employee claim, the Labor Commissioner may, without an evidentiary hearing, decide to file a court action against the employee or simply to do nothing about the claim. Thus, in the court's view, an evidentiary hearing was not required because the Labor Commissioner could simply decide not to pursue the matter in the first place.
The practical impact of this decision is significant. Given the several local enforcement offices with decision making authority throughout the state, the court’s holding makes it more difficult for the state to maintain a uniform enforcement position. The decision could force the Labor Commissioner to resort to either more informal guidance or, alternatively, promulgate regulations concerning the inconsistent decisions.