Case Name: METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA, Petitioner, v. THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent; DEWAYNE CARGILL et al., Real Parties in Interest; CDI CORPORATION et al., Petitioners, v. THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent; DEWAYNE CARGILL et al., Real Parties in Interest
Court: Supreme Court of California
Jurisdiction: California
Decision Date: 2004-02-26
Citations: 32 Cal. 4th 491
Docket Number: No. S102371
Parties: METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA, Petitioner, v. THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent; DEWAYNE CARGILL et al., Real Parties in Interest; CDI CORPORATION et al., Petitioners, v. THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent; DEWAYNE CARGILL et al., Real Parties in Interest.
Judges: 
Reporter: California Reports
Volume: 32
Pages: 491–526

Head Matter:
[No. S102371.
Feb. 26, 2004.]
METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA, Petitioner, v. THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent; DEWAYNE CARGILL et al., Real Parties in Interest; CDI CORPORATION et al., Petitioners, v. THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent; DEWAYNE CARGILL et al., Real Parties in Interest.
Counsel
Jeffrey Kightlinger, Herny Torres, Jr.; Horvitz & Levy, Mitchell C. Tilner, Jon B. Eisenberg; Bergman, Wedner & Dacey, Bergman & Dacey, Gregory M. Bergman, Daphne M. Anneet and Mark W. Waterman for Petitioner Metropolitan Water District of Southern California.
Katten Muchin Zavis, Stuart M. Richter, Patricia T. Craigie, Justin M. Goldstein, Donna L. Dutcher; Freedman & Stone and Marc D. Freedman for Petitioners CDI Corporation, Comforce Technical Services, Inc., H.L. Yoh Company, MD Technical Services Company, Peak Technical Services, Superior Technical Resources, Inc., Superior Staffing Services, Inc., Volt Information Sciences, Inc., Volt Management Corp. and Westaff (USA), Inc.
Musick, Peeler & Garrett and Charles E. Slyngstad for County Sanitation District No. 2 of Los Angeles County as Amicus Curiae on behalf of Petitioner Metropolitan Water District of Southern California.
McMurchie, Weill, Lenahan, Lee, Slater & Pearse and David W. McMurchie for California Special Districts Association as Amicus Curiae on behalf of Petitioner Metropolitan Water District of Southern California.
Jones, Day, Reavis & Pogue, Elwood Lui, Philip E. Cook; Brown, Winfield & Canzoneri, Nowland C. Hong and Scott H. Campbell for County of Los Angeles as Amici Curiae on behalf of Petitioner Metropolitan Water District of Southern California.
Myers, Nave, Riback, Silver & Wilson, Arthur A. Hartinger and Terry Roemer for 148 California Cities, Counties, Towns and Districts, California Association of Sanitary Agencies, State Water Contractors, California Special Districts Association and Association of California Water Agencies as Amici Curiae on behalf of Petitioner Metropolitan Water District of Southern California.
No appearance for Respondent.
Cochran-Bond Connon & Ben-Zvi, Cochran-Bond Law Offices, Walter Cochran-Bond; Law Offices of William M. Samoska, Samoska & Friedman, Judy A. Friedman and Richard N. Grey for Real Parties in Interest Dewayne Cargill, Anvar Alfi, John Sims, Paul Broussard, Joseph Zadikany, Sun Son, Charlotte Manuel, Steven Minor and Lisa Nelson.
Steptoe & Johnson, Edward Gregory, Sheri T. Cheung, Jason Levin and Bennett Cooper for Real Party in Interest California Public Employees’ Retirement System.
Rothner, Segall & Greenstone, Anthony R. Segall, Glenn Rothner and Julia Harumi Mass for American Federation of State, County and Municipal Employees Union, Local 1902, AFL-CIO as Amicus Curiae on behalf of Real Parties in Interest.
Bendich, Stobaugh & Strong, David F. Stobaugh, Stephen K. Strong, Brian J. Waid; Krakow & Kaplan, Rottman • Kaplan, Steven J. Kaplan; Kalisch, Cotugno & Rust, Lee Cotugno and Mark Kalisch as Amici Curiae on behalf of Real Parties in Interest.
Carol R. Golubock and Patricia C. Howard for Service Employees International Union, AFL-CIO, CLC as Amicus Curiae on behalf of Real Parties in Interest.
Davis, Cowell & Bowe, Richard G. McCracken and Andrew J. Kahn for Union of American Physicians and Dentists as Amicus Curiae on behalf of Real Parties in Interest.
Tosdal, Levine, Smith, Steiner & Wax and Thomas Tosdal for Center on Policy Initiatives as Amicus Curiae on behalf of Real Parties in Interest.

Opinion:
Opinion
WERDEGAR, J.
(1) Defendant Metropolitan Water District of Southern California (MWD) contracts with the California Public Employees' Retirement System (CalPERS) for the latter to provide retirement benefits to MWD's employees. The single issue of law presented here is whether, under the Public Employees' Retirement Law (PERL) (Gov. Code, § 20000 et seq.) and MWD's contract with CalPERS, MWD is required to enroll in CalPERS all workers who would be considered MWD's employees under California common law. MWD contends it may exclude from enrollment workers, such as plaintiffs, who are paid through private labor suppliers, even if they would be employees under the common law test. We conclude, as did the lower courts, that the PERL incorporates common law principles into its definition of a contracting agency employee and that the PERL requires contracting public agencies to enroll in CalPERS all common law employees except those excluded under a specific statutory or contractual provision.
We understand, as MWD argues, that public employers must occasionally hire additional workers for projects lasting an extended period of time and that, in some cases, enrolling those workers in CalPERS may involve a needless expense. But while many temporary workers (generally, those employed for no more than six months at a time or 125 days in a fiscal year) are excluded from CalPERS (§ 20305, subd. (a)(3)), the PERL contains no broad exclusion for long-term, full-time workers hired through private labor suppliers. Any change in the PERL to accommodate such long-term temporary hiring must come from the Legislature, not from this court, which cannot remake the law to conform to MWD's hiring practices. Moreover, although the PERL permits participating agencies to seek agreement from CalPERS for exclusion of selected categories of employees (§ 20502), MWD has not negotiated an exception to its CalPERS contract for its long-term project workers. Again, this court is not empowered to remake the parties' agreement even were we of the view that such an amendment would be desirable.
The present writ proceeding, which arises from the trial court's pretrial decision on a single legal issue in this complex litigation, presents only the question of whether the PERL requires enrollment of all common law employees. We therefore do not decide whether plaintiffs are in fact common law employees of MWD, nor do we express any opinion as to whether plaintiffs, in the event they are determined to be MWD's employees as defined in the PERL, are therefore entitled to enrollment in CalPERS as of the dates they were first employed. Still less do we decide whether plaintiffs are MWD's employees for any purpose other than CalPERS enrollment or whether they are entitled to any benefits as employees under other provisions of law.
Factual and Procedural Background
MWD, a public agency engaged in procuring, storing, and delivering water, hires and employs many employees under a merit system set forth in its administrative code, which establishes procedures for the selection of employees and provides those employees with various benefits; these recognized employees are also enrolled in CalPERS retirement plans pursuant to the MWD-CalPERS contract. In addition, however, MWD has entered into contracts with several private labor suppliers to provide it with workers. MWD classifies these workers as "consultants" or "agency temporary employees" and neither enrolls them in CalPERS retirement plans nor provides them with benefits specified in the MWD administrative code.
Plaintiffs are named individual workers hired through labor suppliers, and a proposed class of such workers, who allege MWD misclassified them as consultants and agency temporary employees and for that reason illegally denied them the ordinary benefits of MWD employment, including CalPERS enrollment. Plaintiffs' petition and complaint, sought writ relief compelling MWD to provide class members with compensation, benefits, and employment rights in accordance with the agency's administrative code and, in particular, to enroll class members in CalPERS.
Plaintiffs also named as defendants several of MWD's labor suppliers, alleging they had violated the unfair competition law (Bus. & Prof. Code, § 17200 et seq.) by assisting MWD to avoid its statutory obligations to plaintiffs; plaintiffs sought injunctive relief and other equitable remedies on this cause of action. The trial court permitted CalPERS to intervene in the action; its complaint seeks a declaration that the PERL requires enrollment of all MWD's common law employees not specifically excluded by statute or the MWD-CalPERS contract.
In a case management order, the trial court identified the following question, labeled "Issue A," for pretrial resolution: "Whether MWD is mandated by the [PERL] to enroll all common law employees in CalPERS." After extensive briefing and argument on MWD's motion for summary adjudication and CalPERS's motion for decision, both concerning Issue A, the court ruled that MWD is mandated by the PERL to enroll all common law employees in CalPERS.
MWD and the labor suppliers sought review in the Court of Appeal by petition for writ of mandate. The Court of Appeal, after issuing an order to show cause, denied the petition by opinion, holding the trial court had resolved Issue A correctly. We granted MWD's and the labor suppliers' petitions for review.
The issue upon which we granted review is a purely legal one that can be decided without exploring the details of plaintiffs' relationship with MWD and the labor suppliers. Suffice it to say that plaintiffs alleged, and have produced some evidence to show, that they worked at MWD for indefinite periods, in some cases several years; that MWD managers interviewed and selected them for employment; that they were integrated into the MWD workforce and performed, at MWD offices or worksites, duties that are part of MWD's regular business; that MWD supervisors directly oversaw and evaluated their work, determined their hourly rates of pay, raises, and work schedules, approved their timesheets, and had the power to discipline and terminate them; and in general that MWD had the full right to control the manner and means by which they worked, while the labor suppliers merely provided MWD with "payroll services." Such facts, if proven, might support an argument that plaintiffs are MWD's employees under the established common law test (see Tieberg v. Unemployment Ins. App. Bd. (1970) 2 Cal.3d 943 [88 Cal.Rptr. 175, 471 P.2d 975]; Rest.2d Agency, § 220), which is used by CalPERS administrators to distinguish employees from independent contractors. But these allegations, which MWD has denied for lack of knowledge or information, have not yet been tried.
Discussion
Under the PERL, the CalPERS system covers not only state employees but also employees of "contracting agencies," that is, public entities, such as MWD, that have chosen to participate in CalPERS by contract with the CalPERS governing board. (§§ 20022, 20460.)
A CalPERS "member"—the status to which plaintiffs claim they are entitled—is an "employee who has qualified for membership in this system and on whose behalf an employer has become obligated to pay contributions." (§ 20370, subd. (a).) More specifically, "local miscellaneous members" include "all employees of a contracting agency who have by contract been included within this system, except local safety members." (§ 20383.) Under section 20281, a person hired as an employee of the state or a contracting agency "becomes a member upon his or her entry into employment." As these provisions indicate, only an agency's employees—not those performing services for the agency on other terms—may be enrolled in CalPERS. The PERL makes this rule explicit in section 20300, subdivision (b), which excludes from CalPERS membership "[independent contractors who are not employees."
The contract between a participating agency and CalPERS may exclude some of the agency's employees, but "[t]he exclusions of employees . . . shall be based on groups of employees such as departments or duties, and not on individual employees." (§ 20502.) Furthermore, the CalPERS board may disapprove a contract amendment proposing an exclusion "if in its opinion the exclusion adversely affects the interest of this system." (Ibid.) Finally, employees of contracting agencies may not decline membership for which they qualify: "Membership in this system is compulsory for all employees included under a contract." (Ibid.) The MWD-CalPERS contract follows the above provisions of section 20502; it states that all "[ejmployees other than local safety members" shall become members of CalPERS unless excluded by law or by the agreement, and excludes only a single group, "safety employees."
The above establishes that both under the provisions of the PERL, to which MWD. became subject when it entered into its contract with CalPERS (§ 20506), and under the contract itself, MWD is obliged to enroll in CalPERS all its employees other than safety employees and those, such as certain part- time and temporary employees (§ 20305), excluded by the PERL. Our question, then, is what the PERL means by "employee."
As to contracting agencies, the PERL gives the term no special meaning, stating simply that "employee" means "[a]ny person in the employ of any contracting agency." (§ 20028, subd. (b).) In this circumstance—a statute referring to employees without defining the term—courts have generally applied the common law test of employment. " ' [Wjhere Congress uses terms that have accumulated settled meaning under . the common law, a court must infer, unless the statute otherwise dictates, that Congress means to incorporate the established meaning of these terms.' [Citations.] In the past, when Congress has used the term 'employee' without defining it, we have concluded that Congress intended to describe the conventional master-servant relationship as understood by common-law agency doctrine." (Community for Creative Non-Violence v. Reid (1989) 490 U.S. 730, 739-740 [104 L.Ed.2d 811, 109 S.Ct. 2166], italics added; accord, People v. Palma (1995) 40 Cal.App.4th 1559, 1565-1566 [48 Cal.Rptr.2d 334] ["as a general rule, when 'employee' is used in a statute without a definition, the Legislature intended to adopt the common law definition and to exclude independent contractors"].) California courts have applied this interpretive rule to various statutes dealing with public and private employment. The federal courts have applied it specifically to the question of qualification for retirement benefits. Unless given reason tó conclude the Legislature must have intended the term to have a different meaning in section 20028, subdivision (b), we also can only adhere to the common law test. We proceed to consider MWD's and the labor suppliers' arguments for a contrary reading of the PERL.
Observing that the PERL should be read as a whole, MWD points to several provisions of the law that, it contends, show the legislative intent that a contracting agency's worker is to be covered only if the funds from which the worker is paid are controlled by the agency, a criterion it asserts plaintiffs do not meet because their paychecks were issued by the labor suppliers, not MWD. We agree the provisions of the PERL should be read in the context of the entire law. {City of Huntington Beach v. Board of Administration (1992) 4 Cal.4th 462, 468 [14 Cal.Rptr.2d 514, 841 P.2d 1034].) For the reasons stated below, however, we do not agree that only those on the MWD payroll may be considered MWD employees for purposes of enrollment in CalPERS.
While subdivision (b) of section 20028, concerning employees of contracting agencies, contains no control-of-funds limitation, subdivision (a) of the same statute, concerning employees of state agencies, does; subdivision (a) defines "employee," in relevant part, as "[a]ny person in the employ of the state . . . whose compensation . is paid out of funds directly controlled by the state . . . excluding all other political subdivisions, municipal, public and quasi-public corporations." (Italics added.)
MWD contends subdivision (b) of section 20028 should be read as containing the same control-of-funds limitation as section 20028, subdivision (a) because, prior to the PERL's 1945 codification, the provisions of the two present subdivisions were part of a single paragraph; no reason exists for the Legislature to have required direct agency control in one case (state agencies) but not in the other (contracting agencies); and to make such a distinction would violate the constitutional equal protection rights of any state agency workers excluded from CalPERS because they are paid from funds not directly controlled by the state.
We find these arguments unpersuasive. As the Court of Appeal explained, "[w]here the Legislature makes express statutory distinctions, we must presume it did so deliberately, giving effect to the distinctions, unless the whole scheme reveals the distinction is unintended." Here, every indication is that the distinction was purposeful. Though the precodification version of the law contained provisions regarding state agencies and contracting cities in the same paragraph, indeed the same sentence, that text, like the two subdivisions today, nonetheless clearly distinguished between the two categories of employees and imposed a direct-control-of-funds limitation only as to employees of state agencies. The legislative intent to make this distinction, shown by the plain language of section 20028 and its predecessors, is confirmed by other parts of the PERL permitting state employees who are reassigned to positions in which their compensation does not come from a source directly controlled by the state nevertheless to continue to participate in CalPERS. (§§ 20284, 20772; Cf. § 21020, subd. (d).) These provisions, like the limitation on employment in section 20028, apply only to employment by the state, not by a contracting agency, strongly suggesting the distinction in section 20028 was not accidental.
A rational legislative basis for the distinction is, moreover, readily apparent. The direct-control-of-funds limitation in subdivision (a) of section 20028 prevents local government employees working in programs indirectly funded by the state from claiming state employment. (See, e.g., Adcock v. Board of Administration (1979) 93 Cal.App.3d 399, 402-403 [155 Cal.Rptr. 596] [under predecessor to § 20028, subd. (a), inheritance tax referee paid from state tax revenues controlled by county treasurer is not eligible for CalPERS state service credit].) Contracting agencies, unlike the state, are not typically engaged in indirect funding of other government entities' programs, and a contracting agency, also unlike a state agency, may seek exclusion, under section 20502, of categories of employees not paid out of funds directly controlled by the agency. MWD's claim that the distinction in section 20028 between state and contracting agency employees must have been a drafting error resulting from the creation of two subdivisions from a single statutory paragraph is therefore without merit, as is its claim that the distinction violates equal protection principles because it lacks a rational basis.
MWD also argues that failing to read a control-of-funds limitation into section 20028, subdivision (b) will have the absurd and burdensome consequence of enrolling thousands of contracting agency workers in CalPERS with no prospect those employees will ever receive retirement benefits. This claim rests on the PERL provisions arguably basing the amount of retirement benefits upon compensation paid from funds controlled by the employing agency. (See § 21354 [benefits for local miscellaneous members determined in part from member's "final compensation"], 20069, subd. (a) ["state service" is service "for compensation"], 20630 ["compensation" is "remuneration paid out of funds controlled by the employer"].)
As CalPERS points out, however, other provisions of the PERL may permit retirement benefits to be calculated on a basis not formally dependent on state or contracting agency employer control of funds. (See § 20024 [service credit available for "service in employment while not a member but after persons employed in the status of the member were eligible for membership" as well as for "state service"], 20037 ["final compensation" dependent on member's "compensation eamable"], 20636 ["compensation eamable" dependent on member's "payrate" and "special compensation," both defined without reference to employer control of funds].) We agree with the Court of Appeal that "MWD has not established that the sections it cites constitute the only tests for determining benefit levels."
More to the point, the PERL's enrollment mandate is separate from the right to collect retirement benefits. A contracting agency must enroll all employees who are not excluded from the system by law or contract. (§ 20502; see also § 20281 [new contracting agency employee "becomes a member upon his or her entry into employment"].) The right of any member to receive benefits, on the other hand, is in the first instance for CalPERS itself to decide, after hearing if necessary, when such benefits are sought. (§§ 20123, 20125, 20134.) Even if, as MWD claims, service credit and final compensation are dependent on whether the contracting public agency controlled the funds from which the employee was paid, CalPERS correctly claims the authority to determine, subject to judicial review, "the existence, level and effect of such control following evidentiary hearings" on entitlement to benefits. In a given case, CalPERS may well determine that an employee whose paycheck was issued by a private labor supplier, but whose rate of pay and hours of work were set by the employing contracting agency, whose fimesheéts were subject to approval by that agency's supervisors, and for whose work the labor supplier was paid an amount calculated from the agency-dictated pay rate (all of which, the record suggests, were true of at least some plaintiffs here), was compensated from funds controlled, within the meaning of section 20630, by the contracting public agency. (See People v. Groat (1993) 19 Cal.App.4th 1228, 1232-1234 [24 Cal.Rptr.2d 15] [local government manager who approved her own timesheets thereby controlled disbursement of public funds within meaning of criminal misappropriation statute]; People v. Qui Mei Lee (1975) 48 Cal.App.3d 516, 519, 523 [122 Cal.Rptr. 43] [same, as to county medical director with authority to approve invoices from private hospitals, which were actually paid by county auditor].)
No absurd or obviously unintended result is necessarily created, therefore, by reading section 20028, subdivision (b) according to its plain language, as not containing the direct-control-of-funds limitation found in section 20028, subdivision (a). To the contrary, it is MWD's interpretation of the statute, under which a public agency employee paid through a third party would automatically be disqualified from CalPERS membership, that would undermine the legislative purpose of the PERL. As the trial court cogently observed in its Issue A ruling, MWD's construction "would allow . . . contracting agencies to unilaterally avoid their enrollment obligations by setting up a variety of third-party wage and benefit mechanisms, or by bypassing internal merit hiring systems, both of which appear inconsistent with the legislative requirement in section 20502 that contracting agencies must enroll all employees absent a statutory exclusion or a contractually agreed upon exclusion expressly approved by the CalPERS Board."
MWD also makes two related public policy arguments for construing the PERL to exclude workers hired through labor suppliers: first, MWD observes that if such workers are hired without going through the agency's normal merit selection procedures (in MWD's case, set out in its administrative code), but can obtain full employee benefits, merit selection programs will be undermined; and second, MWD argues that public agencies often need temporary workers solely for individual public works projects, which may take years to complete, and that giving such employees full civil service" rights, including restrictions on discharge, will result in unnecessarily increased public staffing costs.
MWD tethers neither argument to provisions of the PERL, and we are aware of nothing in the PERL to support an exclusion based on either rationale. Participation in the CalPERS retirement system does not depend on whether an agency chooses to classify an employee as eligible for benefits under civil service or local merit selection rules. Such an interpretation could lead, contrary to the letter and spirit of the law, to a patchwork of standards set by local agencies rather than a uniform definition set and applied by the CalPERS administering board. (See §20125 [CalPERS board has sole authority to "determine who are employees"], 20502 [board may disapprove agency proposal to exclude a group of employees]; City of Los Altos v. Board, of Administration (1978) 80 Cal.App.3d 1049, 1051-1052 [144 Cal.Rptr. 351] [legislative intent was for a single system-wide standard of eligibility, not various standards set by individual participating agencies]; see also Com. on Pensions of State Employees, Rep. to Leg. (Dec. 1928) p. 10 [proposed state pension law "has been drawn on the assumption that all state employees shall participate in the system, without regard to whether or not they have civil service status"].) Nor, given the express exclusion of "seasonal, limited-term . or other irregular" workers who are employed for fewer than six months at a time or 125 days (or 1,000 hours) in a fiscal year (§ 20305, subd. (a)(3)), can we infer an intent to exclude, more broadly, all workers hired for a long-term public works project.
Though we cannot rewrite the PERL to relieve MWD of the consequences it foresees from application of the law to its employment practices, MWD itself seemingly has the power to avoid at least some of them. As CalPERS observes, "[i]t was MWD who chose to hire [plaintiffs] through the providers instead of through its own merit selection system." If, as it claims, MWD fears "favoritism, cronyism and political patronage" will result from giving workers hired outside the merit selection system employee status, the agency retains the option of applying its merit selection system more broadly to avoid these evils.
To the extent MWD complains of having to provide long-term project workers the employment security and other benefits provided for in its administrative code, we stress that no such result follows from our plain language reading of the PERL: a determination that long-term project workers are entitled to enrollment in CalPERS would not necessarily make those workers permanent employees for purposes of MWD's administrative code or entitle them to benefits provided by MWD to its permanent employees. For both past and present workers, entitlement to local agency benefits is a wholly distinct question from entitlement to CalPERS enrollment and, as to MWD's future hires, of course, nothing in the PERL prevents it from amending its own code.
The private labor suppliers, citing several statutes and regulations that permit dual employers of the same worker (joint employers or coemployers) to share or allocate between them certain responsibilities of employment, argue the PERL, too, should be construed to recognize coemployment. They maintain that under a theory of coemployment the labor suppliers, rather than their clients such as MWD, should be deemed the employers for purposes of the PERL, thus excluding workers they supply from the public retirement system. No legitimate basis exists, however, for finding a coemployment exception to the PERL.
The cited laws may be fairly read as showing a recognition of leased workers as a special case in certain contexts. But none purports to abrogate the common law test for employment, and none suggests that workers hired through labor suppliers are, for purposes other than those treated by the cited statutes, deemed employees only of the labor supplier. Nor, of course, has the Legislature provided in the PERL for any coemployment exception to a contracting agency's duty to enroll employees in CalPERS. The only relevant legislative choice to date has been to require enrollment of all persons in the "employ" of a contracting agency. (§ 20028, subd. (b).) Where the Legislature has expressly provided for separation of certain payments and benefits (workers' compensation and unemployment insurance) from employment as defined at common law, but has not done so for public retirement benefits, the court may not write such an omitted exception into the PERL statutes. As the Court of Appeal explained, "such revision is a legislative, not a judicial, responsibility."
No more persuasive is the labor suppliers' claim that a worker hired through a supplier waives his or her right to CalPERS membership by agreeing to be hired in this manner. Contrary to the suppliers' assertion that "[n]othing in PERL indicates participation is mandatory," the PERL states in so many words that "[mjembership in this system is compulsory for all employees" not excluded by other provisions of the PERL or by the local agency's contract with CalPERS. (§ 20502; see also § 20281 [employee of state or contracting agency becomes a member upon entry into employment].) That rule protects the system itself, for, as the commission that initially recommended establishment of a state pension system explained, without mandatory membership some employees may prefer to take their full salary and, absent the prospect of a pension, will be reluctant to retire even when they are no longer productive: "The state can secure full value for the money it contributes only through compulsory membership of all employees. One employee should have no more right than another to continue at full salary far beyond the period of full working efficiency." (Com. on Pensions of State Employees, Rep. to Leg., supra, p. 10; accord, State Civil Service, 22 Ops.Cal.Atty.Gen. 205, 206 (1953) [benefits under the PERL are established for a public reason and may not be waived by private agreement].)
None of the federal decisions cited by the labor suppliers and the concurring and dissenting opinion (Roth v. American Hospital Supply Corp. (10th Cir. 1992) 965 F.2d 862; Hockett v. Sun Company, Inc. (10th Cir. 1997) 109 F.3d 1515; Capital Cities/ABC, Inc. v. Ratcliff (10th Cir. 1998) 141 F.3d 1405) is to the contrary. The Roth court relied expressly on authority holding, under ERISA, that participation in a pension plan may be knowingly and voluntarily waived (Roth v. American Hospital Supply Corp., supra, at p. 867); under the PERL, as stated, membership is compulsory for eligible employees of contracting agencies. Roth, moreover, was not an ordinary leased worker but a chief executive officer who, in negotiations over sale of his company, insisted that he continue to be employed by the former parent company. The court limited its waiver holding to those facts, noting that "[e]mployers should not take either our reasoning or result to mean that they may coerce their employees to waive some or all of their benefits." (Id. at p. 868.) The Hockett court applied the common law test for employment; to the extent it gave particular emphasis to the parties' understanding of their relationship, one of the established factors, it relied on its earlier decision in Roth. (Hockett v. Sun Company, Inc., supra, at p. 1527.) Finally, in CapitalCities/ABC, Inc. v. Ratcliff, the same court held simply that the employees had, by express contract, waived their rights to pension benefits. (CapitalCities/ABC, Inc. v. Ratcliff, supra, at p. 1410.) As already explained, such contractual waivers are not recognized under the PERL.
The concurring and dissenting opinion argues "it should be for the Legislature, not this court," to decide "whether a public agency should be permitted to use leased workers to meet its labor needs." (Cone. & dis. opn. of Brown, J., post, at p. 513.) We absolutely agree. Nothing we say here precludes the Legislature, if it so chooses, from amending the PERL to declare leased workers to be the employees of the labor suppliers, as the Legislature in fact has done for certain (but, notably, not all) labor suppliers in the unemployment insurance context. (Unemp. Ins. Code, § 606.5.) But for this court to anticipate legislative action and create an unprecedented exemption from the PERL by replacing the established common law test of employment with a rule of complete deference to the parties' characterization of their relationship (cone. & dis. opn. of Brown, 1, post, at pp. 513, 515-516) would be, we believe, improper, especially as the issue here is one of statutory interpretation, not of common law development. Convinced the common law test must be rewritten so as to serve the "labor consumeras]" purpose of "separating] control from other terms of employment," the concurring and dissenting justice excoriates the court for failing to reach out to embrace this "new labor paradigm." (Id., at pp. 513, 517.) But we believe the court exercises restraint consistent with the "[p]roper exercise of our role" and fully discharges its "fundamental obligation" (Id., at pp. 510, 520) by deciding the single statutory question presented under the procedural posture of this case, Issue A of the case management order, without exploring common law issues neither decided by the lower courts nor briefed by the parties.
Conclusion
In sum, we conclude the PERL's provision concerning employment by a contracting agency (§ 20028, subd. (b)) incorporates a common law test for employment, and that nothing elsewhere in the PERL, in MWD's administrative code, or in statutes and regulations addressing joint employment in other contexts supports reading into the PERL an exception to mandatory enrollment for employees hired through private labor suppliers.
Justice Baxter claims our decision will impose a "crushing burden" on MWD and other contracting agencies by requiring them to make up previously unpaid CalPERS contributions for leased workers. (Dis. opn. of Baxter, J., post, at p. 521.) As previously stated (see ante, at p. 497), however, we do not hold that plaintiffs or any other particular leased workers must be enrolled in CalPERS; nor do we hold that plaintiffs, if found to be MWD employees, must be enrolled as of their dates of initial employment. Moreover, as Justice Baxter himself recognizes (dis. opn. of Baxter, J., post, at pp. 523-524), employees with fewer than five years in qualifying service— presumably including most employees hired as temporary workers through labor suppliers—are ineligible for CalPERS retirement benefits, and a contracting agency's contribution obligations are determined actuarially, taking into account the employer's eligibility experience. (See § 20815, subd. (a), 21060.) Contributions attributable to temporary leased employees should thus be substantially reduced. Finally, pursuant to section 20812, the CalPERS board may adopt a funding period of 30 years for amortization of unfunded contributions from contracting agencies and "shall approve new amortization periods based upon requests from contracting agencies . . . that can demonstrate a financial necessity," making the imposition of ruinous lump-sum liability even more unlikely. In short, Justice Baxter greatly overstates the effect of the court's decision.
Disposition
The judgment of the Court of Appeal is affirmed.
George, C. J., Kennard, J., and Moreno, J., concurred.
Hereafter all statutory references are to the Government Code unless otherwise indicated.
Plaintiffs also include some individuals who allegedly were hired directly by MWD but misclassified as "district temporary employees" and, for that reason, have been denied the ordinary benefits of MWD employment. The complaint does not make clear whether these plaintiffs have also been denied CalPERS enrollment. The parties' contentions on the single issue before us, entitlement to CalPERS enrollment, have focused solely on those plaintiffs hired through labor suppliers; our discussion will therefore do the same.
MWD argues that CalPERS has not historically applied the common law test to leased workers, and one of the minority opinions accuses CalPERS of "misleading procrastination" in this respect. (Dis. opn. of Baxter, J., post, at p. 521.) But CalPERS insists it has done so consistently from as early as 1944, when MWD first sought to join the system, and cites three occasions on which it determined that leased workers were in fact employees under the common law test. Unlike the dissent, we decline to express an opinion on CalPERS's conduct, a matter that is simply not before us. Resolution of the sole question presented—whether MWD is obliged to enroll all its common law employees—does not depend on CalPERS practices.
According to the complaint, none of the plaintiffs are safety employees, who are excluded under the MWD-CalPERS contract.
See, e.g., Tieberg v. Unemployment Ins. App. Bd., supra, 2 Cal.3d at pages 946-950 (unemployment insurance law); McFarland v. Voorheis-Trindle Co. (1959) 52 Cal.2d 698, 702-706 [343 P.2d 923] (workers' compensation exclusivity); Service Employees Internat. Union v. County of Los Angeles (1990) 225 Cal.App.3d 761, 769-770 [275 Cal.Rptr. 508] (public employment collective bargaining law).
Nationwide Mutual Insurance Company v. Darden (1992) 503 U.S. 318, 322-323 [117 L.Ed.2d 581, 112 S.Ct. 1344] ("employee," as used in Employee Retirement Income Security Act (ERISA), is defined by the common law test); see Wolf v. Coca-Cola Company (11th Cir. 2000) 200 R3d 1337, 1340-1342 (leased worker may be employee, under common law test, for purposes of ERISA, but is not entitled to benefits because specifically excluded by terms of employer's plan); Vizcaino v. United States District Court for the Western District of Washington (9th Cir. 1999) 173 F.3d 713, 723-724 (Restatement test applied to determine whether temporary agency employees were employees of Microsoft for purposes of participation in Microsoft's employee stock purchase plan).
Section 20028, subdivisions (a) and (b) provide in full: " 'Employee' means all of the following: [][] (a) Any person in the employ of the state, a county superintendent of schools, or the university whose compensation, or at least that portion of his or her compensation that is provided by the state, a county superintendent of schools, or the university, is paid out of funds directly controlled by the state, a county superintendent of schools, or the university, excluding all other political subdivisions, municipal, public and quasi-public corporations. 'Funds directly controlled by the state' includes funds deposited in and disbursed from the State Treasury in payment of compensation, regardless of their source. H] (b) Any person in the employ of any contracting agency."
See Statutes 1939, chapter 927, section 3, pages 2605-2606, defining an employee as "any person in the employ of the State of California whose compensation . is paid out of funds directly controlled by the State . . . and, for the purposes of this act, any person in the employ of any contracting city who is included by contract under the retirement system."
Justice Baxter argues this court should decide as a matter of law that plaintiffs are ineligible for CalPERS membership because that the labor suppliers issued their paychecks is undisputed. (Dis. opn. of Baxter, J., post, at p. 525, fn. 5.) This analysis assumes that the entity issuing a paycheck necessarily has sole control (within the meaning of the PERL) of the funds from which the worker is paid. But as experience and the decisions cited above indicate, control over disbursement of funds may be exercised by persons other than those who actually write the checks. MWD's asserted control over whether, how long, and at what wages its leased employees work might well be sufficient to constitute control over the funds from which they are paid, funds that MWD supplies through its payments to the labor suppliers. Because the degree and nature of the control exercised by MWD is a matter of disputed fact (see ante, at pp. 498-499), so far unresolved either by trial or by CalPERS hearing, the legal question of how much control is enough is not ripe for decision.
We say nothing here, of course, regarding plaintiffs' entitlement, or lack thereof, to the MWD administrative code benefits sought in their petition and complaint. Only the issue of the PERL's interpretation is before us.
See, e.g., Labor Code section 3602, subdivision (d) (where a worker has multiple employers, one employer may contract with another for the payment of workers' compensation premiums and may thereby satisfy its statutory duty to secure compensation); Unemployment Insurance Code section 606.5 (if labor supplier meets definition of "leasing employer"—a supplier who also determines the workers' assignments and rates of pay and has the right to hire and fire the workers—supplier is the employer for purposes of securing unemployment insurance; otherwise, the "client or customer" remains the employer for unemployment insurance purposes); California Code of Regulations, title 2, section 7286.5 (for purposes of Fair Employment and Housing Act, worker supplied through temporary services agency is employee of temporary services agency "with regard to such terms, conditions and privileges of employment under the control of the temporary service agency," but is employee of client employer as to "such terms, conditions and privileges of employment under the control of that employer").
In a variation on the waiver theory, Justice Baxter argues that because plaintiffs "decided" to be employed through labor suppliers, they should have no right to benefits ordinarily available to MWD employees. (Dis. opn. of Baxter, J., post, at p. 525.) But the record suggests plaintiffs were given no choice in the matter. The named plaintiffs' declarations generally indicate they were interviewed and selected by MWD supervisors and told their employment would be through a labor supplier. The dissent cites no evidence plaintiffs freely chose to avoid "the rigors of a competitive merit selection system." (Ibid.) All that plaintiffs "decided" was to accept employment on the terms offered. In contrast, MWD, exercising apparently unfettered freedom of choice, decided to hire plaintiffs without using the procedures set forth in its administrative code. If any unfairness to other employees results from that decision, it should not be attributed to plaintiffs.
Even if we could properly reach the question of a "new labor paradigm" in this case—despite the lack of even a hint of this idea in the statute at issue—we would not necessarily be convinced this case calls for a fundamentally new understanding of the employment relationship. MWD, a large public employer, is already well organized to assume the risks and burdens of the employment relationship for its scores or hundreds of employees. If the allegations in plaintiffs' complaint are true, MWD may have hired plaintiffs through labor suppliers not to reduce the burden on its human resources department, but to avoid providing them retirement and other employment benefits.