Opinion ID: 1224847
Heading Depth: 3
Heading Rank: 1

Heading: Overruling Riley and its progeny

Text: (2) Caltrans first urges us to reconsider and overrule or disapprove the archaic Riley decision and the subsequent decisions of this court and the Court of Appeal that have applied, extended, or confined its rule in various contexts. As Caltrans graphically puts it, [t]he incoherent, unworkable, and potentially crippling tests which encrust and distort article VII are not even hinted at by its language. Caltrans correctly observes that the private contracting restriction and its exceptions do not appear in the bare language of article VII but derive from judicial interpretation regarding the logical implications of the constitutional provisions. (See CSEA, supra, 199 Cal. App.3d at p. 844.) In Caltrans's view, Riley erred in inferring from California Constitution, former article XXIV, the predecessor of article VII, that the state is prohibited from using independent contractors except in narrow, exceptional situations. According to Caltrans, former article XXIV was simply intended to restrict appointments and promotions in state service except on the basis of merit and competitive examination, in order to avoid favoritism and the spoils system in selecting among existing state employees. Caltrans cites various sources in support of its position that the constitutional civil service mandate was not intended to restrict private contracting. For example, the ballot arguments favoring the adoption of the original civil service mandate in 1934 referred to its purpose to prohibit appointments and promotion in State service except on the basis of merit, efficiency and fitness ascertained by competitive examination. (Ballot Pamp., Proposed Amends. to Cal. Const. with arguments to voters, Gen. Elec. (Nov. 6, 1934), argument in favor of Prop. 7, p. 12, italics added.) In Riley, we considered and rejected this precise argument, concluding that the civil service mandate does not distinguish between employees and independent contractors, but is more concerned with whether the civil service staff could perform the services involved. ( Riley, supra, 9 Cal.2d at p. 135; accord, Burum v. State Compensation Ins. Fund, supra, 30 Cal.2d at pp. 579-580.) As an analytical matter, Riley 's rule seems appropriate to assure that the state civil service is not neglected, diminished, or destroyed through routine appointments to independent contractors made solely on the basis of political considerations or cronyism. (See Williams, supra, 7 Cal. App.3d at p. 397 [ Riley rule emanates from an implicit necessity for protecting the policy of the organic civil service mandate against dissolution and destruction]; CSEA, supra, 199 Cal. App.3d at pp. 846-847 [dual purposes of article VII are to promote efficiency and economy in state government, and to eliminate the `spoils system' of political patronage]; see also Comment, Contracting With the State Without Meeting Civil Service Requirements (1957) 45 Cal.L.Rev. 363, 364 [The inclusion of independent contractors is of vital importance as it cuts off a wide area of possible subversion of the civil service system.].) As plaintiffs observe, Were the rule otherwise, the civil service system could be entirely undone by a system of contracting; and the state's work force could be dominated by independent contractors who would be hired from job to job. Such a system, operating without regard to considerations of economy or efficiency, and open to a patronage/spoils system method of contracting, would conflict with the electorate's probable intent in adopting article VII and its predecessor. Moreover, even assuming for the sake of argument that Riley 's constitutional interpretation was originally flawed, under settled rules of construction we must presume that Riley 's interpretation was preserved and reincorporated into the Constitution on two subsequent occasions when (1) in 1970, the voters reenacted an amended version of former article XXIV pursuant to the recommendation of the California Constitution Revision Commission, and (2) in 1976, the voters adopted the substance of former article XXIV as new article VII. (See Sarracino v. Superior Court (1974) 13 Cal.3d 1, 8 [118 Cal. Rptr. 21, 529 P.2d 53] [adoption of constitutional language similar to that in former constitutional provision is presumed to incorporate authoritative judicial construction of former language]; cf. In re Harris (1989) 49 Cal.3d 131, 136 [260 Cal. Rptr. 288, 775 P.2d 1057] [drafters of initiative measure, and voters adopting it, are deemed to know judicial construction of law serving as its source].) In this connection, we note that in 1966, in summarizing its recommendations with regard to the proposed revision of former article XXIV, the California Constitution Revision Commission stated: The first question discussed in considering Article XXIV was whether the matters treated in the article, and particularly the enumeration of exemptions [from civil service] in Section 4, ought to be retained in the Constitution. It was concluded that California has one of the best civil service systems in the nation and that constitutional treatment of the basic elements of the system is essential to insure continuance of its high quality. It was recognized, for example, that the alternative of placing the entire exemption power with the Legislature would [subject] the legislators to unduly severe pressures to carve out various exceptions to the application of civil service laws and that much strain on the integrity and efficacy of the civil service system could result. (Cal. Const. Revision Com., Proposed Revision (1966) p. 109.) Thus, the California Constitution Revision Commission considered and rejected an approach that would have given the Legislature open-ended authority to create exemptions from civil service in any area in which the Legislature felt that public policy would be served better by an alternative to the civil service system. We believe this legislative history of the current civil service provisions of the California Constitution supports both the retention of the constitutional principle established in Riley and our conclusion that the principle embodied in Riley operates to constrain the actions of the Legislature as well as of the executive branch. Caltrans likewise criticizes Riley 's progeny and the creation of such extensions or modifications as the new state function rule (see Williams, supra, 7 Cal. App.3d at pp. 397-399) and the cost savings rule (see CSEA, supra, 199 Cal. App.3d at pp. 851-853). In Caltrans's view, the rules these cases announced are unsupported by the bare language of the civil service mandate and constitute further judicial legislation. Assuming Riley 's premise is correct, however, and the Constitution indeed limits private contracting, these subsequent cases seem reasonable, practical interpretations of the general constitutional provision. As we explained in a case interpreting another constitutional measure, ... we deal with a constitutional provision [Cal. Const., art. XIII A] of a kind, similar to many others, which necessarily and over a period of time will require judicial, legislative and administrative construction. This is a fairly common procedure. ( Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization (1978) 22 Cal.3d 208, 244 [149 Cal. Rptr. 239, 583 P.2d 1281].) Moreover, ... California courts have held that constitutional and other enactments must receive a liberal, practical common-sense construction which will meet changed conditions and the growing needs of the people. [Citations.] ( Id. at p. 245.) Caltrans asserts supposed policy reasons why we should overrule or disapprove 60 years of settled case law: As a result [of the existing case law], Californians have had to forego promising new techniques for providing services, ranging from contracting with private contractors to outright privatization. This has made more expensive by possibly billions of dollars the delivery of services in California. It also puts lives at risk. For example, the inability to use private engineering firms would threaten the timely completion of the seismic retrofit of California bridges and overpasses. First, although these reasons, if factually based, might support a constitutional amendment to clarify, or indeed abrogate, the private contracting restriction, they offer no solid ground for ignoring traditional principles of stare decisis. (See, e.g., Moradi-Shalal v. Fireman's Fund Ins. Companies (1988) 46 Cal.3d 287, 296-297 [250 Cal. Rptr. 116, 758 P.2d 58].) Caltrans points to no new legal developments, such as scholarly criticism or commentary, or contrary case law in other states, that would cast doubt on the continued vitality of Riley and its progeny. Although Caltrans asserts that many other states allow private contracting, our review of the sister state decisions indicates that, like California, most of these states have substantial restrictions and efficiency and economy requirements to protect their civil service systems from deterioration through private contracting. (See, e.g., Hall v. City of Tuscaloosa (Ala. 1982) 421 So.2d 1244, 1249; Moore v. State, Dept. of Transp. (Alaska 1994) 875 P.2d 765, 768-773; Colorado Ass'n of Pub. Emp. v. D.O.H. (Colo. 1991) 809 P.2d 988, 992-998; Jack A. Parker & Assoc., Inc. v. State, etc. (La. Ct. App. 1984) 454 So.2d 162, 165-167; Michigan State Employees v. Civil Service Com'n (1985) 141 Mich. App. 288 [367 N.W.2d 850, 852]; University of Nevada v. State Employees Ass'n, Inc. (1974) 90 Nev. 105 [520 P.2d 602, 604-607]; Nassau Educ. Chap. v. Great Neck U. Free Sch. (1981) 85 A.D.2d 733 [445 N.Y.S.2d 812, 813]; Carter v. Ohio Dept. of Health (1986) 28 Ohio St.3d 463 [504 N.E.2d 1108, 1109-1110]; Local 4501, Comm. Workers v. Ohio State Univ. (1984) 12 Ohio St.3d 274 [466 N.E.2d 912, 914-915]; Stump v. Dept. of Labor & Industry (1993) 154 Pa.Commw. 471 [624 A.2d 229, 231]; Teamsters Local 117 v. King County (1994) 76 Wn.App. 18 [881 P.2d 1059, 1061-1062]; Wash. Fed., etc. v. Spokane Community Coll. (1978) 90 Wn.2d 698 [585 P.2d 474, 475]; see also Kaplan, The Law of Civil Service (1958) pp. 98-99; Becker, With Whose Hands: Privatization, Public Employment, and Democracy (1988) 6 Yale L. & Pol'y Rev. 88, 99-103; Comment, Contracting With the State Without Meeting Civil Service Requirements, supra, 45 Cal.L.Rev. at pp. 364-365; Note, State Civil Service Law โ Civil Service Restrictions on Contracting Out by State Agencies (1980) 55 Wash. L.Rev. 419, 434-435, fns. 76-84, and cases cited ( Civil Service Note ).) Caltrans acknowledges that although the federal government actively encourages private contracting, applicable legislation calls for policies, procedures, and practices which will provide the Government with property and services of the requisite quality, within the time needed, at the lowest reasonable cost.  (41 U.S.C. former ง 401(2), italics added; see Diebold v. U.S. (6th Cir.1991) 947 F.2d 787, 789 [federal procurement rules require agencies to acquire goods and services at lowest possible cost to taxpayer].) In short, the Riley decision and its progeny seem typical of the restraints many other jurisdictions, including the federal government, have imposed on private contracting. The single critical commentary Caltrans cited was directed toward a State of Washington decision, Wash. Fed., etc. v. Spokane Community Coll., supra, 585 P.2d 474, enforcing Washington's civil service merit system legislation to invalidate a private contract despite a substantial cost savings to the state. (See Civil Service Note, supra, 55 Wash. L.Rev. 419.) The student commentator proposed a modified rule that would permit private contracting in good faith to achieve improved economy. ( Id. at p. 440.) As we have seen, the California courts already permit private contracting if cost savings justify it and other applicable civil service standards are met. ( CSEA, supra, 199 Cal. App.3d at pp. 851-853.) Caltrans suggests that the nature of the services, and new state function tests are difficult to apply and can lead to anomalous results. But Caltrans fails to offer any alternatives short of simply abrogating the private contracting restriction in its entirety. We are not prepared to take that step and disregard three decades of jurisprudence applying and construing the constitutional provision. Second, Caltrans overstates its case substantially in claiming that Riley and its progeny's undue restrictions on private contracting or privatization threaten fiscal responsibility and public safety. As we have seen, applicable case law allows the state to contract privately if the civil service is unable to perform the work adequately and competently. ( Riley, supra, 9 Cal.2d at p. 135.) This broad and flexible exception clearly includes the expense and safety considerations Caltrans cites. As the amicus curiae brief of various county transportation agencies correctly observes, Riley 's test is broad enough to permit contracting out where the nature of the task is such that the civil service could not perform the task efficiently, or quickly enough, or with the same degree of skill. There is nothing in Riley to suggest that personnel shortages, earthquakes, economic efficiencies, new state functions, higher skills, etc., would not be within the meaning of this exception. Additionally, nothing in the record supports Caltrans's assertions that restrictions on private contracting cause additional expense or safety risks. As plaintiffs observe, ... there is no evidence in the record to support Caltrans' bare claim that the use of contracts `results in faster and less expensive service delivery.' [Citation.] Caltrans never even contended such in the trial court, much less produced any evidence showing such to be the case [citation]. (Fn. omitted.) Finally, as we have explained, contrary to Caltrans's assumption, the civil service mandate does not preclude outright privatization of an existing state function. ( Professional Engineers, supra, 13 Cal. App.4th at pp. 593-595, and fn. 4.) That case involved the total withdrawal of a state function on an experimental basis, requiring no expenditure of state funds. Similar experimentation may be permissible under article VII, if justified by considerations of economy and efficiency and if otherwise consistent with applicable civil service requirements, despite the use of state funding. (See CSEA, supra, 199 Cal. App.3d at pp. 844-846.) The present case involves no withdrawal of a state function, however, and as will appear, the provisions of Chapter 433 are too far-reaching in scope to qualify as an experiment. Finding that none of Caltrans's policy arguments favoring reconsideration of Riley has substantial merit, we therefore decline to overrule or disapprove Riley and its progeny.