Court Opinion

ID: 2803434
Source: CourtListenerOpinion
Date Created: 2015-05-26 20:05:26.688714+00
Date Added: 2024-06-11T11:50:22.570601
License: Public Domain

Filed 5/26/15

                            CERTIFIED FOR PUBLICATION

                COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                      DIVISION ONE

                                   STATE OF CALIFORNIA

VECTOR RESOURCES, INC.,                            D065224

        Plaintiff and Appellant,

        v.                                         (Super. Ct. No. 37-2012-00097974-
                                                                   CU-MC-CTL)
CHRISTINE BAKER, as Director, etc., et al.,

        Defendant and Respondent.

        APPEAL from a judgment of the Superior Court of San Diego County, Joel R.

Wohlfeil, Judge. Affirmed.

        Sheppard, Mullin, Richter & Hampton, Richard M. Freeman and Matthew S.

McConnell for Plaintiff and Appellant.

        Christopher Jagard and John J. Korbol for Defendants and Respondents.

        This action arises out of a determination by the Department of Industrial Relations

(the Department) that plaintiff Vector Resources, Inc. (Vector) failed to pay the

appropriate prevailing wages to its workers on a public works project for the San Diego

Unified School District. Specifically, the Director of Industrial Relations (the Director)

issued a decision in which she found that Vector underpaid its employees by failing to

                                             1
pay a higher "shift differential" rate for work performed during shifts commencing after

12:00 noon. The director's decision was based on regulatory language in a document

entitled "Important Notice To Awarding Bodies And Other Interested Parties Regarding

Shift Differential Pay In The Director's General Prevailing Wage Determinations" (the

Important Notice), which was posted on the Department's Web site. The Important

Notice addresses shift differential pay for various crafts used on public works projects,

and is augmented by additional regulatory language in a "Note" that the Department

places on the cover page of prevailing wage shift provisions. The parties refer to this

Note as "the Stamp."1

       Vector filed a declaratory relief action against the Department, seeking a

declaration that the Important Notice and Stamp are invalid and unenforceable as

"underground regulations" because they were not promulgated in compliance with the

notice and hearing requirements of the Administrative Procedure Act (APA). (Gov.

Code, § 11340 et seq.)2 Vector and the Department filed cross-motions for summary

1      Presumably, the parties refer to this Note as the Stamp because Vector alleged in
its operative second amended complaint that "since approximately 2006, the
[Department] has 'stamped' [the] 'Note' on the cover page of shift provisions . . . ."

2      "The APA establishes the procedures by which state agencies may adopt
regulations. The agency must give the public notice of its proposed regulatory action
(Gov. Code, §§ 11346.4, 11346.5); issue a complete text of the proposed regulation with
a statement of the reasons for it (Gov. Code, § 11346.2, subds. (a), (b)); give interested
parties an opportunity to comment on the proposed regulation (Gov. Code, § 11346.8);
respond in writing to public comments (Gov. Code, §§ 11346.8, subd. (a), 11346.9); and
forward a file of all materials on which the agency relied in the regulatory process to the
Office of Administrative Law (Gov. Code, § 11347.3, subd. (b)), which reviews the
                                             2
judgment, based largely on stipulated facts. The court granted the Department's motion

on the ground that under Government Code section 11340.9, subdivision (g), the

Important Notice and the Stamp are exempt from the notice and hearing requirements of

the APA because they are part of an overall prevailing wage determination process that

constitutes "rate setting."

       Vector contends the summary judgment in favor of the Department must be

reversed because (1) the Department admitted that the shift premium rule is a regulation,

(2) the Department admitted that that regulation was not adopted in compliance with the

APA, (3) the Department failed to prove that the shift premium regulation establishes or

fixes rates within the meaning of Government Code section 11340.9, subdivision (g), (4)

the court erred in failing to specifically cite the evidence it relied on to grant summary

judgment, (5) the court's written order ignored the law and the admissible evidence, and

(6) the Department's motion relied upon inadmissible evidence. We affirm.

                   FACTUAL AND PROCEDURAL BACKGROUND

       A. Factual Background

       The factual background is largely based on facts to which the parties stipulated in

support of their cross-motions for summary judgment.

       Workers employed on public works projects in California are entitled to be paid

prevailing wages. The Department determines the prevailing rate of per diem wages.

Prevailing wages are specific to the county where the work is to be performed and the

regulation for consistency with the law, clarity, and necessity (Gov. Code, §§ 11349.1,
11349.3)." (Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557, 568.)
                                              3
particular craft, classification, and type of work involved. Contractors must use the

prevailing wage determinations in effect on the bid advertisement date of the public

works project.

       When the Department determines that the regular straight-time hourly rate within

a collective bargaining agreement is prevailing for a craft, classification, and locality, the

Department may adopt the collective bargaining agreement by reference. Over 90

percent of the Department's prevailing wage determinations are based on collective

bargaining agreements.

       The Department regularly issues prevailing wage determinations for shift work

applicable to a craft, classification, or type of work, in connection with the general

prevailing wage determinations. In 2002, the Director issued an Important Notice

regarding shift differential pay. The Important Notice states:

          "The Director's General Prevailing Wage Determinations includes
          shift differential pay for various crafts used on public works projects.
          This notice is to clarify the worker's eligibility to receive the shift
          differential pay when working on a public works project. Please
          note that not all crafts have shift differential pay published in the
          Director's General Prevailing Wage Determinations. [¶] When a
          worker is required to work a regular shift, he/she must be paid the
          applicable craft rate from the Director's General Prevailing Wage
          Determinations for the construction activity he/she is performing.
          However, when a worker is required to work a shift outside of
          normal working hours, he/she must be paid the shift differential pay
          according to the shift he/she is working. For example if only one
          shift is utilized for the day, and the work being performed is during
          the hours typically considered to be swing (second) shift or graveyard
          (third) shift, the worker employed during the hours typically
          considered to be a swing shift or graveyard shift must be paid the shift
          differential pay for the shift he/she is working. If multiple shifts are
          used for the day, the worker working on the second or third shift must
          be paid according to the shift he/she is working." (Italics added.)

                                              4
       In 2006 the Director began to place the Stamp on the cover page of prevailing

wage shift provisions. The Stamp states:

          "Note: The shift provisions provided in the following pages provide
          guidance on the work hours that are applicable to each shift. Shift
          differential pay is required and will be enforced during each
          applicable shift where shift differential pay is in the determinations.
          Any shift provisions restricting the work hours for a particular shift
          for a type of work will not be enforced on public works. However,
          if work is performed during hours typically associated with a 2nd or
          3rd shift the appropriate shift rate of pay is required. Shift
          differential pay shall not apply to work during traditional shift hour
          (swing or grave) if the determination includes a footnote that
          indicates that the non-shift rate may be paid for a special single shift.
          Please note the exemptions in California Code of Regulations
          Section 16200 (a)(3)(F) do not waive the shift differential pay.
          These regulatory exemptions only apply to overtime pay. Overtime
          pay shall be required in accordance with the determination and
          Labor Code Section 1810 through 1815." (Italics added.)

       The Department issued the Important Notice and the Stamp without publishing a

notice of intent to engage in rule making, inviting public comment, or holding a public

hearing as the APA requires before the adoption of an administrative regulation, unless

an exemption under Government Code section 11340.9 applies.

       The Department maintains a Web site where the current prevailing wage

determinations are available to the public. Public works contractors look to the Web site

for the particular prevailing wage rates in effect at the time of the bid advertisement date

for a public works project. For nearly all of the prevailing wage determinations posted

on the Department's Web site, the Department also posts specific provisions of the

applicable collective bargaining agreements regarding holidays, scope of work, and travel

                                              5
and subsistence. Some, but not all, prevailing wage determinations also include shift

rates. For those determinations, the Department also posts "associated" shift provisions.

       The Important Notice is posted on the Department's Web site as one of at least 112

other "important notices" that clarify, explain, and provide guidance to the public

regarding various aspects of prevailing wage determinations. The language of the Stamp

appearing on the cover page of prevailing shift provisions is also posted on the

Department's Web site.

       B. Procedural Background

       This case arises out of a prevailing wage enforcement action that the San Diego

Unified School District brought against Vector. In that proceeding, the Director

determined that Vector underpaid its employees on a public works project, by failing to pay

the workers at a higher shift differential rate for work performed during a shift that began

after 12:00 noon. Vector sought judicial review of the Director's decision by filing a

petition for writ of mandate in superior court and the present action for declaratory relief.

       In the present action, Vector filed a second amended complaint for declaratory

relief against the Director and the Department (defendants) seeking a declaration that "(a)

the [Department] impermissibly failed to comply with the APA, Labor Code section 1773,

and the supporting regulations, when issuing the rules established by the [Important]

Notice and the Stamp[;] (b) the [Important] Notice and the Stamp constitute invalid

underground regulations[;] and (c) the [Important] Notice and the Stamp are not

procedures that comply with the requirements of Labor Code [section] 1773."

                                               6
       The parties filed a stipulation to file cross-motions for summary judgment, stating

they agreed "that the Court may be able to dispose of the issues in this case via summary

judgment."3 In its summary judgment motion, Vector argued that the rule requiring the

payment of shift premiums set forth in the Important Notice and the Stamp was a

regulation that must comply with the notice and hearing requirements of the APA.

Because these requirements were not met, Vector asserted that the Important Notice and

Stamp were invalid "underground regulations."

       The Department conceded that the shift premium rule was a regulation and that the

notice and hearing requirements of the APA were not met. However, the Department

argued that the shift premium regulations were exempt from the APA as a "regulation that

establishes or fixes rates, prices, or tariffs," under Government Code section 11340.9,

subdivision (g).

       The court granted summary judgment in favor of the Director and against Vector.

The court decided the challenged regulations constituted rate-setting that was exempt

from the APA's rulemaking requirements under Government Code section 11340.9,

subdivision (g), stating:

           "[T]he APA contains an exception for a regulation that 'establishes
           or fixes rates, prices, or tariffs.' [Citation.] Wage determinations set
           'rates' such that these determinations are exempt from the notice and
           hearing provisions of the APA. [Citation.] Moreover, the
           [Department] exercises delegated quasi-legislative power such that
           there is no constitutional requirement that it hold hearings or give

3     The parties stipulated that the defendants' opposition to Vector's summary
judgment motion would serve as their moving papers for their cross-motion.

                                              7
           notice before making wage determinations. [Citation.] As the wage
           determination process is exempted from the hearing requirements of
           the APA, a coverage determination, as an integral part of that
           process, is also exempted. [Citation.] There is no conflict in the
           evidence to create a [triable] issue of material fact to warrant any
           conclusion [other] than that (a) Defendants did not impermissibly
           fail to comply with the APA, Labor Code section 1773, and the
           supporting regulations when, when issuing the rules established by
           the 2002 [Important] Notice and the Stamp[;] and (b) [t]he 2002
           [Important] Notice and the Stamp do not constitute invalid,
           underground regulations."

                                         DISCUSSION

                                I. STANDARD OF REVIEW

       A motion for summary judgment or adjudication must be granted when there is no

triable issue of material fact and the moving party is entitled to judgment as a matter of

law. (Code Civ. Proc., § 437c, subd. (c).) Summary judgment is appropriate in a

declaratory relief action when only legal issues are presented for the court's

determination. (Gafcon, Inc. v. Ponsor & Associates (2002) 98 Cal.App.4th 1388, 1401-

1402.) The defendant's burden in a declaratory relief action "is to establish the plaintiff is

not entitled to a declaration in its favor. It may do this by establishing (1) the sought-

after declaration is legally incorrect; (2) undisputed facts do not support the premise for

the sought-after declaration; or (3) the issue is otherwise not one that is appropriate for

declaratory relief." (Id. at p. 1402.)

       "We review a summary judgment or summary adjudication ruling de novo to

determine whether there is a triable issue as to any material fact and whether the moving

party is entitled to judgment as a matter of law. [Citation.] 'In practical effect, we

assume the role of a trial court and apply the same rules and standards which govern a
                                              8
trial court's determination of a motion for summary judgment.' " (Mills v. U.S. Bank

(2008) 166 Cal.App.4th 871, 895.)

                                        II. ANALYSIS

       A. Applicable Authority

       "The California Prevailing Wage Law is a comprehensive statutory scheme

designed to enforce minimum wage standards on construction projects funded in whole

or in part with public funds. [Citations.] [¶] Under the prevailing wage law, all workers

employed on public works costing more than $1,000 must be paid not less than the

general prevailing rate of per diem wages as determined by the Director . . . for work of a

similar character and not less than the general prevailing per diem wage for holiday and

overtime work." (Road Sprinkler Fitters Local Union No. 669 v. G & G Fire Sprinklers,

Inc. (2002) 102 Cal.App.4th 765, 776; Lab. Code, § 1771.) "The central purpose of the

prevailing wage law is to protect and benefit employees on public works projects." (Ibid.;

Lusardi Construction Co. v. Aubry (1992) 1 Cal.4th 976, 985.) "The Department's

authority pertaining to prevailing wage determinations is quasi-legislative and it has

legislative discretion with respect to such decisions." (California Slurry Seal Assn. v.

Department of Industrial Relations (2002) 98 Cal.App.4th 651, 662.)

      B. The Important Notice and Stamp Are Exempt from the Notice and Hearing
Requirements of the APA

       A prevailing wage determination is exempt from the notice and hearing

requirements of the APA if it is "[a] regulation that establishes or fixes rates, prices, or

tariffs." (Gov. Code, § 11340.9, subd. (g).) Vector contends the Department does not fix

                                               9
or set any actual prevailing rates, including shift premium rates; rather, the Department

only determines the prevailing rates. However, the prevailing wage statutes reveal that

the Department or Director's "determining" prevailing rates is semantically equivalent to

"fixing" or "establishing" rates. Labor Code section 1773 provides, in relevant part:

       "In determining the rates, the Director of Industrial Relations shall ascertain and
       consider the applicable wage rates established by collective bargaining agreements
       and the rates that may have been predetermined for federal public works, within
       the locality and in the nearest labor market area. Where the rates do not constitute
       the rates actually prevailing in the locality, the director shall obtain and consider
       further data from the labor organizations and employers or employer associations
       concerned, including the recognized collective bargaining representatives for the
       particular craft, classification, or type of work involved. The rate fixed for each
       craft, classification, or type of work shall be not less than the prevailing rate paid
       in the craft, classification, or type of work. [¶] If the director determines that the
       rate of prevailing wage for any craft, classification, or type of worker is the rate
       established by a collective bargaining agreement, the director may adopt that rate
       by reference as provided for in the collective bargaining agreement and that
       determination shall be effective for the life of the agreement or until the director
       determines that another rate should be adopted." (Italics added.)

The italicized words in Labor Code section 1773 show that the terms "determine" and

"fix" are used interchangeably and have the same meaning in the statute–i.e., the

Director's determination of a prevailing wage rate fixes (i.e., establishes) that rate.

       Labor Code section 1773.9 similarly illustrates that there is no semantic difference

between "establishing" a prevailing wage rate and "determining" such a rate. Labor Code

section 1773.9, subdivision (a) states: "The Director of Industrial Relations shall use the

methodology set forth in subdivision (b) to determine the general prevailing rate of per

diem wages in the locality in which the public work is to be performed." (Italics added.)

Labor Code section 1773.9, subdivision (b) states:

                                              10
       "The general prevailing rate of per diem wages includes all of the following: [¶]
       (1) The basic hourly wage rate being paid to a majority of workers engaged in the
       particular craft, classification, or type of work within the locality and in the nearest
       labor market area, if a majority of the workers is paid at a single rate. If no single
       rate is being paid to a majority of the workers, then the single rate being paid to
       the greatest number of workers, or modal rate, is prevailing. If a modal rate
       cannot be determined, then the director shall establish an alternative rate,
       consistent with the methodology for determining the modal rate, by considering
       the appropriate collective bargaining agreements, federal rates, rates in the nearest
       labor market area, or other data such as wage survey data. [¶] (2) Other employer
       payments included in per diem wages pursuant to [Labor Code] Section 1773.1
       and as included as part of the total hourly wage rate from which the basic hourly
       wage rate was derived. In the event the total hourly wage rate does not include
       any employer payments, the director shall establish a prevailing employer
       payment rate by the same procedure set forth in paragraph (1)." (Italics added.)

Based on the Legislature's interchangeable use of the terms "determine," "establish," and

"fix," we conclude that in "determining" prevailing wage rates, the Department

"establishes [and] fixes rates" within the meaning of Government Code section 11340.9,

subdivision (g).

       We further conclude that the Important Notice and Stamp both constitute

regulations that "establish" rates within the meaning Government Code section 11340.9,

subdivision (g), notwithstanding the fact that they do not establish or fix a shift

differential rate for a particular craft, classification, or type of work within a specific

locality. The Important Notice states that "[t]he Director's General Prevailing Wage

Determinations includes shift differential pay for various crafts used on public works

projects[,]" and clarifies that "when a worker is required to work a shift outside of normal

working hours, he/she must be paid the shift differential pay according to the shift he/she

is working." (Italics added.) The Stamp similarly provides that "[s]hift differential pay is

required and will be enforced during each applicable shift where shift differential pay is

                                               11
in the determinations." (Italics added.) Thus, the Important Notice and Stamp establish

prevailing wage rates for shifts outside of normal working hours–i.e., they establish that

workers must be paid the applicable shift differential pay for the shift he or she is working.

As integral parts of the prevailing wage determination process, the Important Notice and

Stamp are exempt from the notice and hearing requirements of the APA. (Winzler &

Kelly v. Department of Industrial Relations (1981) 121 Cal.App.3d 120, 128 [the overall

wage determination process and integral parts of that process are exempt from the prior

hearing requirements of the APA].)

        Vector relies heavily on this court's opinion in Division of Labor Standards

Enforcement v. Ericsson Information Systems, Inc. (1990) 221 Cal.App.3d 114 (Ericsson)

in arguing that the Important Notice and Stamp do not fall within the rate setting

exemption of Government Code section 11340.9. In Ericsson, a contract between the

University of California of San Diego and a contractor for installation of a telephone

system required the contractor to pay prevailing wages. (Ericsson, supra, 221

Cal.App.3d at p. 120.) However, because no prevailing wage rate had been determined

for communications technicians who worked on the project, the Division of Labor

Standards Enforcement (DLSE) applied the rate that had been determined for "inside

wiremen," the classification that DLSE deemed to be the most similar to communications

technicians. (Id. at p. 121.) The contractor contended the DLSE's policy of applying a

similar classification to workers who were not covered by a published classification

constituted a rule subject to the notice and hearing requirements of the APA. (Id. at p.

127.)

                                             12
       The Ericsson court agreed that the DLSE's policy was a rule that "should be

promulgated under the APA." (Ericsson, supra, 221 Cal.App.3d at p. 128.) The court

concluded the DLSE's policy was not "a step in the process of prevailing rate

determinations so as to be exempt from the APA . . . ." (Ibid.) Rather, the Ericsson court

decided that the policy created "a standard for the application of already established rates,

to cover a situation not addressed in the statute or regulations . . . ." (Ibid.) Vector

contends that like the policy at issue in Ericsson, the Important Notice and Stamp are

subject to the notice and hearing requirements of the APA because they create a general

standard or rule as to when and under what circumstances already existing shift premium

rates must be paid.

       We conclude Ericsson is inapposite. The DLSE's policy at issue in Ericsson

applied established prevailing wage rates for a particular class of workers to a different

class of workers for whom no prevailing wage determination had been made–i.e., the

"already-established" rates had not been established for the workers to whom the DLSE

applied them. The DLSE's policy was not part of the overall rate determination process

because no such process had been implemented for those workers. In contrast, the

Important Notice and Stamp apply already-established shift differential rates to the

workers for whom those rates were established, clarifying the circumstances under which

those rates are to be applied. As part of the prevailing wage determination process for

those workers, the Important Notice and Stamp are exempt from the notice and hearing

requirements of the APA. (Winzler & Kelly v. Department of Industrial Relations, supra,

121 Cal.App.3d at p. 128.)

                                              13
       Even if the Important Notice and Stamp did not "fix" or "establish" rates within

the meaning of Government Code section 11340.9, subdivision (g), they are exempt from

the notice and hearing requirements of the APA under Labor Code section 1773.5,

subdivision (d), which became effective January 1, 2014 as part of the 2013 amendment

of Labor Code section 1773.5. (Stats. 2013, ch. 780 (S.B.377), § 3.)4 Labor Code

section 1773.5, subdivision (d) provides: "The director shall have quasi-legislative

authority to determine coverage of projects or types of work under the prevailing wage

laws of this chapter. A final determination on any administrative appeal is subject to

judicial review pursuant to Section 1085 of the Code of Civil Procedure. These

determinations and any determinations relating to the general prevailing rate of per diem

wages and the general prevailing rate for holiday, shift rate, and overtime work, shall be

exempt from the Administrative Procedure Act . . . ." (Italics added.)

       We construe the term "shift rate" in the italicized statutory language as a reference

to the pay rate for shifts outside of normal working hours. Thus, Labor Code section

1773.5, subdivision (d) broadly exempts from the APA any determination relating to the

general prevailing rate for shifts outside of normal working hours. The Important Notice

and Stamp clearly are determinations by the Director that, at minimum, relate to, if not

establish or fix, shift differential pay rate (i.e., the rates for shifts outside of normal

4      Because declaratory relief operates prospectively to declare future rights (County
of San Diego v. State of California (2008) 164 Cal.App.4th 580, 607), "we apply the law
in effect at the time of review because that is the law under which the judicial declaration
will have effect." (City of Watsonville v. State Dept. of Health Services (2005) 133
Cal.App.4th 875, 885.)

                                                14
working hours). Accordingly, the Important Notice and Stamp are exempt from the

notice and hearing requirements of the APA under Labor Code section 1773.5,

subdivision (d).5

                                       DISPOSITION

       The judgment is affirmed. The Department is awarded its costs on appeal.

                                                                        NARES, Acting P. J.

WE CONCUR:

O'ROURKE, J.

IRION, J.

5      In light of our legal conclusion that the Important Notice and Stamp are exempt
from the notice and hearing requirements of the APA, we need not address Vector's
contentions that the court erred in failing to specifically cite the evidence it relied on to
grant summary judgment, the court's written order ignored admissible evidence, and the
Department's motion relied upon inadmissible evidence.
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