The California Supreme Court has ended a collective action accusing the Alameda County health care system of underpaying workers, finding the state’s controversial Private Attorney General Act and its provisions that have fueled thousands of lawsuits against employers in the Golden State don't also apply to government employers.
Justice Carol Corrigan wrote the unanimous opinion, filed Aug. 15. Justice Kelli Evans was not part of the opinion. In her place was Justice John Segal of the state's Second District Appeals Court, as assigned by Supreme Court Chief Justice Patricia Guerrero.
California requires counties to provide medical care for indigent residents. Court records indicate the Alameda County Board of Supervisors transferred governance of its medical center to a hospital authority, the Alameda Health System, after securing legislative approval in 1996.
Plaintiffs in the underlying litigation worked at Highland Hospital, which the system operated. Tamelin Stone, a medical assistant, and Amanda Kunwar, a licensed vocational nurse, accused the hospital of denying them off-duty meal periods and rest breaks, keeping inaccurate payroll records and wage statements, and failing to pay workers accurate or timely wages.
The workers brought their claims under PAGA, which allows individual employees to take companies to court rather than rely on state labor officials to seek punishment. Reformers have long targeted PAGA as a tool for “shakedown lawsuits” in which law firms target companies for even minor or technical labor law violations in order to drum up business, but yielding little for the employees who serve as plaintiffs. On June 19, Gov. Gavin Newsom and the California Chamber of Commerce and other pro-business groups in the so-called Fix PAGA coalition announced a deal delivering substantial PAGA reforms.
But for the Alameda workers, the dispute began and ended with the health system’s argument it is a public agency unable to be sued for alleged PAGA violations.
Alameda County Superior Court Judge Noel Wise agreed with that position. But a First District Appellate Court panel partially reversed the ruling, finding the law creating the county’s health system had “no legislative intent to exempt AHS from the meal and rest period and payroll requirements underlying plaintiffs’ first three causes of action,” according to Corrigan. “Subjecting AHS to Labor Code requirements would not infringe any sovereign governmental powers, the court reasoned, because AHS possessed no powers that could not as easily be wielded by a private institution.”
On appeal, the state Supreme Court reviewed the original dispute. Corrigan said the Labor Code and Industrial Wage Commission wage order dictates employers provide meal and rest breaks and defines an employer in the statutory language “communicates that government employers are not subject to the meal and rest break obligations” in the wage order. She further noted there are other examples of laws that explicitly include government entities in certain situations, suggesting laws that don’t do so necessarily exclude such bodies.
Beyond that, she wrote, IWC wage orders historically exempted public employers, including the relevant order from 1976, which stated: “The provisions of this order shall not apply to employees directly employed by the state or any county, incorporated city or town or other municipal corporation.” Even when a 1999 law repealed several wage orders and ordered the IWC to draft new language, the public employer exemption remained. And a law that took effect Jan. 1, 2023, specifically addressed meal and rest periods for public workers engaged in direct patient care, which “indicates the legislature did not believe public employers were required to provide meal and rest breaks to health care workers under prior law,” Corrigan wrote. “Legislative history confirms this understanding.”
Corrigan said the plaintiffs “largely concede” arguments regarding exemptions for public employers, instead contending the health system isn’t an exempt public entity because application of the challenged laws wouldn’t infringe on its sovereign governmental powers. But the court found the letter of the law creating the system “consistently demonstrates that the legislature considered AHS to be a quasi-governmental public entity.”
The appeals panel considered the law “through far too narrow a lens,” Corrigan continued, focusing on a subdivision stipulating the system’s independence from the county while ignoring an explicit definition of the system as “a government entity.” She further noted the California Division of Labor Standards Enforcement commissioner’s office concluded wage payment statues within the challenged section don’t apply to government entities in general and in particular to the Alameda system.
The same logic applied to the question of punitive damages under PAGA, with the court holding those penalties cannot exist unless a worker establishes their employer’s liability, which is not possible for someone working for a public entity.
David Imai, of Aptos, represented the workers. He did not respond to a request for comment.
The California Employment Lawyers Association filed a support brief on behalf of the workers, with representation from Stiller Law Firm, Collier Socks and Pine Tillett. The American Federation of State, County and Municipal Employees also filed a support brief.
Jan Kramer, managing partner of Hennig Kramer and CELA member, said of the ruling: “In my opinion it is unfair and I believe a legislative fix is needed. This decision will be used to strip public employees of the protections of the Labor Code.”
Alameda Health System is represented by Renne Public Law Group.
The California State University Board of Trustees filed a support brief on behalf of the health system, as did the California Association of Joint Powers Authorities, California Special Districts Association, California State Association of Counties and the League of California Cities and Kern County Hospital Authority.