In Johnson v. Arvin-Edison Water Storage District, (— Cal.Rptr.3d —-, Cal.App. 5 Dist., June 03, 2009), a California Court of Appeal considered whether a water storage district is exempt from the California statutes and wage orders that regulate overtime pay and meal breaks. The Court of Appeal held that the water storage district is exempt for the overtime and meal break laws because it is a public agency.
Arvin-Edison Water Storage District (“District”) was formed in 1942 and has previously been designated as a public agency of the state. District, which operates facilities for the storage and distribution of water, has the power to set tolls and charges for the use of water, issue bonds, buy and sell property, acquire property through condemnation, enter into contracts, and to sue and be sued. District is governed by an elected board of directors that is charged with the power to hire employees and set their compensation and duties. District compensates its employees in accord with the provisions of the federal Fair Labor and Standards Act (“FLSA”), but it does not apply the more stringent California requirements for overtime pay and meal breaks.
Randell Johnson (“Johnson”) brought a lawsuit against District in which he alleged that District had failed to pay him and other current and former employees for overtime and had also failed to provide meal breaks as required by the California Labor Code and Industrial Welfare Commission (“IWC”) wage orders. The trial court held that District is exempt from the more stringent California Labor Code provisions and wage orders and granted judgment in favor of District.
Pursuant to the FLSA, employees are only entitled to overtime wages for the work they perform in excess of 40 hours per week and employers are not required to provide meal breaks. In contrast, California Labor Code section 510 provides “eight hours of labor constitutes a day’s work” and sets overtime rates for hours worked in excess of eight per workday, 40 per workweek, 12 per workday, and hours worked on the seventh day of a workweek. Section 512 requires meal periods for employees who work more than five hours per day.
Johnson asserted District is subject to the requirements of sections 510 and 512 because these sections do not exempt public entities from their requirements. The court disagreed finding, absent express language that indicates otherwise, “governmental agencies are not included within the general words of a statute.” This rule applies to the Labor Code. Labor Code provisions only apply to private sector employees unless they are specifically made applicable to public employees. The court found no indication that the Legislature intended sections 510 and 512 to apply to public entities. Additionally, the court found that the application of sections 510 and 512 to District would infringe upon its sovereign powers.
Johnson also asserted IWC Wage Order No.17 applies to District. Each IWC wage order applies to a different classification of employee. Wage Order No. 17, which has the title “Regulating Miscellaneous Employees,” applies to any “industry or occupation not previously covered by, and all employees not specifically exempted in, the Commission’s wage orders in effect in 1997, or otherwise exempted by law.” The majority of IWC wage orders expressly exempt public employees, but Wage Order No. 17 does not. At a 2001 hearing, an IWC commissioner stated that Wage Order No.17 “would apply to an industry that was ‘something altogether new that couldn’t be identified as belonging in any other wage order.'” Given the commissioner’s explanation, Wage Order No. 17 could not apply to District because water districts have existed since before the IWC was created. Accordingly, the court found that Wage Order No. 17 does not apply to District.
Labor Code sections 201 and 202 require that an employer must immediately pay wages to an employee who resigns or who is terminated or is part of a layoff. Section 203 imposes a penalty for willful violations of sections 201 and 202. Section 220 provides that these provisions do not apply to employees who are employed directly “by any county, incorporated city, or town or other municipal corporation.”
Johnson contended that District is not exempt from sections 201, 202, and 203 because it is not a municipal corporation. The court again disagreed. The court noted that in contexts outside the Labor Code, “it has long been established that irrigation districts and water districts are municipal corporations.” The court opined, “Although the specific functions of irrigation districts, water districts, and water storage districts may differ, there is no essential difference between them” because the “principal function of supplying water is the same.”
The Court of Appeal affirmed the judgment of the trial court which granted judgment in favor of District. Neither the provisions of the Labor Code nor Wage Order No. 17 support Johnson’s allegations that the overtime or meal break laws apply to District.
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