Re: Metropolitan Water District of Southern California Temporary Employee Lawsuit

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Posted by Los Angeles Superior Court Decision on April 07, 2001 at 19:42:15:

In Reply to: Metropolitan Water District of Southern California Temporary Employee Lawsuit posted by Update on April 07, 2001 at 13:50:21:

Cargill v. MWD

Los Angeles Superior Court Decision in

Cargill v. Metropolitan Water District of Southern California

Case No. BC 191881

The Metropolitan Water District of Southern California (MWD) contracted with a group of employees (Dewayne Cargill, et al.) hired by Administrative Business Services Inc. Those employees filed a class action against MWD claiming eligibility for CalPERS enrollment as common law employees of MWD. This case raised the crucial question: Whether MWD is mandated by the Public Employees’ Retirement Law (PERL) to enroll all common law employees in CalPERS?

The court ruled that as a “contracting agency” bound by PERL, MWD must enroll “all” of its employees for CalPERS benefits, unless they fall within one of PERL’s express statutory exclusions or within a contractual exclusion contained in MWD’s membership agreement with the CalPERS Board. The Court found that MWD’s agreement with CalPERS contains no applicable exclusion.

MWD contended that the plaintiffs are not “employees,” as that term is defined by PERL. MWD argued that since these workers were not hired through MWD’s merit selection process, and received their compensation from third-party employers who contract with MWD, they were not statutorily regarded as common law employees. MWD, along with the contract service providers, also argued that the workers are co-employees of MWD and third-party providers and, as such, are not eligible for CalPERS enrollment.

CalPERS disagreed. They argued that the term “employee” includes common law employees, that MWD’s civil service regulations are irrelevant to a proper interpretation of legislative intent, and that the paid-by-a-third-party distinction is not supported by statutory or case law dealing with PERL’s mandatory enrollment requirements.

PERL does not contain a detailed definition of the term “employee” in relation to contracting agencies such as MWD. Rather, it defines an “employee” as “Any person in the employ of any contracting agency…”

The applicable statute, section 14107.2 of the Welfare and Institutions Code, does not define “employee.” In defining “employee” in this case, the court looked to a recent second district court of appeal case that followed the common law, stating, “[A]s 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. [Citations.]” People v. Palma, 40 Cal.App.4th 1559, 1565-66 (1995). The common law has long been understood as the standard in California for determining employee status in both private and public sector relationships.

The court ruled that an interpretation of the relevant statutes allowing MWD to structure who must be enrolled by the device of compensation (who actually pays the paycheck) through an intermediary appears inconsistent with legislative purposes articulated in PERL. The court stated that denying benefits to workers who would qualify as common law employees, but who are compensated through third parties, does not appear to be the type of “economy and efficiency” the Legislature had in mind when it wrote the broad inclusive statutory language involved in PERL. The court claimed that a contrary interpretation would allow CalPERS 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 of the Government Code, providing that contracting agencies must enroll all employees absent a statutory exclusion or a contractually agreed upon exclusion expressly approved by the CalPERS Board.

MWD argues that most, if not all, of the workers were aware when they began working for MWD that the arrangement did not provide for CalPERS enrollment. This was not a factor in the court’s final decision. Ultimately, the court ruled that MWD is mandated by the PERL to enroll all common law employees in CalPERS, and that the plaintiffs are in fact, common law employees. The court also urged the court of appeal to review this case if a party seeks a writ from the court of appeal.

If you have any questions about this case, please contact Amy Brown or Kara Ueda at the League of California Cities at 916-658-8200.

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