Appeals court sides with governor in minimum-wage fight

A state appeals court ruled Friday that Gov. Schwarzenegger has the authority to require state Controller John Chiang to cut state workers’ pay to the federal minimum wage. The controller immediately said his office was planning a new court response – either an appeal to the state Supreme Court or the filing of a new suit.

The 3^rd District Court of Appeal, affirming a lower court decision and citing a 2003 case, sided with the Schwarzenegger administration and said the governor could compel the pay cut to $7.25 an hour. The ruling stemmed from an appeal by Chiang’s office of the earlier decision. 

The governor’s office said the prolonged legal wrangling is costing the state money.

“This underscores the fact that everyone loses when we have a budget impasse,” said Schwarzenegger spokesman Aaron McLear. “Every day the Legislature fails to deliver a budget it costs the state $50 million.”

But Chiang said the appellate ruling contained language that left unresolved the issue of whether such a massive payroll change actually was feasible. Chiang, who signs the state’s checks, has argued that the minimum-wage change is not feasible, because the state’s payroll system is antiquated and because it could leave the state open to future penalties for labor-law violations involving overtime and other issues.  

“The issue of feasibility has yet to be litigated,” said Jacob Roper, a spokesman for the controller.

The administration is seeking the cut to the minimum wage for every day the state is without a budget. The state began the 2010-11 fiscal year on Thursday absent a budget.

“While unfeasibility would arguably excuse the Controller from the declaratory judgment to comply with White v. Davis, we have explained that aspect of the judgment was superfluous,” the appeals court said.

Chiang’s office said believes that language leaves unresolved the feasibility question.

“As expected, today’s ruling by the Third District Court of Appeal restates the Supreme Court’s 2003 ruling in White v. Davis, but goes several steps further by saying my office could be excused from reducing the salaries of some 250,000 employees to minimum wage if it is practically infeasible to do so without violating federal labor laws and the State Constitution,” Chiang said in a written statement released by his office.

“This is not a simple software problem. Reducing pay and then restoring it in a timely manner once a budget is enacted cannot be done without gross violations of law unless and until the State completes its overhaul of the state payroll system and payroll laws are changed.

A labor supporter of Chiang’s legal challenge agreed.

The court decision means that the governor can send instructions to the controller, but it depends on what’s in those instructions,” said Bruce Blanning of Professional Engineers in California Government, an ally of Chiang in the court challenge. “The controller has to decide whether it’s feasible without putting the taxpayers in a position of having to pay penalties.”

On Thursday, the Schwarzenegger administration ordered the pay of thousands of state workers cut to the federal minimum wage level of $7.25 per hour.

Department of Personnel Administration Director Debbie Endsley, who represents the governor in bargaining with the state public-employee unions, said Thursday in the administration’s letter to Chiang that the action was necessary because a 2003 decision held that the controller “has no legal authority to pay state employee wages and salaries except as required by federal labor law.”

The federal minimum wage is about a fourth of the pay of the average state worker. After the budget impasse ends, the workers would receive back pay.

Chiang responded sharply to Endsley’s letter.

“In the absence of the leadership needed to bring the Legislature to an agreement on his budget, the Governor again resorts to political tricks.  Because of the limits of the state’s current payroll system, there is no way that his order can be accomplished without violating the State Constitution and the federal Fair Labor Standards Act.”

Some 200,000 employees would be directly affected by the order.