Though it was already rendered moot by the Supreme Court's decision in Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, the Third District Court of Appeal has invalidated the Labor Commissioner's designation of Hartwig v. Orchard Commercial, Inc. (Cal. Dept. of Industrial Relations, DLSE, May 11, 2005, No. 12-56901RB) as a "precedent decision" regarding the characterization of Labor Code § 226.7 pay as penalties, rather than wages. The Labor Commissioner has no authority to issue and enforce precedent decisions.
In Corrales v. Bradstreet, which was tried and argued on appeal as Corrales v. Dell (Angela Bradstreet having just replaced Donna Dell as Labor Commissioner), two claimants appealed from a judgment denying their petition for a writ of mandate and complaint for declaratory relief against Donna Dell, as Labor Commissioner for the State of California. They claimed that the Commissioner violated statutory duties relating to timely processing of employee claims under Labor Code § 98, and improperly issued a precedent decision purporting to be binding in all section 98 hearings, in circumvention of rulemaking requirements of the Administrative Procedure Act, Government Code § 11340 et seq.
On the abeyance and delay issue, the Court of Appeal found no reversible error, not because the practice of holding meal period and rest period claims in abeyance was lawful, but because the appellants apparently obtained hearings on their claims; the Commissioner’s attorney represented that the Commissioner would not violate the law by resuming the abeyance policy; that there was no evidence that the practice would be resumed. On the precedent decision issue, the Court of Appeal held that the Commissioner’s attempt to issue a binding precedent decision was an invalid circumvention of the APA’s rulemaking requirements. Even though the California Supreme Court has already held that section 226.7 payments are wages, not penalties, effectively invalidating the particular precedent decision at stake. Nonetheless, the Court of Appeal decided the matter because it is a matter of general public interest and is likely to recur.
For anyone who has to deal with the argument that wage and hour claims should not be certified as class actions because the availability of Berman hearings makes DLSE claims superior to classwide litigation, the opinion has some useful language about the Labor Commissioner's lack of resource to handle even its existing caseload, e.g., "the Commissioner 'admits that there are some claims filed in Labor Commissioner offices in California which do not proceed to hearing within 90 days of the date that a determination is made to hold a hearing,' and the Commissioner 'admits that there are some cases where ODAs have not been issued within 15 days after holding a hearing.' Appellants cite evidence of a system-wide problem of untimely processing of employee claims (which the Commissioner attributes to a lack of sufficient resources)."