POST v. PALO HAKLAR ASSOCIATES (1999)

Under Labor Code 1 section 98, the Labor Commissioner has the authority to investigate employee complaints, and may provide a hearing in an employee's action to recover wages and determine all matters arising under his jurisdiction. (§ 98, subd. (a).)  The statute further provides that a party to such a hearing may seek review of the Labor Commissioner's order, decision, or award by filing an appeal with the municipal or superior court, where the case will be heard de novo.  (Ibid.)

In this case, respondent Jonathan Vos Post filed a wage claim with the Labor Commissioner, contending that he was an employee of appellants Paul Palo, Peter Haklar, and Palo/Haklar & Associates (“Palo/Haklar”), and was owed wages.   The Labor Commissioner determined that respondent was not an employee.   Because the Labor Commissioner has jurisdiction only over employee wage claims, the claim was dismissed.   Respondent filed an appeal with the superior court.   That court heard the case de novo, determined that respondent was an employee, and made a monetary award in his favor.   Appellants appealed.

After this case was fully briefed, we asked the parties to submit additional briefs addressing a single question, whether a determination by the Labor Commissioner that a claimant is not an employee, and thus that the Labor Commissioner has no jurisdiction, is subject to de novo review in the superior court.   After consideration of the briefs filed in response to our inquiry, we hold that there is no appeal to the superior court from the Labor Commissioner's jurisdictional finding that a claimant is not an employee, and the resulting dismissal of the wage claim.   This holding, of course, does not concern a wage claimant's right to seek judicial relief by filing an ordinary civil action.

Factual and Procedural Background

Post brought a claim before the Labor Commissioner, contending that he was a former employee of Palo/Haklar and was owed wages.   On May 8, 1997, the claim was dismissed.   The Labor Commissioner's Notice of Dismissal states:  “An employer-employee relationship between the parties was not conclusively established.   The Labor Commissioner does not assert jurisdiction.”

Post appealed to the superior court for a trial de novo, titling the appeal as one from a Labor Commissioner order, decision, or award.   On the day of the hearing, appellants, who were unrepresented, asked for additional time to obtain counsel.   They represented that the Labor Commissioner hearing officer had informed them that his order was not appealable.   They also informed the court that they had consulted a number of attorneys, none of whom had been able to give them any guidance regarding the superior court proceedings, and some of whom had said that they did not need counsel.   The trial court denied the request and held a trial on the issues of Post's employment and salary.

Post testified that he had been hired by Palo/Haklar to work on CD-ROM educational and entertainment projects.   He was offered a salary of $2,000 a month, to begin on August 1, 1994, plus travel and office expenses.   He testified that he had worked at least 40 hours a week from August 1, 1994, through the end of March 1995.   He had never received any salary or the other agreed-on reimbursements.

For appellants, Haklar testified that Palo/Haklar had no employees and had never hired Post. Instead, Post had approached Palo/Haklar with a proposal that he obtain financing and new clients, and Palo/Haklar had agreed that if he did so, they would form a new business with Post as a partner.   Post did not obtain financing or new clients, and never performed any work for Palo/Haklar.

The trial court found that Post had worked for Palo/Haklar as an employee at a salary of $2,000 a month.   The court entered judgment in the amount of $16,000 in salary, plus travel and office expenses.   Post sought costs, including $10,961 for attorney fees authorized by statute.   The court ordered $10,269 in fees and costs, and a waiting time penalty of $2,000 under sections 201 and 203.

Appellants filed a motion for relief from the judgment under Code of Civil Procedure section 473.   They argued that they had mistakenly believed that no appeal could be taken from the Labor Commissioner's dismissal, and that their reliance on the Labor Commissioner's advice had resulted in a judgment being taken against them by inadvertence and surprise.   Appellants asked for a new trial.   In support, they submitted Haklar's declaration that the Labor Commission's hearing officer had told him that no appeal could be taken from the Labor Commissioner's dismissal of an action based on lack of subject matter jurisdiction.   Appellants also submitted a number of documents which they indicated could be introduced into evidence at a new trial on the issues of employment and compensation.   The trial court denied the motion.

Discussion

“If an employer fails to pay wages in the amount, time or manner required by contract or by statute, the employee has two principal options.   The employee may seek judicial relief by filing an ordinary civil action against the employer for breach of contract and/or for the wages prescribed by statute. (§§ 218, 1194.)   Or the employee may seek administrative relief by filing a wage claim with the [Labor] commissioner pursuant to a special statutory scheme codified in sections 98 to 98.8.   The latter option was added by legislation enacted in 1976 (Stats.1976, ch. 1190, §§ 4-11, pp. 5368-5371) and is commonly known as the ‘Berman’ hearing procedure after the name of its sponsor.  [¶] The Berman hearing procedure is designed to provide a speedy, informal, and affordable method of resolving wage claims.”  (Cuadra v. Millan (1998) 17 Cal.4th 855, 858, 72 Cal.Rptr.2d 687, 952 P.2d 704, original italics.)

Under this statutory scheme, the Labor Commissioner has the authority to investigate employee complaints, and “may provide for a hearing in any action to recover wages, penalties, and other demands for compensation properly before the division or the Labor Commissioner including orders of the Industrial Welfare Commission, and shall determine all matters arising under his or her jurisdiction.” (§ 98, subd. (a), italics added.)   The statutory scheme also provides that any party to such a hearing may seek review of the Labor Commissioner's order, decision, or award by filing an appeal to the municipal or superior court, where the appeal will be heard de novo. (§ 98.2, subd. (a).)  In its order, decision, or award, the Labor Commissioner must advise the parties of this right to appeal. (§ 98.1, subd. (a).)  As the Supreme Court noted in Cuadra, “if no appeal is taken, the commissioner's decision will be deemed a judgment, final immediately and enforceable as a judgment in a civil action. (§ 98.2.) (See generally, 1 Wilcox, Cal. Employment Law (1997) §§ 5.10 to 5.19, pp. 5-16.2 to 5-52 (hereafter Wilcox)).”  (Cuadra v. Millan, supra, 17 Cal.4th at pp. 858-859, 72 Cal.Rptr.2d 687, 952 P.2d 704.)

Thus, under the statutory scheme, the Labor Commissioner only has jurisdiction to determine the wage claims of employees, and even where an employee claim is filed, is not required to provide a hearing.   If the Labor Commissioner determines that the claimant is not an employee, the Labor Commissioner has no jurisdiction over the claim.   Further, no superior court jurisdiction arises.   The statutory scheme does not provide for superior court de novo review of the Labor Commissioner's jurisdictional determination.  (See Resnik v. Anderson & Miles (1980) 109 Cal.App.3d 569, 572, 167 Cal.Rptr. 340 [parties agreed that jurisdiction of both the superior court and the Labor Commissioner is limited to employee complaints].)  Notably, the Labor Commissioner's written notice of dismissal here makes no mention of appeal rights, as it would if the Labor Commissioner's decision constituted an order, decision, or award subject to review in the superior court.

The superior court's finding that Post was an employee can be analogized to a writ of mandate directing the Labor Commissioner to assert jurisdiction.   Such an order would have been improper.   Mandamus will lie to compel action by a public body or official “only if there is a clear, present, and ministerial obligation to take the action.  [Citations.]   Conversely, the action commanded cannot invade the area of discretion with which an administrative agency is vested over a given subject matter.  [Citations.]”  (Painting & Drywall Work Preservation Fund, Inc. v. Aubry (1988) 206 Cal.App.3d 682, 686, 253 Cal.Rptr. 776.)

Painting & Drywall concerned the Labor Commissioner's duty to enforce minimum labor standards under section 90.5.   That statute provides that the Labor Commissioner “shall establish and maintain a field enforcement unit,” and “shall adopt an enforcement plan for the field enforcement unit.” (§ 90.5, subds.(b) & (c).)   The Court determined that under the statute “the Labor Commissioner has discretion to determine which investigations to conduct.   The statute creates no duty, express or implied, which requires Division to investigate or take action on every complaint which is filed with the Division.”  (Painting & Drywall, supra, 206 Cal.App.3d at p. 687, 253 Cal.Rptr. 776.)   Thus, the Court found, the trial court abused its discretion in mandating the Labor Commissioner to take a prescribed procedure on receipt of a complaint.  (Id. at p. 688, 253 Cal.Rptr. 776.)

The statute here is analogous to that considered in Painting & Drywall.   It explicitly vests discretion in the Labor Commissioner by providing that, “[t]he Labor Commissioner may provide for a hearing in an action to recover wages ․” and has the discretion to make that decision. (§ 98, subd. (a), italics added.)   The Labor Commissioner has no duty to hear each and every employee complaint, and was certainly under no duty to assert jurisdiction over respondent's claim.   Any superior court order mandating that jurisdiction be asserted or a hearing be held would have been an abuse of that court's discretion.   When the Labor Commissioner dismissed Post's claim and decided not to assert jurisdiction, Post's remedy was not to appeal to the superior court, but to file a lawsuit.

Respondent argues that if the Labor Commissioner's finding of lack of jurisdiction is not reviewable by trial de novo in the superior court, wage claimants will be compelled to file ordinary civil actions in every case, and to forgo all attempts to resolve their claims through administrative proceedings, thus destroying the Legislative plan to afford employees speedy relief through an informal process.   We see no reason why this would be so.   While some claimants might choose to initiate civil actions rather than risk a Labor Commissioner determination of no jurisdiction, the “Berman hearing” will still provide a speedy, informal alternative in cases in which a claimant's status as an employee is not at issue.   The fact that no reported case addresses the issue before us here may well indicate that this is an unusual situation.   Further, even where there is an issue concerning a claimant's status, our holding here does not affect a claimant's ability to file a civil suit under any appropriate theory if the Labor Commissioner declines to assert jurisdiction on the ground that the claimant is not an employee, or declines to hold a hearing for any reason.

Respondent also cites the fact that the Labor Commissioner's finding here took place some time after he filed his claim.   He argues the difficulties of litigating a civil action after such a time lapse, and also argues that the length of the proceedings in this case are contrary to the Legislative intent to afford a speedy remedy for employee wage proceedings.   We do not find the argument persuasive.   The legal issues before us do not concern problems of delay which may prevail before the Labor Commissioner, but only a basic question of law concerning section 98.

Disposition

The judgment is reversed, and the matter remanded to the superior court with directions to dismiss the matter in its entirety.   Appellants to recover costs on appeal.

FOOTNOTES

FN1. All further statutory references are to that code unless otherwise indicated..  FN1. All further statutory references are to that code unless otherwise indicated.

ARMSTRONG, J.

TURNER, P.J., and GODOY PEREZ, J., concur.