DLSE Policy Interpretations Do Not Have the
Force of Law
In
an important opinion for employers, a California appellate court recently
reaffirmed that internal policy statements made by the Division of Labor
Standards Enforcement (DLSE) do not have the force of law and are not
binding on the courts in wage and hour cases. California School of Culinary Arts v. Lujan, No. B
160266 (Cal.App. September 18, 2003).
While
advisory opinions and manuals are not precedential,
they do provide guidance to employers and should be consulted for such
guidance. However, employers should confer with legal counsel prior to making
a wage and hour decision based on DLSE interpretations since statutory
authority and case law may in fact warrant a different outcome. Moreover,
labor and employment attorneys should not rely heavily on DLSE advisory
opinions when counseling clients.
DLSE Admits Policy Manual is an "Underground Regulation"
At
issue in the case was whether a cooking school and its instructors were
exempt from overtime wage laws. The DLSE argued that the cooking school was
not exempt because the school was not a "college" as contemplated
under Wage Order 4-2001. The wage order provides a professional exemption
to one who is licensed to teach in an accredited college.
The
cooking school established that it had all the indicia of a college. It was
accredited by an accrediting organization recognized by the United States
Secretary of Education and was approved by a state bureau. The cooking
school argued that its teachers worked in an accredited college and were
thus exempt.
DLSE
disagreed. DLSE cited a statement in its policies and procedures manual
that limited the exemption to institutions that grant bachelor's
or higher degrees. In a letter to the cooking school, DLSE's
counsel stated "[w]hile I agree that the
statement in our Policies and Procedures Manual limiting the exemption to
institutions that grant bachelor's or higher degrees does not have the
force of law, and is an 'underground regulation,' this definition would be
upheld by the courts as consistent with generally accepted usage of the
words 'college or university.'"
In
response to DLSE's contention, the cooking school
filed a complaint for a declaration and judgment that its instructors are
exempt from overtime wages. The court agreed with the cooking school.
DLSE Must Go Through the Administrative Procedures Act
The
DLSE admitted that its policies and procedures manual could not have the
force of law. This concession is based on the California Supreme Court's
ruling in Tidewater Marine Western,
Inc. v. Bradshaw (1996) 14 Cal.4th 557:
DLSE's primary
function is enforcement not rulemaking. [Citation] Nevertheless,
recognizing that enforcement requires some interpretation and that these
interpretations should be uniform and available to the public, the
Legislature empowered the DLSE to promulgate necessary 'regulations and
rules of practice and procedure.' [Citation] The Labor Code, does not
however, include special rulemaking procedures for the DLSE similar to
those that govern IWC rulemaking, nor does it expressly exempt the DLSE
from the [Administrative Procedures Act]. The APA provides that 'no state
agency shall issue, utilize, enforce or attempt to enforce . . . a
regulation' without complying with the APA's
notice and comment provisions.
Tidewater,
14 Cal.
4th 557, 569-571. The Tidewater court concluded that the DLSE must adopt
regulations through the APA process with public participation and
procedural safeguards.
The
DLSE has recognized the effect of Tidewater. In fact, the policies and
procedures manual itself discusses Tidewater and its application to the
DLSE. However, the DLSE takes the position that its interpretations should
still be given great weight.
Court Gives No Deference to DLSE's
Interpretation
The
court looked directly at the language of the IWC order to determine that
IWC did not limit the exemption only to teachers at institutions that
provided bachelor's degrees or higher.
DLSE
attempted to introduce records of IWC meetings to validate its policy to
limit the exemption beyond the plain language of the IWC order.
The
court rejected DLSE's attempts to justify its
interpretation. It held that the DLSE's
interpretation was "entitled to no deference because it is a void
regulation" under Tidewater. Moreover, the court noted that DLSE's interpretation "dramatically changes the
qualifications to obtain a 'teaching exemption.'"
In
scathing language, the court held: "It is our role to interpret the
wage order to decide its enforcement in this case. As well intentioned as
the representatives of DLSE may be, it is not entitled to invoke any
internal policy definition to interpret IWC wage orders simply because it
divines that was the intent of IWC many decades past." Instead, the
court held that DLSE must go through the proper APA formalities if it wants
to place a limitation on the exemption for teachers in accredited colleges.
DLSE Policy Interpretations May Provide Guidance
While
this court gave no weight to the DLSE policy interpretation, other courts
have opined that DLSE interpretations may be looked to for guidance,
especially when the interpretation coincides with the court's own
independent analysis and is supported by statute or case law.
Employers
and legal counsel are advised to consult the DLSE Policies and Procedures
Manual and advisory opinions for guidance. However, DLSE interpretations
should not be considered binding. Employers should consult legal counsel
when they have questions regarding wage and hour issues and not simply rely
on DLSE interpretations.
For
example, the DLSE takes the position that former employees are entitled to
inspect their personnel records. However, the statute itself makes no
mention of former employees. (Labor Code section 11985.) The DLSE's interpretation is based on an
"implied" finding in a statute that has since been amended. In
fact, the DLSE concedes that the current statute does not provide any
explicit or implicit protection to former employees. Many employers have
relied on the DLSE interpretation to conclude that they must provide
personnel records to former employees. Yet, the DLSE's
interpretation should not be given such force.
The proper course of action for
employers faced with such gray areas is to consult legal counsel. Counsel
should review the DLSE interpretation to see if it coincides with statutory
authority and case law before deciding how much weight it should be given.
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