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Edmund G. Brown, Jr., As Governor, Etc., et al v. John Chiang

August 30, 2011


APPEAL from a judgment of the Superior Court of Sacramento County, Patrick Marlette, Judge. (Super. Ct. No. 34200980000158CUWMGDS)

The opinion of the court was delivered by: Robie , J.



Prompted by California's unprecedented budget deficit, on December 19, 2008, Governor Arnold Schwarzenegger issued an executive order directing the Department of Personnel Administration (department) to implement a mandatory two-day-a- month unpaid furlough of most workers employed in the executive branch (furlough order). Our Supreme Court recently held this order was valid because it was ratified by the Legislature. (Professional Engineers in California Government v. Schwarzenegger (2010) 50 Cal.4th 989 (Professional Engineers).) However the court left open the question of whether the decision extended to employees of elected constitutional officers. (Id. at pp. 1005, 1034, fn. 28.) We conclude it does.

State Controller John Chiang, as well as the Lieutenant Governor, Secretary of State, Treasurer, Attorney General, Superintendent of Public Instruction, and members of the State Board of Equalization (hereafter collectively the officers*fn1 ), appeal from the judgment of the trial court granting the Governor's petition for writ of mandate compelling the Controller to exercise his ministerial duty to comply with the furlough order. In a related case brought by several employee organizations, the trial court ruled the Governor had the authority to furlough represented state employees pursuant to Government Code*fn2 sections 19849 and 19851 and the terms of the employees' memoranda of understanding. Arguing the Governor's furlough order did not apply to the Controller's employees, the Controller refused to implement the order as to those employees. The trial court disagreed and issued the requested writ of mandate directing compliance with the order.

On appeal, the Controller contends the trial court erred in granting the petition for writ of mandate. The Controller asserts he does not have a ministerial duty to implement the furlough order because: (1) it does not apply to the officers' employees; (2) subsequent budget legislation rendered the order moot; and (3) the Governor is estopped from enforcing the order. The Controller further asserts that applying the furlough order to the officers' employees would: (1) violate the state Constitution's system of divided executive authority; (2) usurp the power of the Legislature; and (3) infringe upon the officers' right to control the staffing and management of their respective offices.

In Professional Engineers, the California Supreme Court held the Governor "possessed authority to institute a mandatory furlough of represented state employees, reducing the earnings of such employees, only if specifically granted such unilateral authority in an applicable memorandum of understanding [MOU] entered into between the state and the employee organization representing the affected employees," but "even if the Governor lacked authority to institute the challenged furlough plan unilaterally," the Legislature subsequently "validated the Governor's furlough program" by revising the Budget Act of 2008 to "reduc[e] the appropriations for employee compensation contained in the original 2008 Budget Act by an amount that reflected the savings the Governor sought to obtain through the two-day-a-month furlough program." (Professional Engineers, supra, 50 Cal.4th at p. 1000.) The court noted the present appeal, but did not address whether the Governor possesses the power to furlough the officers' employees, either unilaterally or with the Legislature's consent. (Id. at pp. 1005, 1034, fn. 28, 1047.)

For reasons we shall explain, we conclude the Governor's furlough order, which was subsequently approved by the Legislature, applied to the officers' employees, such that the Controller had a ministerial duty to implement the mandatory furlough plan as to these employees. This duty did not cease when the Governor subsequently used the line-item veto to cut the officers' respective budgets because the officers refused to implement the furloughs. Nor do principles of equitable estoppel operate to prevent the Governor from enforcing the furlough order against the officers. Finally, applying the furlough order to the officers does not violate the California Constitution's system of divided executive authority or impermissibly interfere with their statutory right to control the staffing and management of their respective offices. Accordingly, we affirm the judgment issuing a writ of mandate compelling the Controller to comply with the furlough order as to the officers' employees.


On November 6, 2008, the Governor issued a proclamation convening the Legislature in a special session to address California's fiscal crisis and unprecedented state budget deficit. The Legislature failed to reach a resolution.

On December 1, 2008, the Governor issued a proclamation declaring a fiscal emergency. Article IV of the California Constitution provides the Governor may declare a fiscal emergency when "the Governor determines that, for that fiscal year, General Fund revenues will decline substantially below the estimate of General Fund revenues upon which the budget bill for that fiscal year, as enacted, was based, or General Fund expenditures will increase substantially above that estimate of General Fund revenues, or both, . . ." (Cal. Const., art. IV, § 10(f).)*fn3 When this occurs, the Governor may call the Legislature into a special session; submit proposed legislation directly to the Legislature; and if the Legislature fails to pass and send bills to the Governor addressing the crisis, it may not act on any other bill nor adjourn for a joint recess until that bill or bills have been passed and sent to the Governor. (Ibid.)

On December 19, 2008, the Governor issued Executive Order S-16-08 (the furlough order) outlining the worsening fiscal crisis and explaining that: (1) there was an approximately $15 billion General Fund deficit for the 2008-2009 fiscal year, which without effective action was forecast to grow to a $42 billion General Fund budget shortfall over 18 months; (2) on November 6, 2008, the Governor issued a special session proclamation and convened the Legislature to meet in extraordinary session to address the fiscal crisis, but the Legislature failed to enact any bills to address the state's significant economic problems; (3) on December 1, 2008, the Governor declared a fiscal emergency and convened the Legislature to address the crisis; (4) on December 17, 2008, the California Pooled Money Investment Board took unprecedented action to halt lending money for an estimated 2,000 infrastructure projects as a result of the cash crisis, including the substantial risk that California would have insufficient cash to meet its obligations as of February 2009; and (5) the Legislature had failed thus far to effectively address the unprecedented statewide fiscal crisis.

Based on the foregoing, the Governor declared that: (1) immediate and comprehensive action was necessary to prevent the state from missing payroll and other essential services payments; (2) current spending must be reduced to ensure the essential services of the state are not jeopardized and the public health and safety is preserved; and (3) a furlough of state employees will reduce current spending and immediately improve the state's ability to meets its obligations to pay for essential services so as not to jeopardize its residents' health and safety. Accordingly, the Governor, "by virtue of the power and authority vested in [him] by the Constitution and statutes of the State of California, . . . determine[d] that an emergency pursuant to Government Code section 3516.5 exists" and issued an order that "the Department of Personnel Administration . . . shall adopt a plan to implement a furlough of represented state employees and supervisors for two days per month, regardless of funding source." The Governor directed a similar furlough for all state managers and exempt employees. He also ordered the department to "work with all State agencies and departments to initiate layoffs and other position reduction and efficiency measures to achieve a reduction in General Fund Payroll of up to ten percent."

The Legislature remained in session until it passed a budget, which was approved by the Governor. The budget provides in pertinent part: "Notwithstanding any other provision of this act, each item of appropriation in this act, . . . shall be reduced, as appropriate, to reflect a reduction in employee compensation achieved through the collective bargaining process for represented employees or through existing administration authority and a proportionate reduction for nonrepresented employees (utilizing existing authority of the administration to adjust compensation for nonrepresented employees) in the total amounts of $385,762,000 from General Fund items and $285,196,000 from items relating to other funds. . . . The Director of Finance shall allocate the necessary reduction to each item of appropriation to accomplish the employee compensation reductions required by this section."

The Controller, whose office is responsible for processing payroll transactions for state employees, refused to comply with the furlough order with respect to the officers' employees. Accordingly, the Governor filed a petition for writ of mandate to compel the Controller to perform his ministerial duty.

The remaining officers filed a complaint in intervention, seeking a declaration that the Governor lacked the authority to furlough their employees. The trial court ruled in the Governor's favor, holding that the Governor had the statutory authority to furlough represented and unrepresented state employees under sections 19849*fn4 and 19851,*fn5 and the parties' MOU's. This ruling applied to the officers' employees, as the Governor's authority extended to all civil service employees employed by civil executive officers. This power did not impermissibly interfere with the powers and duties assigned to each officer. In addition, the court was not persuaded by the officers' claims that the language of the furlough order did not include their employees, that the Governor was estopped from applying the order to their employees, and that the order was moot*fn6 . This appeal followed.



The Supreme Court Decision In Professional Engineers

Because our Supreme Court's recent decision in Professional Engineers, supra, 50 Cal.4th at page 989 informs our decision here, we begin with a detailed discussion of that decision. There, as we have already explained, shortly after the Governor issued the furlough order, several employee organizations filed three separate lawsuits challenging the validity of the order and also filed separate writ petitions seeking to restrain implementation of the order. (Id. at p. 1003.) The trial court considered the matter on an expedited basis, conducted a single hearing in all three cases, and issued a single ruling denying the petitions and directing the Controller to comply with the furlough order. (Id. at pp. 1004, 1009.)

The plaintiff employee organizations appealed to this court, and ultimately the matter was transferred to the California Supreme Court for resolution of the following issues: "First, on December 19, 2008, did the Governor possess authority to impose unilaterally a mandatory two-day-a-month unpaid furlough for state employees by issuing an executive order? Second, did the Legislature's enactment in February 2009 of the revised 2008 Budget Act and the initial 2009 Budget Act affect the validity of the Governor's executive order or the remedy that the employee organizations may be entitled to obtain in the present proceeding?" (Professional Engineers, supra, 50 Cal.4th at pp. 1009-1010, 1012.)

Turning to the first of these issues, our Supreme Court held that "unless the Governor or the [department] had been granted the authority unilaterally to impose a mandatory unpaid furlough on affected represented employees by the terms of an applicable MOU, the Governor and the [department] lacked authority unilaterally to institute such a furlough through the December 19, 2008, executive order with respect to those employees." (Professional Engineers, supra, 50 Cal.4th at p. 1039.)

In reaching this conclusion, the court rejected the Governor's argument that "the power to furlough state employees in the face of a fiscal emergency is an inherent part of his constitutional authority as the state's chief executive" under article V, section 1 of the California Constitution, noting that the Legislature, not the Governor, "generally possesses the ultimate authority to establish or revise the terms and conditions of state employment through legislative enactments," and "any authority that the Governor or an executive branch entity (such as the [department]) is entitled to exercise in this area emanates from the Legislature's delegation of a portion of its legislative authority to such executive officials or entities through statutory enactments." (Professional Engineers, supra, 50 Cal.4th at p. 1015, citing Pacific Legal Foundation v. Brown (1981) 29 Cal.3d 168, 181-196; State Trial Attorneys' Assn. v. State of California (1976) 63 Cal.App.3d 298, 303; Marine Forests Society v. California Coastal Com. (2005) 36 Cal.4th 1, 31-42.)

The court also rejected the Governor's argument, adopted by the trial court, that sections 19849 and 19851 gave the Governor the statutory authority unilaterally to furlough state employees. As the court explained, section 19851, subdivision (a), which provides for a 40-hour workweek and an eight-hour workday for state employees with an exception that workweeks and workdays of a different number of hours may be established in order to meet the varying needs of the different state agencies, "simply is not relevant" to the unpaid furlough program established through the Governor's executive order. (Professional Engineers, supra, 50 Cal.4th at p. 1025.) This is so because the furlough program "does not establish different hours 'to meet the varying needs of the different state agencies,' but rather imposes an across-the-board rule that applies to virtually all executive branch agencies, regardless of their varying needs." (Ibid.)

Moreover, the furlough program "has no effect on the 'workweek' as that term is employed in section 19851" because "the principal purpose served by the designation of a normal 'workweek' . . . is to establish the number of hours that an employee may be required to work in a given week before the employee is entitled to receive overtime compensation for additional hours worked during that week," and the furlough program does not purport to alter the number of hours an employee is required to work before becoming eligible for overtime compensation. (Professional Engineers, supra, 50 Cal.4th at pp. 1026, 1028.) Because "[n]othing in section 19851, subdivision (a) purports to provide the Governor or the [department] with the authority to impose a unilateral across-the-board reduction of state employees' wages or earnings," the trial court erred in ruling that this provision authorized the Governor's furlough program. (Professional Engineers, at p. 1030.)

The court also rejected the trial court's reliance on section 19849, subdivision (a). This provision provides that the department "'shall adopt rules governing hours of work and overtime compensation and the keeping of records related thereto, including time and attendance records,'" and that "'[e]ach appointing power shall administer and enforce such rules.'" (Professional Engineers, supra, 50 Cal.4th at p. 1031.) The court explained: "The trial court, having concluded that section 19851, subdivision (a) provided the substantive authority for the Governor and the [department] to reduce the hours state employees would be permitted to work, determined that the Governor's December 19, 2008, executive order directing the [department] to implement the furlough program constituted a 'rule' within the meaning of section 19849, subdivision (a) and thus was a permissible means of instituting the program. [¶] Because we have concluded that section 19851 does not authorize the Governor or the [department] to institute the challenged furlough program, section 19849 clearly does not independently provide the Governor or the [department] with such authority." (Professional Engineers, at p. 1031.)

The court further rejected the Governor's reliance on section 3516.5, which "simply provides that, as a general matter, when state employees are represented by a recognized employee organization, the employer is required to provide the organization with notification and an opportunity to meet and confer before the employer implements any law, rule, resolution, or regulation directly relating to matters within the scope of representation," and also provides that "[t]he employer, [in cases of emergency], may implement the proposed action without first notifying the employee organization and giving it an opportunity to meet and confer on the matter, but still must notify and meet and confer with the organization regarding the action as soon as practical." (Professional Engineers, supra, 50 Cal.4th at pp. 1031-1032.) The court explained that section 3516.5 does not purport to provide "a source of authority for a state employer to take any particular type of substantive action in either a non-emergency or emergency situation," but instead "simply provides that when an employer possesses the authority from some other source to take a particular type of action relating to matters within the scope of representation, the employer ordinarily must notify and meet and confer with the employee ...

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