Opinion
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Orange County, Peter J. Polos, Judge. Super. Ct. No. 30-2008-00108355
Calvin J. Park of Law Offices of Calvin Park for Plaintiff and Appellant.
No appearance for Defendant and Respondent.
OPINION
Before Sills, P. J., Rylaarsdam, J., and Moore, J.
After an administrative hearing, the California Labor Commissioner assessed a civil penalty of $147,000 against Bosscon, Inc., for 588 violations of Labor Code section 226. (Lab. Code, § 226.3.) Bosscon filed a petition for writ of mandate in the superior court arguing the penalty was excessive and violative of due process, was invalid because the Labor Commissioner had not followed the rules for imposing a penalty, and was barred under the doctrine of res judicata because the parties had already settled the matter for a lesser amount. The superior court denied the petition; Bosscon appeals and raises the same issues. We reviewed the Labor Commissioner’s decision de novo and find no merit in the appeal. Accordingly, we affirm the judgment.
I
The facts, which we take from the findings in the Labor Commissioner’s decision, are not in dispute. In August 2007, Bosscon, Inc., doing business as Ace Structure Steel, had employees working at two construction sites: one was a church project in Fullerton, and the other was a mall project in Garden Grove. Jesus Covarrubias, the deputy labor commissioner in the Santa Ana office, Jose Rodriquez, a State Department of Employment Development representative, and Steven Kirsch, an investigator with the Orange County District Attorney’s Office, jointly visited the two construction sites. During this investigation they were joined at the church construction site by Kyung Chung, vice-president of Bosscon.
When asked by the deputy labor commissioner, Chung reported that Bosscon had 38 workers at the church construction site. He said six were employees of Bosscon and the others were “1099 type” workers. Chung then turned over a list of employees at that site which showed there were actually 49 employees. The list included each employee’s rate of pay and whether they were paid in cash or by check. It also showed the employees were not being issued proper wage statements; i.e., they were not receiving itemized deduction statements as required by law. As a result, a notice to discontinue work was issued and a records review hearing was set for September 2007 at which Bosscon was ordered to produce certain employee records.
Chung and an assistant appeared at the records review hearing but without the requested records. They said the records would be provided later. Bosscon, they further reported, was relocating its corporate headquarters and the requested records were still in boxes. Chung later turned over time cards and payment schedules for some but not all of the employees. A review of those records showed Bosscon had not provided them with itemized deduction statements. The deputy labor commissioner issued a citation for 591 violations of the Labor Code for failing to provide employees with itemized deduction statements and for failing to keep records required by law. Pursuant to Labor Code section 226, a penalty was assessed at $250 per violation, per employee, for a total penalty of $147,750.
Bosscon requested an administrative hearing. At this hearing Edward Kim, chief vice-president of operations for Bosscon, conceded they had employees at the church and mall construction sites and had not issued itemized deduction statements to these employees. Kim stated that no one in control of Bosscon was aware of the difference between a W-2, a W-4, a W-9, and a Form 1099. He assured the deputy labor commissioner that since issuance of the citation Bosscon was now complying with the Labor Code and was issuing all employee paychecks with an itemized deduction statement attached. The deputy labor commissioner found Bosscon had violated Labor Code sections 226 and 226.3. He concluded there had been a total of 588 violations (rather than 591) and reduced the penalty to $147,000.
Labor Code section 226 provides in relevant part: “(a) Every employer shall, semimonthly or at the time of each payment of wages, furnish each of his or her employees, either as a detachable part of the check, draft, or voucher paying the employee’s wages, or separately when wages are paid by personal check or cash, an itemized statement in writing showing... (4) all deductions....” In it is unclear why the Labor Commissioner found Bosscon in violation of Labor Code section 226.3 because that section only sets out how civil penalties are to be calculated.
According to the Labor Commissioner’s findings on page 5 of the Decision, the total number of violations were calculated as follows: “Vision Center, Fullerton project, pay schedule from July 2, 2007 to August 29, 2007 reflects a total of 376 violations; Garden Grove Galleria Project, pay schedule from February 12, 2007 to August 11, 2007 reflects a total of 212 violations, for a total of 588 violations from February 12, 2007 to August 24, 2007.”
II
Although Bosscon titled its petition for writ of mandamus in the superior court as one falling under Code of Civil Procedure sections 1085 and 1094.5, no administrative record was lodged with the court. This was not an oversight. At the hearing on the petition the trial judge questioned the absence of a proper administrative record, but Bosscon’s counsel answered with what baseball fans might term defensive indifference. He acknowledged that while the court may always order production of the files of the proceedings—and could do so here if it so chose—it was unnecessary as the petition was “attacking the statute, not the proceeding itself.”
Baseball purists likely will point out that when a defensive team is indifferent, for example, to a runner’s advance it may be called defensive indifference but it is officially scored a fielder’s choice and not a stolen base. (See Major League Baseball’s Official Rule 10.07(g).)
Bosscon argues its election to pursue traditional mandamus and to raise questions of pure law which involve the application of due process means that our review of the Labor Commissioner’s decision is de novo. We agree. (Mohilef v. Janovici (1996) 51 Cal.App.4th 267, 285; Rosenblit v. Superior Court (1991) 231 Cal.App.3d 1434, 1443.) We turn, therefore, to the legal arguments.
A.
Relying solely on Hale v. Morgan (1978) 22 Cal.3d 388, Bosscon argues that “the imposition of $147,000.00 based on one citation against the appellant is constitutionally excessive and violative of due process.” No extended or substantive analysis is provided. It simply asserts—in two short paragraphs—that the penalty violates basic due process because “the duration and the amount of penalty provided under Labor Code Section 226.5 is [sic] potentially unlimited.”
The intended reference is Labor Code section 226.3.
In Hale, the trial court assessed a landlord a civil penalty of $100 per day pursuant to Civil Code section 789.3 for willfully depriving his tenant of water and electrical services in order to evict him. Because he had terminated the tenant’s utilities for 173 days, the court assessed the landlord a penalty of $17,300. On appeal, the landlord challenged the constitutionality of section 789.3, both as a violation of equal protection of the laws and as violative of the due process provisions of the state and federal Constitutions. Although Hale held section 789.3 was not unconstitutional, it also held that under the specific facts of the case the amount of the fine was violative of due process because, when measured against the nature of the misconduct and the deterrent purposes of the penalty, the penalty was “‘clearly, positively, and unmistakably’ unconstitutional.” (Hale v. Morgan, supra, 22 Cal.3d at p. 404.) In Starving Students, Inc. v. Department of Industrial Relations (2005) 125 Cal.App.4th 1357, the appellate court expanded on the analysis in Hale. Its discussion (with internal citation and quotation marks omitted) is instructive:
“The Legislature may constitutionally impose reasonable penalties to secure obedience to statutes enacted under the police power, so long as those enactments are procedurally fair and reasonably related to a proper legislative goal. Imposition of civil penalties has, increasingly in modern times, become a means by which legislatures implement statutory policy. Civil penalties may have a punitive or deterrent aspect, but their primary purpose is to secure obedience to statutes and regulations imposed to assure important public policy objectives. It is not uncommon for a civil penalty to require no proof of actual harm. Moreover, a penalty statute presupposes that its violation produces damage beyond that which is compensable.
“The due process clauses of the federal and state Constitutions are the most basic substantive checks on government’s power to act unfairly or oppressively. Courts have consistently assumed that oppressive or unreasonable statutory penalties may be invalidated as violative of due process. We examine the penalty provision to determine whether, as enacted or as specifically applied, the penalties authorized are reasonable and proper or arbitrary and oppressive.
“In considering the constitutionality of a penalty assessment, the courts have examined whether (1) the amount of the statutory penalty is mandatory; (2) the duration of the penalty is potentially unlimited; (3) the prohibited acts encompass a broad range of culpable conduct and widely divergent injuries; (4) the penalty is imposed equally on those with different levels of sophistication and financial strength; and (5) the penalty is potentially more severe that that provided by the Legislature for other more serious transgressions under the statutory scheme.
“A penalty provision that is suspect for these reasons is facially constitutional if under some circumstances, the application of the penalty would be constitutional. A statute is presumed to be constitutional and... it must be upheld unless its unconstitutionality clearly, positively and unmistakably appears. Where a penal statute may be subject to both constitutional and unconstitutional applications, courts evaluate the propriety of the sanction on a case-by-case basis. A penalty may be unconstitutionally excessive as applied to the facts of a particular case.” (Starving Students, Inc. v. Department of Industrial Relations, supra, 125 Cal.App.4th at pp. 1367-1368.)
The penalty in this case was not excessive. Although our review of the facts is limited by the absence of an administrative record, there is enough evidence in the record to indicate the misconduct was willful and was done in a calculated effort to avoid paying a significant amount of taxes to the detriment of both the government and Bosscon’s employees.
The Labor Commissioner’s decision indicates Bosscon took the position at the administrative hearing that it had only inadvertently violated the statute. The Labor Commissioner obviously did not believe these self-effacing comments. The last sentence of Labor Code section 226.3 provides that, “In enforcing this section, the Labor Commissioner shall take into consideration whether the violation was inadvertent, and in his or her discretion, may decide not to penalize an employer for a first violation when that violation was due to a clerical error or inadvertent mistake.” This is a mandatory provision. Given Bosscon does not charge the Labor Commissioner with failing to follow the statute we presume that he followed the law and took into consideration, but rejected, the assertion this was simply an inadvertent mistake.
Bosscon’s willful violation of the statute had serious financial and personal consequences. We know from the record that Bosscon did not report the wages paid to these employees. It was assessed, for example, over $9400 for California Unemployment Insurance that was not paid. Not only did Bosscon “save” what were likely substantial sums of money by not reporting wages to state and federal authorities, but the employees who worked at these construction sites were obviously harmed as well by the failure to report. One of the purposes of Labor Code section 226 is to protect the rights of employees. Bosscon’s failure to comply with these statutory requirements thus involved more than just a reporting or an accounting quibble. It had a real effect on employees who had no means of protecting themselves.
Finally, we dismiss Bosscon’s assertion the penalty was excessive because it involved only one citation. The amount of the penalty was based on the number of violations, not the number of citations. The Labor Commissioner found there had been 588 violations over many months involving many employees. At the administrative hearing Bosscon conceded every violation had occurred. It is disingenuous on appeal to try to minimize the breadth of the statutory violations by complaining that the Labor Commissioner only issued one citation.
B
Bosscon offers two other arguments that have no merit and which may be dealt with quickly.
First it asserts the Labor Commissioner did not issue and serve the notice of decision in accordance with Labor Code section 226.5, subdivision (a). That section provides that the decision and order of the Labor Commissioner “shall be served on all parties to the hearing within 15 days after the hearing.” The hearing was held on March 6, 2008; the decision was signed on May 5, 2008; and the proof of service shows the decision was served on all the parties on May 6, 2008. Although it appears the Labor Commissioner did not prepare and serve the decision timely, Bosscon offers no reason in its four-sentence argument why that failure requires invalidation of the decision. It does not suggest it was prejudiced by the delay, and there is no prejudice to Bosscon evident on the face of the record. Without a showing of prejudice, the Labor Commissioner’s failure to prepare and serve a decision timely, while not commendable, is not a ground on which an order and decision will be invalidated.
Second, it argues the citation failed to give adequate notice and was barred by the doctrine of res judicata. This argument is bottomed on the idea the citation and the assessment imposed for failure to pay California Unemployment Insurance were so confusingly similar they “deprived the Petitioner of the rights without notice and an opportunity to be properly heard. Also, the settlement of the first proceeding should bar the State from seeking additional civil ‘Assessment’ from the Petitioner.” Nothing in the record supports many of the counsel’s factual assertions, including his statement that the unemployment insurance assessment was paid first. That said, even if we assume the facts are as counsel states them, there was no constitutional violation and res judicata has no application. Each document uses “assessment” in its caption. Other than that singularity the two documents are quite different in form and clear as to their individual purpose. No reasonable person would confuse the two, think they covered the same subject, or believe the payment of the unemployment insurance assessment would resolve the statutory violation for failing to provide employees an itemized statement of deductions.
III
The judgment is affirmed.