lump sum back pay award, which resulted in Barber incurring increased income tax
liability. SPB denied Barber’s motion for recovery for increased tax liability. The trial
court upheld SPB’s decision and denied Barber’s petition for writ of mandamus. Barber
appeals the denial of his writ petition and motion for increased tax liability recovery.
Barber contends he is entitled to recover damages for incurring increased tax
liability because his increased tax liability was caused by real party in interest and
respondent, California Department of Corrections and Rehabilitation (CDCR),
improperly terminating his employment. Barber argues that awarding him such relief is
consistent with the remedial statutory purpose of Government Code section 19584,2 of
making an improperly terminated employee whole by restoring the employee to the
financial position he or she would otherwise have occupied had employment not been
wrongfully interrupted. We disagree. Barber is not entitled to increased tax liability
1 Barber’s first appeal was decided in the unpublished decision, Barber v. California State Personnel Board (Oct. 24, 2014, E057014 [nonpub.opn.] (Barber I)). 2 Unless otherwise noted, all statutory references are to the Government Code.
2
recovery under section 19584 or to such recovery as equitable relief, because such relief
is not statutorily authorized. We therefore affirm the judgment denying such an award.
II.
FACTS AND PROCEDURAL HISTORY
We incorporate the undisputed facts summarized in Barber I, regarding Barber’s
employment history leading to his employer, CDCR, serving Barber with a notice of
adverse action and terminating him in April 2009. The notice of adverse action notified
Barber that he was dismissed from his position as a parole agent for alleged violations of
section 19572 (inexcusable neglect of duty, dishonesty, discourteous treatment of the
public or other employees, and behavior either during or outside of duty hours of such a
nature to cause discredit to the appointing authority or the person’s employment). SPB
and the trial court concluded that CDCR’s termination of Barber was proper. Barber
appealed (Barber I).
On October 24, 2014, in Barber I, this court reversed the trial court’s decision
upholding Barber’s termination, and ordered the trial court to issue a peremptory writ of
mandate directing SPB to set aside its decision sustaining CDCR’s dismissal of Barber
and award him “any other relief to which he is entitled.” This court concluded that the
notice of adverse action did not provide Barber with sufficient notice of the workplace
rules he allegedly violated or the specific manner in which the violation occurred. We
therefore held in Barber I that, “[w]ithout that notice, he was deprived of his due process
3
right to prepare an effective defense against the charge and to argue the appropriate
punishment.”
SPB issued a resolution setting aside its previous April 2011 decision, and ordered
CDCR to reinstate Barber and pay Barber all back pay and benefits that would have
accrued had he not been terminated in April 2009. SPB further directed that if the parties
were not in agreement on the amount of Barber’s salary and benefits recovery, the matter
was to be referred to the chief administrative law judge (ALJ) for a hearing. In April
2015, Barber was reinstated, and began working again and receiving salary and benefits.
Although as of October 2015, CDCR paid Barber approximately $500,000 in back
pay (over $450,000 in back pay and over $230,000 in benefits), in January 2016, Barber
submitted a request for additional recovery under section 19584 and a hearing. Barber
asserted that, “due to the large lump sum back pay payment [Barber] received in 2015, he
is now faced with a significantly greater tax burden than if he had been receiving his
salary on a yearly basis and paying his taxes accordingly.” Barber maintained that, as a
consequence, CDCR had a duty to return Barber to the condition he would have been in
had he not been dismissed and, as such, CDCR should reimburse Barber for his increased
tax liability from being paid a lump sum back pay award.
At a prehearing/settlement conference, Barber and CDCR disagreed on whether
Barber was entitled to additional reimbursement of wages to cover Barber’s increased tax
liability. The ALJ instructed the parties to brief the issue of whether Barber’s increased
tax liability was compensable under section 19584.
4
A. Motion to Allow Increased Tax Liability Recovery
In May 2016, Barber filed a motion to allow recovery for increased tax liability
under section 19584 as an element of back pay. The Los Angeles Police Protective
League joined Barber’s motion as amicus curiae and filed a supporting amicus brief and
reply. Barber asserted in his motion that the purpose of section 19584 is to make a
wrongfully terminated employee whole. Barber argued that, in making him whole,
CDCR was required to pay him for incurring approximately $145,000 in increased tax
liability, caused by receiving the lump sum back pay award.
Barber noted that, “[p]rior to 1986, it was not uncommon for courts to disallow the
award of increased tax liability in lump sum awards due to the availability of the
averaging provisions of the Tax Code which eliminate nearly all of the excess liability
that would otherwise result from a lump sum award. [Citation.] The 1986 Tax Reform
Act, P.L. 99-514 (1986), however, repealed the income averaging provision of the old
Revenue Code leaving all those receiving a lump sum award to suffer the consequences
of additional tax liability.” As a consequence, the Equal Employment Opportunity
Commission (EEOC) and National Labor Relations Board (NLRB) have awarded
compensation for increased tax liability resulting from lump sum back pay awards arising
from discrimination claims. Barber argued that CDCR was required to pay him
compensation for his increased tax liability because he would not be made whole without
such recovery.
5
CDCR argued in its opposition that section 19584 does not authorize
compensation for increased tax liability; SPB did not have jurisdiction to award
compensation for increased tax liability; Barber failed to cite any supporting binding case
law; and federal NLRB and EEOC case law does not support Barber’s position because
Barber’s case does not involve discrimination and there is a split of nonbinding federal
authority on whether damages for increased tax liability are recoverable.
B. June 2, 2016, Hearing on Motion for Increased Tax Liability Recovery
On June 2, 2016, an ALJ heard, telephonically, Barber’s motion for increased tax
liability recovery. No witness testimony or evidence was presented. Counsel for Barber
and CDCR presented oral argument. Barber, through his attorney, argued that section
19584 provided for back pay “salary,” in furtherance of making an employee whole after
being wrongfully terminated. Barber’s attorney acknowledged there was little, if any,
state case law on the issue and section 19584 did not include any specific language
authorizing broad equitable relief, as is included in Title VII of the Civil Rights Act.
Barber’s attorney argued that, nevertheless, the intent of section 19584 is to allow for
such relief. Barber’s attorney noted that Barber’s claim was unusual because he received
back pay for six years of salary. Usually, back pay is for a relatively short period of time,
resulting in minimal increased tax liability. In addition, counsel argued that, before tax
laws changed in 1986, receiving a lump sum back pay award was not a problem.
6
CDCR’s attorney argued section 19584 did not allow for increased tax liability
recovery because such relief is not salary or benefits. Counsel further argued the federal
case law Barber relied on is inapplicable because it is founded on federal law which,
unlike section 19584, contains language expressly allowing for broad equitable relief.
CDCR’s attorney stated that the legislature could amend the statute to allow for such
relief or it could be provided for in the memorandum of understanding, which currently
does not provide for increased tax liability recovery. The ALJ took the matter under
submission and issued a written decision on June 16, 2016.
C. SPB’s June 16, 2016, Ruling on Barber’s Motion
The ALJ stated in its June 16, 2016, written decision that section 19584 does not
mention recovery for increased tax liability. Furthermore, the terms “salary,” “benefits,”
and “‘special salary compensations’” do not encompass payment for increased tax
liability. The ALJ also considered and rejected the proposition that SPB had broad
equitable authority to make Barber whole, when section 19584 does not provide tax
liability relief. The ALJ concluded SPB was not vested with statutory or equitable power
to make Barber whole, beyond those remedies provided within the bounds of the
legislative framework and parameters established by the state Legislature in the State
Civil Service Act (§ 18500 et seq.). The ALJ recognized that section 19582, subdivision
(a) of the State Civil Service Act provides authority for SPB to make Barber whole, but
concluded such authority is limited by the statutory authority granted to SPB in section
19584. The ALJ noted that SPB did not have broad equitable authority to award tax
7
relief, unlike federal courts’ broad equitable powers to allow offsets for federal tax
consequences arising from awards under Title VII, including the ADEA3 and ADA.4
The ALJ concluded there was no case law supporting Barber’s contention that SPB had
authority to award him recovery for increased tax liability. The ALJ therefore found that
SPB was not vested with statutory or equitable power to make Barber whole, beyond
remedies provided within the bounds of the legislative framework and parameters
established by the state Legislature in the State Civil Service Act. Accordingly, SPB
denied Barber’s motion for increased tax liability recovery.
D. Barber’s Writ Petition Challenging SPB’s Denial of His Motion
On August 5, 2016, Barber filed in the trial court a verified petition for writ of
mandate under Code of Civil Procedure sections 1085 and 1094.5, challenging SPB’s
ruling denying him increased tax liability recovery. Barber included copies of his tax
returns and tax tables for 2004 through 2015. Barber alleged that SPB erred in denying
his motion for increased tax liability recovery under Government Code section 19584.
Barber argued that the language in Government Code section 19584, stating “‘other
special salary compensations, if sufficiently predictable,’” should be construed as
permitting recovery for increased tax liability. Barber also argued that his increased tax
3 Age Discrimination in Employment Act (ADEA). (29 U.S.C. §§ 216(b), 623(a)(1).) 4 Americans With Disabilities Act (ADA). (42 U.S.C. §§ 12101-12213, 2000e- 5(g)(1).)
8
liability was a “‘predictable’” loss in actual back pay. Barber further asserted that the
purpose of Government Code section 19584 was to make the reinstated employee whole
and SPB had failed to do so by denying him tax liability recovery. Lastly, Barber
asserted that California public employees should have the same rights to recovery for
increased tax liability as private and federal employees. CDCR filed an answer to
Barber’s writ petition, and SPB filed opposition.
E. June 16, 2017, Trial Court Hearing on Barber’s Writ Petition
On June 16, 2017, the trial court heard oral argument on Barber’s writ petition.
Barber, in propria persona, argued that his tax documentation showed that his total tax
liability, had he received his annual salary during the six years he was dismissed from
employment, would have totaled about $5,300, whereas his tax liability on his lump sum
award is $161,000. He therefore must pay approximately $155,000 more in income tax.
Barber said he made about $110,000 a year. As a consequence of his lump sum award,
he was taxed at the highest rate, incurring $171,000 in state and federal taxes. Barber
argued that his increased tax liability was not speculative relief. It could be calculated
with sufficient accuracy. Barber added that he should not have to pay increased tax
liability caused by CDCR wrongfully terminating him. Barber argued he should be made
whole and should not be deprived of recovery for increased tax liability, when NLRB and
EEOC claimants, and civilian employees making ADA and Department of Fair
Employment and Housing claims can recover such relief. Barber noted that he did not
submit his tax return documentation to the ALJ at the hearing on his motion for increased
9
tax liability recovery because the ALJ told him not to because his motion solely
concerned a legal issue, and the ALJ was not going to address factual issues.
CDCR’s counsel responded that NLRB and EEOC decisions are inapplicable
because they do not involve administrative law, and Barber’s case does not involve
discrimination. CDCR’s attorney further argued that whether Barber incurred increased
tax liability was speculative because Barber lacked sufficient evidence proving his claim.
In addition, CDCR’s attorney argued that section 19584 does not include language
allowing for increased tax liability recovery, and there is no supporting case law.
The trial court noted that both parties agreed there was no California case law
directly on point. The trial court further noted that Barber’s increased tax liability was
ascertainable and that, if recoverable as a matter of law, the court could remand the
matter to the ALJ for a hearing on the factual issue of the amount recoverable. The trial
court took Barber’s writ petition under submission and later that day denied it.
The court stated in its minute order that Barber “concedes that there is no binding
authority under California case law.” The court further stated: “The language of Section
19584 is clear in that increased tax liability is not an element of compensable salary or
benefits under the code. If the legislature wanted to include that item, it could have
clearly stated so in the statute. This Court is disinclined to do so. Cases applying section
19584 opine that an item is only compensable when it is of the same general nature or
class of benefits. Tax liability is not a benefit, it is the opposite.” Barber filed a notice of
10
appeal of the June 16, 2017, order. On July 6, 2017, the trial court entered judgment
denying Barber’s writ petition.5
III.
STANDARD OF REVIEW
The parties agree this appeal concerns the purely legal issue of first impression, of
whether Barber can recover increased tax liability damages under section 19584 or as
equitable recovery for a constitutional due process violation.
“Our state Constitution contemplates that SPB shall be the forum in which civil
service disciplinary cases are first adjudicated.” (Alameida v. State Personnel Bd. (2004)
120 Cal.App.4th 46, 57.) SPB is the state administrative agency that initially adjudicated
Barber’s dismissal and award of back pay and benefits. SPB is “‘“created by, and derives
its adjudicatory power from, the state Constitution. (Cal. Const., art. VII, §§ 2
[membership and compensation of board], 3 [‘(a) The board shall enforce the civil
service statutes and, by majority vote of all its members, shall . . . review disciplinary
actions’]. . . .) Under that constitutional grant, [SPB] is empowered to ‘review
disciplinary actions.’ In undertaking that review, [SPB] acts in an adjudicatory capacity.
‘The [SPB] is an agency with adjudicatory powers created by the California
Constitution.’ [Citation.] As such [SPB] acts much as a trial court would in an ordinary
judicial proceeding. Thus, [SPB] makes factual findings and exercises discretion on
5 This court construed Barber’s notice of appeal to have been taken from the July 6, 2017, judgment.
11
matters within its jurisdiction.”’” (Fisher v. State Personnel Bd. (2018) 25 Cal.App.5th
1, 13.)
SPB’s decision may be reviewed in the trial court by filing a petition for a writ of
administrative mandate, which may be brought only “for the purpose of inquiring into the
validity of any final administrative order or decision . . . .” (Code Civ. Proc., § 1094.5,
subd. (a); see also State Bd. of Chiropractic Examiners v. Superior Court (2009) 45
Cal.4th 963, 974.) “‘“On review the decisions of [SPB] are entitled to judicial deference.
The record must be viewed in a light most favorable to the decision of [SPB] and its
factual findings must be upheld if they are supported by substantial evidence.”’” (Fisher
v. State Personnel Bd., supra, 25 Cal.App.5th at p. 13.) “Where, as here, an appeal from
administrative mandamus proceedings presents questions of law, our review is de novo.”
(Alameida v. State Personnel Bd., supra, 120 Cal.App.4th at p. 52; see also Pollak v.
State Personnel Bd. (2001) 88 Cal.App.4th 1394, 1404.)
IV.
PRINCIPLES OF STATUTORY CONSTRUCTION
In his appeal, Barber challenges the trial court’s and SPB’s interpretation of
section 19584. Both the trial court and SPB construed section 19584 as not allowing
recovery for increased tax liability caused by Barber receiving a lump sum back pay
award. Our review of the trial court’s ruling requires this court to interpret section 19584
de novo. (Department of Corrections & Rehabilitation v. State Personnel Bd. (2014) 227
Cal.App.4th 1250, 1256 (Martin).) We are thus required to apply an independent
12
standard of review to the issue of statutory construction raised in the instant appeal.
(Fisher v. State Personnel Bd., supra, 25 Cal.App.5th at p. 14.) In doing so, “‘[w]e give
great deference to the agency’s interpretation of statutes affecting issues within its
administrative sphere.’ [Citation.] However, we ‘do not necessarily defer to SPB’s
interpretations of the governing statutes. [Citation.] The judiciary takes ultimate
responsibility for the construction of statutes, although according great weight and
respect to the administrative construction such as is appropriate under the circumstances.’
[Citation.]” (Martin, supra, at p. 1256.)
When construing a statute, we apply the following well-settled principles of
statutory construction. In discerning the Legislature’s intent, “‘[t]he statutory language
itself is the most reliable indicator, so we start with the statute’s words, assigning them
their usual and ordinary meanings, and construing them in context. If the words
themselves are not ambiguous, we presume the Legislature meant what it said, and the
statute’s plain meaning governs. On the other hand, if the language allows more than one
reasonable construction, we may look to such aids as the legislative history of the
measure and maxims of statutory construction. In cases of uncertain meaning, we may
also consider the consequences of a particular interpretation, including its impact on
public policy.’ [Citation.] ‘“If possible, significance should be given to every word,
phrase, sentence and part of an act in pursuance of the legislative purpose.” [Citation.]
. . . “a construction making some words surplusage is to be avoided.” [Citation.] “When
used in a statute [words] must be construed in context, keeping in mind the nature and
13
obvious purpose of the statute where they appear.” [Citations.] Moreover, the various
parts of a statutory enactment must be harmonized by considering the particular clause or
section in the context of the statutory framework as a whole.’ [Citation.]” (Martin,
supra, 227 Cal.App.4th at p. 1256.) “‘“Ultimately we choose the construction that
comports most closely with the apparent intent of the lawmakers, with a view to
promoting rather than defeating the general purpose of the statute.”’ [Citation.]” (Lee v.
Hanley (2015) 61 Cal.4th 1225, 1233.)
V.
CONSTRUING SECTION 19584
Barber agrees that increased tax liability recovery is not a benefit within the
meaning of section 19584. Instead, Barber argues that increased tax liability recovery is
“salary,” as defined in section 19584. The current definition of “salary” was added to
section 19584 by amendment in 1994 by Senate Bill No. 846 (1993-1994 Reg. Sess.)
(Senate Bill 846). (Compare Stats. 1985, ch. 1195, § 6, p. 4051 with Stats. 1994, ch. 814,
§ 4, p. 4057; see also Martin, supra, 227 Cal.App.4th at p. 1259.)
The State Civil Service Act (§ 18500 et seq.) provides for compensation of
employees who have been wrongfully discharged from state service. (Swepston v. State
supported her request with testimony from financial consultant) with Anderson v.
CONRAIL, 2000 U.S. Dist LEXIS 15978 at [14]-15 (E.D. Pa. Oct. 26, 2000)[6] (refusing
to adjust award to account for tax consequences because such amendment would be
speculative, noting plaintiff had not supported her request with any evidence) and Shovlin
v. Timemed Labeling Sys., Inc., 1997 U.S. Dist. LEXIS 2350 at [7] (E.D. Pa. Feb. 28,
1997).[7]” (Id. at p. 719.)
The Clemens court maintained that the court in Dashnaw v. Pena, supra, 12 F.3d
1112 ignored the Title VII equitable underpinnings, as well as the Tenth Circuit’s
decision in Sears v. Atchison, Topeka & Santa Fe Ry. Co., supra, 749 F.2d at page 1456,
and the Supreme Court’s reasoning in Albemarle Paper Co. v. Moody (1975) 422 U.S.
405, 408, 415-417, 436 (employees are entitled to equitable relief, including back pay, in
class action brought against employer for injunctive relief against acts violative of equal
employment opportunity provisions of Title VII of the Civil Rights Act of 1964, as
amended by the Equal Employment Opportunity Act of 1972);8 Loeffler v. Frank (1988)
486 U.S. 549, 551-554, 558 (discharged male Postal Service employee, who brought
action against Postmaster General under Title VII of the Civil Rights Act of 1964,
6 Not reported in Federal Supplement Second. 7 Not reported in Federal Supplement Second. 8 Title 42 United States Code section 2000e et seq. (1970 ed. & Supp. III).
28
alleging discriminatory discharge on basis of sex, is entitled to recover prejudgment
interest as part of back pay); and Franks v. Bowman Transp. Co., Inc. (1976) 424 U.S.
747, 750, 757, 762 (in Title VII race discrimination action, the prevailing plaintiff
employees were entitled to retroactive seniority relief under the Civil Rights Act).
(Clemens, supra, 874 F.3d at p. 1117.)
The court in Clemens agreed with the analysis of the Third, Seventh, and Tenth
Circuits, holding that the district court may, in its discretion, award an employee gross-up
damages for increased tax liability from a lump sum award. (Clemens, supra, 874 F.3d at
p. 1117.) The Clemens court rejected the employer’s argument that such monetary relief
is legal, not equitable, concluding that the argument is “wrong under Title VII case law.”
(Ibid.; see also Lutz v. Glendale Union High Sch. (9th Cir. 2005) 403 F.3d 1061, 1068-
1069 [“[B]ack pay remains an equitable remedy to be awarded by the district court in its
discretion.”]; EEOC v. Joe’s Stone Crab, Inc. (S.D.Fla.1998) 15 F.Supp.2d 1364, 1380
[Title VII sex discrimination claim, in which federal district court held that “a district
court, in the exercise of its discretion, may include a tax component in a lump sum back
pay award to compensate prevailing Title VII plaintiffs”].)
Clemens and its progeny of similarly decided federal cases allowing increased tax
liability recovery, are brought under federal legislation expressly authorizing broad
equitable relief. The federal cases include discrimination claims brought under Title VII,
against a private or federal employer. Unlike the state Legislature enacting section
19584, “Congress armed the courts with full equitable powers in Title VII cases.”
29
(EEOC v. General Tel. Co. (9th Cir. 1979) 599 F.2d 322, 334-335; accord, Clemens,
supra, 874 F.3d at p. 1116; Albemarle Paper Co. v. Moody, supra, 422 U.S. at p. 418.)
In another relatively recent federal discrimination case against the U.S. Postal
Service and postmaster general, Graham v. Brennan, (U.S. Dist. Ct., D. Ore., Sept. 26,
State Personnel Bd. v. Department of Personnel Admin., supra, 37 Cal.4th at p. 523.)
SPB’s authority is limited by the state Constitution and state statutory law. Statutory law
limits relief ordered by SPB to that which is stated in section 19584. The state and
federal Constitutions do not provide any authority to provide additional equitable or
monetary relief for increased tax liability in the instant case. Barber therefore is not
entitled to any relief beyond that which is statutorily authorized in section 19584.
We conclude, as the court in Martin did, that “[t]he federal authorities that [the
plaintiffs] cite are not pertinent here. Our task is to construe specific language in a
California statute. [The plaintiffs] do not suggest that any of these cases involved an
35
interpretation of statutory language like that in section 19584.” (Martin, supra, 227
Cal.App.4th at p. 1258.) The trial court therefore did not err in affirming SPB’s decision
denying Barber increased tax liability recovery. There is no federal or state case,
constitutional provision, or statutory law that supports awarding Barber such recovery.10
VII.
DISPOSITION
The judgment is affirmed. CDCR and SPB are awarded their costs on appeal.
CERTIFIED FOR PUBLICATION
CODRINGTON J.
I concur:
McKINSTER Acting P. J.
10 We recognize Economy v. Sutter East Bay Hospitals (2019) 31 Cal.App.5th 1147, which addresses gross-up damages in a different context, was recently decided on February 4, 2019, before oral argument on April 2, 2019. Neither party mentioned this case during oral argument. Sutter is not dispositive because it does not involve termination of a CDCR employee subject to relief under section 19584.
36
[Barber v. California State Personnel Board et al., E068719]
Slough, J., Dissenting.
This appeal boils down to whether we should interpret the phrase “other special
salary compensations” as allowing the California State Personnel Board (SPB) and courts
to award reinstated government employees “gross-up” back pay awards to ensure the
employees end up with the same after-tax net income they would have had if they hadn’t
been wrongly terminated in the first place. The majority says no. I disagree and write
separately to explain why.
The need for gross-up awards arises for wrongfully terminated employees who are
reinstated and recover more than a year’s salary and benefits in a lump sum. Under
current state and federal tax law, all income paid in a year, including lump sum back pay
awards, are taxed in the year the employee gets paid. Because the federal and state
income tax regimes are progressive—higher incomes are taxed at a higher rate—a large
lump sum payment can cause the reinstated employee to owe substantially more in taxes
than they would have owed had they received the same income over the course of
uninterrupted employment. (See generally, Ireland, Thomas, Journal of Legal Economics
51, Tax Consequences of Lump Sum Awards in Wrongful Termination Cases (Oct. 2010)
pp. 51-52.) As a result, such employees take home less income than they would have if
they’d never been wrongly terminated.
In this case, for example, Barber was paid all at once for six years of salary and
benefits. Though he was not permitted to put on evidence showing how much he paid, he
1
estimates he paid about $145,000 more in taxes than he would have paid had he worked
steadily through those six years and paid taxes on the income along the way. The
question we face is who bears the burden of this artifact of the tax laws, injured
employees or the government employers who wronged them? Put another way, does the
statute designed to return reinstated government employees to the financial state they
would have been in if they hadn’t been wrongfully terminated allow the award of gross-
up payments needed to accomplish that end?
Because this is a question of statutory construction, I begin with the language of
the provision governing the compensation of reinstated government employees.
“Whenever the board revokes or modifies an adverse action and orders that the employee
be returned to his or her position, it shall direct the payment of salary and all interest
accrued thereto, and the reinstatement of all benefits that otherwise would have normally
accrued. ‘Salary’ shall include salary, as defined in Section 18000, salary adjustments
and shift differential, and other special salary compensations, if sufficiently predictable.”
(Gov. Code, § 19584, unlabeled statutory citations refer to this code.)
Because “salary” is defined by the statute, we don’t apply the ordinary meaning of
the term. Instead, following the definition, we treat “salary” as having the following
components: salary as defined in section 18000, “salary adjustments,” “shift
differential,” and “other special salary compensations, if sufficiently predictable.”
Section 18000 defines salary as “[t]he salary fixed by law.” Salary adjustments are
incremental increases in salary—merit-based, automatic, or discretionary—that an
2
employee may receive within the salary range established for a position. (§§ 19829
published in 1991, roughly contemporaneous with the amendment that inserted the phrase
“special salary compensations,” contains the same ideas. Compensation is “something
that constitutes an equivalent or recompense,” and recompense is “to give something to
by way of compensation (as for a service rendered or damage incurred).” (Webster’s 9th
New Collegiate Dict. (1991) pp. 268, 984, italics added.)
These definitions plainly encompass the idea of income paid for work performed
and the idea of payments made to make up for an injury. Black’s Law Dictionary agrees,
though it breaks the two meanings into separate entries. “1. Remuneration and other
benefits received in return for services rendered; esp., salary or wages . . . 2. Payment of
damages, or any other act that a court orders to be done by a person who has caused
injury to another. In theory, compensation makes the injured person whole.” (Black’s
Law Dict. (8th ed. 2004) p. 301.)
4
How do we decide which is correct in this statutory provision? I don’t believe we
need to decide. The term itself is broad and general, as the government parties
acknowledge. I conclude the plain meaning of the statute includes both senses of the
word compensation. The term is designed as a true catchall. There may be other forms
of special salary payments not captured by the specific categories of statutory salary,
salary adjustments, and shift deferential pay. The statute allows the award of such
payments, if they’re predictable. Similarly, there are remedial awards that may help
ensure a wronged employee receives the same net salary they would have received if not
terminated. A gross-up award to account for increased tax liability falls into the latter
bucket, and I believe it is a form of compensation authorized by the statute. The fact that
the term is plural—“special salary compensations”—fits neatly with this interpretation.
The majority responds by doubling down on their interpretation—literally. Their
primary argument is that the word “compensation”—which they interpret to mean only
“payment for work”—is modified by the word “salary.” The argument is somewhat
opaque, but I believe they mean to say that since “salary” means “payment for work,”
that narrows the meaning of “compensation” to “payment for work” too. (Maj. opn.
p. 17.) I find this unpersuasive, primarily because it reads the concept of salary into the
phrase twice, making the modifier—“salary”—redundant. On their interpretation,
“salary” doesn’t so much modify “compensation” as repeat it. The interpretation I prefer
doesn’t suffer the same defect. I believe the word “salary” limits the term
“compensations”—in the sense of damages received to make up for injuries—to those
5
payments made to compensate for injuries to the amount an employee received in salary
payments. Since the tax laws reduce the net salary a plaintiff receives, gross-up awards
that compensate for such an injury are “special salary compensations.”
The interpretation I propose is also preferable because it effectuates the purpose of
the statute. Section 19584’s plain aim is making whole employees injured by their
employer’s misconduct or mistake. “Whenever the board revokes or modifies an adverse
action and orders that the employee be returned to his or her position, it shall direct the
payment of salary and all interest accrued thereto, and the reinstatement of all benefits
that otherwise would have normally accrued.” As our Supreme Court has recognized,
about this provision as well as other back pay provisions, “[t]he purpose of the remedy is
clear. ‘A back pay order is a reparation order designed to vindicate the public policy of
the statute by making the employees whole for losses suffered on account of an unfair
labor practice.’” (Ofsevit v. Trustees of Cal. State University & Colleges (1978) 21
Cal.3d 763, 777, fn. 14, quoting NLRB v. Rutter-Rex Mfg. Co. (1969) 396 U.S. 258, 263.)
The legislative history, though silent on the meaning of “special salary compensations,”
confirms this purpose. “It is within SPB’s jurisdiction to make the employee ‘whole’
based on the facts of each case.” (Off. of Sen. Floor Analyses, 3d reading analysis of
Sen. Bill No. 846 (1993-1994 Reg. Sess.) Aug. 12, 1994.)
There’s no question Barber suffered a loss to his net salary because of his
wrongful termination. So, ordering a gross-up award to make up for that loss is
necessary to return him to the position he would have been in had he not been wronged.
6
Interpreting the statute as allowing such an award is therefore preferable because it
advances the statute’s make-whole purpose. (Lee v. Hanley (2015) 61 Cal.4th 1225,
1233 [“‘Ultimately we choose the construction that comports most closely with the
apparent intent of the lawmakers, with a view to promoting rather than defeating the
general purpose of the statute’”].) As the U.S. Court of Appeals for the Third Circuit
explained in reaching the same conclusion under the federal employment discrimination
statute, “Our conclusion is driven by the ‘make whole’ remedial purpose of the
antidiscrimination statutes. Without this type of [tax gross-up] equitable relief in
appropriate cases, it would not be possible ‘to restore the employee to the economic
status quo that would exist but for the employer’s conduct.’” (Eshelman v. Agere Sys.,
Inc. (3d Cir. 2009) 554 F.3d 426, 442.) While section 19854’s award provision is
different than the federal statute’s provision, both provide ample room for the deciding
agency or court to consider whether a tax liability gross-up award is appropriate under the
facts of the cases before them. I believe Barber’s is a case where a gross-up award is
appropriate.
The majority complains I would expand the court’s authority by “add[ing] to
section 19584 this additional category of recoverable compensation.” (Maj. opn. at
p. 17.) This rhetoric is empty and unnecessary. It is our job as a court to interpret
statutes in a way that is true to their plain meaning and puts their purpose into effect.
(Searle v. Allstate Life Ins. Co. (1985) 38 Cal.3d 425, 449.) Where the text and the
purpose support a broad interpretation, we should follow the Legislature’s lead.
7
Adopting a hyper-narrow interpretation of such a statutory provision—as the majority
does here—isn’t a recognition of the limits of our authority, but an erroneous trimming of
the statute, in this case one which leaves the purpose of the statute on the cutting room
floor.
The government respondents argue allowing gross-up awards would have far-
reaching consequences for the state budget. “The statewide implication of imprinting
upon section 19584 an obligation by State agencies to make payments to State employees
a premium or ‘gross up’ to cover those employees’ increased tax liabilities is presently
incalculable, but assuredly significant.” I’m not so sure. As I explained above, the need
for a gross-up award is likely to arise only in cases where the employee obtained a lump
sum back pay award covering a period of years, perhaps many years. While there are
such cases, Barber’s is unusual in that he was kept out of his job for six years and then
compensated for the injury in a single payment. It seems unlikely such cases are
numerous enough to cause problems for the California budget. But it’s certain that
denying gross-up awards to reinstated government employees like Barber will make a
significant impact on their individual budgets.
Finally, there’s no reason to think proving the amount of a tax liability gross-up
award will be speculative. Back pay awards are backwards looking and figuring out the
tax consequences is a technical problem, solvable within a reasonable degree of certainty.
(See Ireland, Thomas, Journal of Legal Economics 51, Tax Consequences of Lump Sum
8
Awards in Wrongful Termination Cases, supra, at pp. 52-53.) As a result, such awards
are very likely to be “sufficiently predictable,” as required by the statute.
The majority disagrees tax gross-up awards would be predictable, but only by
equivocating. The point of the restriction is to bar recovery for injuries that are too
speculative from the point of view of a factfinder at trial. (Department of Corrections &
Rehabilitation v. State Personnel Bd. (2014) 227 Cal.App.4th 1250, 1264 [holding it was
sufficiently predictable a reinstated employee would have received merit salary increases
to include them in the damages for wrongful termination].) But the majority reads
“sufficiently predictable” as limiting recovery to injuries that are foreseeable by the
wrongdoer at the time they violate a plaintiff’s constitutional rights. That’s the wrong
focus entirely, and is out of keeping with the general rule in tort recovery that
foreseeability is immaterial to tort damages. (6 Witkin, Summary of Cal. Law (11th ed.
2018) Torts, § 1343, p. 649.)
Barber estimated his increased tax liability in proceedings below. However,
because neither the SPB nor the trial court adjudicated the matter, I would reverse the
order denying Barber’s writ of mandate and order the trial court to direct the SPB to hold
a hearing on the appropriate amount of a gross-up award in his case.
SLOUGH J.
9
AI Brief
AI-generated · verify before citing
Holding. Government Code section 19584 does not authorize the State Personnel Board to award compensation for increased tax liability incurred by an employee receiving a lump sum back pay award. Such tax liability does not constitute 'salary' or 'special salary compensation' under the statute.
Issues
Whether Government Code section 19584 authorizes recovery for increased tax liability resulting from a lump sum back pay award.
Whether the State Personnel Board possesses equitable authority to award tax liability recovery beyond the scope of the State Civil Service Act.
Disposition. Affirmed.
Quotations verified verbatim against the opinion
“The language of Section 19584 is clear in that increased tax liability is not an element of compensable salary or benefits under the code.”