California State Employees' Ass'n v. State Personnel Board

Opinion

MORRISON, J. We have previously construed “pay rates,” as that term is used in the Government Code, to mean “wages.” (California State Employees' Assn. v. State Personnel Bd. (1986) 178 Cal.App.3d 372, 377, 381-382 [223 Cal.Rptr. 826].) In this case the trial court followed that definition and overturned a decision by the State Personnel Board (Board) which departed from that definition. We shall affirm.

The California State Employees’ Association obtained a writ commanding the Board to reconsider its decision to permit the use of contract janitors at a particular state facility.

[795]The operative facts are not in dispute. A state agency entered into a contract with real party in interest Toolworks, Inc. (Toolworks), a nonprofit corporation “operating rehabilitation facilities for persons with disabilities. One of [its] goals is to place persons with disabilities into competitive employment.” “Although the employees . . . would work at reduced salaries, the employees would also work at speeds 50% slower than State janitors.”

Generally, the state’s work must be performed by state workers. (California State Employees' Assn. v. State of California (1988) 199 Cal.App.3d 840, 844 [245 Cal.Rptr. 232].) The exception here at issue relates to so-called “personal services contracts,” which enable the state to perform certain functions at a cost savings. (Gov. Code, § 19130 et seq.; further unspecified sections are to this code.) However, such contracts must meet a variety of tests, including a limitation on pay rates:

“Personal services contracting is permissible to achieve cost savings when all the following conditions are met:

“(2) Proposals to contract out work shall not be approved solely on the basis that savings will result from lower contractor pay rates or benefits. Proposals to contract out work shall be eligible for approval if the contractor’s wages are at the industry’s level and do not significantly undercut state pay rates.” (§ 19130, subd. (a), italics added.)

The Board’s implementing regulation provides: “When a Personal Services Contract is based on cost savings, a contractor’s wages shall be at or above the industry’s level and shall not undercut the State’s pay rate for comparable work by more than 15%, except that if in a nonmetropolitan area of the State the contractor’s rate of pay is more than 15% below the state rate, the contract may be approved if the contractor[’]s rate of pay is closer to the State rate than it is to the comparable industry rate in the local area. In no case shall a contractor’s wages be more than 25% below the State’s pay rate. Comparison of wages for this purpose shall not include the cost of benefits.