Will ‘Judicial Restraint’ Court Defer on Minimum Wage?

When it came down to the bread-and-butter issues that labor unions care about most, the “Rose Bird court” was widely regarded as a “pro-labor” court. Thus it was not surprising that labor leaders were among the most vocal supporters of the embattled justices during the 1986 election. The first real test of how much labor may have lost in the shuffle of California Supreme Court justices will come in a case scheduled to be argued today.

The immediate issue in Henning vs. Industrial Welfare Commission is whether a new minimum wage of $4.25 hour must apply to “tipped” employees, or whether they will be subject to a lesser minimum of $3.50 per hour. “Tipped” employees include all workers who customarily receive $60 per month or more in tips. But a more profound question is lurking in the background: How much deference will the new court give to the established precedents of the Bird era?

The legality of a lower minimum wage for tipped employees is not a new issue for the California Supreme Court. In 1980 the five-member Industrial Welfare Commission was dominated by appointees of Gov. Edmund G. Brown Jr. When the hotel-and-restaurant industry pressed them to set a lower minimum wage for tipped employees, they refused, concluding that they were bound by a legislative amendment enacted in 1975. Labor Code Section 351 provided that an employer may not deduct any amount from wages due an employee on account of any gratuity, “except to the extent that may be permitted by a valid regulation of the Industrial Welfare Commission.” In 1975 the Legislature repealed the quoted exception, leaving the broad prohibition intact.

Thus commission members concluded that Section 351 would not let them adopt a regulation setting a lower minimum wage for tipped employees. In a unanimous opinion in 1980 the state Supreme Court concurred in the commission’s determination. Justice Matthew Tobriner, a life-long specialist in labor law, examined the legislative history of the 1975 amendment and concluded that the Legislature intended that the commission should not be allowed to do indirectly what employers were prohibited from doing directly. Thus, for the past eight years tipped employees and non-tipped employees have been guaranteed the same minimum wage: $3.35 per hour.

When the adequacy of minimum-wage levels was reviewed by the Industrial Welfare Commission last December, several Brown appointees had been replaced by appointees of Gov. George Deukmejian. And the new commission members were more receptive to the urgings of hotel and restaurant owners. Reversing the commission’s prior position, they set minimum-wage levels for tipped employees 18% lower than for other workers. An immediate challenge was heard by the California 3rd District Court of Appeal in Sacramento.

In a unanimous ruling authored by Presiding Justice Robert Puglia, the court on June 16 voided the lower minimum wage for tipped employees, ordering the $4.25 minimum wage to apply to all California workers. Puglia explained that, while commissions like the Industrial Welfare Commission are free to adopt any reasonable interpretation of a statute, once one of two contradictory interpretations is adopted and then approved by the Supreme Court, the decision is governed by the doctrine of stare decisis , or how a court stands on its prior decisions. By granting the expedited hearing that will be held today, the Supreme Court prevented Puglia’s order from taking effect.

How many precedents of the Bird era the new justices are willing to “stand on” is an open question these days. Early speculation that conservative justices would be restrained in overturning the rulings of their predecessors may have been wishful thinking. On Aug. 18 the court surprised many observers by reaching out to overturn the 1979 ruling in Royal Globe Insurance Co. vs. Superior Court, which permitted “bad-faith” claims against insurance companies for unfair practices in refusing settlements. Earlier the court threw out a key death-penalty ruling of the Bird court.

While changing societal conditions occasionally lead the courts to reject precedents, courts with such tendencies are frequently labeled “judicial activists.” Ironically, the refrain of “judicial activism” was heard frequently in 1986 in urging the removal of three justices. The decision in Henning vs. Industrial Welfare Commission will be eagerly awaited by 250,000 California workers who stand to lose 75 cents an hour. It will also be closely scrutinized by California lawyers and judges to see if “judicial activism” has simply donned a new set of robes.