Court Upholds Access of State to Payroll Data

The California Supreme Court, upholding the power of state regulatory agencies, ruled Monday that an employer’s payroll records may be obtained by labor investigators and used against him in a criminal prosecution.

In a 4-3 decision, the court, sharply divided on constitutional issues, rejected contentions that an employer may prevent use of such information as a violation of the Fifth Amendment privilege against self-incrimination.

An employer has no reasonable expectation of privacy in documents--such as time and wage records--that the law requires the employer to keep, the court said in a majority opinion by Justice David N. Eagleson.

An administrative subpoena may be issued for such data when it promotes a “legitimate regulatory aim,” is not directed at inherently criminal activity and requires only “minimal disclosure” of information customarily kept by business, Eagleson said.

The justices overturned a state appeals court decision in February, 1988, that struck down as unconstitutional an administrative subpoena issued by the state Division of Labor Standards Enforcement seeking records from a Seal Beach man suspected of failing to pay overtime to attendants he employed to care for an ailing relative.

State labor officials, appealing to the high court, warned that the appellate ruling could seriously impede investigations by numerous state regulatory agencies and have a “disastrous effect” on their ability to enforce the law.

The ruling was welcomed by H. Thomas Cadell, chief counsel for the state Department of Industrial Relations, as affirming the ability of regulatory agencies to gain vital information from employers.