The Schwarzenegger v. Democrats Budget Showdown

Arnold Schwarzenegger has threatened to sign an executive order in 24 hours cutting state employees’ pay to the minimum wage until a budget agreement is reached, i.e. until the Democrats cave to his demands. He says that he has the legal authority to do so. In response, state Controller John Chiang, who actually has the constitutional responsibility for cutting the checks (and is a Democrat) says that such a move is illegal and will refuse to adhere to it.

Who is right?

The answer is that it may not actually matter. It seems to me that the Democratic strategy is to keep the issue tied up in the courts while Chiang issues the standard paychecks. The law–and the relevant facts–are unclear enough that it could take awhile to resolve them, by which time the budget crisis might be resolved. Schwarzenegger will try to get a quick court order telling Chiang to reduce the payments, but my preliminary view is that it will be hard for him to win this unless he gets a very sympathetic judge. That gives the Democrats the short-term advantage, because at the end of the day, they control the check-writing machine in the Controller’s office. That’s no way to run a state, but there you are.

Here’s the legal skinny, base upon White v. Davis, the 2003 California Supreme Court opinion:

State law is pretty clear on this: the state cannot pay its workers unless the funds have been appropriated, and the funds can’t be appropriated without a budget. Once there is a budget, state workers will get all their back pay (although it’s not clear whether any interest attaches), but in the meantime, they go without.

Federal law, however, complicates things. The Fair Labor Standards Act says that workers have to be paid on time, including workers paid pursuant to a statute (which is what governs state employees). Since federal law pre-empts state law, state law doesn’t control here. The FLSA doesn’t mandate wage levels, though, so to comply with it all an employer has to do is pay federal minimum wage.

So that seems to show that Schwarzenegger is right. Workers must be paid, but only minimum. End of story?

Not a chance. There is a major exception in the FLSA for overtime. Federal interpretive regulations (which judges must defer unless they are plainly wrong) say that whenever a “non-exempt” (basically, hourly) worker works overtime, then she must receive her regular salary for her straight time as well as at least one and one-half times the regular salary for overtime.

Why is that? The idea is that the FLSA’s pro-extra-pay-for-overtime policy is very strong, perhaps on the grounds of regulating total hours worked. If employers didn’t have to pay the full salary for straight time, courts have noted, then employers could essentially eliminate extra overtime pay by reducing the straight time pay.

So federal law seems to have something of a tension in it: it only mandates minimum wage, but it also mandates one and one-half the regular salary rate for overtime. Following federal law will mean that the state will pay those non-exempt workers who don’t overtime minimum wage, and those who do (or foreseeably will) their regular salary plus overtime.

The Controller will argue–as it has argued in the past–that it just isn’t administratively feasible to do this, and that if it screws up the calculations, or makes mistakes, then the state will be liable for treble damages under the FLSA. Thus, it will say, the state has to pay everyone their regular salary to avoid these damages.

In the central precedent on these issues, the Court looked at this question, but punted, saying that it wasn’t fully briefed below, and resolved the case on other grounds.

That is Chiang’s and the Democrats’ opportunity. Chiang will say that 1) the law is unclear; 2) it needs to be litigated ini order for the state to avoid liability; and 3) by the way, we have to have a whole lot of fact-finding, which will take a looooong time to resolve. In the meantime, just to be safe don’t you understand, he will continue paying full salaries.

Schwarzenegger will try to get a preliminary injunction to stop Chiang, but I think he’ll lose: in order to get a preliminary injunction, you have to show irreparable harm, and that will be hard here. Not to mention a strong chance of success on the merits.

We’ll see how this comes out. But in the short run, I think the Democrats have the advantage .

Author: Jonathan Zasloff

Jonathan Zasloff teaches Torts, Land Use, Environmental Law, Comparative Urban Planning Law, Legal History, and Public Policy Clinic - Land Use, the Environment and Local Government. He grew up and still lives in the San Fernando Valley, about which he remains immensely proud (to the mystification of his friends and colleagues). After graduating from Yale Law School, and while clerking for a federal appeals court judge in Boston, he decided to return to Los Angeles shortly after the January 1994 Northridge earthquake, reasoning that he would gladly risk tremors in order to avoid the average New England wind chill temperature of negative 55 degrees. Professor Zasloff has a keen interest in world politics; he holds a PhD in the history of American foreign policy from Harvard and an M.Phil. in International Relations from Cambridge University. Much of his recent work concerns the influence of lawyers and legalism in US external relations, and has published articles on these subjects in the New York University Law Review and the Yale Law Journal. More generally, his recent interests focus on the response of public institutions to social problems, and the role of ideology in framing policy responses. Professor Zasloff has long been active in state and local politics and policy. He recently co-authored an article discussing the relationship of Proposition 13 (California's landmark tax limitation initiative) and school finance reform, and served for several years as a senior policy advisor to the Speaker of California Assembly. His practice background reflects these interests: for two years, he represented welfare recipients attempting to obtain child care benefits and microbusinesses in low income areas. He then practiced for two more years at one of Los Angeles' leading public interest environmental and land use firms, challenging poorly planned development and working to expand the network of the city's urban park system. He currently serves as a member of the boards of the Santa Monica Mountains Conservancy (a state agency charged with purchasing and protecting open space), the Los Angeles Center for Law and Justice (the leading legal service firm for low-income clients in east Los Angeles), and Friends of Israel's Environment. Professor Zasloff's other major activity consists in explaining the Triangle Offense to his very patient wife, Kathy.