Cheated janitors to receive $1.34 million in restitution in healthcare

Transcription

City Attorney Dennis Herrera News Release ForImmediateRelease:
October16,2013
Contacts:
• MattDorseyfortheOfficeoftheCityAttorney..................................................................................................................(415)554‐4662
• DonnaLevittfortheOfficeofLaborStandardsEnforcement......................................................................................(415)554‐6239
Cheated janitors to receive $1.34 million in restitution in healthcare benefits ruling S.F. Superior Court decision today sends a ‘message that our Health Care Security Ordinance has teeth, and that the City is committed to enforcing it aggressively’ SANFRANCISCO(Oct.16,2013)—ASanFranciscoSuperiorCourtjudgetodayaffirmed
administrativeordersagainstalocalcommercialjanitorialservicescompanytopaysome$1.34
millionto275ofitscurrentandformeremployeeswhoweredeniedhealthcarebenefit
expenditurestowhichtheywereentitledunderSanFrancisco’sHealthCareSecurityOrdinance,or
HCSO.Enactedin2006,theHCSOestablishedthepopular“HealthySanFrancisco”programand
createdanemployerspendingrequirementtofundhealthcarebenefitsforemployeesintheCity.
ThecourtorderissuedlatethismorningbyJudgeMarlaJ.Millerfound“substantialevidence”to
supportpriorfindingsbySanFrancisco’sOfficeofLaborStandardsEnforcementandan
administrativelawjudgethatGMGJanitorial,Inc.failedtomaketherequiredexpenditureson
behalfofitsworkersfortheperiod2008to2010.Afterlosingitsadministrativeappealbeforethe
administrativelawjudge,GMGJanitorialfiledsuitinSuperiorCourtonJuly2,2012,arguingthat
theOLSEexceededitsauthorityunderlocallawbyorderingfullrestitution,andthatthe
administrativelawjudge’sfindingswereunsupportedbytheevidence.JudgeMiller’sruling
decisivelyrejectedbothcontentionsinorderingthecompanytopay$1,339,028toitsemployees
“inordertocorrectitsfailuretomaketherequiredexpenditures.”Theorderwilladditionallyallow
theCitytorecoveritscostsintheactioninanamounttobedetermined.
“Thisisanimportantrulingthatwilldirectlycompensateemployeeswhoweredeniedbenefits,
whilealsoassuringlaw‐abidingcompetitorsthattheywon’thavetocompetewithcheaters,”said
CityAttorneyDennisHerrera.“JudgeMiller’srulingsendsastrongmessagethatourHealthCare
SecurityOrdinancehasteeth,andthattheCityiscommittedtoenforcingitaggressively.I’m
gratefultoeveryoneintheOfficeofLaborStandardsEnforcementfortheirexcellentwork.”
[MORE]
CityAttorneyDennisHerrera—Page2
“Whenlow‐wageworkersaredeniedtheirrightfulhealthcarebenefits,thehumanconsequences
areincalculable,”saidOLSEManagerDonnaLevitt.“ThevastmajorityofSanFranciscoemployers
complywithboththeletterandthespiritofthislaw,whichiswhyit’ssoimportantthatviolators
arebroughttojustice.”
TheSanFranciscoCityAttorney’sOfficeplayedakeyroleinworkingwiththen‐SupervisorTom
AmmianoandMayorGavinNewsomtocrafttheCity’sgroundbreakinguniversalhealthcarelaw
enactedin2006.Almostimmediatelythereafter,theofficeembarkedonafour‐yearlegalbattleto
defendthelawfromachallengebytheGoldenGateRestaurantAssociation.Theordinancewas
conclusivelyupheldwhentheU.S.SupremeCourtdeniedreviewinthecaseonJune28,2010.
SanFrancisco’sOLSEenforceslaborlawsadoptedbySanFranciscovotersandtheSanFrancisco
BoardofSupervisors.InadditiontoinvestigatingviolationsoftheHealthCareSecurityOrdinance,
OLSEalsoenforcesSanFrancisco’sMinimumWageOrdinance;PaidSickLeaveOrdinance;
MinimumCompensationOrdinance;HealthCareAccountabilityOrdinance;andSweatfree
ContractingOrdinance.ViolationsoftheHealthCareSecurityOrdinancemaybereportedtoOLSE
at(415)554‐7892orHCSO@sfgov.org.Itswebsiteishttp://www.sfgov.org/olse.
Thecaseis:GMGJanitorial,Inc.v.CityandCountyofSanFranciscoetal.,SanFranciscoSuperior
Court,CaseNo.512328,filedJuly2,2012.
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~lRIGINAL
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DENNIS J. HERRERA, State Bar #139669
City Attorney
JILL FIGG DAYAL, State Bar #168281
VINCE CHHABRIA, Slate Bar #208557
JERRY THREET, State Bar #205983
Deputy City Attorneys
Fox Plaza
1390 Market Street, Fifth Floor
San Francisco, California 94102-5408
Telephone:
(415) 554-3914
Facsimile:
(415) 437-4644
Attorneys for Respondents
CITY AND COUNTY OF SAN FRANCISCO, et al.
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SUPERIOR COURT OF THE STATE OF CALIFORNIA
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COUNTY OF SAN FRANCISCO
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UNLIMITED JURISDICTION
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GMG JANITORIAL, INC., a California
corporation,
Case No. CPF-12-512328
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Petitioner,
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vs.
JUDGMENT [1"Tupe:Jee,
BENYING WRIT OF MA:NDATE
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CITY AND COUNTY OF SAN
FRANCISCO, a Chartered California City and
County; DEPARTMENT OF
ADMINISTRATIVE SERVICES, a
department of the City and County of San
Francisco; OFFICE OF LABOR
STANDARDS ENFORCEMENT, an office
within the Department of Administrative
Services; OFFICE OF THE CONTROLLER,
an office of the City and County of San
Francisco; HEARING OFFICER PETER
KEARNS, an individual in his official capacity
as Administrative Law Judge for the City and
County of San Francisco; REAL PARTIES IN
INTEREST, and DOES 1 THROUGH 100,
INCLUSIVE,
Respondents and Real Parties in
Interest.
I~____________________________~
The above-entitled matter came on regularly for hearing on the Motion for Judgment of
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Respondents CITY AND COUNTY OF SAN FRANCISCO ("CITY"), DEPARTMENT OF
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ADMINISTRATIVE SERVICES, OFFICE OF LABOR STANDARDS ENFORCEMENT, OFFICE
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JUDGMENT, CASE CPF-12-512328
n:\labor\li20 13\ 130043\0087087 4.doc
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OF THE CONTROLLER, and HEARING OFFICER PETER KEARNS (the "ALJ") (collectively
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"Respondents" or the "City") on September 16, 2013, at 9:30 a.m., in Department 302 of this Court,
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the Honorable
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J. HERRERA, City Attorney, appearing through JERRY THREET, Deputy City Attorney. Petitioner
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GMG JANITORIAL, INC. was represented by its counsel, B. Douglas Robbins, of WOOD
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ROBBINS, LLP.
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MARLA J. MILLER
,judge presiding. Respondents were represented by DENNIS
The record of the administrative proceedings having been introduced into evidence, evidence
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of the legislative history of the San Francisco Health Care Security Ordinance ("HCSO") having been
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judicially noticed by the Court, the Court having considered all of the papers on file in this action, the
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evidence presented at the hearing, and the written and oral arguments of counsel, and good cause
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appearing therefor,
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The Court hereby FINDS that there is substantial evidence in the record to support the
challenged findings of the AU in this matter.
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The Court further FINDS that the AU and the OLSE acted in accordance with the language
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and intent of both the HCSO and its implementing regulations in ordering GMG to pay 275 of its
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employees a total of $1 ,339,028.39 in order to correct its failure to make health care expenditures on
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behalf of those same employees for the period 2008-2010, as the HCSO required.
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The Court therefore further FINDS that the City has not acted in excess of its jurisdiction in
this matter, nor has it failed to proceed in the manner required by law.
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Consequently, IT IS HEREBY ORDERED that:
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1. The writ of mandate applied for herein is DENIED;
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2. The OLSE Order to GMG to pay 275 of its employees a total of $1 ,339,028.39 is
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upheld;
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3. Respondents shall recover their costs and disbursements in this action in an amount to
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be determined.
Dated:
0 ~ II.. W (
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.Br.:::~ ~
Judge of the San Francisco Superior Court
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MARLAJ . iVifUt:,e.,
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JUDGMENT, CASE CPF-12-S12328
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City Attorney
VINCE CHHABRIA, State Bar #208557
Fox Plaza
Telephone:
(415) 554-3914
Facsimile:
(415) 437-4644
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corporation,
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Petitioner,
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vs.
olZ[~/{
JUDGMEnT rPro~osedJ
DENYING WRIT OF MANDATE
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INCLUSIVE,
Interest.
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The above-entitled matter came on regularly for hearing on the Motion for Judgment of
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Respondents CITY AND COUNTY OF SAN FRANCISCO ("CITY"), DEPARTMENT OF
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ADMINISTRATIVE SERVICES, OFFICE OF LABOR STANDARDS ENFORCEMENT, OFFICE
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OF THE CONTROLLER, and HEARING OFFICER PETER KEARNS (the "AU") (collectively
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"Respondents" or the "City") on September 16, 2013, at 9:30 a.m., in Department 302 of this Court,
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the Honorable
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J. HERRERA, City Attorney, appearing through JERRY THREET, Deputy City Attorney. Petitioner
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GMG JANITORIAL, INC. was represented by its counsel, B. Douglas Robbins, of WOOD
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ROBBINS, LLP.
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MARLA J. MILLER
' judge presiding. Respondents were represented by DENNIS
The record of the administrative proceedings having been introduced into evidence, evidence
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of the legislative history of the San Francisco Health Care Security Ordinance ("HCSO") having been
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judicially noticed by the Court, the Court having considered all of the papers on file in this action, the
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evidence presented at the hearing, and the written and oral arguments of counsel, and good cause
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appearing therefor,
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The Court hereby FINDS that there is substantial evidence in the record to support the
challenged findings of the AU in this matter.
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The Court further FINDS that the AU and the OLSE acted in accordance with the language
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and intent of both the HCSO and its implementing regulations in ordering GMG to pay 275 of its
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employees a total of $1,339,028.39 in order to correct its failure to make health care expenditures on
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behalf of those same employees for the period 2008-2010, as the HCSO required.
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The Court therefore further FINDS that the City has not acted in excess of its jurisdiction in
this matter, nor has it failed to proceed in the manner required by law.
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Consequently, IT IS HEREBY ORDERED that:
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1. The writ of mandate applied for herein is DENIED;
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2. The OLSE Order to GMG to pay 275 of its employees a total of $1,339,028.39 is
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upheld;
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3. Respondents shall recover their costs and disbursements in this action in an amount to
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be determined.
Dated:
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OCT 1 6 2013
~----------~~----------
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Judge of the San ranClSCO Supenor Court
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MARLA J. MILLER
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J:QI;)GMFNT. CASE CPF-12-512328
n:\labor\li20 1J\130043\00870874.doc
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City Attorney
Fox Plaza
Telephone:
(415) 554-3914
Facsimile:
(415) 437-4644
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corporation,
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Petitioner,
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vs.
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REPL Y BRIEF IN SUPPORT OF
RESPONDENTS' MOTION FOR JUDGMENT
,a
INCLUSIVE,
Hearing Date:
Hearing Judge:
Time:
Place:
September 16, 2013
Hon. Marla J. Miller
9:30 a.m.
Dept. 302
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Interest.
INTRODUCTION
Respondent CITY AND COUNTY OF SAN FRANCISCO ("CITY"), DEPARTMENT OF
ADMINISTRATIVE SERVICES, OFFICE OF LABOR STANDARDS ENFORCEMENT ("OLSE"),
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MPA ISO RESP MOTION FOR JUDGMENT, CASE CPF-12-512328
n:\labor\li20 13\130043\00870695.doc
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OFFICE OF THE CONTROLLER, and HEARING OFFICER PETER KEARNS ("the "AU")
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(collectively "Respondents") filed their Motion for Judgment (the "Motion") against Petitioner GMG
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Janitorial, Inc. ("GMG" or "Petitioner") on August 21, 2013, setting the hearing for September 16,
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2013. On September 3, 2013, GMG filed and served its opposition brief ("Opposition") to the Motion.
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Respondents now file this Reply Brief to the Opposition.
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GMG's Opposition concedes that there is substantial evidence in the record to support the
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AU's findings that GMG failed to make health care expenditures for 275 employees for a three year
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period. Thus, GMG's only challenge still at issue is the appropriateness of the OLSE restitution order.
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GMG's Opposition spends 17 pages arguing that the restitution OLSE ordered GMG to make to its
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employees constitutes punitive damages that exceed the authority granted OLSE under the HCSO. 1
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To support this position, GMG makes various arguments that boil down to the following two
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contentions: 1) The HCSO and its associated regulations do not provide for a punitive damages
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remedy; 2) a monetary remedy benefiting employees must be based on demonstrated, quantifiable
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harm to those employees - in other words, it must be an "actual damages" recovery. These contentions
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are incorrect and should be rej ected by this Court, just as they were by the AU.
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The AU was correct to conclude that the ordinance and its implementing regulations allow the
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OLSE to award back payments to workers deprived of their right to health care expenditures. Any
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other conclusion would eviscerate the purpose and intent of the ordinance and its enforcement
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regulations, by encouraging employers to disregard their health expenditure obligations, knowing they
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could save a tremendous amount of money by instead violating the law and paying penalties that are
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miniscule in comparison to the amount of health care expenditures the law required them to make.
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Respondents therefore respectfully request that the Court deny the Petition and issue judgment
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in favor of the City, upholding the decision of the AU, and upholding the propriety of the OLSE order
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that GMG make $1.34 million in back payments to 275 employees.
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1 GMG's Opposition exceeds the 15-page limit for briefs related to motions. CRC 3.113(d). "A
memorandum that exceeds the page limits [ ] must be filed and considered in the same manner as a
late-filed paper." CRC 3.113(g). Thus, "the court, in its discretion, may refuse to consider these
papers in ruling on the motion (in which event, the minutes or order must so state)." CRC 3. 1300(d). A
court should apply standards of excusable neglect in evaluating a violation of court rules and how to
address it appropriately. See Kapitanski v. Von's Grocery Co. (1983) 146 Cal.App.3d 29,32-33.
2
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LEGAL ARGUMENT
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I.
THE ALJ'S FINDING THAT GMG FAILED TO MAKE THE REQUIRED HEALTH
CARE EXPENDITURES IS SUPPORTED BY OVERWHELMING EVIDENCE IN
THE RECORD.
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As it must, GMG's Opposition concedes GMG's liability for violating the HCSO. Based on
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overwhelming evidence, the OLSE and the AU both found that GMG made no health care
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expenditures for 275 employees during the time period at issue. (GMG: 73-75) Those findings, which
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GMG's Opposition fails to dispute, directly result in GMG's liability for violating the HCSO. GMG
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also does not dispute its liability. It therefore is wholly irrelevant what might have happened ifGMG
had created and operated a Health Reimbursement Account ("HRA") in compliance with the
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applicable laws. GMG failed to make any health care expenditures for 275 employees, and the OLSE
restitution order remedies that violation by requiring that GMG now make the expenditures that it
should have made in 2008-2010.
Even if GMG did dispute these factual findings, there is overwhelming evidence to support the
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AU's findings that GMG failed to maintain an HRA or its equivalent for its employees, and wholly
failed to make health care expenditures, as explained in the City's opening brief. Because there is
overwhelming evidence in the record to support the ALl's findings, and there is no credible evidence
to suggest GMG actually made the disputed health care expenditures, this issue is off the table in these
proceedings. Nevertheless, GMG seeks to reintroduce this issue through a back door by arguing that
the amount of restitution ordered in this case is improper.
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As already explained in the City's opening brief, GMG's arguments, that had it maintaIned an
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HRA, it could have kept unused money in the account at the end of each year, have absolutely no
bearing on this issue. Nor do GMG's arguments about the typical utilization rates ofHRAs set up by
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other employers under the HCSO. The reason is simple. GMG had no HRA and made no health care
expenditures of any kind for the employees in question. It therefore should not be allowed to gain a
windfall by speculating as to what might have happened if it had complied with the law.
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THE CITY ACTED WELL WITHIN ITS JURISDICTION AND AUTHORITY BY
REQUIRING RESTITUTION BY GMG TO ITS EMPLOYEES.
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GMG argues that the OLSE's corrective actions in this case exceed its authority under the
II.
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HCSO and its regulations by seeking punitive damages. While conceding that the OLSE regulations as
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MPAISO RESP MOTION FOR JUDGMENT, CASE CPF-12-512328
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adopted were within the authority delegated to OLSE by the HCSO, GMG's position is that the
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restitution ordered in this case exceeds the authority of the regulations. GMG's position is based on the
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following arguments: 1) a "corrective action" under the regulations must be entirely compensatory or
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it becomes punitive in nature; 2) a "corrective action" under the regulations must be based on proof of
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actual harm to individual employees; 3) a proper measure of restitution under the regulations requires
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that the amount be limited by the typical experience of employers utilizing HRAs under the HCSO;
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and 4) the HCSO and implementing regulations do not allow for a windfall payment to employees.
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GMG's arguments are unpersuasive and the City addresses each of them, below.
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A.
The OLSE Restitution Order Is Both Corrective And Compensatory In Nature.
As described above, the AU made robust findings that the bank account that GMG claimed to
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be an HRA or its equivalent was not, and that GMG completely failed to make the $1.34 million in
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health care expenditures on behalf of its employees required by the HCSO. The AU thus found GMG
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liable for violating the Ordinance. GMG does not dispute this liability. Given these findings, there is
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an exact fit between GMG's $1.34 million health care expenditure deficiency and the $1.34 million
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that OLSE ordered GMG to pay its employees in restitution. Despite this close correlation, GMG
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engages in rhetorical gymnastics to characterize this remedy as punitive damages, and thus beyond
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OLSE's authority under the HCSO and its regulations.
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The $1.34 million back payment ordered by OLSE appropriately corrects GMG's blatant
violation of the HCSO, consistent with the plain intent and purpose of the Ordinance. The purpose of
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the HCSO is two-fold: to benefit vulnerable employees by providing them with health care security,
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and to benefit the public by ensuring that the residents and employees of the City remain healthy and
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are not a drain on public coffers. As the Ninth Circuit stated in connection to the HCSO:
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It is uncontested that individuals without health coverage are significantly less
likely to seek timely medical care than those with health coverage. Lack of
timely access to health care poses serious health risks. The City has provided
evidence that some individuals who lack health care coverage have serious,
chronic health conditions that currently go untreated. It has also provided
evidence that individuals who have recently enrolled in the Health Access
Program established under the Ordinance have begun to receive preventive care,
medication, and other treatment for previously neglected illnesses and injuries.
It is clear that otherwise avoidable human suffering, illness, and possibly death
will result if a stay is denied. Golden Gate Restaurant Assn. v. CCSF, 512 F.3d
1112, 1125 (9 th Cir. 2008).
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Ordering an employer to make back payments to employees of the health care expenditures it
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was required to but failed to make is an obvious and appropriate corrective action for violating the
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HCSO. The Regulations clearly authorize such a corrective action. First, the illustrative table
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positioned under Regulation 9.2 provides that where the violation is a "failure to make the required
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health care expenditures," an appropriate "corrective action" would be an "order[] to make the
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required health care expenditure on behalf of each employee or person whose rights under this
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Ordinance was violated[.]"(GMG: 320) This is exactly what the back pay order in this case did.
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Second, Regulation 9.1 provides that "[ t]he 0 LSE shall not be limited to ordering the actions
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described below2, but may order any other actions it deems necessary to correct the violation(s)
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committed." [emphasis added] (GMG: 320) This broad grant of authority also encompasses the
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remedy ordered in this case. Further, as explained in the City's opening brief, without any response in
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GMG's Opposition, the legislative history of the Ordinance makes clear that it has always authorized
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OLSE to award restitution to employees as a remedy.
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Finally, GMG's opposition presumes that a remedy cannot be truly restitutionary if it has any
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deterrent effect on GMG. This presumption goes too far. In reviewing restitution orders under the
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Unfair Competition Law (Bus. & Prof. Code § 17200, et seq.), the California Supreme Court has
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recognized that this remedy "arm[s] the [trier] with the cleansing power to [ ] effect complete justice."
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Fletcher v. Security Pac. Nat 'I Bank (1979) 23 Ca1.3d 442,449. As part of this "cleansing power,"
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restitution therefore may appropriately also have a deterrent effect on the violator of law. See People
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v. Toomey (1984) 157 Cal.App.3d 1,25-26. Thus, while one significant purpose of the corrective
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action at issue in this case was to place the affected employees as near as possible to the position they
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would have been in had GMG complied with the law, another valid purpose was to deter GMG and
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other employers from violating the HCSO. GMG's suggestion that such a deterrent effect converts a
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restitutio nary remedy into punitive damages has no support in the law.
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2 A careful examination of the regulations reveals that the "actions described below" referred
to in Regulation 9.1 must mean those actions set out in the illustrative table inserted under Regulation
9.2. That table provides illustrative examples of both corrective actions and administrative penalties
and thus serves to illustrate both Regulations 9.1 and 9.2.
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Giving due deference to the OLSE's interpretation of its own regulations, the Court should
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reject GMG's argument that the OLSE exceeded the authority of its own regulations in imposing
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restitution as a remedy in this case. See ReadyLink Health Care, Inc. v. Jones (2012) 210 Cal.AppAth
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1166,1173; Yamaha Corp. v. State Board o/Equalization (1998) 19 Cal.4th 1,12-13. Of course,
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"'final responsibility for interpreting a statute or regulation rests with the courts and a court will not
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accept an agency interpretation which is clearly erroneous or unreasonable. '" ReadyLink, supra, 210
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Cal.App.4th at 1173, quoting Aguilar v. Association for Retarded Citizens (1991) 234 Cal.App.3d 21,
8
28. Yet, the OLSE interpretation in this case is clearly reasonable and consistent with the language and
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intern of the HCSO. It therefore should be upheld.
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B.
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GMG also argues that the OLSE Order to make $1.34 million in back payments to its
12
employees is not authorized because the City failed to prove either that 1) employees suffered actual
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damages in that amount; or 2) GMG was unjustly enriched in that amount. Yet, GMG's "actual
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damages" argument is based on legal principles and cases governing tort damages awards, rather than
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those that apply where restitution is sought by a government entity enforcing a law passed under its
The OLSE Restitution Order Need Not Be Supported By Proof Of Actual
Damages To Employees To Be Valid And Authorized.
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nor do they require that the City prove actual damages to employees to justify a corrective action.
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Therefore, these arguments are inapposite to this dispute.
19
As the City explained in its openigg brief, restitution is a remedy that does not require exact
20
one-to-one correspondence between loss and remedy. See Hernandez v. Lopez (2009) 180 Cal. App.
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4th 932,939. Restitution is appropriate even where "a benefit has been received by the defendant but
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the plaintiff has not suffered a corresponding loss or, in some cases, any loss, but nevertheless the
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enrichment of the defendant would be unjust. Restatement (First) o/Restitution, §1 (1937). Further,
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restitution is an equitable remedy that provides the trial court with discretion beyond that allowed in
25
determining the amount of actual damages. In explaining its conclusion that compensatory damages
26
are not available as a remedy in a VCL action, while restitution is, one Court of Appeal explained:
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We believe this interpretation is consistent with the legislative history of
congruent 1972 amendments to the false advertising law. Both Senate and
Assembly sources indicate that the Legislature was concerned to affirm the
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'general equity power' of the courts, particularly the power to order restitution.
[. . . ] The exclusion of claims for compensatory damages is also consistent
with the overarching legislative concern to provide a streamlined procedure for
the prevention of ongoing or threatened acts of unfair competition. To permit
individual claims for compensatory damages to be pursued as part of such a
procedure would tend to thwart this objective by requiring the court to deal with
a variety of damage issues of a higher order of complexity." Dean Witter
Reynolds, Inc. v. Superior Court (1989) 211 Cal.App.3d 758, 774. 3
Similarly, the regulations that authorize the OLSE corrective action also are concerned with
6
ensuring that remedies for HCSO violations embody such equitable principles. In addition, as the
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City'S opening brief explains, the HCSO has always included restitution as a remedy for its violations.
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As the analysis in Dean Witter Reynolds suggests, where restitution is sought by a public entity to
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correct a violation of a law enacted under the police power for the benefit of the public, it would make
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little sense to require proof of actual harm by each member of the class affected by the violation.
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Instead, it is more than sufficient that the Ordinance presumes harm to both the public and to the
12
affected employees from failure to comply with its requirements to make health care expenditures for
13
those employees. More specifically, it would make no sense, as GMG suggests, for the Court to
14
simply read into the Ordinance or regulations a requirement that the government prove individual
15
harm to employees when it sues as a public entity to enforce its own ordinance and the remedies
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Further, the City did show cognizable harm to the employees who would have benefitted from
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the health care expenditures that GMG was required to make but did not. The record is replete with
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testimony by those e~pJQyees that they would have obtained health care to treat health conditions
20
from which they suffered, if only GMG had complied with the HCSO. The ALJ cited extensively to
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this evidence in finding that there was significant harm to GMG's employees from the company's
22
failure and refusal to make the required health care expenditure. Ignoring this evidence, GMG focuses
23
its efforts instead on the meager expenditures its employees, with their limited income, made in an
24
attempt to provide their own health care. GMG then suggests that these meager expenditures should be
25
the true measure of the harm done to these employees by GMG's violations ofIaw. Neither the HCSO
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3 See also People v. Richards (1976) 17 Ca1.3d 614, 619-20 [restitution in criminal case may
exceed the losses for which a defendant has been held culpable], disapproved olon other grounds by
People v. Carbajal (1995) 10 Ca1.4th 1114.
7
n:\labor\li20 13\130043\00870695.doc
1
nor its regulations authorize such an outrageous approach, and this Court should entirely reject it as
2
antagonistic to both the language and intent of the HCSO.
3
c.
4
GMG also argues that the City has failed to prove that GMG was unjustly enriched in the
The OLSE Restitution Order Is Supported By More Than Sufficient Evidence Of
GMG's Unjust Enrichment And Thus Should Be Upheld.
5
amount of$I.34 million, and thus the corrective action in that amount must be either declared illegal
6
or reduced. GMG's argument is unavailing. The robust findings of the ALJ, supported by
7
overwhelming evidence in the record, make entirely clear that GMG made no health care expenditures
8
for three years for 275 employees, even though it should have made $1.34 million in such
9
expenditures. It could not be any more clear from these findings that GMG was enriched in the amount
10
of$I.34 million that GMG was legally required to spend for the benefit of employees, but that GMG
11
instead unjustly retained for the company's own uses. "To permit the [retention of even] a portion of
12
the illicit profits, would impair the full impact of the deterrent force that is essential if adequate
13
enforcement [of the law] is to be achieved." Fletcher v. Security Pacific National Bank (1979) 23
14
Ca1.3d 442,451 [upholding a restitution order under the VCL].
15
Nevertheless, GMG once again tries to reintroduce evidence of typical employee utilization
16
17
argument is that one way to comply with the HCSO is to set up an HRA, that GMG intended to set up
18
an HRA (even ifit failed to do so), and that GMG's "unjust enrichment" therefore should be measured
19
as ifit did set uQ1>uchan_HRA. GMG's argument isludicrOllS.--
20
At best, the record suggests that GMG thought it could skirt the requirements of the HCSO by
21
declaring one of its regular business accounts an HRA and continue to use that account without
22
complying with any of the requirements for an HRA or its equivalent, such as adequate notice and
23
accounting to employees and regular accounting of contributions on behalf of each employee. At
24
worst, the evidence suggests that GMG sought to mislead OLSE investigators and the ALJ that its
25
business account was intended to be used as an HRA, when in fact GMG had never made any effort to
26
comply with the HCSO. What is clear is that the OLSE and the ALJ both found that GMG had made
27
no health care expenditures and that the business account in question was not an HRA or its
28
8
n:\labor\li20 13\130043\00870695.doc
1
equivalent. Those findings are the basis ofGMG's liability, which GMG does not contest. Therefore,
2
any argument about the utilization rates for an HRA that GMG would have experienced had it
3
complied with the HCSO have absolutely no bearing on the amount by which GMG was unjustly
4
enriched. The AU finding that GMG failed to make the required $1.34 million in health care
5
expenditures is inherently the amount ofGMG's unjust enrichment, as well as the appropriate amount
6
of the OLSE corrective action.
4
7
D.
8
Throughout the administrative proceeding below, as well as this appeal to the Superior Court,
9
The OLSE Corrective Action Is Not A Windfall To Employees But Just
Restitution For The Benefits They Should Have Received From GMG.
GMG has characterized the OLSE corrective action as a $1.34 million "windfall" to its employees.
10
Yet, GMG does not dispute that it was legally required to make that amount in health care
11
expenditures to its employees. Nor does GMG contest that it failed to do so and thus is liable for
12
violations of the HCSO. Instead, GMG employs rhetorical slight of hand to suggest that its own
13
utilization rates after setting up an HRA in response to the OLSE Order, or the utilization rates of other
14
San Francisco employers who use HRAs, should be the measure of restitution allowed by the HCSO
15
and its regulations. This house of cards must fall under examination.
16
17
ordered remedy "is properly authorized under the law and appropriate under the facts of this case."
18
CGMG: 74-75) The ALJ found that reported low utilization rates for HRAs raised concerns that
19
emQ!2Yers were not proQ~jI1fi>lJlling theirJ:IDPloYJ:J:saboul the existence and utilization ofHR As.
20
CGMG: 50) The ALJ also found that there was no basis to conclude what GMG's utilization rate for
21
the time period in question would have been if it had established an HRA. CGMG: 75) In addition, the
22
AU properly concluded that GMG's argument about utilization rates was irrelevant, because when an
23
employer completely fails to comply with the HCSO, there is no basis for assuming the employer
24
would Cor should) have complied by establishing HRAs, nor is there any basis for assuming a
25
particular utilization rate for these hypothetical HRAs, assuming they are properly administered.
26
27
28
4 The AU further found that GMG's historical utilization rate at the time of the hearing had
virtually no probative value and could not be used to measure the amount it should be required to pay
its employees in restitution. As GMG did not contest that finding, it is now binding in this proceeding
and precludes GMG's renewed attempts to use that rate to limit the amount of the corrective action.
9
MP A ISO RESP MOTION FOR JUDGMENT, CASE CPF-12-512328
n:\labor\li20 13\130043\00870695.doc
1
(GMG: 75) Finally, the ALJ rejected the entire concept of this remedy amounting to a "windfall" by
2
putting it into its proper perspective:
3
4
5
6
7
8
Although GMG argues that the corrective action is "punitive" against the
employer and a "windfall" for its employees, such is not the case. The
corrective action [ ] is not punitive, nor is it a windfall. GMG wrongly asserts
that no employee has been harmed in this case. Lack of access to health care
poses serious health risks and can result in substantial harm, Health care cannot
be provided retroactively, and GMG failed to make legally mandated health
care expenditures for 275 employees over a three-years period. During that
period, most ofGMG's employees were provided with absolutely no health care
benefits, and former employees testified that the lack of health benefits had a
real impact on them. As such, one-time payments averaging less that $5,000 per
employee for violation of the HCSO during the 3-year audit period do not
constitute a windfall. [GMG: 75]
9
Allowing violators to "make good" on their spending obligation to their employees by paying a
10
small fraction of what employers are legally required to spend to comply with the HCSO would totally
11
defeat the purposes of the Ordinance. It has no support in either the Ordinance or the regulations and
12
thus should be rejected by this Court.
13
CONCLUSION
14
The Court should enter judgment for the City.
15
Dated: September 9, 2013
16
17
18
19
DENNIS J. HERRERA
City Attorney
JILL FIGG DAYAL
VINCE CHHABRIA
JERRY THREET
. Deputy City Attorneys
i
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!
By:
Ij\
.,____
,>
'I
,! f/
r1~)
'I
.~
/"~~(./(/':/UJ/I . \; \,-,L,z;/
JEjlY TiREEy' _/
Attorney~, for R6spondents
CITY AND COUNTY OF SAN FRANCISCO, ET AL.
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n:\labor\li20 13\130043\00870695.doc
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PROOF OF SERVICE
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3
4
I, MORRIS ALLEN, declare as follows:
I am a citizen of the United States, over the age of eighteen years and not a party to the aboveentitled action. I am employed at the City Attorney's Office of San Francisco, Fox Plaza Building,
l390 Market Street, Sixth Floor, San Francisco, CA 94102.
On September 9, 2013, I served the following document(s):
5
6
REPLY BRIEF IN SUPPORT OF RESPONDENTS' MOTION FOR JUDGMENT;
JUDGMENT [Proposed] DENYING WRIT OF MANDATE
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8
9
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on the following persons at the locations specified:
B. Douglas Robbins
Diana N g. Fung
WOOD ROBBINS, LLP
One Post St., Suite 800
San Francisco, CA 94104
in the manner indicated below:
D
BY UNITED STATES MAIL: Following ordinary business practices, I sealed true and correct copies of
the above documents in addressed envelope(s) and placed them at my workplace for collection and mailing with
the United States Postal Service. I am readily familiar with the practices of the San Francisco City Attorney's
Office for collecting and processing mail. In the ordinary course of business, the sealed envelope(s) that I placed
for collection would be deposited, postage prepaid, with the United States Postal Service that same day.
13
14
15
BY PERSONAL SERVICE: I sealed true and correct copies of the above documents in addressed
envelope(s) and caused such envelope(s) to be delivered b hand at the above locations b a rofess'on
messenger service. A declaration from the messenger who made the delivery D is attached or [8J will be
filed separately with the court.
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18
o
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23
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o
BY OVERNIGHT DELIVERY: I sealed true and correct copies of the above documents in addressed
envelope(s) and placed them at my workplace for collection and delivery by overnight courier service. I am
readily familiar with the practices of the San Francisco City Attorney's Office for sending overnight deliveries. In
-tIre-urdinary courseor-tmslfiess, the seafeo enve!ope[S)lfiat Ipfaced for collection would be collected byacourier
the same day.
BY .ELECTRONIC MAIL: Based on a court order or an agreement of the parties to accept electronic
service, I caused the documents to be sent to the person(s) at the electronic service addressees) listed above. Such
document(s) were transmitted via electronic mail from the electronic address: first.last@sfgov.org D in portable
document format ("PDF") Adobe Acrobat or D in Word document format.
I declare under penalty of perjury pursuant to the laws of the State of California that the
foregoing is true and correct.
Executed September 9, 2013, at San Francisco, California.
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MPA ISO RESP MOTION FOR JUDGMENT, CASE CPF-12-S12328
n:\laborlli20 131130043100870695,doc
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2
3
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DENNIS 1. HERRERA, State Bar #139669
City Attorney
Fox Plaza
Telephone:
(415) 554-3914
Facsimile:
(415) 437-4644
AUG 2 '/ 2013
CLERK OF THE COURT
BY: ROSSALY DELAVEGA-NAVARRO
Deputy Clerk "7
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12
13
corporation,
14
Petitioner,
15
vs.
16
17
18
19
20
21
22
23
INCLUSIVE,
MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF
RESPONDENTS' MOTION FOR JUDGMENT
Hearing Date:
Hearing Judge:
Time:
Place:
September 16, 2013
Hon. Marla J. Miller
9:30 a.m.
Dept. 302
Date Action Filed:
July 6,2012
24
25
Interest.
26
27
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n:\labor\li20 13\130043\00866643.doc
TABLE OF CONTENTS
1
2
3
TABLE OF AUTHORITIES .......................................................................................................... ii
INTRODUCTION ........................................................................................................................... 1
STATEMENT OF FACTS .............................................................................................................. 2
4
5
6
STANDARD OF REVIEW ............................................................................................................. 7
LEGAL ARGUMENT ..................................................................................................................... 8
I.
THE ALl'S FINDING THAT GMG FAILED TO MAKE THE REQUIRED
HEALTH CARE EXPENDITURES IS SUPPORTED BY OVERWHELMING
EVIDENCE IN THE RECORD .............................................................................. 8
II.
THE CITY ACTED WELL WITHIN ITS JURISDICTION AND
AUTHORITY BY REQUIRING RESTITUTION BY GMG TO ITS
EMPLOYEES .......................................................................................................... 9
7
8
9
10
11
A.
The OLSE Ordered GMG To Make Restitution To Its Employees, As
Properly Authorized By The HCSO ......................................................... .1 0
B.
The HCSO And Implementing Regulations Authorize Imposition Of
Restitution To Employees .......................................................................... 11
12
13
14
1.
The Language of the HCSO and Contemporary Implementing
Regulations Authorize Imposition of Such Remedies ................... 11
2.
The 2011 Amendments to the HCSO Confirm That the
Ordinance Authorizes Imposition of Restitution .......................... .12
3.
To The Extent There Is Any Ambiguity In The HCSO's
Language, It Should Be Interpreted To Authorize Restitution As
A Remedy...................................................................................... 12
15
16
17
C.
OLSE's Reguiations Providing for Restitution To Employees As A
Remedy For Violations Ofthe HCSO Are Proper And Valid Exercises
Of Its Discretion ......................................................................................... 13
D.
GMG's Comparison Of The Restitution Order With "Typical" HRA
Utilization Rates Is Inapposite And Should Be Disregarded By The
Court .......................................................................................................... 14
18
19
20
21
CONCLUSION .............................................................................................................................. 15
22
23
24
25
26
27
28
n :\labor\li20 13\ 130043\00866643 .doc
1
2
3
4
5
6
TABLE OF AUTHORITIES
State Cases
Batt v. City and County of San Francisco
(2010) 184 Cal.App.4th 163 ........................................................................................................ 7
City and County ofSan Francisco v. Jen
(2005) 135 Cal.App.4th 305 ...................................................................................................... 13
Dunn v. County ofSanta Barbara
(2006) 135 Cal.App.4th 1281,
review denied ............................................................................................................................... 2
7
8
9
10
11
Fletcher v. Security Pacific National Bank
(1979) 23 Ca1.3d 442 ................................................................................................................. 13
Hashalom v. City of Santa Monica
(2010) 190 Cal.App.4th 375 ........................................................................................................ 7
Hernandez v. Lopez
(2009) 180 Cal.App.4th 932 ...................................................................................................... 10
12
13
14
15
16
In re Marriage of Harris
(2004) 34 Ca1.4th 21 0 ................................................................................................................ 12
JKH Enterprises, Inc. v. Dept. of Industrial Relations
(2006) 142 Cal.App.4th 1046 ...................................................................................................... 7
Ontario Community Foundations, Inc. v. State Bd. OfEqualization
(1984)35 Ca1.3d. 811 .................................................................................................................. 9
17
18
19
20
21
People v. Superior Court (Jayhill Corp.)
(1973) 9 Ca1.3d 283 ................................................................................................................... 13
ReadyLinkHealthCare, Inc. v. Jones
(2012) 210 Cal.App.4th 1166 ................................................................................................ 7, 14
Slocum v. State Bd. OfEqualization
(2005) 134 Cal.AppAth 969 ........................................................................................................ 9
22
23
24
25
26
SP Star Enterprises, Inc. v. City ofLos Angeles
(2009) 173 Cal.App.4th 459 ........................................................................................................ 7
Sylva v. Board ofSupervisors
(1989) 208 Cal.App.3d 648 ....................................................................................................... 13
Yamaha Corp. v. State Board ofEqualization
(1998) 19 Ca1.4th 1 ................................................................................................................ 7, 14
27
28
11
n :\\abor\\i20 \3\ 130043\00866643 .doc
State Statutes & Codes
1
2
3
4
Code of Civil Procedure
§1094 .................................................................................................................................... 2
§1094.5 ................................................................................................................................. 7
Federal Cases
Golden Gate Restaurant Ass 'no v. City and County ofSan Francisco,
512 F.3d 1112 (9th Cir. 2008) .................................................................................................... .2
5
6
Golden Gate Restaurant Ass 'no v. City and County ofSan Francisco,
546 F.3d 639 (9th Cir. 2008) ....................................................................................................... 2
7
Federal Statutes
8
Internal Revenue Code
§223 ...................................................................................................................................... 8
9
San Francisco Statutes, Codes & Ordinances
10
14
San Francisco Administrative Code
§ 14.1, et seq ................................................................ .2, 3, 4,6, 7, 9, 10, 11, 12, 13, 14, 15
§ 14.1(b)(7)(A) ...................................................................................................................... 8
§ 14.1(b)(14) ......................................................................................................................... 8
§ 14.3(a) ...................................................................................................................... 6, 8, 11
§14.3(c) ................................................................................................................................ 8
§14.4(a) .............................................................................................................................. 11
§14.4(e)(1) ................................................................................................................... 11, 12
15
Regulations
16
Office of Labor Standards Enforcement,
Health Care Security Ordinance Implementing Regulations,
Regulation 6.2(A) (2008) ..................................................................................................... 8
Regulation 9.1 (2008) .................................................................................................... 6, 11
Regulation 9.2 (2008) ........................................................................................................ 11
11
12
13
17
18
19
20
Treatises
Restatement (First) of Restitution,
§1 (1937) .................................................................................................................................... 10
21
22
23
24
25
26
27
28
111
n:\labor\li20 13\ 130043\00866643 .doc
INTRODUCTION
1
2
Petitioner GMG Janitorial, Inc. ("GMG" or "Petitioner") filed this action on July 6,2012
3
against the CITY AND COUNTY OF SAN FRANCISCO ("CITY"), DEPARTMENT OF
4
ADMINISTRATIVE SERVICES, OFFICE OF LABOR STANDARDS ENFORCEMENT ("OLSE"),
5
OFFICE OF THE CONTROLLER, and HEARING OFFICER PETER KEARNS ("the "ALl")
6
(collectively "Respondents"), challenging an OLSE administrative order and administrative appeal
7
decision. Both the OLSE order and the ALl decision 1) found that GMG completely failed in 2008-
8
2010 to make the health care expenditures on behalf of275 employees required by the San Francisco
9
Health Care Security Ordinance. ("HCSO" or "Ordinance"); and 2) ordered GMG to make
10
$1,339,028.39 in back payments to those employees to remedy that failure. During the year since
11
GMG filed this petition, the administrative decision ordering GMG to make restitution has remained
12
stayed. During this time, 275 GMG employees have been without any redress for GMG's failure to
13
comply with City law and the administrative order in this case, that GMG make restitution to 275
14
employees.
15
GMG's Petition argues 1) that the ALl's findings that GMG failed to make health care
16
expenditures for 275 employees for a three year period are not supported by substantial evidence; and
17
2) that both the OLSE restitution order, and the ALl's decision upholding it, constitute punitive
18
damages that exceed the authority granted OLSE under the HCSO. These contentions are incorrect.
19
The ALl's determination that GMG failed to make health care expenditures for its employees
20
is supported by overwhelming evidence in the administrative record, much of which also reveals an
21
effort by GMG to mislead both OLSE investigators and the ALl into believing that employees
22
received health reimbursement accounts when they clearly did not. Further, the ALl was correct to
23
conclude that the ordinance and its implementing regulations allow the OLSE to award back payments
24
to workers deprived oftheir right to health care expenditures. Any other conclusion would eviscerate
25
the purpose of the ordinance by encouraging employers to disregard their health expenditure
26
obligations, knowing they could save a tremendous amount of money by instead violating the law and
27
paying penalties that are miniscule in comparison to the amount of health care expenditures the law
28
required them to make.
1
n :\labor\li20 13\ 130043\00866643 .doc
1
Respondents now move this Court under Code of Civil Procedure Section 1094 for Judgment
2
against GMG. Because the decision of the ALl in this matter is "supported by substantial evidence in
3
the administrative record, and there is no indication that [he] failed to proceed in the manner required
4
by law in making that decision," Respondents respectfully request that the Court deny the Petition and
5
issue judgment in favor of the City. See Dunn v. County o/Santa Barbara (2006) 135 Cal.App.4th
6
1281, 1293, review denied.
STATEMENT OF FACTS
7
8
In 2006, San Francisco adopted its groundbreaking universal health care program - the Health
9
Care Security Ordinance. Among other things, the Ordinance requires medium and large employers to
10
make a minimum amount of health care expenditures for each covered employee. (S.F. Admin. Code
11
§14.1, et seq.) An employer group challenged the employer spending requirement, but after several
12
years of litigation the Ninth Circuit upheld it. Golden Gate Restaurant Ass 'no
13
San Francisco, 512 F.3d 1112 (9th Cir. 2008) [granting stay of district court order]; Golden Gate
14
Restaurant Ass 'no
15
district court and remanding]. San Francisco's Office of Labor Standards Enforcement ("OLSE") is
16
responsible under the Ordinance for enforcing the employer spending requirement, and adopted
17
regulations to do so. The requirement went into effect on January 9,2008. Beginning in 2007 and
18
annually thereafter, the OLSE sent businesses registered in San Francisco notices explaining the
19
requirements of the HCSO. (GMG Administrative Record, pp 340-344 (hereinafter designated "GMG:
20
340 - 344") .)
21
V.
V.
City and County of
City and County o/San Francisco, 546 F.3d 639 (9th Cir. 2008) [reversing
GMG, through it employees, provides contracted janitorial service to commercial and
22
residential business clients in San Francisco and throughout California. Gina Gregori is the sole
23
shareholder and the sole director ofGMG. Its employees are primarily monolingual Spanish speakers.
24
GMG employed over 300 people between January 1, 2008 and December 31, 2010 (the "audit
25
period"), the vast number of whom worked as janitors in San Francisco.
26
In February 2011, OLSE began receiving complaints from current and former GMG employees
27
that GMG was not providing any health benefits. (GMG603) After receiving those complaints, Donna
28
Mandel, an OLSE compliance officer, began an investigation. (Jd.) She spoke to Linda Harrison, the
2
n:\Jabor\Ji20 13\130043\00866643.doc
1
controller/treasurer, about how the company was complying with the HCSO. (Id.) Harrison asserted
2
that the company had a system of reimbursement whereby employees could bring bills for medical
3
expenses to the company and get reimbursed. (Id.) Harrison asserted that employees were notified of
4
the reimbursement system in a new hire packet. Harrison told Mandel that employees were not
5
provided any ongoing information about reimbursement funds available to them. (Id.)
6
On February 10,2011, Mandel sent a letter to OMO requesting information about all
7
employees who worked at OMO during the audit period. (OMO: 50-52,346-348,605-606) The letter
8
requested contact information for the employees, the hours they worked during the audit period, and
9
any evidence of health care expenditures made under the law. (!d.) The letter also requested any
10
specific evidence of the reimbursement arrangement that Harrison referenced, including any notice
11
OMO provided to employees and any documentation of the reimbursement arrangement. (Id.) The
12
same day that the letter was sent, Mandel received a call from OMO's then-counsel requesting an
13
extension oftime to reply to the letter, which OLSE granted. (OMO: 606)
14
On March 7, 2011, Mandel received a response from OMO's then-counsel with some, but not
15
all, ofthe requested information. (OMO: 52, 606) OMO provided Spanish and English copies of
16
informational flyers regarding the HCSO, dated 2008, 2009, and 2010. (OMO: 52-53,353-358,607)
17
However, OMO did not provide evidence of when or how the flyers were given to the employees, and
18
the flyers were neither addressed to OMO employees nor included any reference to OMO or its
19
responsibilities under the HCSO. (OMO:607) In addition, the flyers were not accurate. The flyer for
20
2008 (which included the 2008 expenditure rate on it) stated that employees must perform at least 8
21
hours of work per week to be covered,even though the rate in 2008 was 10 hours; it did not shift to 8
22
hours until 2009. (OMO: 54-55,353-354,608-611,754-755) This raised a strong inference that OMO
23
forged the document after the fact, in an effort to mislead OLSE that it had been notifying employees
24
of their rights under the Ordinance.
25
Mandel offered OMO an opportunity to submit additional information. (OMO:53-54, 607) On
26
April 20, 2011, OMO submitted two follow-up e-mails. (OMO: 54-56,360-363,610-612), which were
27
accompanied by five pages of bank documents (OMO: 54-55,365-369) and a one-page informational
28
flyer in Spanish and English for 2011. (OMO: 55,371-372) In the first of these e-mails, OMO stated
3
n:\labor\li20 13\ 130043\00866643 .doc
1
that it had established two bank accounts for the purpose of reimbursing medical expenses, but also
2
stated that neither account was used exclusively for this purpose. (OMO: 54-56,360-362)
3
According to the documentation provided to OLSE, OMO offered health insurance only to
4
limited classes of employees, such as managers, supervisors, corporate office staff, and the small
5
number of janitors who worked in buildings where the client required that its janitors be given health
6
insurance. (OMO: 56, 745-752) As for the overwhelming majority of employees who were not offered
7
health insurance, OMO contended it established a single account with Citibank on or about April 24,
8
2008. (OMO: 63-65) OMO further contended that it drafted and distributed - on a table near where
9
employees picked up their paychecks and on three bulletin boards - a one-page informational flyer
10
regarding the requirements of the HCSO and the right of covered employees to submit medical bills
11
for reimbursement, a copy of which it provided to Mandel on April 20, 2011. (OMO: 64)
12
OLSE requested from OMO missing documents and/or additional evidence five times between
13
March 8, 2011 and May 6, 2011. OMO eventually provided OLSE with 142 employee phone numbers,
14
about half the number OLSE hoped to receive. (OMO: 612-614) However, most ofthe telephone
15
numbers were wrong or disconnected. (Id.) Ultimately, OLSE was able to reach about 17 employees.
16
(OMO: 56,614) All 17 were employed during the audit period, but none ofthem had any knowledge
17
of a supposed OMO health care reimbursement system. (OMO: 56,614-615)
18
On December 7,2011, OLSE issued a Determination of Violation ("DOV") assessing OMO
19
$1,339,028.39 for its failure to make that amount in required health care expenditures to 275 current
20
and former employees. The DOV specified that this amount must be distributed to those employees in
21
order to remedy OMO's failure to make the required expenditures during the relevant period. (OMO:
22
57-61,400-413) The DOV also assessed an administrative penalty of$66,900.08 due to the City.
23
On December 22, 2011, OMO submitted a timely administrative appeal. (OMO: 61,416-431)
24
OMO specifically appealed: 1) the determination that OMO made no health care expenditures in 2008-
25
2010 for the 275 employees at issue, and 2) the corrective action requiring OMO to submit that
26
unspent money directly to the employees who had been denied the health care expenditures. OMO did
27
not appeal OLSE's determination that it must comply with the spending requirement moving forward,
28
nor did it appeal the administrative penalty assessment.
4
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1
At the administrative hearing, OLSE called 13 witnesses, including 2 OLSE staff members and
2
11 former OMO employees. OMO presented no witnesses. (OMO: 48) All 11 former OMO employees
3
testified that OMO never offered them health insurance or any other health benefit during the audit
4
period. (OMO: 65) Despite OMO's claim that it distributed informational flyers about its
5
reimbursement program and placed them on tables and bulletin boards near where the employees
6
picked up their paychecks, no employee had ever seen such a flyer. (Id.) Nor did any employee
7
actually use the supposed reimbursement system. (Id.)
In fact, many employees testified that they were explicitly told by OMO that they had no health
8
9
benefits.! In addition to testifying that they did not know they were eligible for the reimbursement
10
program, all of the employees testified that, had they know they had such benefits, they would have
11
gotten medical and/or dental care at some time during the audit period. Some, to this day, are still
12
physically suffering as a result of their inability to take preventative measures while employed by
13
OMO.2
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
! Employee Franklin Mejia testified that he asked Harrison in 2008 ifhe had benefits and she
said that he did not. (OMO: 639-640) Only in September 2011, when Mejia had a bad cough lasting a
week, and the manager of the building in which he worked called OMO on his behalf, did Oregori tell
Mejia that he could go to Kaiser to check himself out. (OMO: 640-641,645) Mejia worked for years
without knowing he was covered. He testified that had he known, he would have gotten a medical and
dental checkup and would have seen a doctor when he was sick. (OMO: 638). Oriselda Suzuki
testified that in 2008, after being injured on the job, she asked her supervisor if she had medical
benefits and she was also told no, that she had to pay for her medical expenses out of pocket. (OMO:
657-658) Jose Luis Contreras testified that he asked a supervisor in 2011 whether he had health
benefits, and he was told no. (OMO: 679) Jesus Oarcia Ibarra testified that he asked ifhe had benefits
but was told he was ineligible. (OMO: 783) Maria Valdez Iglesias testified that in September 2009,
when she started working, her supervisor told her that she did not have medical benefits, and also
made her sign a document stating so. (OMO: 700, 710) And when a splintered broom broke off in her
eye at work, Iglesias testified that she was told to conceal the fact that it happened at work in
exchange for $300. (OMO: 701)
2 Suzuki testified that she would have seen a doctor for chronic asthma, which she still had.
(OMO: 656-657) Dominguez testified that she would have gotten a mammogram years ago for a lump
that was still growing and requires surgery. (OMO: 674-675) Contreras testified that he had a hernia in
2009 while he was employed by OMO but had to delay his surgery for about a year because OMO told
him he lacked health care coverage. (OMO: 677-678) Iglesias testified that she would have gone
regularly to a primary care doctor to treat a chronic kidney condition, which caused her to be
repeatedly rushed to an emergency room for medical bills she could not afford. (OMO: 705) Caballero
testified that he would have seen a doctor about fevers and back pain in addition to regular checkups.
(OMO: 686). Ibarra testified that he would have seen a doctor in 2011 when he dislocated his shoulder
at work and that he still suffered shoulder pain. (OMO: 782-787). Alfaro testified that he suffered
work-related injuries to his ankle, back, and wrist and was never given medical benefits from OMO to
care for those injuries. (OMO: 792-794). Maria Elsa Alvarenga testified that her shoulder hurt after a
fall at work but that she did not see a doctor because OMO would not pay for the visit. (RT: OMO:
5
n:\!abor\li20 13\130043\00866643.doc
1
On May 1,2012, the ALJ issued his decision, denying GMG's appeal and upholding the DOV
2
in full. (See GMG: 46-77) The decision ordered GMG to make the required payments to its current
3
and former employees by June 20, 2012. (GMG: 76)
4
5
6
7
8
9
The ALl first found that GMG's Citibank account did not qualify as a health reimbursement
account or an account with substantially the same purpose during the audit period:
(1) GM G failed to show that any quarterly or regular payments were made to
the Citibank account on behalf of individual employees as required under
HCSO Section 14.3(a); (2) GMG failed to prove that it provided notice to its
employees about the existence of a health reimbursement account or how to
access any such account; and (3) none of the 275 employees who were
purportedly covered by the reimbursement account between 2008 and 2010 ever
used the account, and the account therefore had a 0% utilization rate during the
three-year audit period. (GMG: 73)
10
11
The ALl further found that GMG undermined its credibility by first informing the OLSE that there
12
were two separate health reimbursement accounts and then abandoning that assertion without
13
explanation. (GMG: 73)
14
The ALl also found that GMG undermined any argument that it provided notice to its
15
employees because its purported 2008 notice stated that employees had to work 8 hours to be eligible
16
for coverage when the 8 hour rule did not go into effect until 2009, which suggests that GMG had
17
forged the notice documents it provided to OLSE during its investigation. (GMG: 73) Moreover, the
18
ALl found credible the testimony of the 11 former employees who stated that they never received or
19
saw notice of any health reimbursement account. (GMG: 73-74)
20
The ALl next found that the requirement that GMG pay the $1,339,028.39 in unmade health
21
care expenditures to the employees who were denied their rights under the Ordinance was properly
22
authorized and appropriate under the facts ofthis case:
23
24
25
26
(1) the employer spending requirement under the HCSO requires employers to
make health care expenditures to or on behalf of each covered employee, and
the facts show that GMG failed to do so on behalf of 275 of its employees
between 2008 and 2010; (2) HCSO Regulation 9.1 specifically authorizes the
OLSE to order any action it deems necessary to correct the violation; (3) of the
former employees who appeared at the appeal hearings, some paid for health
care services out-of-pocket, some relied on public hospitals at taxpayer expense,
and others had to forego health care services altogether because they didn't have
27
28
807-808). And Jaime Alexander Reyes testified that he would have gotten regular medical checkups if
he knew of health care benefits. (GMG: 802).
6
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1
2
3
4
5
6
the resources to pay for medical or dental care without any reimbursement; and
(4) the corrective action effectively removes any competitive advantage that
GMG might have over other companies that were in compliance with the HCSO
during the audit period. (GMG: 75)
GMG filed a timely petition for writ of mandate under California Code of Civil Procedure
Section 1094.5. The City now moves for entry of judgment in its favor.
STANDARD OF REVIEW
Two standards of review govern GMG's writ petition. With respect to GMG's contention that
7
the AU's decision was factually erroneous, this Court accords great deference to the administrative
8
findings, in a context where, as here, a vested right is not involved. The Court must uphold the
9
agency's findings so long as they are supported by substantial evidence in the record. Hashalom v.
10
City of Santa Monica (2010) 190 Cal.App.4th 375, 381; SP Star Enterprises, Inc. v. City of Los
11
Angeles (2009) 173 Cal.App.4th 459, 469 (citing JKH Enterprises, Inc. v. Dept. ofIndustrial Relations
12
(2006) 142 Cal.AppAth 1046, 1062).
13
With respect to GMG's contention that the remedy sought by OLSE and imposed by the ALJ
14
was not authorized by law, this Court also accords deference to the agency. Where, as here, an agency
15
has been delegated authority to make rules implementing a statute, the scope of judicial review is
16
limited to whether the rule "lay within the lawmaking authority delegated by the Legislature," and
17
whether that rule "is reasonably necessary to implement the purpose of the statute." Yamaha Corp. v.
18
State Board of Equalization (1998) 19 Ca1.4th 1, 10-11. Moreover, administrative agencies may "fill
19
up the details" of a statutory scheme, and such regulations are "presumed valid." Batt v. City and
20
County of San Francisco (2010) 184 Cal.AppAth 163, 171.
21
To the extent GMG contends that OLSE has misinterpreted its own regulations, that question
22
also requires judicial deference. This is so because an agency implementing its own rules is likely to
23
be "intimately familiar with the [regulations] [ ] and sensitive to the practical implications of one
24
interpretation over another, and the [agency's] interpretation [is] likely to be correct[.]"ReadyLink
25
HealthCare, Inc. v. Jones (2012) 210 Cal.App.4th 1166, 1173; Yamaha, supra, 19 Ca1.4th at 12-13.
26
27
28
7
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LEGAL ARGUMENT
1
2
3
4
I.
THE ALJ'S FINDING THAT GMG FAILED TO MAKE THE REQUIRED HEALTH
CARE EXPENDITURES IS SUPPORTED BY OVERWHELMING EVIDENCE IN
THE RECORD.
GMG alleges in the third cause of action that there is insufficient evidence to support the ALJ's
5
findings that GMG failed to maintain HRAs for its employees and wholly failed to make health care
6
expenditures. 3 However, there is overwhelming evidence in the record to support the ALJ's findings,
7
and there is no credible evidence to suggest GMG actually made health care expenditures for these
8
275 employees during the applicable three-year period. 4
9
GMG's argument that it made health expenditures on behalf of these 275 employees is
10
predicated on the assertion that it set up health reimbursement accounts ("HRAs") for these employees
11
and that these accounts had "substantially the same purpose or effect" as Health Savings Accounts, as
12
defined under section 223 of the Internal Revenue Code. 5 However, when an employer sets up an
13
HRA for its employees, it allocates a specific amount of money to each employee on a monthly or
14
quarterly basis, informs each employee on a monthly or quarterly basis how much money has accrued
15
in his or her account, informs each employee about the kinds of expenses that are reimbursable from
16
his or her account, and provides each employee with instructions about how to obtain reimbursement.
17
18
19
20
21
22
23
24
25
26
27
28
3 Section 14.3(a) of the Ordinance sets forth the central mandate at issue in this case: "Covered
employers shall make required health care expenditures to or on behalf of their covered employees
each quarter." GMG does not dispute that it was a "covered employer" nor does it dispute that the
aforementioned 275 individuals were "covered employees."
4 GMG also alleges that there was insufficient evidence in the record to support several other
findings of the AU; however, these are essentially legal arguments based on GMG's assertion that the
restitution ordered by OLSE and upheld by the ALJ was a punitive fine. These arguments therefore are
addressed in the next section.
5 A "health care expenditure" is "any amount paid by a covered employer to its covered
employees or to a third party on behalf of its covered employees for the purpose of providing health
care services for covered employees or reimbursing the cost of such services for its covered
employees." (HCSO § 14.1 (b)(7)(A).) A "required health care expenditure" is "the total health care
expenditure that a covered employer is required to make every quarter for all its covered employees."
HCSO §14.1(b)(14). "The required health care expenditure must be made regularly, and no later than
30 days after the end of the preceding quarter." (Implementing Regulation §6.2(A).) "A covered
employer shall: (i) maintain accurate records of health care expenditures, required health care
expenditures, and proof of such expenditures made each quarter each year." (HCSO § 14.3(c).) "Where
an employer does not maintain or retain adequate records documenting the health expenditures made
... it shall be presumed that the employer did not make the required health expenditures for the quarter
for which records are lacking, absent clear and convincing evidence otherwise." (!d.)
8
n:\labor\li20 13\130043\00866643 .doc
1
(GMG: 565-566) As the AU properly found, GMG did none of these things. Instead, GMG, upon
2
learning it was under investigation, attempted to argue that two (and later one) of its regular bank
3
accounts were actually "health reimbursement accounts," and then sought to mislead the OLSE into
4
believing it had informed its employees of the availability of reimbursement accounts.
5
GMG could have satisfied the HCSO by providing health insurance to its employees. If it
6
wished to comply by establishing HRAs, in could have hired a third party administrator to set up those
7
accounts, as the majority of employers with HRAs do. (GMG: 570-575) GMG even could have
8
provided HRAs directly by setting up individual accounts for its employees, providing them with
9
notice of how they worked and informing them periodically of the balance of funds available to them.
10
(Id.) GMG did none of these things, as the ALJ's own summary of his findings clearly shows (GMG:
11
73-75). It is nothing short of preposterous for GMG to assert that the AU lacked substantial evidence
12
to conclude GMG failed to satisfy its obligations under the Ordinance as to these 275 employees.
13
II.
THE CITY ACTED WELL WITHIN ITS JURISDICTION AND AUTHORITY BY
REQUIRING RESTITUTION BY GMG TO ITS EMPLOYEES.
14
15
GMG alleges that "the OLSE's corrective actions in this case exceed their authority under law
16
by seeking non-remedial non-consequential damages - seeking, rather a punitive damages remedy."
17
(GMG Janitorial, Inc., Petition for Writ of Mandate, CPF-12-5123, p. 8, ~~ 29-30 (JuI. 6,2012). In
18
support of this argument, GMG quotes from two cases, Slocum and Ontario Community Foundations:
19
"agencies do not have discretion to promulgate regulations that are inconsistent with the governing
20
statute, or that alter or amend the statute or enlarge its scope" (emphasis added by GMG). See Slocum
21
v. State Bd. Of Equalization (2005) 134 CaI.App.4th 969, 974; Ontario Community Foundations, Inc.
22
v. State Bd. Of Equalization (1984) 35 CaI.3d. 811, 816-817.
23
GMG is incorrect for several reasons. First, the remedy ordered by OLSE and upheld by the
24
AU was remedial in nature, and did not constitute punitive damages. Second, the remedial action was
25
authorized both by the HCSO and by the OLSE regulations properly implementing the HCSO. And,
26
finally, GMG's comparison of the utilization rates of typical HRAs with the ordered restitution is
27
inapposite and thus should be disregarded by the Court.
28
9
n:\labor\li20 13\ 130043\00866643 .doc
1
A.
The OLSE Ordered GMG To Make Restitution To Its Employees, As Properly
Authorized By The HCSO.
2
3
Undergirding GMG's Petition is the assertion that the OLSE-ordered payments to employees
4
constitute "non-remedial non-consequential damages." This characterization is both factually and
5
legally incorrect.
6
As described above, the AU made robust findings that GMG completely failed to make the
7
health care expenditures on behalf of its employees required by the HCSO, and also found that the
8
"evidence" GMG offered to the contrary was entirely incredible. Given these findings, there is an
9
exact correlation between the health care expenditure deficiency and the amount OLSE ordered GMG
10
to pay its employees. Despite this correlation, GMG seeks to characterize this remedy as punitive
11
damages, and thus beyond OLSE's authority under the HCSO.
12
GMG offers no legal authority to support its argument that the amounts OLSE ordered it to pay
13
to employees are "non-remedial, non-consequential damages." In contrast, a review of basic legal
14
principles makes clear that these payments are more appropriately characterized as restitution.
15
Although GMG contends that if it had actually set up HRAs, its employees might not have used all the
16
money in their accounts, restitution need not be exactly measured against the loss to individuals
17
affected by the illegal conduct. "In modem legal usage, [restitution's] meaning has frequently been
18
extended to include not only the restoration or giving back of something to its rightful owner, but also
19
compensation, reimbursement, indemnification, or reparation for benefits derived from, or for loss or
20
injury cause to, another." Hernandez v. Lopez (2009) 180 Ca1.App.4th 932, 939. Restitution thus is
21
justified as a remedy even where "a benefit has been received by the defendant but the plaintiff has not
22
suffered a corresponding loss or, in some cases, any loss, but nevertheless the enrichment of the
23
defendant would be unjust. In such cases, the defendant may be under a duty to give to the plaintiff the
24
amount by which he has been enriched." Restatement (First) of Restitution, § 1 (1937).
25
This rationale is even stronger where, as here, the party seeking relief is a government entity
26
suing under a remedial statute designed to benefit a vulnerable group of third parties. It would make
27
little sense to require that the government prove individual harm to third parties when it sues to
28
10
n;\labor\li20 13\ 130043\00866643 .doc
1
enforce its own ordinance that protects those employees and the remedies ordered are authorized by
2
the ordinance being enforced.
3
4
B.
The HCSO And Implementing Regulations Authorize Imposition Of Restitution
To Employees.
1.
The Language of the HCSO and Contemporary Implementing Regulations
Authorize Imposition of Such Remedies.
5
6
As originally enacted, the HCSO required in Section 14.3(a) that covered employers "shall
7
make required health care expenditures to or on behalf of their covered employees each quarter. [ ... ]
8
The [OLSE] shall enforce the health expenditure requirements under this Section." [emphasis added]
9
Further, Section 14.4(e)(I) provided that "[t]he City shall enforce the obligations of covered
10
employers under this Chapter, and may impose administrative penalties upon covered employers who
11
fail to make required health care expenditures on behalf of their employees within five business days
12
of the quarterly due date." Finally, Section 14.4(a) provided that "[t]he City shall develop and
13
promulgate rules to govern the operation of this Chapter."
14
The HCSO required employers to make health care expenditures on behalf of covered
15
employees, and delegated to OLSE the primary administrative task of enforcing this requirement. To
16
that end, the Ordinance further delegated authority to OLSE to adopt rules governing such
17
enforcement. The Implementing Regulations adopted by OLSE in June, 2008 provided OLSE with the
18
ability to impose broad relief to correct violations. (See GMG: 299-338) In adopting these regulations
19
following extensive hearings, OLSE specifically noted that it was giving weight to considerations of
20
equity and practicality. (GMG: 300, ~ 6) The regulations adopted by OLSE clearly contemplate the
21
imposition of equitable remedies such as restitution.
22
23
24
25
26
27
28
Specifically, the OLSE regulations governing enforcement of the HCSO provide for such
equitable remedies. Regulation 9.1, entitled "Corrective Action," provides:
The OLSE may order employers who violate this Ordinance to take appropriate
corrective action to address violations of this Ordinance. The OLSE shall not be
limited to ordering the actions described below, but may order any other
actions it deems necessary to correct the violation(s) committed. [emphasis
added] (GMG: 320)
Further, Regulation 9.2 provides that one of the "corrective actions" that may be imposed by
OLSE on an employer for failure to make a required health care expenditure is the following:
11
n:\labor\li20 13\ 130043\00866643 .doc
1
2
3
The party shall be ordered to make the required health care expenditure on
behalf of each employee or person whose rights under this Ordinance was
violated, and/or to reimburse the individual for any and all out-of pocket
medical expenses incurred by that individual for the period during which the
employer was in violation of this Ordinance, up to the amount of the required
health care expenditure. [ ] (GMG: 320)
4
Taken together, the HCSO and implementing regulations clearly authorize the OLSE to impose on a
5
covered employer the remedy of restitution to covered employees for amounts that the employer was
6
required to spend on them for health care, but did not.
7
2.
The 2011 Amendments to the HCSO Confirm That the Ordinance
Authorizes Imposition of Restitution.
8
9
In 2011, the Board of Supervisors amended the H CSO in multiple respects not related to the
10
issue before this Court. (See GMG: 872-892) As part of that process, the Board also enacted a
11
clarifying amendment of Section 14.4(e)(I) of the HCSO to provide:
12
13
14
The City shall enforce the obligations of covered employers under this Chapter,
including requiring restitution to employees where appropriate, and shall
impose administrative penalties upon covered employers who fail to make
required health care expenditures on behalf of their employees within five
business days of the quarterly due date. [amended language underlined] (GMG:
885)
15
The Legislative Digest of the proposed amendments that accompanied them during the legislative
16
process explained that this added language regarding restitution was declarative of existing remedies
17
under the HCSO: "Other remedies and corrective actions available to enforce the Ordinance,
18
including restitution to employees, would remain unchanged." [emphasis added] (GMG: 891) Thus,
19
the available legislative history of the 2011 amendments further demonstrates that the remedy of
20
restitution was authorized by the HCSO as a remedial measure available to the OLSE to enforce the
21
expenditure requirements of the Ordinance.
22
23
24
3.
To The Extent There Is Any Ambiguity In The HCSO's Language, It
Should Be Interpreted To Authorize Restitution As A Remedy.
"The fundamental purpose of statutory construction is to ascertain the intent of the lawmakers
25
so as to effectuate the purpose of the law." In re Marriage a/Harris (2004) 34 Ca1.4th 210, 221, 17
26
Cal.Rptr.3d 842,96 P.3d 141.) "If the statutory terms are ambiguous, then [] we 'select the
27
construction that comports most closely with the apparent intent of the Legislature, with a view to
28
promoting rather than defeating the general purpose of the statute, and avoid an interpretation that
12
n:\labor\li20 !3\130043\00866643.doc
1
would lead to absurd consequences." City and County of San Francisco v. Jen (2005) 135 Cal.App.4th
2
305,310. "[T]he court must consider the consequences that might flow from a particular construction
3
and should construe the statute so as to promote rather than defeat the statute's purpose and policy.
4
Sylva v. Board of Supervisors (1989) 208 Cal.App.3d 648, 654.
In upholding a restitutionary remedy under the Unfair Competition Law ("UCL") on a similar
5
6
challenge that the statutory language did not specifically authorize it, the California Supreme Court
7
stated:
To permit the [retention of even] a portion of the illicit profits, would impair the
full impact of the deterrent force that is essential if adequate enforcement [of the
law] is to be achieved. One requirement of such enforcement is a basic policy
that those who have engaged in proscribed conduct surrender all profits flowing
therefrom. Fletcher v. Security Pacific National Bank (1979) 23 Ca1.3d 442,
451.
8
9
10
11
12
The Court went on to explain that "the basic equitable principles underlying the [remedies section of
13
the DCL] arm the trial court with broad discretionary power to order restitutionary relief." Fletcher,
14
supra,23 Ca1.3d at 452; see also People v. Superior Court (Jayhill Corp.) (1973) 9 Ca1.3d 283, 286.
Where, as here, a statute is designed to protect a class of persons, such as low-paid employees,
15
16
by requiring employers to make health care expenditures on their behalf, and the statute includes broad
17
language providing for remedies for violating those requirements, that statutory language must be
18
interpreted in such a manner as to support its remedial purpose. GMG argues that the statute does not
19
authorize OLSE to require it to make the payments that it completely failed to make. Such a
20
construction would wholly defeat the purpose of the HCSO, allowing GMG to significantly profit
21
from its violations, and leaving GMG's workers without the benefit of the statutory protections. In
22
contrast, the City's interpretation preserves and fulfills the purpose of the HCSO, thereby "avoid[ing]
23
an interpretation that would lead to absurd consequences." CCSF v. Jen, supra, 135 Cal.App.4th at
24
310.
25
C.
OLSE's Regulations Providing for Restitution To Employees As A Remedy For
Violations Of the HCSO Are Proper And Valid Exercises Of Its Discretion.
26
27
Because the regulations adopted by the OLSE were promulgated under the authority
28
specifically delegated to it by the Board of Supervisors to implement that portion of the HCSO, the
13
n:\labor\li20 13\130043\00866643.doc
1
Court's inquiry here "necessarily is confined to the question whether the [regulations adopted are]
2
'arbitrary, capricious or [without] reasonable or rational basis.'" Yamaha Corp. v. State Board of
3
Equalization (1998) 19 Ca1.4th 1, 10-11. Given the explicit legislative delegation of authority to OLSE
4
to adopt the regulations, the careful process by which OLSE adopted the regulations after multiple
5
public hearings, 0 LSE' s clear articulation in the regulations of the rationale justifying the enforcement
6
remedies contained therein (including an explicit mention of the need to apply equity in the
7
enforcement process), the very clear nexus between restitution as an enforcement remedy and the
8
remedial purpose of the HCSO, there can be no doubt that the regulations at issue are valid. As the
9
AU concluded in upholding the OLSE order in the face of GMG's arguments, the ordered remedy "is
1
°
properly authorized under the law and appropriate under the facts of this case." (HOD: 29-30)
11
Applying the strong presumption of regularity required under the law, the court should hold that the
12
regulations are valid and uphold the remedy imposed thereunder. 6
13
D.
GMG's Comparison Of The Restitution Order With "Typical" HRA Utilization
Rates Is Inapposite And Should Be Disregarded By The Court.
14
15
The vast majority of employers satisfy the HCSO's spending requirement by spending the
16
requisite amount on health insurance for their employees. (GMG: 49, 560, 734) Some employers
17
comply by spending the requisite amount on the "city payment option," whereby they make payments
18
to the City which allows their employees to participate in the City's health care programs at a deep
19
discount. (!d.) A small minority of companies comply by setting up HRAs for their employees,
20
allocating the requisite amount for each employee and informing each employee of the allocation on a
21
monthly or quarterly basis. (GMG: 49-50, 560, 565-566, 570-575, 734)
22
GMG asserts that an employer that totally fails to comply with the health care spending
23
requirement in any fashion should be allowed to "make good" by asserting that the employer would
24
have chosen the HRA compliance option, and then assuming that the employees would have spent
25
only 10% of the money, thereby allowing the law-violating employer to retain 90% of the amount it
26
27
28
6 Because the court also must defer to the expertise of the OLSE in interpreting its own
regulations, the regulations also should be upheld if the argument is that the OLSE exceeded the
authority of its own regulations in imposing restitution as a remedy in this case. See ReadyLink, supra,
210 Ca1.App.4th at 1173; Yamaha, supra, 19 Ca1.4th at 12-13.
14
n:\labor\li20 13\ 130043\00866643 .doc
1
should have spent on health care. Thus, concludes GMG, the OLSE restitution order requiring GMG
2
to make $1,339,028.39 in health care expenditures to its covered employees for the years it failed to do
3
so, constitutes punitive damages and a windfall to the employees. This argument is unavailing.
4
First, GMG's assertion about that employees typically utilize only 10% ofHRA money has no
5
support in the administrative record. The ALJ found that reported low utilization rates for HRAs raised
6
concerns that employers were not properly informing their employees about the existence and
7
utilization ofHRAs. (GMG: 50) Second and far more importantly, the ALJ properly concluded that
8
GMG's argument about utilization rates was irrelevant, because when an employer completely fails to
9
comply with the HCSO, there is no basis for assuming the employer would (or should) have complied
10
by establishing HRAs, nor is there any basis for assuming a particular utilization rate for these
11
hypothetical HRAs, assuming they are properly administered. (GMG: 75) Allowing violators to
12
"make good" on their spending obligation to their employees by paying a small fraction of what most
13
employers spend in compliance with the HCSO would totally defeat the purposes of the Ordinance.
CONCLUSION
14
15
16
The Court should enter judgment for the City.
Dated: August 20,2013
17
DENNIS J. HERRERA
City Attorney
JILL FIGG DAYAL
VINCE CHHABRIA
JERRY THREET
Deputy qty Attorneys
18
19
20
21
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MPAISO RESP MOTION FORmDGMENT, CASE CPF-12-512328
n:\labor\li20 13\130043\00866643 _doc
PROOF OF SERVICE
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I, MORRIS ALLEN, declare as follows:
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I am a citizen of the United States, over the age of eighteen years and not a party to the aboveentitled action. I am employed at the City Attorney's Office of San Francisco, Fox Plaza Building,
1390 Market Street, Sixth Floor, San Francisco, CA 94102.
On August 21,2013, I served the following document(s):
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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF RESPONDENTS'
MOTION FOR JUDGMENT
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on the following persons at the locations specified:
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B. Douglas Robbins
Diana Ng. Fung
WOOD ROBBINS, LLP
One Post St., Suite 800
San Francisco, CA 94104
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in the manner indicated below:
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o
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BY UNITED STATES MAIL: Following ordinary business practices, I sealed true and correct copies of
the above documents in addressed envelope(s) and placed them at my workplace for collection and mailing with
the United States Postal Service. I am readily familiar with the practices of the San Francisco City Attorney's
Office for collecting and processing mail. In the ordinary course of business, the sealed envelope(s) that I placed
for collection would be deposited, postage prepaid, with the United States Postal Service that same day.
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BY PERSONAL SERVICE: I sealed true and correct copies of the above documents in addressed
envelope(s) and caused such envelope(s) to be delivered by hand at the above locations by a professional
messenger service. A declaration from the messenger who made the delivery 0 is attached or C8J will be
filed separately with the court.
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BY OVER.J.~IGHT DELIVERY: I sealed true and correct copies of the above documents in addressed
envelope(s) and placed them at my workplace for collection and delivery by overnight courier service. I am
readily familiar with the practices of the San Francisco City Attorney's Office for sending overnight deliveries. In
the ordinary course of business, the sealed envelope(s) that I placed for collection would be collected by a courier
the same day.
BY ELECTRONIC MAIL: Based on a court order or an agreement of the parties to accept electronic
service, I caused the documents to be sent to the person(s) at the electronic service address(es) listed above. Such
document(s) were transmitted via electronic mail from the electronic address: frrst.last@sfgov.org 0 in portable
document format ("PDF") Adobe Acrobat or 0 in Word document format.
I declare under penalty of perjury pursuant to the laws of the State of California that the
foregoing is true and correct.
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Executed August 21,2013, at San Francisco, California.
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G"'~ "I ~.:!
--;
j ./
--rve&-,--,--MORRIS ALLEN
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V/ ~~ __
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n:\labor\li20 13\ 13 0043\00866643 .doc

Cheated janitors to receive $1.34 million in restitution in healthcare

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