Metropolitan News-Enterprise


Wednesday, October 17, 2001


Page 1


C.A. Sides With ‘Outsourced’ MWD Workers in Benefits Dispute


By KENNETH OFGANG, Staff Writer/Appellate Courts


Workers at the Metropolitan Water District who are employed through private service contractors are entitled to the same retirement and other benefits as MWD employees, the Court of Appeal for this district ruled yesterday.

Denying MWD’s petition for writ of mandate, Div. One upheld Los Angeles Superior Court Judge Charles W. McCoy’s ruling that workers employed for MWD by Superior Staffing Services, Inc., Volt Management Corp., Fame Personnel Services, and other companies are entitled to enroll in the California Public Employee Retirement System.

The ruling could have a significant impact on other local government agencies which outsource a portion of their labor needs, typically to companies which provide significantly less in benefits than the agency does to its own employees.

Los Angeles County has already been named as a defendant in similar suits attacking outsourcing at the County Counsel’s Office and the Internal Services Department.

The firms representing the plaintiffs in those cases, Seattle’s Bendich, Stobaugh & Strong and the Beverly Hills firm of Kalisch, Cotugno & Rust, filed amicus briefs on behalf of the MWD plaintiffs.

Independent Contractors

The Bendich firm also represented Microsoft Corporation workers in litigation that resulted in a $97 million class-action settlement. The plaintiffs there similarly claimed they were improperly classified as independent contractors and unlawfully deprived of employee benefits.

McCoy ruled that the workers’ employment status had to be determined under the common-law “control” test. To the extent that the outside contractors are basically payroll services and it is the MWD that controls the employees’ work, they are employees under the Public Employees’ Retirement Law and entitled to CALPERS benefits, the judge said.

Justice Reuben Ortega, writing for the Court of Appeal, agreed.

“…CALPERS consistently has employed the common law control test to define employment in its relations with contracting agencies in general, and MWD in particular,” the justice wrote.

While MWD and the providers argued that the providers hired and paid the employees, Ortega said they did so “only in the technical sense that MWD told each worker whether he would be ‘hired’ by MWD or a particular provider.”

Declarations submitted by several workers, the justice said, showed that they were interviewed and hired by MWD personnel, and had no contact with the providers as to non-payroll matters. MWD, not the ostensible employers, set hours, made assignments, evaluated performance, determined promotions, and made decisions regarding termination, Ortega noted.

Retirement Law

The justice rejected the contention that the contract employees aren’t covered by the retirement law because they aren’t “paid by public funds.” That requirement applies only to state workers, not those employed by local agencies—such as MWD—which contract with CALPERS, Ortega explained.

Ortega also rejected MWD’s argument that the contract workers cannot qualify for CALPERS enrollment because they weren’t hired under civil service procedures, as all MWD employees must be under the agency’s rules.

“Because…entitlement to PERL benefits is statutory, the existence of MWD’s merit hiring system, whatever its requirements, cannot alter MWD’s contract with CALPERS,” he wrote. That contract, he explained, requires the agency to enroll all of its employees, as defined by common law.

“Moreover, the plaintiff/workers were hired in substantial, although not technical, compliance with the merit hiring system,” the justice said.  “MWD selected specific workers for specific jobs based on their having specific skills and experience.”

Impact on MWD

An attorney involved in the case said it would have a big impact on MWD. The agency “has a great many employees…who are going to meet the common-law definition and are going to have to be enrolled” in CALPERS, Anthony Segall told the MetNews.

Segall, of Pasadena’s Segall, Rothner, & Greenstone, represented American Federation of State, County, and Municipal Employees Local 1902, an MWD workers’ union that filed an amicus brief on behalf of the contract employees.

But Segall said the statewide impact might be “not as widespread as all of the parties who filed amicus briefs would have you believe.”

The MWD, he said, “is a very extreme case” because the contract workers were “completely absorbed into [the agency’s] own workforce” and in some cases actually moved back and forth between the MWD’s payroll and those of the contract providers.

Jon Eisenberg of Horvitz & Levy, appellate counsel for the MWD, declined comment, saying he had not yet had a chance to discuss the case with his client.



Copyright 2001, Metropolitan News Company