Is a public entity exempt from California's Labor Code?

The California Court of Appeal recently upheld the trial court’s denial of class certification on the grounds that the employer was a public entity that was not subject to the Labor Code violations that the former employee alleged.

The San Diego Convention Center Corporation (SDCCC) – the defendant in the case of Allen v. San Diego Convention Center Corporation, Inc. – hired the plaintiff as a guest services representative on an hourly basis in 2014. It terminated her in 2019.

The plaintiff filed a class action complaint. She alleged that the SDCCC committed violations of California’s Labor Code by failing to do the following:

• to provide meal periods (sections 226.7, 512, and 1198)
• to provide rest periods (sections 226.7 and 1198)
• to pay hourly wages for time worked during meal and rest periods (sections 223, 510, 1194, 1194.2, 1197, 1197.1, and 1198)
• to pay vacation wages (section 227.3)
• to pay sick time (sections 246 and the following)
• to indemnify the plaintiff and others for the cost of non-slip shoes, which were allegedly necessary to their work (section 2802)
• to provide accurate written wage statements (section 226)
• to timely pay all final wages (sections 201, 202, and 203)

The plaintiff also claimed breaches of the Unfair Competition Law (UCL) and asked for civil penalties under the Private Attorney General Act of 2004 (PAGA) as a representative of current and former SDCCC employees for the alleged Labor Code violations.

The SDCCC filed a demurrer. It argued that it was exempt from liability for the alleged Labor Code violations as a public entity and as a wholly-owned subsidiary and instrumentality of San Diego City.

The trial court agreed that the SDCCC was a public entity and mostly sustained the demurrer. However, the trial court overruled the demurrer in relation to the alleged failure to timely pay final wages and left the plaintiff’s UCL and PAGA claims intact for this allegation.

The plaintiff filed a motion for class certification. The trial court denied this motion. It made the following findings:

• The plaintiff no longer had a claim for derivative waiting time penalties under section 203 since her claim regarding missed meal and rest periods was dismissed at the demurrer stage
• Certification of the UCL claim was unwarranted since the SDCCC was exempt from liability for the alleged Labor Code violations
• The PAGA and individual claims under sections 201, 202, and 203 were still set for trial

The California Court of Appeal for the Fourth District, First Division dismissed the plaintiff’s appeal and affirmed the trial court’s decision to deny class certification.

The Labor Code provisions raised in this case were inapplicable to public employers, the Court of Appeal noted. Thus, the SDCCC, as a public entity, was not subject to the Labor Code violations that the plaintiff alleged, the appellate court ruled.

The SDCCC was formed under the authority of state law and was defined by San Diego’s municipal code as a part of the city, the Court of Appeal explained. The SDCCC operated for the municipality’s sole benefit. It was not an independent corporation and was instead an agent of San Diego City, which appointed its leaders and which had to publicly account for its operations, the appellate court concluded.