Stone v. Alameda Health System

IN THE SUPREME COURT OF

CALIFORNIA

TAMELIN STONE et al.,

Plaintiffs and Appellants,

v.

ALAMEDA HEALTH SYSTEM,

Defendant and Respondent.

S279137

First Appellate District, Division Five

A164021

Alameda County Superior Court

RG21092734

August 15, 2024

Justice Corrigan authored the opinion of the Court, in which

Chief Justice Guerrero and Justices Liu, Kruger, Groban,

Jenkins, and Segal* concurred.

__________________________

* Associate Justice of the Court of Appeal, Second Appellate

District, Division Seven, assigned by the Chief Justice pursuant

to article VI, section 6 of the California Constitution.

STONE v. ALAMEDA HEALTH SYSTEM

S279137

Opinion of the Court by Corrigan, J.

This case concerns whether a hospital authority created

by a county Board of Supervisors and authorized by the

Legislature to manage the county’s public health facilities may

be held liable for wage and hour violations and civil penalties

under the Labor Code Private Attorneys General Act of 2004

(Lab. Code, § 2698 et seq.; PAGA). 1 We conclude the Legislature

intended to exempt public employers such as the hospital

authority from Labor Code provisions governing meal and rest

breaks (§§ 226.7, 512) and related statutes governing the full

and timely payment of wages (see § 220, subd. (b)).2 We further

conclude public entities are not subject to PAGA penalties for

the violations alleged here. Because the Court of Appeal

reached different conclusions, we reverse its judgment.

I. BACKGROUND

All California counties have a mandatory duty to provide

medical care for their indigent residents. (Welf. & Inst. Code,

§ 17000; Hunt v. Superior Court (1999) 21 Cal.4th 984, 991;

County of San Diego v. State of California (1997) 15 Cal.4th 68,

1

All statutory references are to the Labor Code unless

otherwise indicated.

2

As we will discuss (post, at pp. 14–15), the Legislature

recently amended some of these provisions. (See Stats. 2022,

ch. 845, § 2, enacting Sen. Bill No. 1334 (2021–2022 Reg. Sess.).)

Those amendments are not at issue here.

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Opinion of the Court by Corrigan, J.

104–105.) After years of managing a medical center for this

purpose, the Alameda County Board of Supervisors (Board of

Supervisors) determined that transferring governance of the

center to a hospital authority would “improve the efficiency,

effectiveness, and economy of the community health services

provided” and would be “the best way to fulfill its commitment

to the medically indigent, special needs, and general

populations of” the county. (Health & Saf. Code, § 101850,

subd. (a).) The Board of Supervisors sought the legislative

authorization to do so. In 1996 the Legislature enacted Health

and Safety Code, section 101850 (hereafter sometimes referred

to as “the enabling statute”). (Stats. 1996, ch. 816, § 1, p. 4277.)3

This statute authorized the establishment of defendant

Alameda Health System (AHS) as a “separate public agency”

(Health & Saf. Code, § 101850, subd. (a)(2)(C); see id.,

subd. (a)(2)(D)) “strictly and exclusively dedicated to the

management, administration, and control of the medical center”

(id., subd. (b)).

Plaintiffs worked at Highland Hospital, a facility operated

by AHS. Tamelin Stone was a medical assistant and Amanda

3

The Legislature found and declared that “the adoption . . .

of a special authority is required” because “there is no general

law under which [this hospital] authority could be formed.”

(Health & Saf. Code, § 101850, subd. (a)(1).) “ ‘Hospital

authority,’ ” as defined in the enabling statute, “means the

separate public agency established by the Board of Supervisors

of Alameda County to manage, administer, and control the

Alameda Health System.” (Id., subd. (a)(2)(C).) The Board of

Supervisors adopts the hospital authority’s bylaws and must

approve any changes to them. (Id., subd. (e).) The statute

directs the hospital authority to “apply as a public agency” for

licenses to provide health care. (Id., subd. (g).)

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STONE v. ALAMEDA HEALTH SYSTEM

Opinion of the Court by Corrigan, J.

Kunwar was a licensed vocational nurse. In their wage and hour

suit against AHS, plaintiffs alleged these positions were subject

to requirements of the Labor Code and wage orders, in

particular Industrial Wage Commission (IWC) wage order

No. 5-2001 (Cal. Code Regs., tit. 8, § 11050; hereafter Wage

Order No. 5). The operative complaint alleged that AHS

frequently denied or discouraged the taking of meal and rest

breaks and “automatically deducted ½ hour from each workday”

even when meal periods were not taken. Plaintiffs asserted

seven class action claims: (1) failure to provide off-duty meal

periods (§§ 226.7, 512); (2) failure to provide off-duty rest breaks

(§ 226.7); (3) failure to keep accurate payroll records (§§ 1174,

1174.5, 1175); (4) failure to provide accurate itemized wage

statements (§§ 226, 226.3); (5) unlawful failure to pay wages

(§§ 204, 222, 223, 225.5, 218.6, 218.5, 510, 1194, 1194.2, 1198);

(6) failure to timely pay wages (§§ 204, 210, 222, 223, 225.5,

218.6, 218.5); and (7) civil penalties for these violations under

PAGA (§ 2698 et seq.).4

AHS demurred on the ground that it was a public entity

not subject to suit for the Labor Code violations asserted. The

demurrer was sustained without leave to amend. Based on

Johnson v. Arvin-Edison Water Storage Dist. (2009) 174

Cal.App.4th 729 (Johnson), the court held that “provisions of the

Labor Code apply only to private sector employees unless they

are specifically made applicable to public employees.” Because

it found AHS was a public agency, and because the statutes and

4

The complaint’s additional, nonclass claims for

discrimination, retaliation, harassment, constructive wrongful

termination, and intentional infliction of emotional distress,

along with its requests for declaratory and injunctive relief, are

not before us in this appeal.

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STONE v. ALAMEDA HEALTH SYSTEM

Opinion of the Court by Corrigan, J.

wage order provisions at issue do not mention public

employment, the court concluded AHS had no liability. The

court also dismissed the PAGA claim. It reasoned that public

entities like AHS are not “ ‘person[s]’ ” subject to PAGA

penalties (§§ 18, 2699, subd. (b)); the PAGA claim here derived

from Labor Code violations that had been rejected; and, because

PAGA penalties are punitive in nature, they are not available

against public entities (Gov. Code, § 818).

The Court of Appeal reversed in part, reasoning as follows.

Construing the enabling statute, rather than the Labor Code

provisions themselves, the court discerned no legislative intent

to exempt AHS from the meal and rest period and payroll

requirements underlying plaintiffs’ first three causes of action.

(Stone v. Alameda Health System (2023) 88 Cal.App.5th 84, 93–

94 (Stone).) It distinguished contrary authority as involving

state agency defendants, whereas the enabling statute indicates

that AHS “shall not be considered to be an agency, division, or

department of the county.” (Health & Saf. Code, § 101850,

subd. (j); see Stone, at pp. 93–94.) Subjecting AHS to Labor

Code requirements would not infringe any sovereign

governmental powers, the court reasoned, because AHS

possessed no powers that could not as easily be wielded by a

private institution. (Stone, at pp. 94–95.) The court held the

fourth cause of action was properly dismissed under an

exemption in the wage statements statute because AHS “is a

‘governmental entity’ of some kind” (id. at p. 97; see § 226,

subd. (a)),5 but it concluded AHS was subject to liability under

5

Plaintiffs now suggest this ruling was incorrect. We do not

address the argument, however, because it was not raised in the

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STONE v. ALAMEDA HEALTH SYSTEM

Opinion of the Court by Corrigan, J.

the wage payment statutes referenced in the fifth and sixth

causes of action (Stone, at pp. 95–96). Relying on a similar

analysis in Gateway Community Charters v. Spiess (2017) 9

Cal.App.5th 499 (Gateway), the court reasoned AHS was not

exempt from these obligations as a “municipal corporation”

(§ 220, subd. (b)) because it lacked such governmental authority

as the power to impose taxes or to acquire property through

eminent domain. (Stone, at pp. 95–96.) Finally, the court

determined AHS was subject to PAGA penalties as alleged in

the seventh cause of action. Although it agreed AHS is not a

“person” subject to default penalties where no statutory penalty

is specified (see § 2699, subds. (b), (f); see also § 18), the court

held AHS was nevertheless subject to penalties for violating

statutes that do provide for specific penalties. (Stone, at pp. 98–

99.) Having concluded such penalties are not punitive in nature,

the court determined Government Code section 818 posed no

obstacle to their imposition on a public entity. (Stone, at p. 99.)

Because this appeal was taken from a dismissal on

demurrer, and involves questions of statutory interpretation,

our review is de novo. (Segal v. ASICS America Corp. (2022) 12

Cal.5th 651, 658; Roy Allan Slurry Seal, Inc. v. American

Asphalt South, Inc. (2017) 2 Cal.5th 505, 512.)

II. DISCUSSION

A. Analytical Framework

Statutory interpretation questions are guided by familiar

principles. “Our fundamental task is to ascertain the

petition for review or answer. (See Cal. Rules of Court, rule

8.516(b)(1); Dynamex Operations West, Inc. v. Superior Court

(2018) 4 Cal.5th 903, 916, fn. 5.)

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Opinion of the Court by Corrigan, J.

Legislature’s intent and effectuate the law’s purpose, giving the

statutory language its plain and commonsense meaning.

[Citation.] We examine that language in the context of the

entire statutory framework to discern its scope and purpose and

to harmonize the various parts of the enactment.” (Kaanaana

v. Barrett Business Services, Inc. (2021) 11 Cal.5th 158, 168.) If

the language is clear, “ ‘its plain meaning controls. If, however,

the language supports more than one reasonable construction,

then we may look to extrinsic aids, including the ostensible

objects to be achieved and the legislative history.’ ” (Skidgel v.

California Unemployment Ins. Appeals Bd. (2021) 12 Cal.5th 1,

14.) An administrative agency’s “interpretation of a statute ‘it

enforces is entitled to great weight unless clearly erroneous or

unauthorized.’ ” (Ibid.) Considering the remedial nature of

statutes governing employees’ wages, hours, and working

conditions, these provisions are liberally construed to promote

worker protection. (McLean v. State of California (2016) 1

Cal.5th 615, 622 (McLean).)

When construing a statute, courts frequently consult

interpretive maxims. “A traditional rule of statutory

construction” relevant here “is that, absent express words to the

contrary, governmental agencies are not included within the

general words of a statute.” (Wells One2One Learning

Foundation (2006) 39 Cal.4th 1164, 1192 (Wells).) This principle

is deeply embedded in our state’s jurisprudence. (See Mayrhofer

v. Board of Education (1891) 89 Cal. 110, 113 (Mayrhofer).)

Multiple decisions have applied the rule to interpretations

of the Labor Code. (See, e.g., Allen v. San Diego Convention

Center Corp., Inc. (2022) 86 Cal.App.5th 589, 597–598 (Allen);

California Correctional Peace Officers’ Assn. v. State of

California (2010) 188 Cal.App.4th 646, 653 (California

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Opinion of the Court by Corrigan, J.

Correctional); Johnson, supra, 174 Cal.App.4th at p. 736; see

also 71 Ops.Cal.Atty.Gen. 39, 44 (1988) [“provisions of the Labor

Code extending to public employment do so expressly”].) In at

least one instance, the Legislature has done so as well. We

quoted a Senate committee report on this subject in Campbell v.

Regents of University of California (2005) 35 Cal.4th 311 when

discussing a bill extending whistleblower protection to public

employees. After noting the silence of existing whistleblower

laws on their applicability to public employment, the report

explained: “ ‘Generally, . . . provisions of the Labor Code apply

only to employees in the private sector unless they are

specifically made applicable to public employees.’ (Sen. Com. on

Industrial Relations, Analysis of Assem. Bill No. 3486 (1991–

1992 Reg. Sess.) as amended Apr. 21, 1992, p. 2.)” (Campbell,

at p. 330; see also Stoetzl v. Department of Human Resources

(2019) 7 Cal.5th 718, 752 (Stoetzl) [quoting the same report].)

This interpretive maxim is modified by a caveat, however.

The “rule excludes government agencies from the operation of

general statutory provisions only if their inclusion would result

in an infringement upon sovereign governmental powers.”

(Regents of University of California v. Superior Court (1976) 17

Cal.3d 533, 536.) Like the rule, the caveat is well established.

Early cases explained that “the state is not bound by general

words in a statute” if they “would operate to trench upon [the

state’s] sovereign rights, injuriously affect its capacity to

perform its functions, or establish a right of action against it.”

(Miles v. Ryan (1916) 172 Cal. 205, 207; Mayrhofer, supra, 89

Cal. at p. 113.) “Where, however, no impairment of sovereign

powers would result, the reason underlying th[e] rule of

construction ceases to exist and the Legislature may properly be

held to have intended that the statute apply to governmental

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bodies even though it used general statutory language only.”

(Hoyt v. Board of Civil Service Commrs. (1942) 21 Cal.2d 399,

402.)

As we cautioned in Wells, the sovereign powers caveat,

like the rule it modifies, “is simply a maxim of statutory

construction. While the ‘sovereign powers’ principle can help

resolve an unclear legislative intent, it cannot override positive

indicia of a contrary legislative intent.” (Wells, supra, 39 Cal.4th

at p. 1193.) We must examine “the language, structure, and

history of the particular statute[s] before us” to determine

whether the Legislature intended to impose their requirements

on public employers. (Ibid.) Although interpretive maxims may

aid in that analysis, the fundamental question is always one of

legislative intent. (See State ex rel. Harris v.

PricewaterhouseCoopers, LLP (2006) 39 Cal.4th 1220, 1237–

1238 [declining to address sovereign powers infringement where

legislative intent to exclude public entities from False Claims

Act (Gov. Code, § 12650 et seq.) was clear].)

B. Public Entity Liability for Meal and Rest Break Violations

We begin by considering whether the Legislature intended

to exclude public entity employers from the meal and rest break

obligations at issue here. We then consider whether AHS

qualifies as a public entity. Because the statutory language,

context, and history provide “positive indicia” of a legislative

intent to exclude public employers, resort to interpretive

maxims is unnecessary, and we need not address whether

application of the laws would invade AHS’s sovereign powers.

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1. Legislative Intent To Exclude Public Entity

Employers

a. Statutory Language

The Labor Code’s meal and rest break obligations are

found in sections 226.7 and 512. Section 226.7 provides that

“[a]n employer shall not require an employee to work during a

meal or rest or recovery period” mandated by statute,

regulation, IWC wage order, or other order. (§ 226.7, subd. (b).)

Section 512, governing meal periods, mandates: “An employer

shall not employ an employee for a work period of more than five

hours per day without providing the employee with a meal

period of not less than 30 minutes.” (§ 512, subd. (a).) The

applicable IWC wage order is in accord. (See Wage Order No. 5,

subd. 11(A).) The relevant rest break requirement is also found

in the wage order, which mandates: “Every employer shall

authorize and permit all employees to take rest periods . . . .”

(Wage Order No. 5, subd. 12(A).) The Labor Code does not

define the term “employer” (McLean, supra, 1 Cal.5th at p. 627),

but a definition is found in the wage order. It states:

“ ‘Employer’ means any person as defined in Section 18 of the

Labor Code, who directly or indirectly, or through an agent or

other person, employs or exercises control over the wages, hours,

or working conditions of any person.” (Wage Order No. 5,

subd. 2(H).) Section 18, in turn, provides: “ ‘Person’ means any

person, association, organization, partnership, business trust,

limited liability company, or corporation.” 6

6

Plaintiffs’ derivative claim for inaccurate payroll records

also turns on the meaning of “person,” because section 1174

places its record-keeping obligation on “[e]very person

employing labor in this state” (italics added).

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In summary, the Labor Code and wage order impose meal

and rest break obligations on “employers,” and, under the

relevant wage order, an “employer” must be a “person as defined

in Section 18 of the Labor Code.” (Wage Order No. 5,

subd. 2(H).) Accordingly, section 18’s definition of the term

“person” is central to resolving the issues here.

Although we have not previously construed section 18, we

considered a similar definition of “person” in Wells, supra, 39

Cal.4th 1164. The False Claims Act states that a “ ‘[p]erson’

includes any natural person, corporation, firm, association,

organization, partnership, limited liability company, business,

or trust.” (Gov. Code, § 12650, subd. (b)(9).) We observed that

all the words and phrases used to describe a “person” covered by

the act “are those most commonly associated with private

individuals and entities” as opposed to public or governmental

agencies. (Wells, at p. 1190.) As Wells noted, a nearly identical

list of words and phrases appears in the Labor Code’s definition

of “person.” (See Wells, at p. 1191, fn. 14; see also § 18.) Indeed,

the Labor Code’s definition is more precise, stating that the

word person “means” the typically private entities listed (§ 18),

whereas under the False Claims Act a person “includes” these

entities but may also encompass other entities not listed (Gov.

Code, § 12650, subd. (b)(9)). In statutory drafting, the term

“includes” is typically one of enlargement, whereas “means” is

more restrictive. (See City of San Jose v. Superior Court (2017)

2 Cal.5th 608, 622, fn. 6; Ornelas v. Randolph (1993) 4 Cal.4th

1095, 1101.) The wage order’s reliance on the term “person,” as

defined in section 18, therefore communicates that government

employers are not subject to the meal and rest break obligations

it prescribes.

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Opinion of the Court by Corrigan, J.

As we have noted in other contexts, “the Legislature is

capable of bringing government entities within the scope of

specific legislation when it intends to do so.” (Brennon B. v.

Superior Court (2022) 13 Cal.5th 662, 678.) In contrast to the

statutes at issue here, other Labor Code provisions specifically

describe their applicability to public employers. For example, a

statute within the same chapter as the meal break law (§ 512)

declares that “[s]ections 550, 551, 552 and 554 of this chapter

[governing maximum consecutive working days] are applicable

to cities which are cities and counties and to the officers and

employees thereof.” (§ 555.) Thus, even within the same

chapter, the Legislature has directed that some, but not all,

wage and hour laws apply to public entities. (See Johnson,

supra, 174 Cal.App.4th at pp. 736–737.) Similarly, the statute

mandating paid sick leave defines “employer” for its purposes as

“any person employing another under any appointment or

contract of hire and includes the state, political subdivisions of

the state, and municipalities.” (§ 233, subd. (b)(1); see § 245.5,

subd. (b)(1).) Likewise, the minimum wage law states, “For

purposes of this subdivision, ‘employer’ includes the state,

political subdivisions of the state, and municipalities.”

(§ 1182.12, subd. (b)(3).) In yet another example, the workers’

compensation law specifically defines “employer” to include

“[t]he State and every State agency” and “[e]ach county, city,

district, and all public and quasi public corporations and public

agencies therein.” (§ 3300, subds. (a)–(b).) As AHS points out,

the worker’s compensation law and section 18 were enacted as

part of the same legislation. (Stats. 1937, ch. 90, § 18, p. 186;

id., § 3300, p. 266.) Thus, within the same session, the

Legislature expressly included public employers in section 3300

but not in section 18. Of course, other Labor Code provisions

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Opinion of the Court by Corrigan, J.

specifically exclude government employers from their terms

(e.g., § 220, subd. (b)), a practice that blunts any inference one

might draw from legislative silence. But here, “employer” is

defined by reference to section 18, and section 18 is not silent

about whether government employers are covered; its language

affirmatively indicates that they are not.

While section 18’s definition of “person” is central to our

interpretation of the relevant Labor Code and wage order

provisions, this definition by itself is not dispositive.

Nevertheless, construing section 18 to exclude public employers

from meal and rest break obligations is generally consistent

with the text of the applicable wage order. “Nearly a century

ago, the Legislature responded to the problem of inadequate

wages and poor working conditions by establishing the IWC and

delegating to it the authority to investigate various industries

and promulgate wage orders fixing for each industry minimum

wages, maximum hours of work, and conditions of labor.

[Citations.] Pursuant to its ‘broad statutory authority’

[citation], the IWC in 1916 began issuing industry- and

occupation-wide wage orders specifying minimum requirements

with respect to wages, hours, and working conditions [citation].”

(Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th

1004, 1026 (Brinker).) Because the Legislature has also on

occasion enacted statutes addressing these issues, “wage and

hour claims are today governed by two complementary and

occasionally overlapping sources of authority: the provisions of

the Labor Code, enacted by the Legislature, and a series of 18

wage orders, adopted by the IWC. (Brinker, at p. 1026.) IWC

wage orders thus bear a quasi-legislative status and “are to be

accorded the same dignity as statutes.” (Id. at p. 1027.)

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Wage Order No. 5, which covers hospital workers, states

that, unless specifically noted otherwise, “the provisions of this

order shall not apply to any employees directly employed by the

State or any political subdivision thereof, including any city,

county, or special district.” (Wage Order No. 5, subd. 1(C).) The

plain language of the governing wage order thus expressly

excludes public employers from most of the wage and hour

obligations it places on private employers, including meal and

rest break obligations. (Id., subds. 11, 12.)

b. Legislative History

Relevant history of the statutes and wage orders also

supports a conclusion that the Legislature did not intend for

meal and rest break requirements to apply to public employers.

Historically, the IWC wage orders completely exempted

government employers from their reach. (California

Correctional, supra, 188 Cal.App.4th at p. 655.) The version of

Wage Order No. 5 issued in 1976 thus stated: “The provisions

of this Order shall not apply to employees directly employed by

the State or any county, incorporated city or town or other

municipal corporation.” (Cal. Code Regs., tit. 8, former § 11380

[IWC wage order former No. 5-76, subd. 1(C)].) The IWC’s

statement as to the basis explained that this exemption

“reflect[ed] the Attorney General’s advice that the IWC may not

issue regulations covering employees of the state and its

subdivisions without explicit legislative authorization.” (IWC,

Statement as to the Basis for Wage Order No. 5-76 subd. 1 (Oct.

18, 1976).)

The IWC eliminated the wage orders’ overtime provisions

in the late 1990’s, but the Legislature repudiated this change by

enacting the Eight-Hour-Day Restoration and Workplace

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Flexibility Act of 1999 (Stats. 1999, ch. 134, enacting Assem. Bill

No. 60 (1999–2000 Reg. Sess.)). (See Brinker, supra, 53 Cal.4th

at p. 1037; Johnson, supra, 174 Cal.App.4th at p. 735.) The bill

“repealed five wage orders, including IWC wage order No. 5–98

(Jan. 1, 1998), and required the IWC to review its wage orders

and readopt orders conforming to the Legislature’s expressed

intentions. (§ 517; Stats. 1999, ch. 134, § 21, p. 1829.) It also

enacted section 512, which for the first time set out statutory

meal period requirements.” (Brinker, at p. 1045.) Critically, for

our purposes, the Legislature did not alter the wage orders’

exemption for public employers. On the contrary, newly enacted

section 515, subdivision (b) generally affirmed the IWC’s ability

to “review, retain, or eliminate any exemption from provisions

regulating hours of work that was contained in any valid wage

order in effect in 1997.” With two exceptions in orders

concerning agricultural and household occupations, “public

employees were expressly exempted from the IWC wage orders

in effect in 1997.” (California Correctional, supra, 188

Cal.App.4th at p. 655.) We presume the Legislature was aware

of the preexisting exemption for public employment when it

affirmed the IWC’s authority to modify the wage orders. (See

People v. Superior Court (Zamudio) (2000) 23 Cal.4th 183, 199.)

As a result, its enactment of section 515 is strong evidence that

it intended to maintain the exemption.

In 2001, the IWC amended the wage orders to specifically

apply certain provisions to government employees. (See Stoetzl,

supra, 7 Cal.5th at p. 748.) Newly amended subdivision 1(C) of

IWC Wage Order No. 5-2001 (Jan. 1, 2001) stated: “Except as

provided in Sections 1, 2, 4, 10, and 20, the provisions of this

order shall not apply to any employees directly employed by the

State or any political subdivision thereof, including any city,

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county, or special district.” (Italics added.) This provision

remains unchanged in the current wage order. (See Wage Order

No. 5, subd. 1(C).) The exceptions concern applicability of the

order (id., subd. 1), definitions (id., subd. 2), minimum wages

(id., subd. 4), meals and lodging provided to employees (id.,

subd. 10), and penalties (id., subd. 20). Notably, the IWC did

not, and has never, altered the government exemption from

wage order provisions governing meal periods (id., subd. 11),

rest periods (id., subd. 12), overtime (id., subd. 3), or record-

keeping (id., subd. 7).

The Legislature’s intent to exempt public employers from

meal and rest break obligations is further confirmed by its

recent enactment of section 512.1. (Stats. 2022, ch. 845, § 2,

enacting Sen. Bill No. 1334 (2021–2022 Reg. Sess.).) Effective

January 1, 2023, the new statute requires that public

employers, which it defines as “the state, political subdivisions

of the state, counties, municipalities, and the Regents of the

University of California” (§ 512.1, subd. (e)(2)), must provide

meal and rest periods to all employees who provide or support

“direct patient care . . . in a general acute care hospital, clinic,

or public health setting” (id., subd. (e)(1)).7 The enactment of

section 512.1 is telling because it indicates the Legislature did

not believe public employers were required to provide meal and

rest breaks to health care workers under prior law. Legislative

history confirms this understanding. A Senate Rules

Committee report stated that the bill would “extend[] existing

meal and rest period rights and remedies available to private

7

The complaint alleges conduct that occurred before

section 512.1’s enactment. Plaintiffs do not contend the new

statute applies retroactively.

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sector employees to [certain health care workers] who are

directly employed by specified public sector employers.” (Sen.

Rules Com., Off. of Sen. Floor Analyses, Analysis of Sen. Bill

No. 1334 (2021–2022 Reg. Sess.) as amended Aug. 25, 2022,

p. 1.) The report explained that “existing labor code provisions

entitle private sector employees to an unpaid 30-minute meal

period, as specified, and per existing Industrial Wage Orders, to

a 10-minute rest period. . . . In general, [the] California Labor

Code regulates private employment unless a provision explicitly

states that it applies to public sector employment. Employees

providing patient care in a public health setting and at the

University of California may currently be entitled to a meal and

rest period; however, these rights would have to be negotiated

as part of their collective bargaining agreement. This bill

statutorily entitles these workers to a meal and rest period . . .

eliminating the need for these rights to be collectively

bargained.” (Id. at p. 4.)

c. Agency Interpretations

Administrative agency interpretations are also in accord.

In considering how the wage orders applied to those staffed in

temporary government positions, the Department of Labor

Standards Enforcement (DLSE) opined that if “workers are

employed directly by the public entity . . . the bulk of the wage

order provisions would not apply.” (Dept. Industrial Relations,

DLSE Opn. Letter No. 2003.01.10 (Jan. 10, 2003) p. 3; see id. at

p. 4 [“if the workers are employees of the public entity, then they

are not subject to the wage orders and any work schedule which

meets the requirements of the Fair Labor Standards Act [of 1938

(29 U.S.C. § 201 et seq.)] would suffice”].) While DLSE opinion

letters are not entitled to deference, they are generally

considered with respect. (Kilby v. CVS Pharmacy, Inc. (2016) 63

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Opinion of the Court by Corrigan, J.

Cal.4th 1, 13 (Kilby); see Brinker, supra, 53 Cal.4th at p. 1029,

fn. 11.)

d. Case Law

Finally, appellate decisions have uniformly concluded

that, unless the laws in question expressly state otherwise, the

Labor Code’s wage and hour requirements do not apply to public

employers. Relying in part on the statutory interpretation

maxim that “absent express words to the contrary,

governmental agencies are not included within the general

words of a statute” (Wells, supra, 39 Cal.4th at p. 1192), the

court in Johnson concluded provisions requiring overtime pay

(§ 510) and meal breaks (§ 512) do not apply to public agencies.

(Johnson, supra, 174 Cal.App.4th at pp. 736–738.) California

Correctional, supra, 188 Cal.App.4th at pages 652–654 agreed

with this interpretation of section 512 and extended it to

section 226.7, which requires rest and recovery periods. In so

doing, it rejected an argument that an express exemption for the

state regarding wage payments (§ 220, subd. (a)) implied that

all other provisions in the chapter applied to public agencies by

default. (California Correctional, at pp. 653–654; see

Kajberouni v. Bear Valley Community Services Dist. (E.D. Cal.

2022) 599 F.Supp.3d 961, 966–968 [relying on Johnson and

California Correctional to dismiss meal and rest break claims

against a public entity].) Morales v. 22nd Dist. Agricultural

Assn. (2018) 25 Cal.App.5th 85, 94–95, followed Johnson in

concluding public entities are not subject to overtime obligations

under section 510 or IWC wage order No. 10-2001 (Cal. Code

Regs., tit. 8, § 11100), even when they act as a joint employer.

Allen, supra, 86 Cal.App.5th at pages 597–598 also followed

Johnson in holding that meal and rest break and overtime laws

(§§ 226.7, 510, 512) do not apply to public employers. Indeed,

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Opinion of the Court by Corrigan, J.

the parties in Allen agreed that public entities are exempt from

these requirements, and the only question was whether the

defendant was a public entity. (Allen, at p. 598.)8

Cases reaching an opposite conclusion are distinguishable

because they involved provisions that are expressly applicable

to public employers. Sheppard v. North Orange County

Regional Occupational Program (2010) 191 Cal.App.4th 289, for

example, considered whether the minimum wage provision in

IWC wage order No. 4-2001 (Cal. Code Regs., tit. 8, § 11040)

applied to a public employer. Like Wage Order No. 5 here, the

Sheppard wage order stated that its provisions did not apply to

public employers “ ‘[e]xcept as provided in Sections 1

[(“Applicability of Order”)], 2 [(“Definitions”)], 4 [(“Minimum

Wages”)], 10 [(“Meals and Lodging”)], and 20 [(“Penalties”)].’ ”

(Sheppard, at p. 300, italics added.) Because this language

expressly carves out an exception, Sheppard concluded the wage

order’s minimum wage requirements apply to all employers,

including public entities. (Id. at pp. 300–301.) Similarly,

Flowers v. Los Angeles County Metropolitan Transportation

Authority (2015) 243 Cal.App.4th 66 considered a public transit

authority’s liability for minimum wage and rest break

violations. But these claims arose under IWC wage order No. 9-

2001 (Cal. Code Regs., tit. 8, § 11080), which was amended in

8

In a related context, Krug v. Board of Trustees of

California State University (2023) 94 Cal.App.5th 1158, review

granted December 13, 2023, S282131 (Krug) recently concluded

California State University, a public institution, was not

required to reimburse employees for work-related expenses

under section 2802. The court’s analysis relied heavily on the

sovereign powers doctrine, however, and did not consider the

Labor Code’s definition of “person” in section 18. (See Krug, at

pp. 1166–1170.)

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2004 to make minimum wage and rest period requirements

expressly applicable to public transit drivers. (Flowers, at

pp. 76–77.) Finally, Guerrero v. Superior Court (2013) 213

Cal.App.4th 912 discussed public entity liability when

construing IWC wage order No. 15-2001 (Cal. Code Regs., tit. 8,

§ 11150). The wage order at issue in Guerrero was exceptional

because “unlike 14 of the 17 industry, occupation and

miscellaneous wage orders (including wage order No. 4–2001 at

issue in Sheppard . . .), wage order No. 15–2001 does not

expressly exempt public employees from its provisions.”

(Guerrero, at p. 954.) Accordingly, based on its plain language,

the wage order’s requirements applied to public as well as

private employers. (Id. at p. 955.) In contrast to Guerrero, the

wage order at issue here does include an exemption for public

employers. (Wage Order No. 5, subd. 1(C).) And, in contrast to

Sheppard and Flowers, the exemption does not carve out an

exception for meal periods (id., subd. 11) or rest periods (id.,

subd. 12).

2. AHS Is an Exempt Public Employer

Plaintiffs largely concede that the Labor Code provisions

at issue are generally not applicable to public employers. Their

primary argument is that the provisions apply to AHS because

AHS is not a public entity. Specifically, they urge that the

exemption from wage and hour requirements extends only to a

subset of public entities: those with sovereign governmental

powers that would be infringed by application of these laws.

Plaintiffs’ argument misapprehends the sovereign powers

doctrine.

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Our analysis begins with the text of the enabling statute. 9

It was also the foundation of the Court of Appeal’s analysis. This

special legislative enactment empowered the Alameda County

Board of Supervisors to create AHS to discharge the county’s

mandatory duty to provide medical care to qualifying residents.

Because section 101850 enabled the creation of AHS, and

specifically delineated AHS’s powers and obligations in regard

to several laws, its text offers the best evidence of legislative

intent as to the entity’s public status. (See People v. Trevino

(2001) 26 Cal.4th 237, 241.) The statutory text consistently

demonstrates that the Legislature considered AHS to be a

quasi-governmental public entity.

The enabling statute repeatedly describes AHS as a

“public agency.” In a subdivision devoted to definitions, it states

that “ ‘Hospital Authority’ means the separate public agency

established” pursuant to the enabling legislation. (Health &

Saf. Code, § 101850, subd. (a)(2)(C), italics added.) The statute

authorizes AHS to “apply as a public agency” for appropriate

health care licenses. (Id., subd. (g), italics added.) It dictates

that “[t]he hospital authority shall be a public agency subject to

the Meyers-Milias-Brown Act” (id., subd. (u), italics added),

which governs labor-management relations in local government

(Gov. Code, § 3500 et seq.). It also deems AHS “a public agency

9

Within the same division of the Health and Safety Code as

AHS’s enabling statute, the Legislature has authorized special

health authorities for several other local governments. (See

Health & Saf. Code, §§ 101525 [Sonoma County Dental Health

Authority], 101550–101565 [Monterey County Special Health

Care Authority], 101655–101657 [Central Coast Hospital

Authority], 101675–101820 [Santa Barbara County Special

Health Care Authority], 101852–101856 [Kern County Hospital

Authority].)

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for purposes of eligibility with respect to grants and other

funding and loan guarantee programs.” (Health & Saf. Code,

§ 101850, subd. (ag), italics added.) As defined by the Health

and Safety Code, a “ ‘[p]ublic entity’ includes the state, a county,

city, district, public authority, public agency, and any other

political subdivision or public corporation in the state.” (Health

& Saf. Code, § 13050.1, italics added.) As a public hospital

authority, and a public agency under the enabling statute’s

terms, AHS is clearly a “public entity” encompassed by this

definition.

Moreover, several provisions of the enabling statute

address AHS’s rights and liabilities under laws that specifically

apply to public entities. The statute dictates that members of

AHS’s governing board “shall not be vicariously liable for

injuries caused by the act or omission of the hospital authority

to the extent that protection applies to members of governing

boards of local public entities” under the Government Claims

Act (Gov. Code, § 810 et seq.). (Health & Saf. Code, § 101850,

subd. (t); see Gov. Code, § 820.9.) Another subdivision extends

the same immunity to AHS employees, providing that they “are

public employees” for purposes of Government Claims Act

provisions “relating to claims and actions against public entities

and public employees.” (Health & Saf. Code, § 101850,

subd. (w)(3); see Gov. Code, § 811.4 [“ ‘Public employee’ means

an employee of a public entity”].) The law declares AHS “is not

a ‘person’ subject to suit under the Cartwright Act.” (Health &

Saf. Code, § 101850, subd. (ab); see Bus. & Prof. Code, § 16702

[defining “person”]; see also Blank v. Kirwan (1985) 39 Cal.3d

311, 323 [holding “actions of political subdivisions of the state

. . . are outside the scope of the act”].) The statute also specifies

that open sessions conducted by AHS “constitute official

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proceedings authorized by law” and are privileged under Civil

Code section 47. (Health & Saf. Code, § 101850, subd. (af).)

Finally, it requires AHS to comply with Government Code

requirements for employment contracts between employees and

local agency employers. (Id., subd. (an); see Gov. Code, § 53260.)

Other parts of the enabling statute specifically exempt

AHS from laws that generally apply to public entities. These

provisions are instructive because they indicate the Legislature

viewed AHS as a public entity that would have otherwise been

subject to the laws in question. Thus, the statute dictates that

AHS records “shall not be subject to disclosure pursuant to the

California Public Records Act.” (Health & Saf. Code, § 101850,

subd. (ad)(3); see Gov. Code, § 7920.000 et seq.) The statute

further provides that meetings of the AHS governing board

convened for the sole purpose of discussing or acting on trade

secrets may be held in closed session, with the “public report of

actions taken in closed session . . . limited to a brief general

description.” (Health & Saf. Code, § 101850, subd. (ae)(1).) This

subdivision appears to define a limited exception to the

requirements of the Ralph M. Brown Act, which requires that

all meetings of legislative bodies and local agencies “be open and

public.” (Gov. Code, § 54953.) Finally, the enabling statute

declares that “[n]otwithstanding [provisions] of the Government

Code related to incompatible activities,” AHS administrative

staff “shall not be considered to be engaged in” such

incompatible activities “as a result of employment or affiliation

with the county.” (Health & Saf. Code, § 101850, subd. (ac); see

Gov. Code, § 1125 et seq.) Again, these exceptions would not

have been necessary unless AHS was a governmental entity to

which the referenced laws otherwise applied.

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Substantively, the enabling statute describes several ways

in which AHS’s affairs are intertwined with, and dependent

upon, Alameda County. All members of AHS’s governing board

are appointed, “both initially and continually,” by the county’s

Board of Supervisors. (Health & Saf. Code, § 101850, subd. (c).)

The Board of Supervisors also has responsibility for adopting

and amending the medical center’s bylaws (id., subd. (e)) and

retains sole control over use of the medical center’s “physical

plant and facilities” (id., subd. (o)). With some exceptions, AHS

employees “are eligible to participate in the [Alameda] County

Employees Retirement System.” (Id., subd. (s); see Health &

Saf. Code, § 101851 [defining the exceptions].) The statute

authorizes AHS to borrow money from the county to operate the

medical center (Health & Saf. Code, § 101850, subd. (y)) and

requires AHS to provide the county with quarterly reports on

both patient care “and any other data required by the county”

(id., subd. (am)(3)). The county’s Board of Supervisors has full

authority to “terminate the activities of [AHS] and expire [AHS]

as an entity” if it determines AHS should no longer perform its

intended functions. (Id., subd. (ak).)10

10

At AHS’s request, we took judicial notice of evidence

offered to show AHS operates in a close relationship with the

county. For example, the county’s annual comprehensive

financial report for the year ending June 30, 2021, includes

detailed information on AHS’s revenues and costs as part of the

county’s financial statements. The report explains that the

county has retained ownership of certain hospital facilities and

leases them to AHS for $1 annually. It also indicates the county

has helped finance AHS’s operations. This assistance includes

allocating to AHS 75 percent of the revenue generated from a

voter-approved sales tax increase.

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Opinion of the Court by Corrigan, J.

Despite the weight of these repeated indications that AHS

is a public entity, the Court of Appeal relied on a single

subdivision of the enabling statute to reach a contrary

conclusion. Subdivision (j) of that statute states: “A hospital

authority created pursuant to this chapter shall be a legal entity

separate and apart from the county and shall file the statement

required by Section 53051 of the Government Code. The

hospital authority shall be a government entity separate and

apart from the county, and shall not be considered to be an

agency, division, or department of the county. The hospital

authority shall not be governed by, nor be subject to, the charter

of the county and shall not be subject to policies or operational

rules of the county, including, but not limited to, those relating

to personnel and procurement.” (Health & Saf. Code, § 101850,

subd. (j), italics added.) Relying on the italicized language, the

Court of Appeal contrasted AHS with defendants in Johnson,

supra, 174 Cal.App.4th 729 and California Correctional, supra,

188 Cal.App.4th 646, both of which were designated as state

agencies. (See Stone, supra, 88 Cal.App.5th at p. 93.) The court

remarked, “Here, far from identifying respondent with the state

(or one of its political subdivisions), respondent’s enabling

statute actively discourages such an identification.” (Id. at

pp. 93–94.) For that reason alone, it found the enabling statute

offered no positive indicia of a legislative intent to exempt AHS

from the Labor Code’s meal and rest break requirements. (Id.

at p. 94; see Wells, supra, 39 Cal.4th at p. 1193.)

The Court of Appeal viewed the enabling statute through

far too narrow a lens. Even the sentence the court relied on

explicitly states that AHS “shall be a government entity.”

(Health & Saf. Code, § 101850, subd. (j).) The subdivision does

not go on to negate this statement, as the court suggested. It

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provides that AHS is a government entity, but one that is

separate from the county. The Court of Appeal itself recognized

that AHS “is a ‘governmental entity’ of some kind.” (Stone,

supra, 88 Cal.App.5th at p. 97.) California has a great many

governmental agencies. The fact that they are not all fully

autonomous sovereigns does not nullify their governmental

status. The court cited no authority for its assumption that the

Labor Code’s exemption for public employers extends only to

public entities that are acknowledged divisions of a state or local

government body. Nor do plaintiffs. Absent such authority, we

are guided by the statute’s repeated references to AHS’s public

entity status.

This reading is confirmed by Health and Safety Code

section 101850, subdivision (j)’s own requirement that AHS file

statements pursuant to Government Code section 53051. Under

that statute, every “ ‘public agency,’ ” defined as “a district,

public authority, public agency, and any other political

subdivision or public corporation” (Gov. Code, § 53050), must

file a statement with the Secretary of State for inclusion in the

state’s registry of public agencies (Gov. Code, § 53051). Such

filings ensure that AHS enjoys public agency immunity under

the Government Claims Act. (See Wilson v. San Francisco

Redevelopment Agency (1977) 19 Cal.3d 555, 557–558.)

Requiring public agency filings is a strong indication that the

Legislature intended for AHS to be treated as a governmental

entity. Moreover, even though the enabling statute states that

AHS is not to be considered part of the county, it gives AHS some

of the same powers and protections as a division of government.

AHS is subject to state and federal tax laws in the same manner

as a county (Health & Saf. Code, § 101850, subd. (z)), its

nonproprietary income is “exempt from state income taxation”

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Opinion of the Court by Corrigan, J.

(id., subd. (ag)), and donations to it are “tax deductible to the

extent permitted by state and federal law” (ibid.). The enabling

statute also explicitly states that, upon transfer of the medical

center’s control or ownership to AHS, AHS shall have “all the

rights and duties set forth in state law with respect to hospitals

owned or operated by a county.” (Id., subd. (m), italics added.)11

Based on all the foregoing, we cannot agree with the Court

of Appeal that by designating AHS a “government entity

separate and apart from the county” the Legislature intended it

to be treated as a private employer. On the contrary, read as a

whole, the enabling statute makes clear that AHS is a public

entity.12 Accordingly, as a public employer, AHS is not a

“person” subject to liability for the meal and rest break and

associated payroll records violations alleged in plaintiffs’

complaint. (See § 18; Wage Order No. 5, subd. 2(H).)

The language of Wage Order No. 5, which defines the

scope of the Labor Code’s protections in the relevant industry,

supports this conclusion. With exceptions not relevant here, it

11

An amicus curiae brief filed by local government

associations in support of AHS asserts that designating special

districts as separate governmental entities “is essential to risk

management.” Such designations help to ensure that a special

district’s liabilities are not imposed upon the city or county they

serve.

12

Legislative history of the enabling statute is in accord.

The transfer of management to AHS was intended to give

Alameda County greater flexibility and help it reduce the costs

of running its public health facilities (see Health & Saf. Code,

§ 101850, subd. (a)(1); Sen. Local Gov. Com., Analysis of Assem.

Bill No. 2374 (1995–1996 Reg. Sess.) as amended Jun. 24, 1996,

at p. 1), but there is no indication the Legislature meant to

privatize the county’s delivery of health care.

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Opinion of the Court by Corrigan, J.

states that “the provisions of this order shall not apply to any

employees directly employed by the State or any political

subdivision thereof, including any city, county, or special

district.” (Wage Order No. 5, subd. 1(C), italics added.)

Plaintiffs argue AHS cannot be considered a political

subdivision of the state because it lacks “geographical

jurisdiction.” They glean this asserted requirement from two

statutes not at issue here: the False Claims Act, which states

that the term “ ‘political subdivision’ ” includes any “legally

authorized local governmental entity with jurisdictional

boundaries” (Gov. Code, § 12650, subd. (b)(6)), and the

California Voter Participation Rights Act, which defines the

term as “a geographic area of representation created for the

provision of government services” (Elec. Code, § 14051,

subd. (a)). But all statutory definitions of the term are broad,

and most make no reference to the need for a “geographic

jurisdiction.” For example, the Labor Code itself states:

“ ‘Political subdivision’ includes any county, city, district, public

housing authority, or public agency of the state, and assessment

or improvement districts.” (§ 1721, italics added.) Similarly

broad definitions of “political subdivision” can be found in

several other codes. (See, e.g., Gov. Code, §§ 8557, subd. (b)

[“includes any city, city and county, county, district, or other

local governmental agency or public agency authorized by law”],

8698, subd. (a) [“includes the state, any city, city and county,

county, special district, or school district or public agency

authorized by law”]; Pub. Util. Code, §§ 1402 [“means a county,

city and county, city, municipal water district, county water

district, irrigation district, public utility district, or any other

public corporation”], 21010 [“means any county, city, city and

county, public corporation, district or other political entity or

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Opinion of the Court by Corrigan, J.

public corporation of this State”]; Rev. & Tax Code, § 8732.1

[“means any governmental organization formed and operating

under the authority of the laws of this state and includes

counties, cities, cities and counties, school districts, fire

protection districts, irrigation districts, and recreation

districts”].)

AHS was expressly authorized by the Legislature as a

“public agency” (Health & Saf. Code, § 101850, subds. (a)(2)(C),

(g), (u), (ag)) and falls easily within the meaning of “political

subdivision” in the Labor Code and Wage Order No. 5. Indeed,

a related chapter of the Health and Safety Code makes clear

that the Legislature considers regional hospital authorities like

AHS to be political subdivisions. The enabling statute for Kern

County Hospital Authority, an amicus curiae here, states: “This

chapter is necessary to allow the formation of a new political

subdivision, a public hospital authority . . . .” (Health & Saf.

Code, § 101852, subd. (b)(5), italics added.) Plaintiffs have

suggested no reason why the Legislature would have extended

the wage order exemption to Kern County’s hospital authority

but not to that of Alameda County. Finally, even assuming AHS

does not fall within the category of a “political subdivision” or

“special district” as those terms are used in the wage order,

plaintiffs’ argument ignores the exemption’s use of the word

“including.” As noted above, “the word ‘including’ in a statute is

‘ordinarily a term of enlargement rather than limitation.’ ”

(Hassan v. Mercy American River Hospital (2003) 31 Cal.4th

709, 717.) The wage order’s use of this term indicates that the

exemption applies to public entities beyond the examples listed.

The Court of Appeal reached a different conclusion about

AHS. It found the enabling statute contained no “positive

indicia” of legislative intent (Wells, supra, 39 Cal.4th at p. 1193)

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Opinion of the Court by Corrigan, J.

to treat AHS as a public entity. (Stone, supra, 88 Cal.App.5th

at p. 94.) It went on to consider “whether any ‘ “infringement

upon sovereign [governmental] powers” ’ would result from

subjecting” AHS to the requirements of Wage Order No. 5 or the

relevant statutes. (Stone, at p. 94.) It concluded there was no

such infringement because AHS lacked sovereign powers in the

first place. The court reasoned that providing medical care to

the indigent is “ ‘not a core government function’ ” and so could

be delegated to private parties. (Ibid.) It faulted AHS for failing

to distinguish “between powers wielded by itself, on one hand,

and those that might be wielded by a private institution to

whom the county has delegated its function of poverty

alleviation, on the other.” (Id. at p. 95.) Having equated AHS

with a “private institution,” the court concluded no sovereign

powers would be implicated by subjecting AHS to liability for

the alleged meal and rest break violations. (Ibid.)

The Court of Appeal’s analysis stumbles at the threshold.

Nowhere does the opinion explain how AHS can be understood

to be a private institution when it was created by a county board

of supervisors, pursuant to necessary authorization from the

state Legislature, and upon terms requiring the county’s

ongoing involvement in AHS’s board membership, bylaws,

licensure, and finances.

In any event, we need not decide whether the Court of

Appeal’s sovereign powers analysis is correct. As noted, the

sovereign powers principle is merely a maxim of statutory

construction that “can help resolve an unclear legislative

intent.” (Wells, supra, 39 Cal.4th at p. 1193.) Because

numerous sources reveal positive indicia of legislative intent

both to treat AHS as a public entity and to exclude public

entities from the Labor Code requirements at issue, we need not

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employ this interpretive maxim. (See Allen, supra, 86

Cal.App.5th at pp. 600–601 [concluding convention center

corporation was an exempt public entity without conducting

sovereign powers analysis].)

Nor are plaintiffs correct to suggest a sovereign powers

analysis takes precedence over contrary indications of

legislative intent. According to plaintiffs, “Under the sovereign

powers maxim only those entities whose sovereign powers . . .

would be infringed by application of the statute are exempt from

those statutes.” This analysis puts the cart before the horse.

“Maxims of statutory construction . . . are not immutable rules

but instead are guidelines subject to exceptions.” (Wishnev v.

The Northwestern Mutual Life Ins. Co. (2019) 8 Cal.5th 199, 213

(Wishnev).) While interpretive maxims are helpful aids to

statutory construction, they are to be consulted only when

statutory language is unclear. (See Mejia v. Reed (2003) 31

Cal.4th 657, 663.) “In construing a statute a court’s objective is

to ascertain and effectuate the underlying legislative intent.

[Citation.] This fundamental rule overrides the [sovereign

powers] doctrine, just as it would any maxim of jurisprudence,

if application of the doctrine or maxim would frustrate the

intent underlying the statute.” (Moore v. California State Bd. of

Accountancy (1992) 2 Cal.4th 999, 1012.) In other words, the

sovereign powers maxim “cannot override positive indicia of a

contrary legislative intent.” (Wells, supra, 39 Cal.4th at

p. 1193.)

In the same vein, plaintiffs contend an employer can be

considered a public entity exempt from Labor Code

requirements only if it has the same sovereign powers as a city

or county. Yet the only authority they cite for this proposition,

Gateway, supra, 9 Cal.App.5th 499, addressed a different

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question. The issue there was whether a “nonprofit public

benefit corporation” that operated charter schools could be

considered a “ ‘municipal corporation’ ” under a specific

exemption set forth in in section 220, subdivision (b). (Gateway,

at pp. 502–503; see post, at pp. 39–42.) Assuming Gateway

correctly decided this question, its holding cannot support

plaintiffs’ broad assertion that only entities with the same

sovereign powers as a division of government, such as taxing or

eminent domain authority, are exempt from Labor Code

requirements. Many aspects of AHS’s creation and ongoing

close relationship with county government distinguish it from

the nonprofit corporation in Gateway. To the extent “hallmarks

of sovereignty” (Stone, supra, 88 Cal.App.5th at p. 89) are

required to make AHS an exempt public entity, those identified

above suffice. (Cf. Hagman v. Meher Mount Corp. (2013) 215

Cal.App.4th 82, 88 [observing public benefit corporations lacked

these “element[s] of sovereignty” and are not public entities

immune from adverse possession].)

It is evident from the statutes and Wage Order No. 5, as

well as relevant legislative history and administrative

interpretations, that the Legislature intended to exempt public

entities from meal and rest break obligations. It is also clear

from the text of Health and Safety Code section 101850 that the

Legislature intentionally authorized AHS to be created as a

public entity. The statutes provide no basis for us to impose an

additional “sovereign powers” requirement in examining AHS’s

public entity status. Moreover, plaintiffs’ proposed analysis

would lead to uncertain and inconsistent results. In every case,

a public entity’s exemption would turn upon a court’s

assessment of whether sovereign powers would be infringed.

Besides the absence of a statutory basis, such an outcome would

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frustrate the Legislature’s clear intent to exclude public entities

from the Labor Code requirements at issue. Accordingly, the

trial court properly sustained the demurrer to plaintiffs’ first

and second causes of action for meal and rest break violations

and their third cause of action under section 1174 for associated

payroll violations.

C. Public Entity Liability for Related Wage Violations

Plaintiffs’ fifth and sixth causes of action regarding

nonpayment of wages are premised on AHS’s alleged failure to

compensate them for meal and rest breaks and associated

overtime to which they were entitled.13 Because we have

determined that AHS, as a public entity employer, had no

obligation under the Labor Code to provide meal and rest

breaks, all claims premised on the asserted violations

necessarily fail. Nevertheless, the parties have asked us to

address the scope of public entity liability under the statutes in

question, and there is a split of authority related to the issue.

Having examined the relevant statutory text, history, and

administrative interpretations, we now conclude public hospital

authorities such as AHS are excluded from liability under

several of the asserted provisions.

Plaintiffs have alleged violations of statutes that, for

purposes of this opinion, we will call the Labor Code’s “wage

13

The fifth cause of action alleges plaintiffs “were paid ½

hour per day less than their actual working hours on those days

when Defendants’ [sic] unlawfully denied them meal periods but

deducted ½ hour nonetheless.” The sixth cause of action alleges

defendants failed to timely pay “wages which were earned but

not paid when Defendants improperly deducted ½ hour from

[plaintiffs’] wages for meal periods not taken, and . . . premium

wages for missed meal and rest breaks.”

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Opinion of the Court by Corrigan, J.

payment” provisions.14 These statutes establish requirements

for the amount and timing of wage payments (see, e.g., §§ 204,

222, 223, 1194) and prescribe penalties for the failure to pay full

wages in a timely fashion (see, e.g., §§ 210, 225.5). Although

some of the wage payment laws have now been extended to state

employees (see McLean, supra, 1 Cal.5th at p. 619), the Labor

Code specifically exempts local government employers from the

requirements of some wage payment laws. Section 220,

subdivision (b) defines this exemption. It states: “Sections 200

to 211, inclusive, and Sections 215 to 219, inclusive, do not apply

to the payment of wages of employees directly employed by any

county, incorporated city, or town or other municipal

corporation. All other employments are subject to these

provisions.” (§ 220, subd. (b), italics added.)15 AHS’s potential

14

This nomenclature is meant to refer only to the subset of

laws asserted in plaintiffs’ complaint. Specifically, plaintiffs cite

sections 201, 204, 218.5, 218.6, 222, 223, 222.5, 510, 1194, 1194.2,

and 1198. The parties refer to these laws as “prompt payment”

provisions. (See McLean, supra, 1 Cal.5th at p. 619.) McLean

used this phrase to refer to sections 201 through 203, which

govern the payment of final wages to an employee who resigns

or is discharged. (See McLean, at pp. 618–619.) Plaintiffs here

are not seeking to recover final wages, and their complaint

alleges violations of different statutes. For this reason, we do

not adopt the parties’ phrasing.

15

Amicus curiae California Employment Lawyers

Association (CELA) argues specific exemptions for public

employers, like this one, are evidence the Legislature intended

all generally applicable provisions of the Labor Code to

encompass public as well as private employment. The argument

disregards the specific context and history of the provisions at

issue. For example, the prompt payment statutes were first

enacted in 1911, before the Labor Code existed. (Stats. 1911,

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liability under the statutes referenced in section 220,

subdivision (b) thus turns on whether it constitutes a “municipal

corporation” for purposes of the exemption.16

The Labor Code does not define “municipal corporation,”

but the term’s meaning is informed by historical precedent. In

re Madera Irrigation District (1891) 92 Cal. 296 (Madera)

discussed the Legislature’s constitutional authority to create

municipal corporations. We quoted a treatise’s definition: “ ‘A

municipal corporation proper is created mainly for the interest,

advantage, and convenience of the locality and of its people. The

primary idea is an agency to regulate and administer the

interior concerns of the locality in matters peculiar to the place

incorporated, and not common to the state or people at large.’ ”

(Id. at p. 323.) The Legislature has the power to create such

corporations to serve a specific public purpose, and it need only

grant them the limited powers necessary to serve that purpose.

ch. 663, § 1, p. 1268; see McLean, supra, 1 Cal.5th at p. 619,

fn. 1.) The Legislature’s 1937 adoption of these provisions into

the new Labor Code, including the exemption for public

employers, does not signal a general intent to include public

employers throughout unrelated provisions of the code, contrary

to statutory text and legislative history.

16

It is important to note that plaintiffs’ fifth and sixth causes

of action allege violations of some statutes (§§ 222, 223, 225.5;

see also §§ 510, 1194, 1194.2, 1198) that do not fall within the

section 220, subdivision (b) exemption. Consistent with the

parties’ briefing and the decision below, our opinion here

addresses only whether AHS is a “municipal corporation” for

purposes of section 220, subdivision (b). We express no view on

whether or to what extent public entities may be liable for Labor

Code violations beyond the scope of the section 220,

subdivision (b) exemption, or whether plaintiffs can allege a

sufficient factual basis for claims that are not affected by the

exemption.

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(Id. at p. 318.) Madera made clear that “[t]he municipal

corporations which may be thus created are not limited to cities

and towns.” (Id. at p. 319.) Rather, they may be formed as

“mere agencies of the state in local government, without any

powers except such as the legislature may confer upon them,

and . . . at all times subject to a revocation of such power.” (Id.

at pp. 319–320.) Subsequently, Morrison v. Smith Bros. (1930)

211 Cal. 36, 39 distinguished between “two different species” of

public corporations for tort law purposes. While incorporated

cities or towns constitute “municipal corporation[s] proper” (id.

at p. 40), quasi-municipal corporations encompass organizations

created to assist state or local governments in providing a public

service (id. at pp. 40–41). Generally, the term “municipal

corporation” has been understood to include both categories.

(See id. at p. 41.)

Section 220, subdivision (b) defines an exemption for “any

county, incorporated city, or town or other municipal

corporation.” Because the statute specifically names “county,

incorporated city, [and] town” (ibid.), it is evident that

“municipal corporation” refers to something other than one of

these defined local entities. (See Madera, supra, 92 Cal. at

p. 319.) “ ‘The only reasonable interpretation of this section is

that the Legislature knew from the decided cases that

“incorporated city or town” referred to a municipal corporation

in the strict sense, and intended that the additional term “or

other municipal corporation” should refer to municipal

corporations in the commonly accepted sense — namely, public

corporations or quasi-municipal corporations. Any other

interpretation would give no meaning to the term “or other

municipal corporation.” ’ ” (Division of Labor Law Enforcement

v. El Camino Hosp. Dist. (1970) 8 Cal.App.3d Supp. 30, 35 (El

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Opinion of the Court by Corrigan, J.

Camino).) The statute directly following section 220 also

supports a broad reading of “municipal corporation.”

Section 220.2 states, in relevant part: “Contributions to

vacation allowances, pension or retirement funds, sick leave,

and health and welfare benefits on behalf of persons employed

by any county, political subdivision, incorporated city or town or

other municipal corporations may be made in the same manner

and on the same basis as made by private employers.” (Italics

added.) Again, the Legislature has used “municipal

corporation” to refer to something other than a “county, political

subdivision, incorporated city or town.” (Ibid.)

The history of section 220’s enactment reinforces this

construction. The requirement that wages be timely paid in full

traces back to a 1911 law, which imposed these payment

obligations on “[a]ny person, firm or corporation” employing

labor. (Stats. 1911, ch. 663, § 3, p. 1269.) Similar to section 220,

subdivision (b), the original wage payment law declared: “None

of the provisions of this act shall apply to any county, city and

county, incorporated city or town, or other municipal

corporation.” (Stats. 1911, ch. 663, § 4, p. 1269.) The 1911 law

was later amended, then repealed. When it was reenacted in

1919, the Legislature included the express exemption for public

employers (Stats. 1919, ch. 202, § 10, p. 297) and specifically

described the law as “[a]n act to regulate the payment of wages

or compensation for labor or service in private employments

. . . .” (Stats. 1919, ch. 202, p. 294, italics added.) In 1937, the

law’s provisions were codified in sections 200 to 225 of the newly

created Labor Code. (See McLean, supra, 1 Cal.5th at p. 619,

fn. 1; Smith v. Superior Court (2006) 39 Cal.4th 77, 87, fn. 4; see

also Stats. 1937, ch. 90, §§ 200–225, pp. 197–200.) When the

wage payment requirements were codified, so too was the

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exception for government employers. The original version of

section 220 stated that the wage payment laws codified in

sections 200 to 211 and 215 to 219 did not “apply to the payment

of wages of employees directly employed by the State or any

county, incorporated city or town or other municipal

corporation.” (Stats. 1937, ch. 90, § 220, p. 200.) Other than

carving out state employment for separate treatment in

section 220, subdivision (a), the Legislature has not altered the

exemption in any significant way or sought to limit its reach to

a narrower subset of government employers.

Administrative interpretations also support a broad

reading of the term “municipal corporation” in section 220,

subdivision (b). As noted, before the IWC wage orders were

amended in 2001, they exempted government employers from

all requirements. (See ante, at pp. 14–15; California

Correctional, supra, 188 Cal.App.4th at p. 655.) The wording of

this exemption was nearly identical to the language of

section 220, subdivision (b). It stated: “The provisions of this

Order shall not apply to employees directly employed by the

State or any county, incorporated city or town or other

municipal corporation.” (Cal. Code Regs., tit. 8, former § 11380

[former wage order No. 5-76, subd. 1(C)]; compare § 220,

subd. (b) [“Sections 200 to 211, inclusive, and Sections 215 to

219, inclusive, do not apply to the payment of wages of

employees directly employed by any county, incorporated city,

or town or other municipal corporation”].) The exemption in pre-

2001 wage orders has been interpreted broadly to include all

public employers. (See, e.g., Morales v. 22nd Dist. Agricultural

Assn. (2016) 1 Cal.App.5th 504, 540–541; California

Correctional, at p. 655.)

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Perhaps most telling, the Labor Commissioner’s office

itself has concluded that government entities, and AHS in

particular, are not subject to wage payment statutes within the

section 220, subdivision (b) exemption. The DLSE, “headed by

the Labor Commissioner, is authorized to enforce California’s

labor laws.” (Kilby, supra, 63 Cal.4th at p. 13.) Although the

DLSE’s enforcement policies are not entitled to special judicial

deference because they were not adopted in compliance with the

Administrative Procedure Act (Gov. Code, § 11340 et seq.; see

Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th

557, 568–577), interpretations the agency has reached in the

course of case-specific adjudication may offer persuasive

guidance in similar cases (Kilby, at p. 13). Courts therefore

“generally consider DLSE opinion letters with respect” (ibid.),

“having due regard for the agency’s expertise and special

competence, as well as any reasons the agency may have

proffered in support of its interpretation.” (Alvarado v. Dart

Container Corp. of California (2018) 4 Cal.5th 542, 559

(Alvarado); see Harris v. Superior Court (2011) 53 Cal.4th 170,

190.)

At AHS’s request, we have taken judicial notice of nearly

a dozen letters and notices from the Labor Commissioner

declining to proceed against AHS based on section 220,

subdivision (b). Citing this statute, several letters state that

DLSE “does not have jurisdiction over regular wages and

waiting time penalties claims against government entities, such

as the Alameda Health System.” Similarly, one notice explains

that the office is closing its investigation of AHS because:

“Pursuant to Labor Code Section 220(b), penalties under Labor

Code Section 203.1 do not apply to public entities such as named

Defendant, Alameda Health System.” Although the opinions

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STONE v. ALAMEDA HEALTH SYSTEM

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stated in these letters are not controlling authority, and some

address wage violations different from those alleged here, the

opinions reflect the considered views of an agency with deep

experience and special expertise in enforcing the Labor Code

provisions at issue. (See Alvarado, supra, 4 Cal.5th at p. 559;

Brinker, supra, 53 Cal.4th at p. 1029, fn. 11.) As such, they offer

persuasive support for AHS’s interpretation of section 220,

subdivision (b).

A broad interpretation of “municipal corporation” is also

consistent with the view prevailing in decades of case law. In El

Camino, supra, 8 Cal.App.3d. Supp. 30, a case dating from 1970,

a predecessor agency to the DLSE sued a hospital district for

unpaid wages and penalties. The trial court sustained a

demurrer, concluding the hospital district was a “municipal

corporation” for purposes of the section 220, subdivision (b)

exemption. (El Camino, at pp. Supp. 32–33.) Its ruling, adopted

by the superior court’s appellate department, reasoned that the

statute’s use of “municipal corporation” signifies a broad

reference to “public corporations or quasi-municipal

corporations” (id. at p. Supp. 35), and a hospital district falls

within this category because it is a public agency “ ‘created or

authorized by the Legislature to aid the state in some form of

public or state work, other than community government’ ” (id.

at p. Supp. 33). Johnson, supra, 174 Cal.App.4th 729 relied on

El Camino in holding that a water storage district was an

exempt municipal corporation under section 220,

subdivision (b). The court reasoned that such districts “perform

an essential government function for a public purpose . . .

through an elected board of directors with regulatory powers.”

(Johnson, at p. 741.) Similarly, Kistler v. Redwoods Community

College Dist. (1993) 15 Cal.App.4th 1326, 1337 held that a

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STONE v. ALAMEDA HEALTH SYSTEM

Opinion of the Court by Corrigan, J.

community college district was a “municipal corporation”

exempt from fee-shifting provisions of the wage payment

statutes. (See §§ 218.5, 220, subd. (b).)17

Plaintiffs counter that all of these cases involved entities

that, unlike AHS, held sovereign governing powers. Their

argument rests heavily on Gateway, supra, 9 Cal.App.5th 499,

the sole decision we have encountered that imposes a narrow

reading on the term “municipal corporation” in section 220,

subdivision (b). Gateway’s analysis on this point is

questionable, however, and its holding is distinguishable.

The issue in Gateway was whether a nonprofit public

benefit corporation operating charter schools is an exempt

municipal corporation under section 220, subdivision (b). The

court began its analysis by declaring the phrase “other

municipal corporation” in section 220, subdivision (b)

ambiguous. (Gateway, supra, 9 Cal.App.5th at p. 504.) Without

considering the meaning ascribed to the term in prior case law,

such as Madera, supra, 92 Cal. 296, or other sources, the court

invoked the statutory construction maxims “noscitur a sociis

(‘literally, “it is known from its associates” ’) and ejusdem generis

(‘literally, “of the same kind” ’)” to resolve this perceived

ambiguity. (Gateway, at p. 504.) The court observed that the

words immediately preceding “ ‘other municipal corporation’ ”

are “ ‘any county, incorporated city, or town.’ ” (Ibid., quoting

§ 220, subd. (b).) Rather than concluding from this list that a

17

In a related context, Torres v. Board of Commissioners

(1979) 89 Cal.App.3d 545, 549–550, held that a housing

authority was a “municipal corporation” for purposes of the

Ralph M. Brown Act, setting the requirements for open

meetings of local agencies.

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STONE v. ALAMEDA HEALTH SYSTEM

Opinion of the Court by Corrigan, J.

“municipal corporation” must refer to some entity other than a

county, incorporated city, or town, to avoid rendering the phrase

surplusage (see Madera, at p. 319; El Camino, supra, 8

Cal.App.3d at p. Supp. 35), the court asked “what key

characteristics are common to a ‘county, incorporated city, or

town’ that another entity must possess to enable it to be

characterized as an ‘other municipal corporation.’ ” (Gateway,

at p. 504.) While conceding that the performance of an

important public function is a key requirement, Gateway

asserted, without citation to authority, that courts “must also

consider, for example, whether the entity is governed by an

elected board of directors; whether the entity has regulatory or

police powers; whether it has the power to impose taxes,

assessments, or tolls; whether it is subject to open meeting laws

and public disclosure of records; and whether it may take

property through eminent domain.” (Id. at p. 506.)

Applying these criteria, which it had derived solely from

the noscitur a sociis and ejusdem generis maxims, the court

concluded the nonprofit corporation before it was not an exempt

municipal corporation. Although the company’s provision of

public education through charter schools served an essential

governmental function, and its charter subjected it to both the

Ralph M. Brown Act and California Public Records Act, the

Gateway court found the corporation too different from a

“county, incorporated city, or town” (§ 220, subd. (b)) to fall

within the exemption. (Gateway, supra, 9 Cal.App.5th at

pp. 506–507.) It explained: “Gateway does not have the power

to acquire property through eminent domain; it may not impose

taxes and fees upon those who live within its geographical

jurisdiction, indeed it has no geographical jurisdiction but exists

pursuant to its charter; it has no independent regulatory or

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Opinion of the Court by Corrigan, J.

police powers but remains subject to the limitations of its

charter throughout its existence; and its board of directors is not

comprised of members elected by the public. Without these

multiple crucial characteristics that are common to municipal

and quasi-municipal corporations, we cannot conclude Gateway,

a nonprofit public benefit corporation, is an ‘other municipal

corporation’ for purposes of section 220(b). In truth, without the

publicly elected board, the geographical jurisdictional boundary,

and the power to forcefully raise funds or acquire property from

people within its geographical jurisdiction, Gateway bears little

resemblance to a ‘county, incorporated city, or town’ or to the

quasi-municipal districts that have been deemed to qualify as

‘other municipal corporations’ (for purposes of section 220(b)),

i.e., public school districts, hospital districts, and water storage

districts.” (Gateway, at pp. 506–507.)

Gateway is distinguishable from the present case in key

respects. Although the Gateway employer served a public

purpose by providing public education through charter schools,

there was no suggestion it was itself a public entity. In Wells,

we concluded nonprofit corporations operating charter schools

were not entitled to the “ ‘public entity’ immunity enjoyed by

their chartering districts.” (Wells, supra, 39 Cal.4th at p. 1200.)

These corporations are often largely free from the interference

and oversight of government bureaucracy, in both their

operations and their finances. (Id. at p. 1201.) The same is not

true of AHS. As discussed, AHS was created pursuant to specific

legislative authorization, not a charter, and its affairs are

closely overseen by the Alameda County Board of Supervisors.

Moreover, in contrast to the Labor Commissioner’s consistent

rulings in multiple cases that AHS is exempt from certain wage

payment statutes, the Commissioner “expressly concluded

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Gateway did not qualify as an ‘ “other municipal corporation” ’

under section 220(b).” (Gateway, supra, 9 Cal.App.5th at p. 503,

italics added.)

Nor are we persuaded by Gateway’s narrow construction

of “municipal corporation” in section 220, subdivision (b). The

court cited no authority for its assertion that an exempt

municipal corporation must possess sovereign powers

equivalent to those of a local government. It imposed these

requirements by applying maxims of construction and

examining the types of entities found to constitute municipal

corporations in previous decisions. (See Gateway, supra, 9

Cal.App.5th at pp. 505–506 [discussing the hospital, community

college, and water storage districts at issue in El Camino,

Kistler, and Johnson].) But these previous decisions simply

considered whether the entities before them could be considered

municipal or quasi-municipal corporations. None held that the

term required the various hallmarks of sovereignty the Gateway

court imposed. Moreover, Gateway’s analysis places undue

emphasis on maxims of construction at the expense of other

indicia of legislative intent. “Maxims of statutory construction,

including the doctrine of ejusdem generis, are not immutable

rules but instead are guidelines subject to exceptions . . . .

‘[E]jusdem generis is only an aid in getting the meaning and does

not warrant confining the operations of a statute within

narrower limits than were intended.’ ” (Wishnev, supra, 8

Cal.5th at pp. 213–214.)

Based on the language and history of section 220,

subdivision (b), administrative interpretations of the provision,

and relevant case law, we conclude AHS is a “municipal

corporation” exempt from requirements of certain wage

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payment statutes. The trial court properly sustained AHS’s

demurrer to the fifth and sixth causes of action for this reason.

D. Public Entity Liability for PAGA Penalties

Plaintiffs’ seventh cause of action seeks penalties under

PAGA (§ 2698 et seq.) for the various Labor Code violations

alleged.18

Several Labor Code statutes require that, in addition to

damages, employers who violate them pay civil penalties. (See

Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73,

80 (Kim).) For example, an employer who unlawfully fails to pay

full wages due must pay civil penalties of $100 for an initial

violation as to each employee, $200 for each subsequent

violation, and 25 percent of the amount unlawfully withheld.

(§ 225.5.) Initially, only the Labor Commissioner could sue to

recover civil penalties, but state enforcement proved

problematic for a number of reasons. (See ZB, N.A. v. Superior

Court (2019) 8 Cal.5th 175, 186–187 (ZB); Iskanian v. CLS

Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, 378–

379.) To enable broader enforcement and facilitate “maximum

compliance” with the state’s labor laws, the Legislature enacted

PAGA. (Arias v. Superior Court (2009) 46 Cal.4th 969, 980; see

Kim, at p. 81.) PAGA authorizes an “aggrieved employee” to

18

After oral argument in this case, the Legislature enacted

extensive amendments to the PAGA statutes. (Stats. 2024,

ch. 44, § 1 [enacting Assembly Bill No. 2288, effective Jul. 1,

2024]; id., ch. 45, § 1 [enacting Senate Bill No. 92, effective Jul.

1, 2024].) The amendments are not at issue and no party

suggests they should apply here. Our discussion addresses

versions of the PAGA statutes in effect throughout the litigation

of this case, and we express no opinion on operation of the newly

amended provisions.

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Opinion of the Court by Corrigan, J.

pursue civil penalties on the state’s behalf, with 75 percent of

the recovery paid to the Labor and Workforce Development

Agency (LWDA) and 25 percent to “aggrieved employees.”

(§ 2699, former subds. (a), (i); Stats. 2016, ch. 31, § 189, eff. Jun.

27, 2016.) An “ ‘aggrieved employee’ ” is defined as “any person

who was employed by the alleged violator and against whom one

or more of the alleged violations was committed.” (§ 2699,

former subd. (c).)19

We granted review, in part, to decide whether public

employers are subject to PAGA penalties. As with the wage

payment claims discussed above, however, the predicate for

plaintiffs’ PAGA claim fails here since AHS is not liable for the

underlying meal and rest break violations. Because AHS, as a

public employer, cannot be held liable based on the statutes

giving rise to penalties, plaintiffs are not “aggrieved employees”

for purposes of PAGA. (See Krug, supra, 94 Cal.App.5th at

pp. 1170–1171, review granted [dismissing derivative PAGA

claims for lack of underlying violation]; Gomez v. Regents of

University of California (2021) 63 Cal.App.5th 386, 404–405

[same].) Although a plaintiff need not assert an unredressed

injury to have standing under the version of PAGA in effect

during this litigation, the statute plainly requires that the

plaintiff have “sustain[ed] a Labor Code violation committed by

19

Recent amendments have changed the definition of

“aggrieved employee” and the distribution of penalties

recovered. The law now defines “ ‘aggrieved employee’ ” for

some purposes as a person employed by the alleged violator who

“personally suffered each of the violations alleged” during a

specified timeframe. (§ 2699, subd. (c)(1).) Further, under the

new law, 65 percent of a PAGA recovery is paid to the LWDA

and 35 percent to aggrieved employees. (Id., subd. (m).)

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Opinion of the Court by Corrigan, J.

his or her employer.” (Adolph v. Uber Technologies, Inc. (2023)

14 Cal.5th 1104, 1121 (Adolph); see § 2699, former subd. (c); see

also Kim, supra, 9 Cal.5th at pp. 83–85.) When liability for this

underlying violation has not been established, any PAGA claims

seeking penalties for the alleged violation must also fail. (See

Adolph, at pp. 1123–1124; Rocha v. U-Haul Co. of California

(2023) 88 Cal.App.5th 65, 77–78.) Nevertheless, because the

parties and amici curiae have fully briefed the issue, and it is

undoubtedly one of statewide importance, we now consider

whether public employers like AHS are subject to PAGA

penalties.

The civil penalties recoverable under PAGA fall into two

categories. If a Labor Code provision “provides for a civil penalty

to be assessed and collected by the Labor and Workforce

Development Agency or any of its departments,” PAGA

authorizes aggrieved employees to sue for those penalties on

behalf of themselves and other employees so aggrieved. (§ 2699,

subd. (a).) Many Labor Code statutes, however, do not establish

a penalty for their violation. In addition to creating a right of

action for aggrieved employees to recover defined penalties,

PAGA created a new default penalty when no penalty had

previously been provided. (See ZB, supra, 8 Cal.5th at p. 185;

Home Depot U.S.A., Inc. v. Superior Court (2010) 191

Cal.App.4th 210, 216.) For any “person” with one or more

employees, this default penalty is set at $100 for the initial

violation against each aggrieved employee, per pay period, and

$200 for each subsequent violation. (§ 2699, former

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Opinion of the Court by Corrigan, J.

subd. (f)(2).)20 Significantly, for our purposes, PAGA specifies

that the term “ ‘person’ has the same meaning as defined in

Section 18.” (§ 2699, subd. (b).)21 As discussed, when a Labor

Code statute expressly references section 18’s definition, public

employers are not included unless otherwise specified. (See

ante, at pp. 9–11; see also Sargent v. Board of Trustees of

California State University (2021) 61 Cal.App.5th 658, 672–673

(Sargent).)

The Court of Appeal acknowledged that AHS is “a public

entity of some sort” and agreed that, based on section 18’s

definition, it is therefore “not a ‘person’ for purposes of PAGA.”

(Stone, supra, 88 Cal.App.5th at p. 98.) Because section 2699,

subdivision (f) clearly frames liability in terms of a “person,” the

court concluded AHS is not subject to default penalties under

20

The full text of the former subdivision states: “For all

provisions of this code except those for which a civil penalty is

specifically provided, there is established a civil penalty for a

violation of these provisions, as follows: [¶] (1) If, at the time of

the alleged violation, the person does not employ one or more

employees, the civil penalty is five hundred dollars ($500).

[¶] (2) If, at the time of the alleged violation, the person employs

one or more employees, the civil penalty is one hundred dollars

($100) for each aggrieved employee per pay period for the initial

violation and two hundred dollars ($200) for each aggrieved

employee per pay period for each subsequent violation. [¶] (3) If

the alleged violation is a failure to act by the Labor and

Workplace Development Agency, or any of its departments,

divisions, commissions, boards, agencies, or employees, there

shall be no civil penalty.” (§ 2699, former subd. (f), italics

added.) The amended statute continues to use the word “person”

in defining the parties subject to default penalties. (See § 2699,

subd. (f).)

21

Section 2699, subdivision (b) was not altered by the recent

amendments.

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Opinion of the Court by Corrigan, J.

this provision. We agree. But the court posited that nondefault

penalties are different. Under its reading of section 2699, the

requirement that an employer be a “person” applies only to

subdivision (f)’s default penalties and “does not apply to those

statutory violations ‘for which a civil penalty is specifically

provided.’ ” (Stone, at p. 98.) Accordingly, despite AHS’s status

as a public entity, the court concluded AHS is subject to PAGA

claims arising from statutes that impose defined penalties.

(Stone, at p. 98.)

Although the Court of Appeal cited no authority for this

reading of section 2699, it appears to have been influenced by

Sargent, supra, 61 Cal.App.5th 658. Sargent also distinguished

between PAGA claims for defined and default penalties. It

observed that section 2699, subdivision (a), unlike

subdivision (f), does not include the word “person.” (Sargent, at

p. 671.) Based on the plain language of subdivision (a), in

particular its failure to reference section 18’s definition of

“person,” Sargent held “any employer that is subject to a civil

penalty assessed and collected by the Labor [and Workforce

Development] Agency is subject to PAGA.” (Sargent, at p. 671,

italics added.) The dichotomy recognized by Sargent and the

Court of Appeal carries obvious significance for public

employers, which would potentially be subject to PAGA suits for

specified penalties under Labor Code provisions that apply to

them. On close examination, however, this interpretation

appears inconsistent with legislative intent and could lead to

absurd results. It also runs counter to the policy underlying

Government Code section 818, which shields public entities

from punitive sanctions.

Turning to the relevant text, PAGA’s general provision

states: “Notwithstanding any other provision of law, any

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STONE v. ALAMEDA HEALTH SYSTEM

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provision of this code that provides for a civil penalty to be

assessed and collected by the Labor and Workforce Development

Agency or any of its departments, divisions, commissions,

boards, agencies, or employees, for a violation of this code, may,

as an alternative, be recovered through a civil action brought by

an aggrieved employee on behalf of himself or herself and other

current or former employees pursuant to the procedures

specified in Section 2699.3.” (§ 2699, former subd. (a).) This

subdivision addresses only who can recover civil penalties

(aggrieved employees) and how they may do so (through a

representative action conducted pursuant to section 2699.3). It

does not speak to the identity of defendants against whom such

an action may be brought. 22 While Sargent construed this

silence as an intent to authorize PAGA suits against all

employers, including the government, that construction reads

too much into legislative silence and is contrary to the statute

read in its entirety.

Although section 2699, subdivision (a) does not describe

the types of employers subject to suit, other provisions of the

PAGA statute do. The very next subdivision states that, “[f]or

22

The newly amended version of this subdivision continues

to describe only the parties who may bring a PAGA suit. It

states: “Notwithstanding any other provision of law, any

provision of this code that provides for a civil penalty to be

assessed and collected by the Labor and Workforce Development

Agency or any of its departments, divisions, commissions,

boards, agencies, or employees, for a violation of this code, may,

as an alternative, be recovered through a civil action brought by

an aggrieved employee on behalf of the employee and other

current or former employees against whom a violation of the

same provision was committed pursuant to the procedures

specified in Section 2699.3.” (§ 2699, subd. (a).)

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STONE v. ALAMEDA HEALTH SYSTEM

Opinion of the Court by Corrigan, J.

purposes of this part,” meaning all PAGA statutes in part 13 of

the Labor Code (§§ 2698–2699.8), “ ‘person’ has the same

meaning as defined in Section 18.” (§ 2699, subd. (b).)

Following this definition, subdivision (f) sets out the default

penalties aggrieved employees may collect depending on how

many people the “person” employs. (Id., subd. (f)(1)–(2).) And

subdivision (l) prohibits aggrieved employees from suing for

PAGA penalties, of either type, when the LWDA “cites a person

within the timeframes set forth in Section 2699.3 for a violation

of the same section or sections of the Labor Code under which

the aggrieved employee is attempting to recover.” (§ 2699,

subd. (l), italics added [formerly § 2699, subd. (h)].)23

Legislative history demonstrates that the choice to use

section 18’s definition of “person” was intentional. When the bill

to enact PAGA was amended to include references to “persons”

subject to default penalties (Sen. Bill No. 796 (2003–2004 Reg.

Sess.), as amended Mar. 26, 2003, § 2), legislative staff observed

that the bill included no definition of this term. A bill analysis

pointed out that “person” has different meanings in various

parts of the Labor Code, and it encouraged the bill’s author “to

add a definition of ‘person’ specifically applicable to” PAGA.

(Sen. Com. on Labor & Industrial Relations, Analysis of Sen.

Bill. No. 796 (2003–2004 Reg. Sess.) as amended Mar. 26, 2023,

23

The provisions of section 2699, former subdivision (h) now

appear in section 2699, subdivision (l). They are unchanged in

any significant respect. We note that the word “person” also

appears in the definition of who can sue. (See § 2699,

subd. (c)(1).) Section 18’s definition of “person” can refer both to

individual employees and the organizations that employ them.

No party contends the use of “person” in section 2699,

subdivision (c) has significance for the issues here, and we do

not consider it further.

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p. 5.) Less than a month later, the bill was amended to

incorporate the section 18 definition. (Sen. Amend. to Sen. Bill

No. 796 (2003–2004 Reg. Sess.) Apr. 22, 2003, § 2.) In light of

this choice, it is difficult to conceive that by failing to mention

employers at all in section 2699, subdivision (a), the Legislature

intended to import a broader definition and expand PAGA to

public employers sub silentio.

Moreover, nothing in the statutory text suggests the

Legislature intended to subject public employers to some types

of PAGA penalties but not others. Nor has any party suggested

why it might have done so. Indeed, the Court of Appeal’s

reading has problematic consequences when applied to the

statute’s provision barring duplicate actions. As noted,

section 2699, subdivision (l) prohibits aggrieved employees from

suing under PAGA if the LWDA “cites a person” for violating the

same Labor Code provisions at issue. (Italics added.) Because

PAGA’s definition of “person” does not include public employers

(§ 2699, subd. (b); see § 18), subdivision (l)’s ban on duplicate

actions protects only private employers. This result makes

sense if public employers are not subject to PAGA penalties in

the first place. But a potential absurdity arises if, as the Court

of Appeal ruled, public employers are subject to PAGA suits for

penalties defined in specific Labor Code statutes. The

subdivision would protect private employers from duplicative

PAGA actions for these penalties but would not extend the same

protection to public employers. No reason for such a distinction

has been suggested by the parties or amici curiae, and none

appears in the legislative history of PAGA. On the contrary,

committee reports stated that “no private action may be brought

when the LWDA or any of its subdivisions initiates proceedings

to collect penalties on the same facts and under the same code

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Opinion of the Court by Corrigan, J.

provisions.” (Sen. Judiciary Com., Analysis of Sen. Bill No. 796

(2003–2004 Reg. Sess.) as amended Apr. 22, 2003, p. 8, italics

added; see Assem. Com. on Judiciary, Analysis of Sen. Bill

No. 796 (2003–2004 Reg. Sess.) as amended May 12, 2003, p. 2.)

The distinction would be particularly difficult to justify given

that state and local taxpayers are the ultimate source of

recoveries obtained from public employers. (See post, at pp. 57–

59.)24

Countering this view, amicus curiae CELA points to

section 2699, subdivision (f)(3). This provision, which appears

in the portion of section 2699 that defines default penalties,

states: “If the alleged violation is a failure to act by the [LWDA],

or any of its departments, divisions, commissions, boards,

agencies, or employees, there shall be no civil penalty.” (§ 2699,

subd. (f)(3).) Advocating a broader reading than that reached by

the Court of Appeal, or any published decision, CELA argues

this provision shows the Legislature intended to subject public

employers to all PAGA penalties, because otherwise there would

have been no reason for it to specify that the LWDA, a public

agency, was excluded. The argument falters. In enacting

PAGA, the Legislature was well aware of the staffing and

budgetary constraints that hindered the LWDA’s ability to

investigate labor violations and enforce penalties. (See Kim,

24

Other provisions appear to prevent duplicate actions.

Specifically, section 2699.3 dictates that an aggrieved

employee’s action for PAGA penalties “shall commence only

after” the LWDA has been given notice of the alleged violation

and has declined to investigate or to issue a citation. (§ 2699.3,

subd. (a); see also § 2699, subd. (a) [describing PAGA “as an

alternative” to enforcement by the LWDA].) Our point in

discussing section 2699, subdivision (l) is merely to note the

incongruity created by the Court of Appeal’s interpretation.

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Opinion of the Court by Corrigan, J.

supra, 9 Cal.5th at p. 86; see also Sen. Com. on Labor &

Industrial Relations, Analysis of Sen. Bill. No. 796 (2003–2004

Reg. Sess.) as amended Mar. 26, 2023, p. 4.) Even so, the PAGA

statutes impose some additional obligations on the LWDA. (See,

e.g., §§ 2699.3, former subds. (a)(2), (c).) In enacting

subdivision (f)(3), the Legislature evidently sought to avoid the

absurd result of subjecting the agency to penalties for failing to

uphold its Labor Code obligations as an investigating entity,

rather than as an employer itself. (See, e.g., Sen. Rules Com.,

Analysis of Sen. Bill No. 796 (2003–2004 Reg. Sess.) as amended

Sept. 2, 2003, p. 3 [explaining “civil penalties do not apply if the

alleged violation is a failure to act by the LWDA or any of its

subdivisions”].) The express LWDA exemption from default

penalties cannot reasonably be read as an authorization to

impose nondefault penalties on all other public employers.

CELA’s related argument regarding a provision of the

California Occupational Safety and Health Act of 1973

(Cal/OSHA; § 6300 et seq.) fares no better. Cal/OSHA expressly

applies to public employers (§ 6304; see § 3300) and authorizes

civil penalties for violations (§ 6423 et seq.; see Stats. 1999,

ch. 615, § 5, pp. 4339–4340 [repealing prior law’s prohibition

against penalties being assessed against certain public

employers]). Within this context, section 6434.5 requires that

penalties assessed against police or fire departments be

deposited into the Workers’ Compensation Administration

Revolving Fund. It also provides that these penalties may be

refunded if the department has abated all violations and has not

been cited for new violations in the past two years. (§ 6434.5,

subds. (a)–(b).) If funds received as a penalty are not refunded,

they are allocated to the California Firefighter Joint

Apprenticeship Program or the Office of Criminal Justice

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Opinion of the Court by Corrigan, J.

Planning. (Id., subd. (b).) The final subdivision of the statute

states: “This section does not apply to that portion of any civil

or administrative penalty that is distributed directly to an

aggrieved employee or employees pursuant to the provisions of

Section 2699.” (Id., subd. (c).) CELA asserts this subdivision

reflects a legislative belief that police and fire departments are

subject to PAGA penalties; otherwise, the exception would have

been unnecessary. But the Legislature’s intent in adding

section 6434.5, subdivision (c) is far from clear. The purpose of

the statute was to establish a refund and allocation program for

police and fire departments similar to one that had been

established for public school districts. (See Assem. Com. on

Labor & Employment, Analysis of Assem. Bill No. 186 (2005–

2006 Reg. Sess.) as introduced Jan. 25, 2005, pp. 2–3.) But the

statute pertaining to public schools includes no carveout for

PAGA penalties (see § 6434), and legislative history includes no

explanation for why such an exception was added to

section 6434.5. The Legislature may have simply wanted to

make clear that, unlike Cal/OSHA penalties, the penalties

awarded to aggrieved employees under PAGA are never subject

to refund. Regardless, we cannot assume the Legislature

intended to extend PAGA to public employers by negative

implication in an unrelated statute. “ ‘[A]n intention to legislate

by implication is not to be presumed.’ ” (In re Christian S. (1994)

7 Cal.4th 768, 776.)

Because the scope of PAGA’s application is unclear from

the text of section 2699 alone, it is appropriate to consult

extrinsic sources. A conclusion that public employers are not

subject to PAGA penalties is most consistent with the statute’s

legislative history. The Legislature declared that PAGA’s

purpose was to “achieve maximum compliance with state labor

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STONE v. ALAMEDA HEALTH SYSTEM

Opinion of the Court by Corrigan, J.

laws in the underground economy and to ensure an effective

disincentive for employers to engage in unlawful and

anticompetitive business practices.” (Stats. 2003, ch. 906, § 1,

subd. (a), p. 6629, italics added.) Committee reports extensively

discuss the difficulties state authorities had encountered

enforcing labor laws in California’s “underground economy.”

(See, e.g., Sen. Judiciary Com., Analysis of Sen. Bill No. 796,

supra, as amended Apr. 22, 2003, pp. 2, 4; Sen. Rules Com.,

Analysis of Sen. Bill No. 796 (2003–2004 Reg. Sess.) as amended

May 12, 2003, p. 4; Assem. Com. on Judiciary, Analysis of Sen.

Bill No. 796, supra, as amended May 12, 2003, p. 3; Assem. Com.

on Labor & Employment, Analysis of Sen. Bill No. 796 (2003–

2004 Reg. Sess.) as amended Jul. 2, 2003, p. 3.) The Legislature

was also motivated by a United States Department of Labor

study documenting widespread wage violations in the Los

Angeles garment industry. (See Sen. Judiciary Com., Analysis

of Sen. Bill No. 796, p. 2; Sen. Rules Com., Analysis of Sen. Bill

No. 796, p. 4; Assem. Com. on Labor & Employment, Analysis of

Sen. Bill No. 796, p. 3.) Public entity employers like AHS are

not part of an “industry” or “underground economy.”

Moreover, the legislators who enacted PAGA sought to

avoid abuses of the Unfair Competition Law (UCL; Bus. & Prof.

Code, § 17200 et seq.) that had recently come to light. (See Sen.

Judiciary Com., Analysis of Sen. Bill No. 796, supra, as amended

Apr. 22, 2003, p. 7; Assem. Com. on Labor & Employment,

Analysis of Sen. Bill No. 796, supra, as amended Jul. 2, 2003,

p. 6.) They crafted an “aggrieved employee” standing

requirement to avoid the problem of so-called shakedown

lawsuits by UCL plaintiffs who had suffered no actual injuries.

(Kim, supra, 9 Cal.5th at p. 90.) The Legislature enacting PAGA

would have been aware of longstanding case law holding that

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“government entities are not ‘persons’ who may be sued under

the UCL” (Wells, supra, 39 Cal.4th at p. 1203; see Leider v.

Lewis (2017) 2 Cal.5th 1121, 1132, fn. 9.) Within this context, it

would have been anomalous for the Legislature to subject

government entities to a broad range of civil penalties without

making this intent clear anywhere in the text or legislative

history of PAGA.

Finally, the only fiscal effect of PAGA identified by the

Assembly Appropriations Committee was “potential increased

penalty revenue to the [general fund] and to LWDA.” (Sen.

Rules Com., Analysis of Sen. Bill No. 796 (2003–2004 Reg. Sess.)

as amended Sept. 2, 2003, p. 5.) If government employers were

subject to civil penalties under PAGA, it seems likely the

Legislature would have also noted the potential costs these

employers would incur if penalized. The omission of any

mention of costs points to a lack of intent to impose PAGA

penalties on public employers.25

25

As a counterpoint, CELA points to the assertion in an

Assembly Republican analysis that PAGA “likely would result

in major costs to state and local employers to defend lawsuits

and pay increased penalties and attorneys’ fees.” (Assem.

Republican Caucus, Labor & Employment Com., Analysis of

Sen. Bill No. 796 (2003–2004 Reg. Sess.) as amended Sept. 2,

2003, p. 48.) The same analysis reflects that, with a single

exception, Assembly and Senate Republicans opposed the bill to

enact PAGA. (Assem. Republican Caucus, at p. 46.) Even

assuming the quoted statement was meant to refer to state and

local government employers, it is settled that “the views of [a]

bill’s opponents found in committee and floor analyses . . . shed

little light on the Legislature’s intent, which is the focus of our

analysis.” (Los Angeles Unified School Dist. v. Superior Court

(2023) 14 Cal.5th 758, 782 (Los Angeles Unified); see American

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The costs public entities could incur if subject to PAGA

suits are potentially quite large. In addition to penalties, which

can be sizable in cases involving numerous employees or lengthy

time periods, PAGA provides for one-way fee-shifting. With

minor exceptions, aggrieved employees who prevail in a PAGA

action are entitled to recover “reasonable attorney’s fees and

costs.” (§ 2699, subd. (k)(1).) Attorney fees in these complex

suits can be substantial. In Sargent, for example, the trial court

ordered California State University to pay $2,905,200 in PAGA

penalties for asserted Labor Code violations and a total of

$7,793,030 in attorney fees. (Sargent, supra, 61 Cal.App.5th at

p. 666.) Although the Court of Appeal struck the PAGA

penalties after concluding that public entities are not subject to

default penalties (id. at pp. 674–675), it upheld the attorney fee

award (id. at p. 675). While subjecting public entities to civil

penalties might serve PAGA’s goal of augmenting the LWDA’s

enforcement of the Labor Code (see Kim, supra, 9 Cal.5th at

Financial Services Assn. v. City of Oakland (2005) 34 Cal.4th

1239, 1264; Tan v. Appellate Division of Superior Court (2022)

76 Cal.App.5th 130, 140.) A partisan bill analysis does not

provide insight into the views of the Legislature as a whole.

(That v. Alders Maintenance Assn. (2012) 206 Cal.App.4th 1419,

1428, fn. 9.) Nor is it significant, for our purposes, that some

public employee unions supported the passage of Senate Bill

No. 796. As with the views of opponents, views held by a bill’s

supporters are not evidence of the Legislature’s intent. (See Los

Angeles Unified, at p. 783; Metropolitan Water Dist. of Southern

California v. Imperial Irrigation Dist. (2000) 80 Cal.App.4th

1403, 1426.) Individuals and organizations frequently support

legislation that does not directly benefit them. The Sierra Club

also supported PAGA (see Assem. Com. On Labor &

Employment, Analysis of Sen. Bill No. 796, supra, as amended

Jul. 2, 2003, p. 8), for example, but that does not make it an

environmental statute.

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p. 83; Stats. 2003, ch. 906, § 1, p. 6629), the result would simply

rob Peter to pay Paul. Even though 75 percent of penalties

recovered would go to the LWDA for its enforcement efforts,

those penalties would be paid from the coffers of other taxpayer-

funded public institutions.26

We addressed a similar issue in Wells regarding the False

Claims Act. As with PAGA, a false claims action can be initiated

by a government authority or by a qui tam plaintiff acting on

behalf of the state. (Gov. Code, § 12652, subd. (c)(1); Wells,

supra, 39 Cal.4th at p. 1188.) A party found liable may be

required to pay treble damages, costs of suit, and a civil penalty

of up to $11,000 per violation. (Gov. Code, § 12651, subd. (a);

Wells, at p. 1187.) The prosecuting authority or qui tam plaintiff

may recover up to 50 percent of any such recovery. (Gov. Code,

§ 12652, subd. (g); Wells, at pp. 1188–1189.) Wells concluded the

consequences of exposing public school districts to liability in

such cases would be dramatic, interfering with their ability to

provide free public education as mandated by the Constitution.

(Wells, at p. 1193.) We observed: “The Legislature is aware of

the stringent revenue, budget, and appropriations limitations

affecting all agencies of government — and public school

districts in particular. Given these conditions, we cannot lightly

presume an intent to force such entities not only to make whole

the fellow agencies they defrauded, but also to pay huge

additional amounts, often into the pockets of outside parties.

Such a diversion of limited taxpayer funds would interfere

significantly with government agencies’ fiscal ability to carry

26

For example, amicus curiae California State University

asserts that unfunded PAGA liability is one reason for a recent

tuition increase affecting all students.

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out their public missions.” (Wells, at pp. 1195–1196.) The same

concerns are at play here. An entity found liable for PAGA

penalties would have to pay not only the costs of suit, but also

the prevailing plaintiff’s attorney fees. (§ 2699, subd. (k)(1).)

And, unlike the False Claims Act, there is no statutory ceiling

on the amount of PAGA penalties an entity could be required to

pay. The drain on public funds that could result from exposing

public employers to PAGA penalties is perhaps even greater

than the prospect we considered in Wells.

The parties debate whether exposing public entities to

PAGA penalties would be consistent with the policy underlying

Government Code section 818. That provision, enacted as part

of the Government Claims Act, “was intended to limit the state’s

waiver of sovereign immunity and . . . its exposure to liability

for actual compensatory damages in tort cases.” (Kizer v. County

of San Mateo (1991) 53 Cal.3d 139, 146 (Kizer), disapproved on

other grounds in Los Angeles Unified School Dist. v. Superior

Court, supra, 14 Cal.5th at p. 775.) It mandates:

“Notwithstanding any other provision of law, a public entity is

not liable for damages awarded under Section 3294 of the Civil

Code or other damages imposed primarily for the sake of

example and by way of punishing the defendant.” 27 (Gov. Code,

§ 818.) A sanction need not be “simply” or “solely” punitive to

run afoul of Government Code section 818. (Los Angeles

Unified, at p. 775; see id. at pp. 775–776.) Rather, “the ultimate

question” is “whether, by virtue of being imposed ‘primarily for

the sake of example and by way of punishing the defendant’

27

Civil Code section 3294 provides for punitive damages

upon clear and convincing proof the defendant acted with

“oppression, fraud, or malice.” (Id., subd. (a).)

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([Gov. Code,] § 818), the damages before the court function, in

essence, as a form of punitive or exemplary damages.” (Id. at

p. 773.)

We explained in Kim that PAGA penalties “are intended

to ‘remediate present violations and deter future ones,’ not to

redress employees’ injuries.” (Kim, supra, 9 Cal.5th at p. 86.)

The penalties “are thus calculated ‘ “to punish the employer” for

wrongdoing’ [citation] and ‘ “to deter violations” ’ [citation]

rather than ‘compensate employees for actual losses incurred.’ ”

(Adolph, supra, 14 Cal.5th at p. 1117.) We have compared

PAGA penalties to punitive damages, noting that, “ ‘ “like

punitive damages, [they] are intended to punish the wrongdoer

and to deter future misconduct.” [Citation.] An act may be

wrongful and subject to civil penalties even if it does not result

in injury.’ ” (Kim, at p. 86, quoting Raines v. Coastal Pacific

Food Distributors, Inc. (2018) 23 Cal.App.5th 667, 681.) Most

recently, in addressing penalties under section 226 for wage

statement violations, we observed that “the purpose of imposing

civil penalties is typically, as with punitive damages, not

primarily to compensate, but to deter and punish.” (Naranjo v.

Spectrum Security Services, Inc. (2024) 15 Cal.5th 1056, 1075.)

The Court of Appeal reached a contrary conclusion. It reasoned

that the primary purpose of PAGA penalties is not to punish,

but rather to secure compliance with labor statutes and

regulations by providing an “ ‘economic incentive’ ” for plaintiffs

“and ‘the means to retain counsel to pursue perpetrators.’ ”

(Stone, supra, 88 Cal.App.5th at p. 99.)

AHS does not contend that imposing PAGA penalties on

public entities is prohibited by Government Code section 818,

and we do not decide that question. Instead, AHS contends

PAGA should be interpreted to avoid a potential conflict with

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section 818. We agree that policy concerns similar to those

animating the Government Code statute are implicated here.

“Section 818 . . . manifests an appreciation that when additional

impositions upon a public entity are ‘primarily for the sake of

example and by way of punishing the defendant’ (ibid.), they

further drain the public fisc, create a liability that will be borne

not by the immediate wrongdoers but by taxpayers, and may not

effectively achieve the goals of retribution and deterrence — and

for these reasons, such awards should not be permitted, at least

without a clear indication by the Legislature that they may be

imposed.” (Los Angeles Unified, supra, 14 Cal.5th at p. 770.)

Requiring public entities to pay PAGA penalties would pose

similar difficulties. “[T]he purpose behind the statutory ban on

punitive damages against public entities — to protect their tax-

funded revenues from legal judgments in amounts beyond those

strictly necessary to recompense the injured party — applies

equally here.” (Wells, supra, 39 Cal.4th at p. 1196, fn. 20.)

Considering this policy, and the longstanding recognition that

“civil penalties may have a punitive or deterrent aspect” (Kizer,

supra, 53 Cal.3d at p. 147), we would expect the Legislature to

have more clearly communicated any intention to impose PAGA

penalties on public employers. It has not done so.

Accordingly, based on the statutory text, legislative

history, and public policy, we conclude public entity employers

are not subject to PAGA suits for civil penalties.28 If the

Legislature intends otherwise, it is of course free to amend the

28

The contrary holding of Sargent v. Board of Trustees of

California State University, supra, 61 Cal.App.5th 658

regarding nondefault penalties under section 2699,

subdivision (a) is disapproved.

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STONE v. ALAMEDA HEALTH SYSTEM

Opinion of the Court by Corrigan, J.

relevant statutes or pass new legislation to provide for a

different result.

III. DISPOSITION

The judgment of the Court of Appeal is reversed. The

Court of Appeal is directed to remand the matter to the trial

court with directions to reinstate its ruling on the demurrer and

conduct any further proceedings the court deems appropriate.

(See, e.g., City of Stockton v. Superior Court (2007) 42 Cal.4th

730, 747.)

CORRIGAN, J.

We Concur:

GUERRERO, C. J.

LIU, J.

KRUGER, J.

GROBAN, J.

JENKINS, J.

SEGAL, J.*

__________________________

* Associate Justice of the Court of Appeal, Second Appellate

District, Division Seven, assigned by the Chief Justice pursuant

to article VI, section 6 of the California Constitution.

62

See next page for addresses and telephone numbers for counsel who

argued in Supreme Court.

Name of Opinion Stone v. Alameda Health System

__________________________________________________________

Procedural Posture (see XX below)

Original Appeal

Original Proceeding

Review Granted (published) XX 88 Cal.App.5th 84

Review Granted (unpublished)

Rehearing Granted

__________________________________________________________

Opinion No. S279137

Date Filed: August 15, 2024

__________________________________________________________

Court: Superior

County: Alameda

Judge: Noel Wise

__________________________________________________________

Counsel:

Law Offices of David Y. Imai and David Y. Imai for Plaintiffs and

Appellants.

Stiller Law Firm, Ari J. Stiller; Collier Socks, Dustin L. Collier; Pine

Tillett and Scott Tillett for California Employment Lawyers

Association as Amicus Curiae on behalf of Plaintiffs and Appellants.

Teague Patterson and Gillian Santos for the American Federation of

State, County and Municipal Employees as Amicus Curiae on behalf of

Plaintiffs and Appellants.

Renne Public Law Group, Ryan P. McGinley-Stempel, Amy Ackerman,

Arthur A. Hartinger, Geoffrey Spellberg, Sam Wheeler, M. Abigail

West and Anastasia Bondarchuk for Defendant and Respondent.

Complex Appellate Litigation Group and Jens B. Koepke for the Board

of Trustees of the California State University as Amicus Curiae on

behalf of Defendant and Respondent.

Colantuono, Highsmith & Whatley, Michael G. Colantuono and

Pamela K. Graham for the California Association of Joint Powers

Authorities, California Special Districts Association, California State

Association of Counties and the League of California Cities as Amici

Curiae on behalf of Defendant and Respondent.

Liebert Cassidy Whitmore, Brian P. Walter and Alex Y. Wong for Kern

County Hospital Authority as Amicus Curiae on behalf of Defendant

and Respondent.

Counsel who argued in Supreme Court (not intended for

publication with opinion):

David Y. Imai

Law Offices of David Y. Imai

311 Bonita Drive

Aptos, CA 95003

(831) 662-1706

Scott Tillett

Pine Tillett LLP

14156 Magnolia Boulevard, Suite 200

Sherman Oaks, CA 91423

(818) 379-9710

Ryan P. McGinley-Stempel

Renne Public Law Group

350 Sansome Street, Suite 300

San Francisco, CA 94104

(415) 848-7250