The opinion
Filed 5/30/25 Souza v. Board of Adminstration of the Public Employees’ Retirement System CA3
NOT TO BE PUBLISHED
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Sacramento)
----
MARGARET SOUZA et al., C099861
Plaintiffs and Appellants, (Super. Ct. No. 34-2022-
80003802-CU-WM-GDS)
v.
BOARD OF ADMINISTRATION OF THE PUBLIC
EMPLOYEES’ RETIREMENT SYSTEM,
Defendant and Respondent;
REGIONAL GOVERNMENT SERVICES,
Real Party in Interest and Appellant.
Twenty years ago, in Metropolitan Water Dist. v. Superior Court (2004) 32 Cal.4th
491, our Supreme Court held the Public Employees’ Retirement Law (PERL) (Gov.
Code, § 20000 et seq.)1 incorporates the common law test for employment, and that
1 Undesignated statutory references are to the Government Code.
1
public agencies that contract with California’s Public Employees’ Retirement System
(CalPERS) are required to enroll their common law employees in CalPERS. In this case,
the Board of Administration of CalPERS determined Margaret Souza worked for the City
of Hughson as a common law employee after she retired from public service, in violation
of rules governing postretirement employment, and the trial court upheld that
determination. Souza appeals, arguing (1) the Legislature has abrogated the common law
test for employment in the circumstances of this case, (2) if the common law test applies,
CalPERS and the trial court both erred when they found she was a common law
employee, and (3) CalPERS’s decision was based on underground regulations. We reject
all three arguments and thus affirm.
FACTUAL AND PROCEDURAL BACKGROUND2
From 1975 to 2010, Souza worked as a finance director for the cities of Turlock,
Newman, and Patterson. Through her employment, she was a member of CalPERS and
was entitled to retirement benefits under the PERL. She retired in October 2010, and
began receiving a CalPERS retirement allowance in December 2010.
A. Souza’s Postretirement Work for the City of Hughson
In February 2011, a few months after she retired, Souza began working for the
City of Hughson (the City). Bryan Whitemyer was the city manager at the time. He
testified the City’s “financial situation was very, very discouraging. We were running
deficits” and “we had to lay-off at least five to eight people.” Whitemyer thought the
City’s finance director was “not qualified for the position,” and she ultimately retired.
Whitemyer did not immediately begin recruiting a new finance director because “[t]he
2 Much of the factual background is taken from the underlying administrative
decision and the trial court’s decision in this case. Both decisions contain numerous
factual findings, most of which Souza does not challenge. Indeed, she cites both
decisions extensively in her briefs.
2
City was in such disarray financially, there was tremendous pressure from the unions and
others, how can you hire highly paid executives when you’re laying off all the lower paid
staff?” Nonetheless, Whitemyer “still needed to balance the budget,” and he “needed to
find someone to help with that critical, urgent task.”
Whitemyer had previously worked with Souza when he was the assistant city
manager and then the interim city manager for the City of Patterson and she was the
finance director. Whitemyer had a very high opinion of Souza and believed she was “one
of the best Finance Directors” he had ever worked with. Whitemyer thus reached out to
Souza for help with the City’s budget. According to Souza, Whitemyer approached her
and said, “he was shorthanded at the moment and . . . needed to have the budget prepared
and analyzed because of [the City’s] dire financial straits.” She understood Whitemyer
was not offering her a full-time position and she “was not interested in . . . getting a full-
time position. I just wanted to help him for a short-term situation until they were able to
find another Finance Director.”
Souza worked for the City pursuant to two different contractual arrangements.
She initially worked pursuant to a written “Part-Time Finance Director Employment
Agreement” between the City and Souza. The agreement provided Souza would “serve
as a part-time interim finance director for the City and . . . perform all services
appropriate to that position, as well as such other services as may be assigned by the
City.” It also provided the parties “understand and agree that the employment
relationship between them is at-will which may be terminated by either party at any time
with or without notice and with or without cause.” Finally, it provided Souza would be
paid $45 per hour for up to 1,000 hours of work during any fiscal year. Whitemyer
testified that, pursuant to this contract, Souza was a “temporary” and “at-will”
“employee.”
Approximately eight months after Souza began working for the City, Whitemyer
still had not begun recruiting for a permanent finance director because the City’s finances
3
were still poor. He wanted Souza to continue working on the City’s budget, but he was
aware of recent changes to postretirement employment rules and did not want the City to
violate them. After consulting with the city attorney, Whitemyer decided it would be best
for the City to contract with Regional Government Services (RGS) for Souza’s services.
RGS is a joint powers authority created by the Association of Bay Area Governments and
the City of San Carlos. According to RGS’s Executive Director Richard Averett, it was
formed “to provide a way for smaller public agencies to obtain professional level . . .
services in . . . the quantity that they needed, the amount that they needed, so that they
were able to get top level talent without going to the market and hiring that top level
talent.”
Contracting with RGS for Souza’s continued services involved two separate
contracts: (1) an “Agreement for Management and Administrative Services” between the
City and RGS entered into on September 28, 2012; and (2) an “Employment Agreement”
between RGS and Souza entered into on October 31, 2012.
The “Agreement for Management and Administrative Services” between RGS and
the City provided RGS would assign “an RGS employee or employees to serve as the
[City’s] Director of Finance.” The assigned employee would “[b]e reasonably available
to perform the services during the normal work week, for approximately 900 hours each
. . . year,” would “[m]eet regularly and as often as necessary for the purpose of consulting
about the scope of work performed,” and would perform “[o]ther [d]uties” that were part
of the “job description” for the position. The job description for the City’s director of
finance was attached to the agreement. The City would pay RGS $58.57 an hour for this
employee’s services.
The agreement also provided: “It is understood that the relationship of RGS to
[the City] is that of an independent contractor and all persons working for or under the
direction of RGS are its agents and employees and not agents or employees of [the
City]. . . . [¶] . . . [¶] [The City] shall not have the authority to direct how services are to
4
be performed, specify the location where services are to be performed, or establish set
hours or days for performance, except as set forth [herein].” It also provided: “RGS
shall assign only competent personnel to perform services pursuant to this Agreement. In
the event that [the City], in its sole discretion, at any time during the term of this
Agreement, desires the reassignment of such person or persons, RGS shall consider
reassigning such person or persons.” Finally, it provided either party could terminate the
agreement “with or without cause, upon 30 days written notice.”
The “Employment Agreement” between RGS and Souza provided Souza was an
“at-will” employee of RGS. It also provided RGS would assign her to “a variety of
clients, including the City of Hughson,” to perform duties “not yet delineated,” and
would pay her $45 an hour.
Souza worked for the City pursuant to the RGS contract from approximately
October 2012 to July 2015. During this time, she considered herself to be an employee of
RGS, not of the City. She reported her time using RGS’s online payroll software. RGS
paid her, and in turn, billed the City for the hours she worked. RGS provided her with a
W-2. She acknowledged receiving RGS’s personnel rules, and she considered herself
bound by those rules, not the City’s rules. RGS—not the City—was responsible for
providing her with workers’ compensation, disability insurance, sick leave required by
law, and “anything else that the law might require that [an employer] provide to an
employee.”
Souza’s work for the City was the same under both sets of contractual
arrangements. She testified she only worked on the City’s budget and on “activities
associated with budgeting,” and she did not perform the other duties listed in the finance
director’s job description. She typically worked under 20 hours a week. She testified
Whitemyer was her “contact,” but he did not guide her work, and, “He didn’t tell me
what to do. He just told me what he wanted.” She also testified that when she worked as
finance director for the cities of Turlock, Newman, and Patterson she reported to the city
5
manager, but the city manager did not give her direction on preparing the budget because
she had “been working in city finance for 40 years, so you get it down pretty good.” The
budget process she followed when she worked for the City was no different than the
budget process she followed when she worked for the cities of Turlock, Patterson or
Newman, and her interactions and working relationship with Whitemyer were the same
as her interactions and working relationships with the city managers of those cities.
Whitemyer testified he did not “act as [Souza’s] supervisor,” did not direct her “as
to what steps she needed to take in order to prepare and reconcile the City budget,” and
he was “most interested in the end product.” He did not have the experience to prepare a
budget, and no other City employee had that experience either. He had no intention of
having Souza perform all the duties of the finance director, just those relating to the
budget.
Souza had a City e-mail address. She was identified in the minutes of city council
meetings and in various reports as “Interim Finance Director,” “Director of Finance,” or
“Finance Director.” She was identified as “Director of Finance” on the City’s Web page.
On the City’s 2012-2013 organizational chart, she was identified as “Interim Finance
Director P/T.”3
Whitemyer was asked why Souza was referred to as interim finance director or
finance director, and he explained it was “based on expediency” because “the quickest
way to get something to the [City] Council was to use what had already been in place,
which was the Finance Director job description.” He also thought it was important to
utilize “titles that people were familiar with” because he was afraid if he referred to
Souza as a “consultant” people would say, “this is frivolous spending.” Finally, he
3 On draft organizational charts for 2013-2014 and 2014-2015, the finance director
position was identified as “vacant,” and next to that was a box that stated, “Reg Gov
Solutions, Margaret Souza.”
6
explained that referring to Souza as finance director would give her “credibility” with the
city council and the community.
Souza worked for the City until it hired a new finance director in mid-2015. All
told, she worked for the City from approximately February 2011 to July 2015, or for over
four years.
B. The Underlying Administrative Proceedings
In February 2018, CalPERS began investigating the nature of Souza’s relationship
with the City, and in January 2020, it determined she was a common law employee and
her employment violated certain postretirement employment rules.
Souza appealed, and an evidentiary hearing was held before an administrative law
judge (ALJ) from the Office of Administrative Hearings. Following the hearing, the ALJ
issued a proposed decision finding Souza was a common law employee of the City and
her employment violated the applicable postretirement employment rules,4 and CalPERS
adopted the ALJ’s proposed decision in its entirety.
C. The Trial Court Proceedings
Souza and the City challenged the decision by filing a petition for writ of mandate
pursuant to Code of Civil Procedure section 1094.5. They argued the evidence did not
4 Briefly, the PERL provides, “A retired person shall not serve, be employed by, or
be employed through a contract directly by, a public employer in the same public
retirement system from which the retired person receives the benefit without
reinstatement from retirement, except as permitted by this section.” (§ 7522.56, subd.
(b).) “A person who retires from a public employer may serve without reinstatement . . .
upon appointment by . . . a public employer . . . because the retired person has skills
needed to perform work of limited duration,” but such appointments “shall not exceed a
total for all employers . . . of 960 hours . . . in a . . . fiscal year” and “[t]he rate of pay for
the employment shall not . . . exceed the maximum, paid by the employer to other
employees performing comparable duties.” (Id., subds. (c), (d).) The ALJ found Souza
violated the postretirement employment rules because her hourly rate was greater the
maximum rate authorized for the City’s finance director position, and Souza does not
challenge that finding.
7
support the finding that Souza was a common law employee and the ALJ “made
numerous errors of law” that were effectively adopted by CalPERS. They also sought a
judicial declaration that the challenged decision “is predicated on unlawful ‘underground
regulations’ and, thus, is ultra vires.” The parties agreed the challenged decision
implicated Souza’s fundamental vested right to receive a retirement benefit, and the trial
court was thus authorized to exercise its independent judgment on the evidence.5
Applying its independent judgment, the trial court found the evidence supported
CalPERS’s determination that Souza was a common law employee of the City. We will
discuss the basis for the trial court’s decision below. Judgment was entered denying the
petition, and Souza, the City, and RGS filed a timely notice of appeal.
Although not directly relevant to this appeal, we note the trial court related this
case with four other cases that also involve CalPERS retirees who provided services to
cities through RGS.6 The petitioners in all five related cases challenged CalPERS’s
finding that they were common law employees. The trial court found in favor of the
petitioner in one of the cases (Abid-Cummings v. Board of Administration of the Public
Employees’ Retirement System, Super. Ct. Sac. County, 2023, No. 34-2022-80003798
(Abid-Cummings)), and in favor of CalPERS in the other four cases, including this case,
5 “Section 1094.5 of the Code of Civil Procedure provides the basic framework by
which an aggrieved party to an administrative proceeding may seek judicial review of
any final order or decision rendered by a state or local agency.” (Bixby v. Pierno (1971)
4 Cal.3d 130, 137, fn. omitted.) Where it is claimed the agency’s findings are not
supported by the evidence, two standards of review apply at the trial court level: the
independent judgment standard and the substantial evidence standard. The independent
judgment standard applies in cases where the agency’s decision affects a fundamental
vested right, and the substantial evidence standard applies in all other cases. (Id. at
pp. 143-144.)
6 Both parties have asked us to judicially notice the related case order. We deny
both requests as unnecessary because that order is already part of the record and thus
does not need to be judicially noticed.
8
and the petitioners in those four cases have all appealed. The other three appeals are: (1)
Sandhu v. Board of Administration of the Public Employees’ Retirement System, No.
C100028; (2) Estate of Douglas Breeze v. Board of Administration of the Public
Employees’ Retirement System, No. C099877; and (3) Dowswell v. Board of
Administration of the Public Employees’ Retirement System, No. C100027. In February
2025, we issued a published decision affirming the judgment in the Sandhu case (and we
note that Souza raises many of the same arguments that we resolved in the Sandhu case).
In her briefs, Souza relies extensively on the trial court’s decision in the Abid-
Cummings case. Like Souza, Linda Abid-Cummings worked for the City of Hughson
after she retired, and she worked pursuant to the same contract between the City and RGS
that Souza worked pursuant to. Unlike Souza, however, the trial court found Abid-
Cummings was not a common law employee of the City. It thus granted Abid-
Cummings’ petition for writ of mandate and entered judgment in her favor, and CalPERS
did not appeal. Souza spends much time arguing the facts in this case are “almost
identical” to the facts in Abid-Cummings and criticizing the trial court for “contradicting”
its analysis and findings in that case. She also asks us to judicially notice the trial court’s
decision and the transcript of the hearing in Abid-Cummings. We deny the request
because “only relevant material may be [judicially] noticed,” and the trial court’s decision
in Abid-Cummings is not relevant to our resolution of this appeal. (Mangini v. R.J.
Reynolds Tobacco Co. (1994) 7 Cal.4th 1057, 1063, disapproved on other grounds in In
re Tobacco Cases II (2007) 41 Cal.4th 1257, 1276; see also Pereira-Goodman v.
Anderson (1997) 54 Cal.App.4th 864, 872, fn. 5 [declining to take judicial notice of
superior court decision and noting such decisions “do not have precedential value”].)
One of the primary issues in this case is whether the trial court’s finding that Souza was a
common law employee is supported by substantial evidence, not whether it is consistent
with a contrary finding in another case. Accordingly, the trial court’s finding that Abid-
9
Cummings was not a common law employee—which finding was not appealed—is not
relevant to this appeal.7
DISCUSSION
Souza makes three arguments on appeal: (1) the common law test for employment
is not applicable to the facts of this case; (2) even if it is applicable, the trial court
misapplied the test and/or erred in finding she was a common law employee; and (3)
CalPERS’s decision was based, at least in part, on underground regulations. We discuss
each argument in turn. We note at the outset that Souza’s briefs contain a total of 92
footnotes, many of which contain arguments not raised in the body of the briefs.
“Footnotes are not the appropriate vehicle for stating contentions on appeal” (Sabi v.
Sterling (2010) 183 Cal.App.4th 916, 947), and we thus have not considered arguments
raised only in footnotes (Requa v. Regents of University of California (2012)
213 Cal.App.4th 213, 226, fn. 9).
I
The Common Law Test Applies
Souza’s first argument is that the common law test for employment does not apply
because, under the circumstances of this case, it has been abrogated by sections 37103
and 53060. We disagree.
Pursuant to the PERL, CalPERS provides retirement benefits to its “members,”
who include “not only state employees but also employees of ‘contracting agencies,’ that
is, public entities . . . that have chosen to participate in CalPERS by contract with the
CalPERS governing board. (§§ 20022, 20460.)” (Metropolitan Water Dist. v. Superior
7 For similar reasons, we deny CalPERS’s request for judicial notice of the trial
court’s decision in the other related cases and both parties’ requests for judicial notice of
other nonprecedential CalPERS decisions. We also deny Souza’s (third) request for
judicial notice on the ground that the document is not relevant to our analysis.
10
Court, supra, 32 Cal.4th at p. 499 (Metropolitan).) Here, all of the cities that Souza
worked for prior to her retirement in 2010 were contracting agencies, as is the City of
Hughson.
The PERL defines a “ ‘[m]ember’ ” as “an employee who has qualified for
membership in this system and on whose behalf an employer has become obligated to
pay contributions” (§ 20370, subd. (a)), and an “employee[] of a contracting agency”
(§ 20383), and it defines an “ ‘[e]mployee’ ” as “[a]ny person in the employ of any
contracting agency” (§ 20028, subd. (b)). “Membership in [CalPERS] is compulsory for
all employees.” (§ 20502, subd. (a)(3).) “As these provisions indicate, only an agency’s
employees—not those performing services for the agency on other terms—may be
enrolled in CalPERS. The PERL makes this rule explicit in section 20300, subdivision
(b), which excludes from CalPERS membership ‘[i]ndependent contractors who are not
employees.’ ” (Metropolitan, supra, 32 Cal.4th at p. 499.)
In Metropolitan, our Supreme Court held the PERL incorporates the common law
test for employment to distinguish employees from independent contractors. Like this
case, Metropolitan involved a public agency that contracted with CalPERS to provide
retirement benefits to its employees, and also contracted with several labor suppliers to
provide it with temporary workers. (Metropolitan, supra, 32 Cal.4th at pp. 496-497.)
The agency considered the workers to be consultants rather than employees and it did not
provide them with benefits that were contingent on employment. (Id. at p. 497.) A group
of workers sued the agency, arguing they were employees and were entitled to all
employment-related benefits, including membership in CalPERS, and the trial court
permitted CalPERS to intervene in the action. (Id. at pp. 497-498.)
Prior to trial, the trial court decided a threshold issue and ruled the agency was
required to enroll all common law employees in CalPERS. (Metropolitan, supra,
32 Cal.4th at p. 498.) The parties sought review of that ruling by petition for writ of
mandate, the appellate court denied the petition, and our Supreme Court granted review
11
to decide what it deemed a “purely legal” issue: whether the PERL required a contracting
agency “to enroll in CalPERS all workers who would be considered [its] employees
under California common law.” (Metropolitan, at p. 496; see id. at p. 498.) The agency
argued, “it may exclude from enrollment workers, such as plaintiffs, who are paid
through private labor suppliers, even if they would be employees under the common law
test.” (Id. at p. 496.) The court disagreed, holding, “the PERL incorporates common law
principles into its definition of a contracting agency employee and that the PERL requires
contracting public agencies to enroll in CalPERS all common law employees except
those excluded under a specific statutory . . . provision.” (Ibid.)
The court began its analysis by noting, “As to contracting agencies, the PERL
gives the term [‘employee’] no special meaning, stating simply that an ‘employee’ means
‘[a]ny person in the employ of any contracting agency.’ (§ 20028, subd. (b).)”
(Metropolitan, supra, 32 Cal.4th at p. 500.) It then explained, “In this circumstance—a
statute referring to employees without defining the term—courts have generally applied
the common law test of employment,” and, “[u]nless given reason to conclude the
Legislature must have intended the term to have a different meaning in section 20028,
subdivision (b), we also can only adhere to the common law test.” (Id. at pp. 500, 501.)
Finally, it concluded, “the PERL’s provision concerning employment by a contracting
agency (§ 20028, subd. (b)) incorporates a common law test for employment, and . . .
nothing elsewhere in the PERL . . . supports reading into the PERL an exception to
mandatory enrollment for employees hired through private labor suppliers.” (Id. at
p. 509.)
RGS is analogous to a labor supplier that provides temporary workers to
contracting agencies, and Metropolitan teaches that if those temporary workers meet the
common law test for employment, then they are employees for purposes of the PERL.
Despite Metropolitan’s holding that the PERL incorporates the common law test
for employment, Souza contends that test does not apply because sections 37103 and
12
53060 have effectively abrogated it in the circumstances of this case.8 (Metropolitan,
supra, 32 Cal.4th at p. 496.) Souza is incorrect.
Section 37103 provides a city “may contract with any specially trained and
experienced person, firm, or corporation for special services and advice in financial,
economic, accounting, engineering, legal or administrative matters.”9 Similarly, section
53060 provides any public or municipal corporation (which includes a city) “may
contract with and employ any persons for the furnishing . . . [of] special services and
advice in financial, economic, accounting, engineering, legal, or administrative matters if
such persons are specially trained and experienced and competent to perform the special
services required.” Souza argues the City exercised its statutory authority to “contract”
for “special services and advice in financial . . . matters” when it entered into its contract
with RGS. This may be true, but it is not relevant because nobody is contending the City
lacked authority to enter into a contract with RGS for Souza’s services. Moreover,
8 She also cites a third statute, section 54981, which provides, “The legislative body
of any local agency may contract with any other local agency for the performance by the
latter of municipal services or functions within the territory of the former.” However, she
never discusses this statute or explains its applicability to this case, and we thus do not
address it.
9 Souza asks us to judicially notice some of the legislative history of section 37103.
Although legislative history is subject to judicial notice, we deny the request because
Souza makes no attempt to explain how this legislative history is relevant or how it helps
us interpret section 37103. (See People v. Investco Management & Development LLC
(2018) 22 Cal.App.5th 443, 471, fn. 8 [denying request to judicially notice legislative
history because it is “not relevant to a material issue in this case”].) Indeed, Souza’s sole
mention of this legislative history is in a footnote where she states only that she “has
obtained the legislative history of Government Code § 37103.” It is not our job to comb
through the legislative history to develop an argument on Souza’s behalf. (See Alvarez v.
Jacmar Pacific Pizza Corp. (2002) 100 Cal.App.4th 1190, 1206, fn. 11 [“It is not our
responsibility to develop an appellant’s argument”].) Souza also asks us to judicially
notice the legislative history of section 7522.56, but she never mentions this legislative
history in her briefs or explains its relevance to this case, and we thus deny that request as
well.
13
nobody is contending Souza was not “specially trained and experienced,” or that she did
not provide “special services and advice in financial . . . matters” within the meaning of
those sections 37103 or 53060. Instead, the issue in this case is whether Souza was an
employee within the meaning of the PERL when she was performing those special
services for the City.
Souza argues, variously, that: (1) sections 37103 and 53060 have preempted,
abrogated, or modified the common law test in the circumstances of this case; (2) “[t]he
power to contract for specialized services necessarily means that the RGS contract
describes the legal relationship [between the City and Souza] even if one or more
common law criteria of employment might exist”; and (3) “the plain language of
Government Code § 37103 grants [the City] . . . the right to utilize contracting rather than
employment as a means to obtain specialized services from RGS and its assigned
employee, SOUZA.” Souza’s argument is not entirely clear. It appears, however, that
she contends the fact that sections 37103 and 53060 use the word contract—i.e., a city
“may contract . . . for special services”—means that any person providing such special
services is, ipso facto, an independent contractor. Not so.
The fact that cities are authorized to contract for special services says nothing
about whether the person providing those services is an independent contractor or an
employee. And as our Supreme Court has held, “ ‘the employment relationship is
fundamentally contractual.’ ” (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 335.)
Thus, contracting for special services is perfectly compatible with finding the person
providing those services is an employee. Indeed, Souza was initially hired by the City
pursuant to a contract that identified her as an employee, and she was later hired by RGS
pursuant to a contract that identified her as an employee. The City and RGS thus both
contracted for Souza’s services and employed her. Moreover, section 53060 provides a
city may “contract with and employ” a person to furnish special services, which appears
to acknowledge that a person may be employed by contract, and, perhaps more
14
importantly, to recognize that a person hired by a city pursuant to section 53060 may be
an employee. (Italics added.)
Souza cites case law that holds the common law is inapplicable when it has been
modified by statute. (See, e.g., Lowman v. Stafford (1964) 226 Cal.App.2d 31, 39 [“when
modified by state statutes, the common law is inapplicable in California”]; Monterey
Club v. Superior Court (1941) 48 Cal.App.2d 131, 145 [“In California the common law is
inapplicable where . . . it has been modified by our statutes”].) This is true, but there is
nothing in the language of sections 37103 and 53060 that suggests either statute modifies
the common law test for employment for purposes of the PERL.
Souza also cites the statement in Metropolitan that, “[u]nless given reason to
conclude the Legislature must have intended the term [‘employee’] to have a different
meaning . . . , we . . . can only adhere to the common law test.” (Metropolitan, supra,
32 Cal.4th at p. 501.) Again, however, nothing in the language of sections 37103 or
53060 gives us reason to conclude the Legislature must have intended to modify the
meaning of the term “employee” for purposes of the PERL when a city contracts for
special services. Indeed, we note that section 37103 does not contain the term
“employee” or any variation thereof, much less define the term, and section 53060 uses
the term “employ” without further definition and would thus appear to be governed by
Metropolitan’s holding that when a statute refers to employment without defining the
term, “courts have generally applied the common law test.” (Metropolitan, at p. 500.)
Souza argues we must harmonize the PERL with sections 37103 and 53060 and
must give effect to each statute. We agree. As our Supreme Court has emphasized, “ ‘A
court must, where reasonably possible, harmonize statutes, reconcile seeming
inconsistencies in them, and construe them to give force and effect to all of their
provisions.’ ” (Pacific Palisades Bowl Mobile Estates, LLC v. City of Los Angeles (2012)
55 Cal.4th 783, 805.) Here, however, we find no inconsistency or conflict between the
PERL’s utilization of the common law employment test, and a city’s authority to contract
15
for special services pursuant to sections 37103 and 53060. Instead, we harmonize and
give effect to all of these statutory provisions as follows: If a contracting agency
contracts with a person or a firm for special services as authorized by sections 37103 and
53060, then the common law employment test is used to determine whether the person
providing those services is an employee for purposes of the PERL (in which case the
person must be enrolled in CalPERS), or an independent contractor (in which case
enrollment is not required).
Souza cites Handler v. Board of Supervisors (1952) 39 Cal.2d 282 and Kennedy v.
Ross (1946) 28 Cal.2d 569, for the proposition that “[p]ersons performing specialized
services on a temporary basis have been held to be neither officers nor employees of the
governmental body.” Neither case stands for the proposition that a person performing
specialized services can never be deemed an employee, and neither case deals with the
issue raised here.
In Handler, a county entered into a contract with an attorney and an engineer to
assist the district attorney on a discrete project, and one of the issues was whether the
attorney and the engineer could be hired by resolution of the board of supervisors, or
whether they had to be hired pursuant to ordinances governing the employment of what
the court referred to as “officers and regular employees.” (Handler v. Board of
Supervisors, supra, 39 Cal.2d at p. 286; see id. at pp. 283-284.) The court noted counties
were authorized by law to contract with and employ persons to provide special services
and advice in legal and engineering matters, and it held such persons could be hired by
resolution. In so holding, the court noted in passing that “[p]ersons performing
specialized expert services do so on a temporary basis and are neither officers nor
[regular] employees, nor do they hold a position with the county. They are more akin to
independent contractors.” (Id. at p. 286.) The court did not hold that all persons
performing specialized services on a temporary basis are independent contractors rather
than employees for purposes of the PERL.
16
In Kennedy, a city entered into a contract with an engineer to furnish plans and
specifications for a public works project. Someone filed a lawsuit against the city to
restrain it from paying the engineer “on the ground that . . . the [engineer] had not been
exempted by the civil service commission pursuant to certain provisions of the city
charter.” (Kennedy v. Ross, supra, 28 Cal.2d at p. 571; see id. at pp. 570-571.) As a
result of the lawsuit, the city controller refused to pay the engineer, and the engineer
sought a writ of mandate directing the controller to pay him. The controller argued the
contract was illegal because it did not comply with the “civil service employment
system” established by the city charter. (Id. at p. 571.) The city’s civil service
commission opined the engineer “was an independent contractor” and was not “subject to
the civil service provisions of the charter.” (Id. at p. 572.) The court agreed, noting that,
“[t]he provisions of the charter do not foreclose the [city] from entering into contracts
with individuals for the performance of professional services as independent contractors,”
and the civil service system created by the charter only applies “ ‘to persons employed in
permanent positions in municipal departments.’ ” (Id. at pp. 572, 573.) As in Handler,
the court did not hold that all persons performing specialized professional services for a
city are independent contractors rather than employees for purposes of the PERL.
Souza also cites an Attorney General opinion for the proposition that section
53060 permits a public agency to employ persons with special skills to provide special
services when those services cannot be provided by the agency’s own employees. The
issue in that case, however, was whether the special services could be provided by the
agency’s employees, not whether persons providing special services are employees or
independent contractors. (19 Ops.Cal.Atty.Gen. 153, 155 (1952).)
The Handler and Kennedy cases and the Attorney General opinion contain no
discussion of the common law test for employment, no discussion of the meaning of the
term “employee” in the PERL, and no discussion of any other issue that is relevant to this
case, and it is axiomatic that “case[s] [are] not authority for propositions not considered
17
and decided.” (Picerne Construction Corp. v. Castellino Villas (2016) 244 Cal.App.4th
1201, 1214-1215.)
In sum, we find nothing in sections 37103 and 53060 affects the holding in
Metropolitan that contracting agencies are required to enroll all common law employees
in CalPERS.
II
Substantial Evidence Supports the Trial Court’s Conclusion
that Souza Was a Common Law Employee
Souza next argues the trial court’s finding that she was a common law employee is
not supported by the evidence. We disagree. We first describe the common law test and
the trial court’s application of that test. We then discuss the applicable standard of
review. Finally, we explain why the trial court’s finding that Souza was a common law
employee is supported by the evidence.
A. The Common Law Test
“The distinction between independent contractors and employees arose at common
law to limit one’s vicarious liability for the misconduct of a person rendering service to
him. The principal’s supervisory power was crucial in that context because ‘ . . . [the]
extent to which the employer had a right to control [the details of the service] activities
was . . . highly relevant to the question whether the employer ought to be legally liable
for them. . . .’ [Citations.] Thus, the ‘control of details’ test became the principal
measure of the servant’s status for common law purposes.” (S. G. Borello & Sons, Inc. v.
Department of Industrial Relations (1989) 48 Cal.3d 341, 350 (Borello).) “Following
common law tradition, California decisions . . . uniformly declare that ‘[t]he principal test
of an employment relationship is whether the person to whom service is rendered has the
right to control the manner and means of accomplishing the result desired.’ ” (Ibid.) Our
Supreme Court has emphasized that “what matters under the common law is not how
much control a hirer exercises, but how much control the hirer retains the right to
18
exercise.” (Ayala v. Antelope Valley Newspapers, Inc. (2014) 59 Cal.4th 522, 533
(Ayala).) “Perhaps the strongest evidence of the right to control is whether the hirer can
discharge the worker without cause, because ‘[t]he power of the principal to terminate the
services of the agent gives him the means of controlling the agent’s activities.’ ” (Id. at
p. 531.)
Although “the right to control work details is the ‘most important’ or ‘most
significant’ consideration,” courts also consider “other factors” or “ ‘secondary’ indicia of
the nature of a service relationship.” (Borello, supra, 48 Cal.3d at p. 350.) These other
factors include: “(a) whether the one performing services is engaged in a distinct
occupation or business; (b) the kind of occupation, with reference to whether, in the
locality, the work is usually done under the direction of the principal or by a specialist
without supervision; (c) the skill required in the particular occupation; (d) whether the
principal or the worker supplies the instrumentalities, tools, and the place of work for the
person doing the work; (e) the length of time for which the services are to be performed;
(f) the method of payment, whether by the time or by the job; (g) whether or not the work
is a part of the regular business of the principal; and (h) whether or not the parties believe
they are creating the relationship of employer-employee.” (Id. at p. 351; see also Tieberg
v. Unemployment Ins. App. Bd. (1970) 2 Cal.3d 943, 949 (Tieberg).) These factors
“ ‘cannot be applied mechanically as separate tests; they are intertwined and their weight
depends often on particular combinations.’ ” (Borello, at p. 351.)
B. The Trial Court’s Ruling
The trial court found the weight of the evidence supported CalPERS’s
determination that Souza was a common law employee. It first found the City had the
right to control her work as evidenced by the fact that it could terminate her services
without cause. As the trial court noted, the City’s contract with Souza expressly stated
her employment was “ ‘at-will’ ” and the City could terminate her at any time “ ‘with or
without cause.’ ” And, pursuant to the terms of the City’s contract with RGS, it could
19
effectively terminate Souza’s services without cause because it had the right to terminate
its contract with RGS without cause. The trial court acknowledged the contract between
RGS and the City stated the City could not direct how Souza’s work was to be performed,
but it found, “the parties’ actual conduct established otherwise. For example, Whitemyer
told Souza what the City Council wanted, Souza presented Whitemyer with the budget,
and he had to agree with it.” It thus found, “the control factor weighs in favor of an
employee-employer relationship.”
The trial court then discussed the secondary factors.10 It found four secondary
factors weighed in favor of an employment relationship: (1) the work Souza performed
was part of the regular business of the City; (2) the work was usually done by a City
employee under the supervision of the City; (3) the length of time Souza provided
services to the City (over four years); and (4) Souza was paid by the hour rather than by
the job (although it found this factor weighed only “slightly in favor of an employee-
employer relationship”). It also found two secondary factors were either neutral or not
relevant in the circumstances of this case: (1) the skill required was neutral because
Souza was performing work that was typically performed by a highly skilled City
employee; and (2) who supplied the tools and the place of work was not relevant because
the services Souza was providing were intellectual and case law teaches “the factor of
ownership of tools is of little importance where the service to be performed is an
intellectual endeavor.” (Tieberg, supra, 2 Cal.3d at p. 954.) Finally, the trial court
disregarded the one factor that weighed in favor of an independent contractor
10 The only secondary factor it did not discuss was “whether the one performing
services is engaged in a distinct occupation or business.” (Borello, supra, 48 Cal.3d at
p. 351.) Souza does not discuss this factor other than to state the following: “That RGS
and its employee SOUZA had a distinct business of consulting based on RGS’ staff
expertise is clear from both the SOUZA employment agreement and RGS contract.”
There is no citation to the record and no further discussion or analysis of this factor, and
we thus do not consider it further.
20
relationship—the belief or intent of the parties—because “[c]ourts ignore the parties’
characterization [of their relationship] if their actual conduct establishes a different
relationship.” (Vendor Surveillance Corp. v. Henning (2021) 62 Cal.App.5th 59, 84.)
C. Standard of Review
In a case such as this one, “[w]here the trial court has independently reviewed an
administrative agency’s factual findings, an appellate court applies the substantial
evidence test to the findings of the trial court.” (Davis v. Civil Service Com. (1997)
55 Cal.App.4th 677, 686, italics added.) “In applying the substantial evidence test, ‘[the]
appellate court focuses on the findings of the trial court, rather than those of the
administrative agency.’ ” (Hittle v. Santa Barbara County Employees Retirement Assn.
(1985) 39 Cal.3d 374, 388, fn. 9.) The substantial evidence test is deferential. “We must
uphold the trial court’s findings unless they are ‘ “ ‘so lacking in evidentiary support as to
render them unreasonable.’ ” ’ ” (Molina v. Board of Administration, etc. (2011)
200 Cal.App.4th 53, 61.) “[W]e must draw all legitimate and reasonable inferences in
favor of the trial court’s decision.” (Bell v. Department of Motor Vehicles (1992)
11 Cal.App.4th 304, 309.) “ ‘The judgment will be upheld if there is any substantial
evidence in support of each of the trial court’s essential findings; all contrary evidence
will be disregarded on appeal.’ ” (Hittle, at p. 388, fn. 9.)
Souza argues we must review the finding that she was an employee de novo,
giving “no deference” to the trial court’s decision. We again disagree.
“The determination of employee or independent-contractor status is one of fact if
dependent upon the resolution of disputed evidence or inferences, and the [agency’s]
decision must be upheld if substantially supported. [Citation.] If the evidence is
undisputed, the question becomes one of law [citation], but deference to the agency’s
view is appropriate.” (Borello, supra, 48 Cal.3d at p. 349.) Numerous cases hold, “[t]he
question whether one is an independent contractor on the one hand or an . . . employee on
the other, is ordinarily one of fact, the determination of which by the trial court on
21
substantial evidence will be binding on the reviewing tribunal.” (Rogers v. Whitson
(1964) 228 Cal.App.2d 662, 672, italics added; see also Vendor Surveillance Corp. v.
Henning, supra, 62 Cal.App.5th at p. 75 [“Determining whether a person is an employee
or an independent contractor is generally a question of fact if it depends on resolving
disputes in the evidence” (italics added)]; Brose v. Union-Tribune Publishing Co. (1986)
183 Cal.App.3d 1079, 1081 [“Whether a person is an employee or an independent
contractor is ordinarily a question of fact” (italics added)].) The question of whether a
person is an employee or an independent contractor becomes a question of law “only if
the evidence is undisputed” (Becerra v. McClatchy Co. (2021) 69 Cal.App.5th 913, 948),
or if the evidence supports only one credible conclusion (Borello, at p. 349), or “if from
all the facts only one inference may be drawn” (Brose, at p. 1081).
Souza contends the question of whether she was an employee or an independent
contractor is one of law because the evidence in this case is undisputed. We acknowledge
that much (but not all) of the evidence is undisputed. However, this is not a case where
only one inference or conclusion may be drawn from the evidence. Our task is thus to
decide whether the trial court’s decision is supported by substantial evidence.
D. Analysis
i. Indicia of RGS employment
Souza’s first argument is that the trial court erred by failing to consider the indicia
of her employment relationship with RGS. She misunderstands the issue.
The trial court noted, “the working relationship at issue is the one between Souza
and the City.” We agree, and thus the issue in this case is whether a common law
employment relationship existed between Souza and the City, not whether a common law
employment relationship existed between Souza and RGS.
In this regard, we note that a long line of case law recognizes that dual
employment or coemployment may exist when an entity like RGS supplies workers to
clients such as the City. As our Supreme Court has explained, “The possibility of dual
22
employment is well recognized in the case law. ‘Where an employer sends an employee
to do work for another person, and both have the right to exercise certain powers of
control over the employee, that employee may be held to have two employers.’ ”
(Kowalski v. Shell Oil Co. (1979) 23 Cal.3d 168, 174; see also Martinez v. Combs (2010)
49 Cal.4th 35, 76 [noting there may be “situations in which multiple entities control
different aspects of the employment relationship. This occurs, for example, when one
entity (such as a temporary employment agency) hires and pays a worker, and another
entity supervises the work”].)
Indeed, in Metropolitan itself, our Supreme Court recognized the possibility that,
in a case such as this one, where an entity like RGS supplies workers to clients like the
City, a particular worker could have “coemployers” who “share or allocate between them
certain responsibilities of employment.” (Metropolitan, supra, 32 Cal.4th at p. 506.)
Much like Souza does here, the labor suppliers in Metropolitan argued, “the PERL . . .
should be construed to recognize coemployment,” and to hold that “labor suppliers, rather
than their clients . . . should be deemed the employers for purposes of the PERL, thus
excluding workers they supply from the public retirement system.” (Ibid.) The court
rejected this argument, holding, “No legitimate basis exists . . . for finding a
coemployment exception to the PERL.” (Ibid.) It also noted the Legislature has
recognized that leased workers are “a special case in certain contexts,” but has not
“provided in the PERL for any coemployment exception to a contracting agency’s duty to
enroll [common law] employees in CalPERS. The only relevant legislative choice to date
has been to require enrollment of all persons in the ‘employ’ of the contracting agency.”
(Ibid.) And, as discussed above, it held the PERL incorporates the common law test of
employment.
We note there was no suggestion in Metropolitan that indicia of a common law
employment relationship between the leased workers and the labor suppliers was relevant
to the issue of whether the leased workers were common law employees of the
23
contracting agency for purposes of the PERL. Thus, we agree with the trial court that the
only relevant question in this case is whether Souza was a common law employee of the
City.
ii. The trial court’s application of the common law test
Souza’s second argument is that the trial court “failed to apply the uncontroverted
evidence in a manner consistent with the law.”11 We understand this to mean either that
the trial court misapplied the common law test, or that its findings about the various
factors are not supported by substantial evidence, or both. We start with the trial court’s
finding on the primary factor—the right to control—and then consider its findings on
those secondary factors that Souza discusses.
a. The Primary Factor–the Right to Control
As noted above, “ ‘[t]he principal test of an employment relationship is whether
the person to whom service is rendered has the right to control the manner and means of
accomplishing the result desired.’ ” (Borello, supra, 48 Cal.3d at p. 350.) As also noted
above, case law teaches, “[p]erhaps the strongest evidence of the right to control is
whether the hirer can discharge the worker without cause, because ‘[t]he power of the
principal to terminate the services of the agent gives him the means of controlling the
agent’s activities.’ ” (Ayala, supra, 59 Cal.4th at p. 531.)
As discussed above, Souza initially worked pursuant to a “Part-Time Finance
Director Employment Agreement” between herself and the City. The agreement refers to
Souza as “Employee” and it describes the relationship between the parties as an
“employment relationship.” It also states the parties understand Souza’s “employment” is
“at-will” and “may be terminated by either party at any time with or without notice and
11 Souza also argues the trial court failed to apply the evidence “in a manner
consistent with . . . Abid-Cummings.” As discussed above, the trial court’s decision in
Abid-Cummings is not relevant.
24
with or without cause.” The City thus had a contractual right to terminate Souza without
cause, which is “[p]erhaps the strongest evidence of the right to control.” (Ayala, supra,
59 Cal.4th at p. 531.)
As for the period of time that Souza worked for the City pursuant to the RGS
agreements, she argues that the City had no power to terminate her employment—only
RGS had that power. If the City was not satisfied with her services, its only recourse was
to terminate the RGS contract or request another RGS advisor. That is essentially what
the trial court found as well: i.e., it found that the City could effectively terminate
Souza’s relationship with it, even if the City could not terminate Souza’s relationship with
RGS. The evidence supports the trial court’s findings.
The City/RGS Agreement provided it could be terminated by either party “with or
without cause,” and also provided the City could request another advisor if they were not
satisfied with Souza’s work. Souza asserts, “The right to cancel the contract is
fundamentally different from the right to terminate SOUZA’s employment,” but she fails
to explain why this is so. In either event, Souza would no longer be providing services to
the City. We thus agree that, pursuant to the terms of the City/RGS Agreement, the City
could effectively terminate Souza’s services with it if it was not satisfied with her work,
either by terminating its contract with RGS or by requesting a different advisor. And the
City’s right to terminate Souza’s services also gave it “ ‘the means of controlling [her]
activities.’ ” (Ayala, supra, 59 Cal.4th at p. 531.)
Souza argues the evidence shows the City did not actually exercise control over
her work. This may be true, but it is not dispositive (or even particularly relevant). As
noted above, “what matters under the common law is not how much control a hirer
exercises, but how much control the hirer retains the right to exercise.” (Ayala, supra,
59 Cal.4th at p. 533.) “ ‘If the employer has the authority to exercise . . . control, whether
or not that right is exercised with respect to all details, an employer-employee
relationship exists.’ ” (Tieberg, supra, 2 Cal.3d at p. 949.) “[I]t is not the control actually
25
exercised, but that which may be exercised which is determinative.” (Toyota Motor Sales
U.S.A., Inc. v. Superior Court (1990) 220 Cal.App.3d 864, 875.)
We also note that the lack of control actually exercised by the City in this case is
easily explained by the fact that the work Souza performed was typically performed by a
highly skilled employee with extensive experience in public sector budgeting and with
little supervision. Souza acknowledged that when she worked for the cities of Turlock,
Newman, and Patterson she did not receive direction on how to prepare the budget
because she had “been working in city finance for 40 years, so you get it down pretty
good.” And Whitemyer testified he did not have the experience to prepare a detailed
municipal budget. It is thus not surprising that Whitemyer did not actually exercise
much, if any, control over Souza’s work and instead relied on her decades of experience
in budget preparation. The evidence is thus sufficient to support the trial court’s
conclusion the City had the right to control Souza’s work, even if they rarely, if ever,
exercised that right.
b. The Secondary Factors
Souza also challenges several of the trial court’s findings regarding the secondary
factors.12
One of the secondary factors is “the kind of occupation, with reference to whether,
in the locality, the work is usually done under the direction of the principal or by a
specialist without supervision.” (Borello, supra, 48 Cal.3d at p. 351.) As the trial court
accurately recognized, “This factor focuses on how the work ‘is usually done’ in a given
locale, not how the work was done in this particular case.” (Vendor Surveillance Corp. v.
12 Souza does not challenge all of them, and we will assume any finding that is not
challenged is supported by substantial evidence. (See, e.g., Cameron v. Sacramento
County Employees’ Retirement System (2016) 4 Cal.App.5th 1266, 1278 [“factual
findings not contested must be accepted as true”].)
26
Henning, supra, 62 Cal.App.5th at p. 80.) The trial court found the work Souza did for
the City was “usually done under the supervision . . . of a higher-level City employee.”
Souza does not directly challenge this finding. Instead, she argues general supervision is
insufficient to establish control, because even true independent contractors may be
generally supervised. This may be true, but the trial court’s finding that this factor
weighed in favor of an employer-employee relationship is supported by the evidence. It
is undisputed the work Souza did was usually performed by the City’s finance director,
and the finance director is a permanent City employee under the direction and control of
the city manager. The City’s municipal code provides, “It is the duty of the city manager,
and he or she has the authority, to control, order, and give directions to all heads of
departments.” (Hughson Mun. Code, § 2.08.060.)13 The municipal code also provides,
“The city manager is the finance officer of the city, and it is his duty to, and he shall have
the authority to, control, regulate, and authorize the . . . fiscal management activities of
the city.” (Hughson Mun. Code, § 2.08.110.) And the finance director’s job description
(which was attached to the City/RGS Agreement) states the finance director is the head of
the finance department and “[r]eceives administration direction from the City Manager.”
The evidence thus establishes: (1) Souza was performing at least some of the finance
director duties on an interim and part-time basis; and (2) the city manager had the
authority and the duty to control the finance director’s activities. Although this secondary
factor is not dispositive, the trial court’s finding that it “weighs in favor of an employee-
employer relationship” is supported by the evidence.
Another secondary factor is “whether or not the work is a part of the regular
business of the principal [here, the City].” (Borello, supra, 48 Cal.3d at p. 351.) The trial
court found the work Souza did “fell within the ambit of the City’s financial department,
13 Souza’s request that we judicially notice portions of the City’s municipal code is
granted.
27
and . . . would have been performed by the City’s Finance Director if the position was not
vacant,” and that “Souza’s work on the City’s budget is not distinct from the City’s
regular business.” The trial court found this secondary factor weighed in favor of finding
an employment relationship, and this finding is supported by the evidence. Indeed, we
note that Souza’s counsel acknowledged at the hearing “that preparing a budget is part of
the City’s regular business.”
In sum, the trial court’s findings that the primary factor and four of the secondary
factors weigh in favor of an employment relationship are either supported by the
evidence or are not challenged by Souza. Moreover, Souza does not challenge the trial
court’s findings that two of the secondary factors are neutral or inapplicable in the facts
of this case. Finally, she does not challenge the trial court’s finding that the one factor
that weighs in favor of an independent contractor relationship—the intent of the parties—
is not sufficient to overcome the other factors. We therefore find the trial court’s
conclusion that Souza was a common law employee is supported by substantial evidence.
III
The Underground Regulations Argument
Souza’s final argument is that CalPERS’s decision was impermissibly based on
underground regulations and is thus “ultra vires.” We reject this argument as well.
The Administrative Procedure Act (APA) (§ 11340 et seq.) establishes detailed
procedural requirements that state agencies must follow when adopting regulations,
including providing the public with notice of any proposed regulations, giving interested
parties the opportunity to comment thereon, and responding to comments in writing.
(§ 11346; see generally §§ 11346.2, 11346.4, 11346.5, 11346.8, 11346.9.) The APA
defines the term “ ‘[r]egulation’ ” broadly to include “every rule, regulation, order, or
standard of general application or the amendment, supplement, or revision of any rule,
regulation, order, or standard adopted by any state agency to implement, interpret, or
make specific the law enforced or administered by it, or to govern its procedure.”
28
(§ 11342.600.) A rule subject to the APA thus has two identifying characteristics:
(1) “the agency must intend its rule to apply generally, rather than in a specific case”; and
(2) “the rule must ‘implement, interpret, or make specific the law enforced or
administered by [the agency], or . . . govern [the agency’s] procedure.’ ” (Tidewater
Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557, 571 (Tidewater).) A rule that
meets this definition is a regulation and is subject to the APA even if the agency calls it
something different like a “guideline,” a “policy,” or a “bulletin,” and even if it is
unwritten. (Cal. Code Regs., tit. 1, § 250, subd. (a) [APA applies to any “guideline,
criterion, bulletin, manual, instruction, order, standard of general application, or other
rule” that meets definition of regulation]; Morning Star Co. v. State Bd. of Equalization
(2006) 38 Cal.4th 324, 336 [policy need not be written in order to be subject to APA
because “[w]e decline to endorse an approach that would allow an agency to avoid APA
requirements simply by driving its regulations further underground”].) A regulation that
is adopted without following the APA’s procedures is known as an “underground
regulation” (Missionary Guadalupanas of Holy Spirit Inc. v. Rouillard (2019)
38 Cal.App.5th 421, 432), and underground regulations are void and may not be used or
enforced by the agency (§ 11340.5, subd. (a); Tidewater, at p. 572).
Souza argues that CalPERS is utilizing “unwritten and undefined common law
criteria” and/or “[a]n unwritten agency interpretation” of the law. We presume she
contends CalPERS’s use of the common law test to determine whether someone is an
employee or an independent contractor is improper because it has never adopted a
regulation stating it uses that test and identifying the criteria it considers when applying
that test. Assuming this is her argument, we reject it. CalPERS uses the common law
test because our Supreme Court has interpreted the PERL and held it incorporates that
test to distinguish employees from independent contractors. (Metropolitan, supra,
32 Cal.4th at p. 496.) “[A]n agency is mandated to follow the judicial interpretation of a
statute.” (Capen v. Shewry (2007) 155 Cal.App.4th 378, 390.) CalPERS is thus required
29
to apply the common law test. Moreover, a long line of California cases explains how to
apply the common law test and what factors to consider. (See, e.g., Borello, supra,
48 Cal.3d at p. 350; Ayala, supra, 59 Cal.4th at pp. 531-533; Tieberg, supra, 2 Cal.3d at
p. 949.) Given this clear legal mandate and authority, CalPERS does not have to
promulgate a regulation in order to apply the common law test.
Souza also complains about CalPERS’s use of an “employment relationship
questionnaire.” CalPERS uses this questionnaire to obtain information from workers and
public agencies in order to help it determine whether a particular worker is a common
law employee. It contains questions like the following: “How were you hired?” “To
whom do you report?” “Do you perform services pursuant to a formal job description or
duty statement?” “For the services in question, did the agency provide you with any
training?” “Is your work directed, supervised or reviewed by anyone?” “Does the
agency have the right to control how you do your work?” And, “Who pays you?” Souza
states the questionnaire “meets the APA’s definition of a regulation, and as such, is
fundamentally flawed.” That is the extent of her argument on this issue. An “appellant
must present meaningful legal analysis supported by citations to authority . . . .
[Citations.] When a point is asserted without argument and authority for the proposition,
‘it is deemed to be without foundation and requires no discussion by the reviewing
court.’ ” (In re S.C. (2006) 138 Cal.App.4th 396, 408.) We need not consider
“conclusory claims” (ibid.), or claims made without “intelligible legal argument” (Berger
v. Godden (1985) 163 Cal.App.3d 1113, 1117), and would thus be well within our right to
simply ignore this particular argument.
Even if we were to consider it, we note Souza cites no legal authority that holds a
questionnaire meets the definition of a regulation. The APA expressly states it does not
apply to “[a] form prescribed by a state agency or any instructions relating to the use of
the form.” (§ 11340.9, subd. (c).) Although the term “form” is not defined, we find a
questionnaire is analogous to a form (see, e.g., Tidewater, supra, 14 Cal.4th at p. 572
30
[noting with approval that courts have held a checklist used by officers when
administering intoxilyzer test is not a regulation]), particularly in the absence of any
contrary legal authority from Souza.
Souza also asserts—again with no analysis—that the questionnaire fails to define
critical terms like “ ‘control,’ ‘supervision,’ ‘reporting,’ and ‘training,’ ” and is thus “void
for vagueness.” She fails to explain how the use of undefined terms (that are not
particularly vague) makes the questionnaire an underground regulation. The void for
vagueness doctrine arises out of the due process clause—not the APA. (See In re Sheena
K. (2007) 40 Cal.4th 875, 890 [“the underpinning of a vagueness challenge is the due
process concept of ‘fair warning’ ”].) “To satisfy due process, a statute must be
sufficiently clear to provide adequate notice of the prohibited or required conduct referred
to therein. [Citations.] Thus, a statute will be deemed void for vagueness if it either
forbids or requires the doing of an act in terms so vague that persons of common
intelligence must necessarily guess as to its meaning and differ as to what is required.”
(Nisei Farmers League v. Labor & Workforce Development Agency (2019)
30 Cal.App.5th 997, 1012-1013.) Souza cites no cases applying the vagueness doctrine
to a questionnaire, and she cites no cases holding vague terms can make a questionnaire
an underground regulation.
Souza’s final argument is that CalPERS’s application of the common law “is
inconsistent and arbitrary,” and she asks us to judicially notice three nonprecedential
CalPERS decisions that she contends demonstrate this inconsistency. We deny the
request to judicially notice these decisions for two reasons. First, Souza fails to explain
how these three decisions are evidence that CalPERS applies the common law test in an
inconsistent manner, because each decision was written by a different ALJ from the
Office of Administrative Hearings. Second, and perhaps more importantly, in each case
the ALJ applied the common law test to the evidence introduced at the administrative
hearing, and it is well settled that “interpretations that arise in the course of case-specific
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adjudication are not regulations.” (Tidewater, supra, 14 Cal.4th at p. 571; see also Capen
v. Shewry, supra, 155 Cal.App.4th at p. 387 [“If the interpretation arises in the course of
an enforcement proceeding involving the adjudication of a specific case it is not a
regulation subject to the APA”].)
Souza’s bigger argument may be that the common law test itself can lead to
inconsistent and unpredictable results.14 This may be true. In the words of one court,
“ ‘It is often a very elusive question whether a person under a given state of facts is an
[employee] or an independent contractor,’ ” and “the difference between the two ‘is not a
line at all but a twilight zone filled with shades of gray.’ ” (Richardson v. APAC-
Mississippi (1994) 631 So.2d 143, 149.) As a result, courts “on quite analogous factual
situations [have] reached opposite conclusions.” (Ibid.; see also Carlson, Why the Law
Still Can’t Tell an Employee When It Sees One And How It Ought to Stop Trying (2001)
22 Berkeley J. Emp. & Lab. L. 295, 335 [“However courts state the test of employee
status, they routinely concede its failure to produce predictable results for many workers
whose status is ambiguous”].) Some inconsistency may be inevitable given that the
common law test is a multi-factored test, and case law teaches, “ ‘the individual factors
cannot be applied mechanically as separate tests; they are intertwined and their weight
depends often on particular combinations.’ ” (Borello, supra, 48 Cal.3d at p. 351.) Thus,
even a slight change in the facts can lead to different results. (See, e.g., Harger v.
Structural Servs., Inc. (1996) 121 N.M. 657, 667 [916 P.2d 1234, 1334] [“ ‘Every case
presents its own combination of facts, from which the resultant must be arrived at. A fact
found controlling in one combination may have a minor importance in another’ ”].)
14 Amici curiae made a similar argument in the Sandhu case when they stated the
common law test “disincentivize[s]” “experienced retired annuitants and CalPERS
contracting agencies . . . from entering into independent contracting agreements” “due to
the risk” they will be deemed employees. Souza asks us to judicially notice the amicus
brief and CalPERS asks us to judicially notice its answer thereto, and we grant both
requests.
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Indeed, our Supreme Court has noted that some courts and commentators contend one of
the “significant disadvantages” of the common law test is the fact “that a multifactor, ‘all
the circumstances’ standard makes it difficult for both hiring businesses and workers to
determine in advance how a particular category of workers will be classified, frequently
leaving the ultimate employee or independent contractor determination to a subsequent
and often considerably delayed judicial decision. In practice, the lack of an easily and
consistently applied standard often leaves both businesses and workers in the dark.”
(Dynamex Operations W. v. Superior Court (2018) 4 Cal.5th 903, 954.) The Legislature
is free to amend the PERL to require CalPERS to apply a different and more predictable
test, or to provide that workers providing services to public agencies through contracts
with third parties like RGS are not employees of the public agencies. Unless and until it
does so, however, we are bound by our Supreme Court’s determination that “the PERL
requires contracting public agencies to enroll in CalPERS all common law employees” as
determined by application of “the established common law test of employment.”
(Metropolitan, supra, 32 Cal.4th at pp. 496, 508.)
DISPOSITION
The judgment is affirmed. The parties shall bear their own costs on appeal. (Cal
Rules of Court, rule 8.278(a)(5).)
/s/
EARL, P. J.
We concur:
/s/
HULL, J.
/s/
KRAUSE, J.
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