# California Hotel & Motel Ass'n v. Industrial Welfare Commission

> California Supreme Court · August 13, 1979 · 25 Cal. 3d 200

URL: https://www.frixlaw.com/law-library/cases/9629265

## Case

- **Full name:** CALIFORNIA HOTEL AND MOTEL ASSOCIATION Et Al„ Plaintiffs and Appellants, v. INDUSTRIAL WELFARE COMMISSION Et Al„ Defendants and Respondents
- **Court:** California Supreme Court
- **Decided:** August 13, 1979
- **Citations:** 25 Cal. 3d 200; 157 Cal. Rptr. 840; 599 P.2d 31; 1979 Cal. LEXIS 303
- **Precedential status:** Published
- **Opinion:** Concurrence by Christian
- **Judges:** Newman, Christian
- **Cited by:** 82 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9629265

## How later opinions describe it (automated extraction)

- explaining that to facilitate judicial review of the agency's action, "[t]he statement should reflect the factual, legal, and policy foundations for the action taken"

## Opinion text

CHRISTIAN, J., * Concurring. †
I have joined in the majority opinion. That opinion stands on its own reasoning as a disposition of the cause but a separate response to the dissent is appropriate to underscore the soundness of the majority opinion.
The dissent maintains that “experienced observers of how government agencies work will be astonished to learn” that the California Supreme Court has adopted the following standard to test a statement of basis: “ ‘A statement of basis will necessarily vary depending on the material supporting an order and the terms of the order. The statement should reflect the factual, legal, and policy foundations for the action taken. The statement of basis must show that the order adopted is reasonably supported by the material gathered by or presented to the commission—through its own investigations, the wage board proceedings, and the public hearings—and is reasonably related to the purposes of the enabling statute. The statement of basis is not the equivalent of the findings of fact that a court may be required to make. A statement of basis is an explanation of how and why the commission did what it did. If terms of the order turn on factual issues, the statement must demonstrate reasonable support in the administrative record for the factual determinations. If, on the other hand, terms of the order turn on policy choices, an assessment of risks or alternatives, or predictions of economic or social consequences, the statement of basis must show how the commission resolved conflicting interests and how that resolution led to the order chosen. If an order differentiates among classes of industries, employers, or employees, the statement of basis must show that the distinction drawn is reasonably supported by the administrative record and are reasonably related to the purposes of the enabling statute.’ ” (Dis. opn., ante, at pp. 216-217, fns. omitted.)
It is not clear what the dissent means when it asserts that “experienced observers of how government agencies work will be astonished to learn” that this court has adopted this standard. Presumably, experienced observers of how agencies work will be familiar with developments in *219 administrative law over the last decade. For example, students of administrative law will be familiar with the long line of cases from the federal appellate courts interpreting section 4(c) of the Administrative Procedure Act (APA), 5 Ünited States Code section 553(c) (1970), which contains a statement of basis requirement similar to the requirement of Labor Code section 1177. 1 Leading cases interpreting the federal statement of basis requirement, cited in the majority opinion, include Rodway v. United States Dept, of Agriculture (D.C.Cir. 1975) 514 F.2d 809, 816-818 ; Amoco Oil Co. v. Environmental Protection Agency (D.C. Cir. 1974) 501 F.2d 722, 734-741 ; Kennecott Copper Corp. v. Environmental Protection Agcy. (D.C.Cir. 1972) 462 F.2d 846, 850 ; Greater Boston Television Corporation v. F.C.C. (D.C.Cir. 1970) 444 F.2d 841 , 850-853 and Scenic Hudson Preservation Conf. v. Federal Power Com’n. (2d Cir. 1965) 354 F.2d 608 , 612-613; see also Citizens to Preserve Overton Park v. Volpe (1971) 401 U.S. 402 [ 28 L.Ed.2d 136 , 91 S.Ct. 814 ], Students of administrative law will also be familiar with academic writings on the federal statement of basis requirement, e.g., 1 Davis, Administrative Law Treatise (2d ed. 1978) pages 496-506. (See also, Davis, Administrative Law of the Seventies (1976) pp. 172-176, 393-398 (1978 supp.) pp. 124-129; Jaflfee, Judicial Control of Administrative Action (1965) passim; Wright, The Courts and the Rulemaking Process: The Limits of Judicial Review (1974) 59 Cornell L.Rev. 375.) The standard adopted in the majority opinion represents a distillation of the standards articulated in these cases and commentaries. Students of administrative law familiar with these materials will not be astonished to learn that the California Supreme Court has adopted a position in line with the contemporary trend of authority.
The dissent seems to contend that California Labor Code section 1177 is not analogous to section 4(c) of the federal APA, and that authorities interpreting section 4(c) are therefore not helpful to interpretation of section 1177. The dissent stresses that section 1177 requires a “statement as to the basis” upon which an order is predicated. (Dis. opn., ante, p. 217; italics added.) According to the dissent, section 1177 (unlike § 4(cc)) does not require “ ‘a statement of. . . basis and purposes.’ ” Neither, the dissent says, does section 1177 require a “ ‘statement of basis.’ ” The dissent’s analysis through italics is not enlightening. There is no significant distinction between the phrases “statement as to the basis upon *220 which the order is predicated” (Lab. Code, § 1177), “statement of their basis and purpose” of a rule (APA § 4(c)), and “statement of basis” (maj. opn.). The legislative histories behind Labor Code section 1177 and federal APA section 4(c) indicate that the state and federal Legislatures had similar intentions in requiring agencies to adopt statements as to basis or statements of basis and purpose. (Compare the iterim rep. on the resolution that led to enactment of current § 1177, quoted in the majority opn., ante, p. 210, fn. 21, with the U.S.Sen. documents quoted in 1 Davis, Administrative Law Treatise, supra, p. 497.) Section 1177 and section 4(c) are analogous, and authorities interpreting the federal statute, although not controlling, are persuasive in interpreting section 1177.
In connection with the discussion of the asserted distinctions between section 1177 and section 4(c), the dissent states; “What happened in Sacramento, I suggest, is that an initial call for ‘written findings’ soon gave way to approval of words (‘statement as to the basis’) for which legislative analogies are easily found in the preambular paragraphs that often introduce statements.” (Dis. opn., ante, p. 217, fn. 1.) The dissent offers no evidence to support this speculation regarding legislative intent, and disregards the legislative histories cited supra. It quotes the following paragraph: “The Administrative Procedure Act provides in §553 that the agency, after receiving written comments, ‘shall incorporate in the rules adopted a concise general statement of their basis and purpose.’ The APA does not require a statement of findings of fact. See Att’y Gen. Manual on the APA 32 (1947): ‘Except as required by statutes providing for “formal” rule making procedure, findings of fact and conclusions of law are not necessary. Nor is there required an elaborate analysis of the rules or of the considerations upon which the rules were issued. Rather, the statement is intended to advise the public of the general basis and purpose of the rules.’ ” (Davis, Administrative Law of the Seventies, supra, p. 172, quoted in the dissent, ante, p. 217.) The dissent apparently is under the impression that the quoted paragraph reflects Professor Davis’ views on the current law pertaining to statement of basis under the federal APA. This impression is incorrect. Professor Davis quoted the Attorney General’s manual merely to indicate the state of the law in 1947. Professor Davis then goes on to demonstrate how much the law regarding findings, reasons, statements of basis and purpose, and an agency’s response to comments has evolved since then, particularly over the last 10 years. (See Davis, Administrative Law of the Seventies, supra, pp. 172-176, 393-398 (supp. 1978) pp. 124-129; see also 1 Davis, Administrative Law Treatise, supra, pp. 496-506.) Perhaps the dissent is *221 advocating that this court revert to administrative law "of the 1940s. This may astonish experienced observers of how government agencies and courts work.
The dissent concludes that the “To Whom It May Concern” paragraph of Order 5-76 (quoted in the maj. opn., ante, p. 210, fn. 19) is not “a model or prototype statement,” that the paragraph “hardly merits inclusion in any formbook,” and that its “arguable defects” have not caused any “prejudicial error.” These ipse dixit assertions do not provide any guidance as to how the cited paragraph was adequate or inadequate as a statement of basis. For example, the dissent does not address the conclusions reached by the majority: (1) The “To Whom It May Concern” provision is simply a recitation of the commission’s authority and of the procedures outlined in Labor Code sections 1171 through 1204, and therefore does not fulfill the purposes of an adequate statement of basis. (2) The commission exempted a number of industries from its regulations covering hours and days of work, because the commission concluded that collective bargaining agreements “adequately” protected employees in those industries. The commission did not exempt the public housekeeping industry from coverage, even though the association presented evidence that collective bargaining in the industry was “adequate” rather than “weak.” The commission did not explain how it distinguished adequate from inadequate collective bargaining agreements. The commission did not explain why it exempted other industries, but not the public housekeeping industiy. (3) The commission reduced the workweek in the public housekeeping industry from 48 to 40 hours, without responding to the appellant’s argument that the practice of having a longer workweek benefited both employers and employees because of the peakload demand for employment peculiar to the industry.
The dissent closes with the following quotation: “[A] statement that ‘findings’ and ‘reasons’ are required for informal rulemaking would be inaccurate, for such a statement would be an oversimplification. The focus of discerning judges is not on such words as ‘findings’ and ‘reasons’ but is on the total picture in each case of the reasonableness of the support for the rules in the rulemaking record and the adequacy of the agency’s explanation for its determination. In most cases in which the question has been important, the adequacy of the explanation is mixed in with other facets of the challenge of the rules, so that a focus on the explanation, without taking into account the interrelated complexities, is somewhat artificial.” (1 Davis, Administrative Law Treatise, supra, p. 499, *222 quoted in the dissent, ante, p. 217.) The dissent claims that these observations by Professor Davis “evidence more insight as to over-all fairness in governing than does the majority (‘By the Court’) opinion ....” (Id., at p. 217.) The dissent quotes Professor Davis out of context. If the quoted paragraph is read in the context of the entire section covering findings, reasons, statement of basis and purpose, and an agency’s response to comments (see 1 Davis, Administrative Law Treatise, supra, pp. 496-506), it is easy to see that the text fully supports the position adopted by the majority. Professor Davis writes that the courts “have been at their creative best” in helping to shape what is “unquestionably one of the greatest inventions of modern government” by fashioning statutory and common law rules that enable a court to set aside orders and regulations if “(1) facts in the rulemaking record are inadequate in critical degree, (2) the agency has failed to respond to comments that are deemed vital, (3) the agency has failed to sustain the burden of proof with respect to facts the reviewing court finds essential, (4) affected persons have had insufficient opportunity to know and to meet important facts the agency has considered, or (5) the agency’s statement of basis and purpose of the rules is unduly vague or is not firmly supported by facts in the rulemaking record.” (Id., at p. xiii.) In the instant case, the commission failed to respond to appellant’s comments that the public housekeeping industry was entitled to be exempted from regulations covering hours and days of work, because collective bargaining agreements in the industry adequately dealt with these issues. The commission failed to respond to appellant’s comments that the industry should be allowed to retain a 48-rather than a 40-hour week because of peak-load employment demands peculiar to the industry. Appellant had an insufficient opportunity to know what facts the commission considered important in determining whether collective bargaining in an industry was adequate or weak. The “To Whom It May Concern” provision of Order 5-76 was unduly vague as a statement of basis in these respects. Because the commission did not state the reasons why it ruled as it did, it is impossible for a court to determine whether the order and reasons are adequately supported by facts in the administrative record. Thus, the commission failed to satisfy four out of Professor Davis’ five standards. The charge that the majority opinion shows a lack of “insight as to over-all fairness in governing” is unmerited.
Assigned by the Acting Chairperson of the Judicial Council..
Reporter's Note: Concurring opinion filed September 7, 1979.
Section 1177 states: “Each order of the commission shall include a statement as to the basis upon which the order is predicated . . . .” Section 4(c) of the APA states: “After consideration of the relevant matter presented, the agency shall incorporate in the rules adopted a concise general statement of their basis and purpose.” (See also Executive Order No. 12044, 43 Fed. Reg. 12661 (Mar. 23, 1978), reprinted at 5 U.S.C.A. § 553 (1979 supp.) (“Improving Government Regulations”); see ante, p. 210, fn. 20.)

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9629265. Public record. Not legal advice.