Department of Indust. Relations etc.
Filed 2/27/13
Ogundare v. Department of Indust. Relations etc. CA5
NOT
TO BE PUBLISHED IN THE OFFICIAL REPORTS
California
Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or
relying on opinions not certified for publication or ordered published, except
as specified by rule 8.1115(b). This
opinion has not been certified for publication or ordered published for
purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIFTH APPELLATE DISTRICT
AYODEJI A. OGUNDARE et al.,
Respondents,
v.
DEPARTMENT OF INDUSTRIAL
RELATIONS, DIVISION OF LABOR STANDARDS ENFORCEMENT,
Appellant.
F061162
(Super.
Ct. No. CV268425)
APPEAL from
a judgment of the Superior Court of
David D.
Cross for Appellant.
Dowling,
Aaron & Keeler, Daniel K. Klingenberger and Stephanie Hamilton Borchers for
Respondents.
-ooOoo-
Ayodeji A.
Ogundare, individually and doing business as Pacific Engineering Company
(together Pacific), filed a petition for writ of administrative mandate asking
the trial court to set aside a “debarmentâ€
Department of Industrial Relations, Division of Labor Standards Enforcement
(DLSE) that would have precluded Pacific from bidding or working on public
works construction projects for one year.
The trial court reviewed the administrative record and concluded there
was no credible evidence to support a finding that Pacific violated prevailing
wage laws with intent to defraud,
which finding was necessary in this case for debarment to be imposed under
Labor Code section 1777.1.
name="_ftnref2" title="">[2] Accordingly, the trial court granted
Pacific’s petition. DLSE appeals,
arguing that (i) the trial court failed to apply the correct standard of
review (i.e., the substantial evidence test) and (ii) there was
substantial evidence in the record to support the administrative finding of
intent to defraud. We agree on both
points and will reverse.
FACTS AND PROCEDURAL HISTORY
Pacific was
a general engineering construction company based in Bakersfield, California,
that performed concrete (flat) and underground (water, soil and sewer)
construction work. Ninety-nine percent
of the projects undertaken by Pacific were public works projects. Pacific was owned and managed by Ayodeji A.
Ogundare (Ogundare), who was a licensed contractor.
In 2007 and
2008, DLSE conducted investigations regarding public works projects on which
Pacific was a subcontractor, including a project in Delano for sewer and
sidewalk construction (the Delano project), a project in Madera to build a
youth center (the Madera project), and a project in Exeter to construct a
school building (the Exeter project). As
a result of these investigations, DLSE notified Pacific of apparent violations
of laws relating to public contracts and issued civil wage and penalty
assessments against Pacific. Additionally,
DLSE initiated the instant debarment proceedings against Pacific based on
particular allegations that Pacific violated prevailing wage laws in a manner
that was allegedly willful and with intent to defraud. The present appeal concerns the debarment
proceedings only.
title="">[3]
The
debarment proceedings were commenced against Pacific in December 2008, when
DLSE filed a statement of alleged violations, seeking Pacific’s debarment
pursuant to the provisions of section 1777.1.
The hearing
of the debarment proceedings was held on April 30, 2009, before a hearing
officer. Pacific and DLSE were each
represented by counsel and following the presentation of evidence and closing
arguments, the hearing officer took the matter under submission. On August 6, 2009, the hearing officer issued
a written statement of decision that was adopted the same day by DLSE as the
decision of that agency. The statement
of decision stated that Pacific committed willful violations with intent to
defraud, and a one-year debarment of Pacific was ordered by DLSE therein.
The
statement of decision stated the following principal conclusions: “[Pacific] ‘willfully’ and with ‘intent to
defraud’ violated the public works laws in not paying prevailing wages to one
worker, Laborer Miguel Ibarra and [in not paying] prevailing overtime to two
workers, Laborers Javier Perez (on the Madera project) and Juan Ramirez (on the
Exeter project). Although the DLSE
argued that [Pacific] had a pattern and practice of failing to pay prevailing
wages and prevailing overtime on the three projects at issue as well as on
previous projects … the evidence simply was not presented at this hearing to
establish this was the case.†Further,
as to the alleged inadequacy of Pacific’s payroll records, the statement of
decision stated that Pacific willfully violated provisions of section 1776
by submitting certified payroll records to DLSE, prime contractors, awarding
bodies and others, that were “not accurate.â€
However, Pacific’s failures to provide adequate payroll records,
although willful, were not sufficient in themselves to show intent to defraud.
On the specific issue of intent to
defraud, the statement of decision elaborated:
“[Miguel] Ibarra’s testimony that he was always paid $15.00 per hour on
the Delano project and worked 61 hours during the week ending August 4, 2007 is
credible especially since he provided a copy of a paycheck corroborating his
testimony. [Pacific] knew that payment
to this individual was not in compliance with the public works laws as
evidenced by the fact that the check shows payment at $15.00 per hour for 61
hours worked yet [Pacific] submitted to the DLSE certified payroll records
listing the correct prevailing wage rate that should have been paid and
listing only 25 hours worked for the week ending August 4, 2007. In this regard, [Pacific] ‘willfully’
violated the public works laws.
[Pacific] also violated the public works laws with ‘intent to defraud’ evidenced
by the fact that he put the required amount of payment on the certified payroll
records he signed under penalty of perjury knowing that he paid a much lower
rate.†Additionally, the statement of
decision indicated that Pacific’s intent to defraud was further corroborated by
the failure to pay overtime prevailing wages to Javier Perez and Juan Ramirez,
since it appeared that Pacific “was attempting to split the total hours worked
by Perez and Ramirez, so as not to have to pay or report prevailing overtime
that was in fact worked by both workers.â€
As a consequence of the violations
and of the finding of intent to defraud, the statement of decision ordered that
Pacific “shall be ineligible to, and shall not, bid on or be awarded a contract
for a public works project, and shall not perform work as a subcontractor on a
public work … for a period of one (1) year .…â€
On September 22, 2009, after DLSE
adopted the statement of decision as the decision of DLSE in this matter,
Pacific filed a petition for writ of administrative mandate pursuant to Code of
Civil Procedure section 1094.5, seeking to have the order of debarment set
aside on the ground that the order was not supported by the record. A first amended petition for writ of
administrative mandate was filed by Pacific on December 4, 2009.
On August 16, 2010, the trial court
issued its written order ruling on the petition for administrative writ of
mandate. The trial court applied the
“independent judgment†standard of review to the administrative decision on the
assumption that Pacific’s interest in bidding on public contracts was a
“fundamental vested right.â€
(Capitalization omitted.) In
applying that standard to the record before it, the trial court found that
“there was no credible evidence offered by [DLSE] to support a finding of an
intent to defraud .…â€
(Capitalization omitted.)
Moreover, the trial court explained that without a finding of intent to
defraud pursuant to section 1777.1, subdivision (a), the mere willful
violations in this case could not (by themselves) justify debarment since there
were no prior willful violations as required by section 1777.1,
subdivision (b). (Cf., § 1777.1,
subd. (a) [debarment appropriate if violation of prevailing wage law was
found to be with “intent to defraudâ€]; id.,
subd. (b) [debarment for “willful†violations appropriate only if a prior
willful violation occurred in past three years].) Accordingly, no basis existed for debarment
under section 1777.1, and the trial court granted Pacific’s petition.
DLSE timely filed its
DISCUSSION
Standard of
Review
Since
our standard of review is affected by the standard of review that was
applicable in the trial court, we will begin with a summary of the law
regarding the trial court’s standard of review.
A.
In the Trial Court
“Section 1094.5 of the Code of Civil Procedure governs judicial review
by administrative mandate of any final decision or order rendered by an
administrative agency. A trial court’s
review of an adjudicatory administrative decision is subject to two possible
standards of review depending upon the nature of the right involved. [Citation.]
If the administrative decision substantially affects a fundamental
vested right, the trial court must exercise its independent judgment on the
evidence. [Citations.] The trial court must not only examine the
administrative record for errors of law, but must also conduct an
to determine whether the weight of the evidence supports the administrative
findings. [Citation.] If, on the other hand, the administrative
decision neither involves nor substantially affects a fundamental vested right,
the trial court’s review is limited to determining whether the administrative
findings are supported by substantial evidence.
[Citations.]†(
Cal.App.4th 305, 313, relying on Strumsky
v. San Diego County Employees Retirement
Assn. (1974) 11 Cal.3d 28, 32 & Bixby
v. Pierno (1971) 4 Cal.3d 130, 143-144.)
Whether an administrative decision
substantially affects a fundamental vested right must be determined on a
case-by-case basis. (
“A right may be deemed fundamental ‘on either or both of two bases: (1) the character and quality of its
economic aspect; [or] (2) the character and quality of its human
aspect.’ [Citation.] ‘The ultimate question in each case is
whether the affected right is deemed to be of sufficient significance to
preclude its extinction or abridgement by a body lacking judicial
power. [Citation.]’ [Citation.]â€
(Wences v. City of Los
fundamental the courts do not alone weigh the economic aspect of it, but the
effect of it in human terms and the importance of it to the individual in the
life situation.†(Bixby v. Pierno, supra,
at p. 144.) For example, an
agency’s decision to revoke a professional license or the right to practice
one’s trade or profession has been found to affect the person’s fundamental
vested rights. (Rand v. Board of Psychology (2012) 206 Cal.App.4th 565, 574.) On the other hand, “as a general rule, when a
case involves or affects purely economic interests, courts are far less likely
to find a right to be of the fundamental vested character. [Citations.]â€
(JKH Enterprises, Inc. v.
Department of Industrial Relations (2006) 142 Cal.App.4th 1046, 1060 [cases
digested] (JKH Enterprises).)
B.
In
the Court of Appeal
“Regardless of the nature of the
right involved or the standard of judicial review applied in the trial court,
an appellate court reviewing the superior court’s administrative mandamus
decision always applies a substantial evidence standard. [Citations.]â€
(JKH Enterprises,
p. 1058.) However, “the reviewing
court’s focus changes, depending on
which standard of review governed at trial.â€
(MHC Operating Limited Partnership
v. City of San Jose (2003) 106 Cal.App.4th 204, 218, italics added.) “[D]epending on whether the trial court
exercised independent judgment or applied the substantial evidence test, the
appellate court will review the record to determine whether either the trial
court’s judgment or the agency’s findings, respectively, are supported by
substantial evidence. [Citation.] If a fundamental vested right was involved
and the trial court therefore exercised independent judgment, it is the trial
court’s judgment that is the subject of appellate court review. [Citations.]
On the other hand, if the superior court properly applied substantial
evidence review because no fundamental vested right was involved, then the
appellate court’s function is identical to that of the trial court. It reviews the administrative record to determine
whether the agency’s findings were supported by substantial evidence, resolving
all conflicts in the evidence and drawing all inferences in support of
them. [Citations.]†(JKH
Enterprises, supra, 142
Cal.App.4th at p. 1058, fn. omitted.)
The Trial Court Should Have Applied
Substantial Evidence Test
Looking to the character and quality
of the right involved, we conclude that Pacific’s one-year debarment from being
able to bid or work on public projects did not implicate a fundamental vested
right. Pacific was not prevented from
bidding or working on all construction projects, but only from certain kinds of
work (i.e., public projects). Hence, it
appears that the interest affected was purely economic in this case. (See, e.g., JKH Enterprises, supra,
142 Cal.App.4th at pp. 1061-1062 [stop work order and penalty issued by
Department of Industrial Relations due to employer’s failure to provide
workers’ compensation to employees did not implicate fundamental vested
right—interest involved “purely economicâ€]; Kawasaki
Motors Corp. v. Superior Court
(2000) 85 Cal.App.4th 200, 204 [protest to New Motor Vehicle Board of
manufacturer’s termination of automotive dealer franchise reviewed under
substantial evidence test as purely economic contractual privileges were
involved]; Standard Oil Co. v. Feldstein
(1980) 105 Cal.App.3d 590, 604-605 [no fundamental right to operate four rather
than three refinery units even though return on investment may be lower].)
It follows that the trial court
applied the wrong standard. It should
have reviewed DLSE’s administrative decision under the substantial evidence
test rather than under the independent judgment standard of review. However, we need not send the matter back to
the trial court to apply the proper standard.
Where the trial court erroneously uses the independent judgment
standard, an appellate court may proceed to review the matter by applying the
substantial evidence standard to the administrative findings. (Housing
Development Co. v. Hoschler (1978) 85 Cal.App.3d 379, 387;
(1964) 229 Cal.App.2d 124, 133; 2A Cal.Jur.3d (2007) Administrative Law,
§ 754, p. 230.)
Administrative Decision Supported by
Substantial Evidence
The question
remains whether a different result would have been required in the present case
under the substantial evidence test.
whether findings of an administrative decision are supported by substantial
evidence.†(Northern Inyo Hosp. v. Fair Emp. Practice Com. (1974) 38 Cal.App.3d
14, 23-24.) If the administrative
decision is supported by substantial evidence, we may not overturn it merely
because a contrary finding would have been equally or more reasonable. (Id.
at p. 24) “In general, substantial
evidence has been defined in two ways:
first, as evidence of ‘“‘ponderable legal significance … reasonable in
nature, credible, and of solid value’â€â€™ [citation]; and second, as ‘“relevant
evidence that a reasonable mind might accept as adequate to support a
conclusionâ€â€™ [citation].†(
Bd. No. 2 (1983) 148 Cal.App.3d 548, 555)
“Unless the finding, viewed in the light of the entire record, is so
lacking in evidentiary support as to render it unreasonable, it may not be set
aside.†(Northern Inyo Hosp. v. Fair Emp. Practice Com.,
In order to impose debarment in the
present case, it was necessary for DLSE to establish intent to defraud under
section 1777.1. That statute
provides, in relevant part, as follows:
“Whenever a contractor or subcontractor performing a public works
project pursuant to this chapter is found by the Labor Commissioner to be in
violation of this chapter with intent to defraud, … the contractor or
subcontractor … is ineligible for a period of not less than one year or more
than three years to do either of the following:
[¶] (1) Bid on or be awarded
a contract for a public works project.
[¶] (2) Perform work as a
subcontractor on a public works project.â€
(§ 1777.1, subd. (a)(1) & (2).) The term “intent to defraud†is defined in
the applicable regulations as follows:
“‘Intent to defraud’ means the intent to deceive another person or
entity, as defined in this article, and to induce such other person or entity,
in reliance upon such deception, to assume, create, transfer, alter or
terminate a right, obligation or power with reference to property of any
kind.†(Cal. Code Regs., tit. 8,
§ 16800.)
Here, as noted above, the statement of decision adopted by DLSE
explained that intent to defraud was found based on (among other things) the
following: “[Miguel] Ibarra’s testimony
that he was always paid $15.00 per hour on the Delano project and worked 61
hours during the week ending August 4, 2007 is credible especially since he
provided a copy of a paycheck corroborating his testimony. [Pacific] knew that payment to this
individual was not in compliance with the public works laws as evidenced by the
fact that the check shows payment at $15.00 per hour for 61 hours worked yet
[Pacific] submitted to the DLSE certified payroll records listing the correct
prevailing wage rate that should have been paid and listing only 25
hours worked for the week ending August 4, 2007. In this regard, [Pacific] ‘willfully’
violated the public works laws.
[Pacific] also violated the public works laws with ‘intent to defraud’
evidenced by the fact that he put the required amount of payment on the
certified payroll records he signed under penalty of perjury knowing that he
paid a much lower rate.†Additionally,
the statement of decision indicated that Pacific’s intent to defraud was
further corroborated by the failure to pay overtime prevailing wages to Javier
Perez and Juan Ramirez, since it appeared that Pacific “was attempting to split
the total hours worked by Perez and Ramirez, so as not to have to pay or report
prevailing overtime that was in fact worked by both workers.â€
The parties, like the trial court,
have placed primary emphasis on the evidence relating to Miquel Ibarra’s
wages. DLSE argues that such evidence
was sufficient to reasonably allow the conclusion that Pacific acted with an
intent to defraud. Pacific, on the other
hand, argues that in light of the entire record, the evidence was inadequate to
support that conclusion.
We’ll begin with Pacific’s
position. Pacific argues that since
Ibarra testified he did not keep a record of the number of hours he worked for
any particular week and he was unsure of the total hours he worked on the
particular week reflected on the paycheck introduced into evidence (i.e., the week
ending August 4, 2007), it was not substantiated that he was paid only $15 per
hour. Pacific also claims that the large
discrepancy between Ibarra’s paycheck (showing Ibarra was paid $15 per hour)
and the certified payroll records (showing he was paid a prevailing wage of
$36.10 and worked only 25 hours that week) did not show intent to defraud. In that regard, Pacific points out that
although the statement of decision noted the certified payroll records were
signed (by Ogundare) under penalty of perjury, the record on appeal does not
include any signature. Ogundare’s name
is printed on the signature line, but no signature is present. Also, Pacific refers to the fact that the
statement of decision characterized Pacific’s inaccurate payroll records as a
“‘willful’†violation of the recordkeeping statute (§ 1776), but not a
fraudulent violation of that statute.
Finally, Pacific points out that three other employees testified that
they had been paid properly (i.e., prevailing wages) on the same job.
DLSE’s position is that intent to
defraud was established by the evidence, in particular Ibarra’s testimony that
he was paid $15 per hour as confirmed by the paycheck for the week of August 4,
2007, and the certified payroll records for that same week showing that Ibarra
was paid prevailing wages of $36.10 per hour and only worked 25 hours that
week. We agree with DLSE. Although Ibarra did not keep a record of his
hours, his testimony that he was paid $15 per hour was clearly supported by the
paycheck. The notation on that check
indicated he was being paid for 61 hours worked on the Delano job, and the
total amount paid was $915. Doing the
math, this equates to $15 per hour. For
the identical week, the certified payroll records reported by Pacific to DLSE pursuant
to section 1776 (whether or not personally signed under oath by Ogundare)
represented to DLSE that Ibarra was making $36.10 per hour and worked only 25
hours. (See § 1776,
subd. (a)(1) & (2) [records must include hours worked, wages paid, and
declaration stating compliance with § 1771 (prevailing wage law)].) No satisfactory explanation was ever provided
by Pacific for this glaring discrepancy between Ibarra’s actual paycheck
reflecting $15 per hour and the contrary representations by Pacific to DSLE. A party’s intent, including intent to
defraud, may be shown by circumstantial evidence. (1 Witkin, Cal. Evidence (5th ed., 2012)
Circumstantial Evidence, § 122, p. 528; People v. Phillips (1960) 186 Cal.App.2d 231, 240.) A reasonable conclusion from this evidence is
that Pacific violated the prevailing wage law with intent to defraud.
DISPOSITION
The trial court’s judgment granting
Pacific’s writ of administrative mandate is reversed. The matter is remanded to the trial court
with instructions that a new order be entered by the trial court denying the
writ and affirming DLSE’s administrative decision to impose a one-year
debarment. Costs on appeal are awarded
to DLSE.
_____________________
Kane, J.
WE CONCUR:
_____________________
Wiseman,
Acting P.J.
_____________________
Detjen, J.
name="_ftn1" title="">[1] Debarment occurs when an individual or entity
is excluded from bidding, contracting or subcontracting on public works
projects, usually for a defined period of time, due to violations
of public contract law or other wrongful conduct. (See Labor Code, § 1777.1, subd. (b);
695, 703.)
name="_ftn2" title="">[2] Unless
otherwise indicated, all further statutory references are to the Labor Code.
