After a two-year battle, a state appeals court ruled recently that it is legal to pay thousands of hourly state employees the federal minimum wage of $7.25 for the month of July, or at least until a budget passes.
Gov. Arnold Schwarzenegger has been working on this policy for the past two years, and with the arrival of the new fiscal year sans a budget, he is using this as a tactic to close California's $19 billion deficit. However, State Controller John Chiang once again is refusing to comply with this policy and is ready to file a new lawsuit against the Governor's minimum wage order.
The state's Department of Personnel Administration filed a lawsuit in superior court Tuesday seeking a restraining order to force the controller to comply with the governor's actions.
According to Chiang, reducing the salaries of 200,000 employees to minimum wage "is practically unfeasible to do so without violating federal labor laws and the state constitution."
He also argues that the state's computerized payroll system cannot handle the change. According to a published report, Chiang said it was not possible with the state's current technology to pay some employees their full salaries and others minimum wage.
Chiang also addressed the legality of the issue. He believes that if Schwarzenegger's order is applied, it could cost the state billions of dollars in fines and penalties. "The federal Fair Labor Standards Act entitles a worker to "double damages," if an employer cuts pay to minimum wage.
This is the second time Gov. Schwarzenegger has taken this path. In 2008, when the legislature failed to come up with a budget, the governor issued the order to cut pay to the federal minimum, but court challenges delayed implementation. By the time the ruling came down in favor of the administration, a budget had been approved.
Out of the 239,586 state workers who could be subject to the governor's order, 37,000 workers belong to unions and will not be paid the federal minimum wage. The unions recently signed new contracts, which included pay cuts and pension reforms, leaving about 162,000 state employees affected by the new order.
Also, certain state workers such as doctors and attorneys, will not be paid at all because federal law exempts them from minimum wage rules. They will not be paid until a budget is signed.
Salaried managers will also see their pay cut to $455 per week.
However, once a budget is passed, workers will receive their full pay back.
Assembly Speaker John A. Perez calls this a "political stunt that will not save the state a single penny."
Perez, who strongly opposes the order, is deeply disappointed. "I find it shocking that the Governor is deliberately causing real suffering in an attempt to force the legislature to pass his job-killing budget. The Governor shouldn't be playing political games to distract from the fact that his budget will devastate California's recovery and wipe out 430,000 jobs," Perez said in a statement.
According to the Employment Development Department (EDD) out of 13.8 million people employed by the state, Whites represent the largest segment among racial/ethnic groups, at 46.6 percent, Hispanics account for a 32.3 percent, Asians 12.4 percent, and African Americans account for six percent.