In Association for Los Angeles Deputy Sheriffs (ALADS) v. County of Los Angeles (2021) 60 Cal.App.5th 327, review denied (Apr. 21, 2021), the California Court of Appeals for the Second District overturned the trial court’s dismissal of the union’s case for failure to exhaust administrative remedies. In overturning the trial court’s decision, the appellate court held that ALADS was not required to exhaust all administrative remedies prior to bringing a lawsuit because the administrative remedies were inadequate. However, the appellate court found that ALADS did not state a valid claim against the County because the section of the California Labor Code at issue did not apply to public employers.   

            In April 2012, during conversion to a new payroll system, the County failed to apply an agreed-upon cap to certain bonus payments. This error resulted in salary overpayments to 107 deputies. ALADS’ Memorandum of Understanding (MOU) contained a provision regarding how the County was to collect overpayments. In May 2017, the County sent letters to the overpaid deputies, informing them of the overpayment, and giving them two repayment options: remitting payment in full, or repaying the amount through payroll deductions at a specified rate.

            ALADS objected to the paycheck deductions and sent a letter to the County claiming such deductions were unlawful. When the County and ALADS could not reach an agreement regarding the issue, ALADS filed a lawsuit against the County. The lawsuit alleged that the wage garnishment law (Code Civ. Proc., § 706.010 et seq.) provided the exclusive procedure for withholding an employee’s earnings, and those earning are exempt from prejudgment attachment (§ 487.020, subd. (c)). ALADS further alleged the deductions violated California Labor Code section 221, which makes it unlawful “for any employer to collect or receive from an employee any part of wages theretofore paid by said employer to said employee.”

            The County argued that the case should be dismissed because ALADS failed to exhaust its remedies under the MOU. Generally, the doctrine of exhaustion of remedies requires an organization to exhaust all non-judicial remedies—such as grievances, arbitration, agency appeals, etc.—prior to filing a lawsuit. Here, that would have involved completing the grievance procedure for all individual members who received the overpayments. However, the Court of Appeals held that this case fell under an exception to the doctrine, which provides that an individual need not exhaust all administrative remedies if the remedies are legally inadequate. The court relied on its previous ruling (also involving ALADS: ALADS v. County of Los Angeles (2019) 42 Cal.App.5th 918) in holding that the grievance procedure outlined in the MOU was inadequate because it did not provide classwide relief. The court reiterated that when a judicial action seeks relief on behalf of a class, “if the available administrative remedies do not provide classwide relief, then no plaintiff need exhaust them before suing.” Since the grievance procedure would require separate adjudication of each individual’s claim and would not be binding in future cases, the court found that it was inadequate and ALADS could file a lawsuit even though it had not completed the grievance process.

            However, the appellate court still found that dismissal was proper because the “home rule” doctrine gives the County the exclusive right to regulate matters relating to its employees’ compensation. (Cal. Const., art. XI, § 1, subd. (b), see also §§ 3 & 4.) The home rule doctrine stems from Article XI, Sections 4 and 5 of the California Constitution, which provides that charter cities and counties have exclusive authority to regulate and determine their own municipal affairs, free from intrusion by the state. Because of the home rule doctrine, unless California Labor Code provisions are specifically made applicable to public employers, they only apply to employers in the private sector. Thus, the court found that Labor Code section 221 did not apply to LA County employees. The court found that the same principles applied regarding the home rule doctrine and the wage garnishment law, and thus the wage garnishment law was also not applicable to ALADS’ members.

            Although the appellate court ultimately found that the MOU provisions properly authorized the County to recover overpayments from ALADS’ members, the affirmation that plaintiffs do not need to exhaust the grievance procedure prior to filing a lawsuit is an important holding for unions. If the MOU does not provide for classwide relief, the union is free to grieve the issue while simultaneously filing a lawsuit on its members’ behalf.