Facts

California Governor Arnold Schwarzenegger furloughed state employees three days per month starting from February 2009 to June 2010. Through their unions, between 70,000 and 80,000 state employees sued the state and named over 60 other special fund agencies (whose funding comes from sources other than the State's General Fund) as respondents.

PLAINTIFFS' CONTENTIONS:
: The state employees claimed the Governor violated Government Code section 19851(a), requiring employees to have a 40-hour workweek, unless an alternative arrangement is established to meet the particularized needs of specific state agencies and departments. The employees contended that the Governor ignored specific needs of "special fund" agencies, which receive funding through sources other than the state's general operating fund. The employees further claimed that furloughed employees at these agencies would not reduce the general fund budget deficit, and that furloughs at other agencies would actually exacerbate it, and lose money.

RESPONDENTS' CONTENTIONS:
The Governor contended that special fund employees were furloughed to achieve "labor parity." He stated that he was not required to consider each individual agency's needs, but only do what was in the best interest of the state, via the Emergency Services Act. Special Fund agencies, such as CalPERS, CalSTRS, the Earthquake Authority and the State Lottery argued that their operations were being harmed by the furloughs without any savings to the General Fund. CalPERS and CalSTRS argued that the lifting of the furloughs and back pay awards should be made to all of their employees, not just those represented by the unions.

Damages

The employees sought damages in back pay from February 2009, as well as an injunction to prevent future furlough enforcement without considering each individual state agency's needs.

Result

The court found for the employees and special fund agencies, finding that the governor illegally exceeded his authority. The Governor and Department of Personnel Administration were ordered to cease and desist enforcement of further furloughs of all employees at the Special Fund agencies and the State Controller's Office was ordered to compensate all such employees for lost back pay. Damages are estimated to be in the $500 million range.