State IOUs to Workers Is Illegal, Appeals Court Rules

SAN FRANCISCO — The state must pay its employees on their scheduled paydays even if a state budget has not been passed, a federal appeals court ruled Thursday.

The 2-1 decision in a 1990 case by the U.S. 9th Circuit Court of Appeals could lead to double pay for thousands of state workers paid in IOUs during last year’s budget impasse, a union lawyer said.

“What this assures is that this (delay in pay) is not going to happen again,” said Roberta Perkins, lawyer for a group of state highway maintenance workers who filed the suit.

The ruling has little immediate financial effect on the cash-starved state government because the highway workers--estimated at 1,200 to 1,500 by Perkins--were not awarded double pay in the case.

U.S. District Judge William Shubb ruled that their paychecks were improperly delayed for two weeks in July, 1990, until that year’s budget was signed, but that the state had acted in good faith.

But looming ahead is a larger suit, on behalf of some of the employees issued IOUs during last year’s record budget deadlock.

U.S. District Judge Garland Burrell has ruled that the IOUs did not comply with state law, which requires payment in cash or its equivalent, said Gary Messing, a union lawyer. If Burrell also rules that pay was illegally delayed, Messing said, Thursday’s decision should entitle workers to double pay for the period of delay.