SAN FRANCISCO -- A San Francisco Superior Court Judge yesterday ruled that Gov. Arnold Schwarzenegger's executive order creating a furlough program for state employees does not apply to workers at California's workers' comp insurer of last resort -- the State Compensation Insurance Fund. The case was brought by the carrier's in-house attorneys and their position was supported by SCIF President Jan Frank, even though the carrier was named as a defendant to the lawsuit.

The ruling by Judge Peter Busch hinged on a couple of legal issues: whether an earlier case in Sacramento that failed to overturn the furlough program should bar this case from going forward and whether a furlough is the same as a "staff cutback" as envisioned by the legislature.

CASE -- the California Attorneys, Administrative Law Judges and Hearing Officers in State Employement, which is the bargaining agent for SCIF's in-house attorneys-- was a party to that original challenge but was allowed to proceed with this lawsuit after Busch found the scope of the first case was limited. "The first court said it didn't have before it CASE members who weren't in an executive agency," he said, noting a clarifying order issued by the original judge. And since even defense counsel conceded that SCIF is not an executive agency, he found that the first case did apply here.

With the procedural issue out of the way, Busch looked at the debate over what constitutes a "staff cutback." That term was important as it is the term used by the Legislature when it added Insurance Code section 11873(c) to exempt SCIF from "hiring freezes and staff cutbacks" imposed by the state.

David Tyra, an attorney with Kronick, Moskovitz, Tiedemann & Girard in Sacramento who represented the state, argued that this means "the Governor retains control over the hours and working conditions and SCIF has control over the size of the workforce."

But Busch found this was out of line with the legislative intent behind the statute, which states that "allowing SCIF to expand and contract its workforce without regard for hiring requirements applicable to other state departments will allow SCIF's executive leadership to exercise its best business judgment on SCIF's staffing needs."

Busch reasoned that "staff cutbacks has to be read in its common sense meaning. A furlough program is a staff cutback," he maintained in granting CASE's petition. CASE is now charged with drawing up the order implementing the decision.

"It would seem that going forward the furloughs will stop [for SCIF employees]," attorney Patrick Whalen told Workers' Comp Executive moments after the ruling. "What's still unclear though is what this means for the last 2.5 months," he noted in reference to the days off without pay that SCIF workers have already taken.

Still to be seen is what the state will do. Tyra declined to comment after the hearing on the outcome or the state's plans for an appeal.

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