K & S Staffing Sol. v. W. Sur. Co.

316 Cal.Rptr.3d 834

K & S STAFFING SOLUTIONS, INC., Plaintiff and Appellant,

v.The WESTERN SURETY COMPANY, et al., Defendants and Respondents.

C096705, C097987

Court of Appeal,

Third District.

Filed January 2, 2024

As Modified on Denial of Rehearing January 19, 2024

APPEAL from a judgment of the Superior Court of San Joaquin County, Jayne C. Lee, Judge. Affirmed. (Super. Ct. No. STK-CV-UCC-2017-0011949)

Downey Brand, Matthew J. Weber, Stockton, Alexandra K. LaFountain, Sacramento, and Jennifer L. Williams for Plaintiff and Appellant.

Brunn & Flynn, Gerald E. Brunn, John K. Peltier, Modesto, and Drexwell M. Jones for Defendants and Respondents.

BOULWARE EURIE, J.

California’s mechanics’ lien law (Civ. Code, §§ 8000-9566)¹ provides a measure of protection to those working on private and public works of improvement. Among other things, it requires certain contractors that are awarded a public works contract involving an expenditure over $25,000 to post a payment bond before work begins. It also authorizes laborers and several others to assert a claim against the payment bond when they have not been paid in full.

In this appeal, we consider two questions about this law that arose after a subcontractor for two state projects failed to fully pay a staffing company for its services. We consider first whether the staffing company is a "laborer" within the meaning of the mechanics’ lien law. We consider next whether the payment bonds issued for these projects are subject to the mechanics’ lien law’s requirements. The trial court concluded that the staffing company was not a "laborer" and that the payment bonds were subject to the mechanics’ lien law’s requirements. Because we agree, we affirm.

BACKGROUND

California’s Department of Transportation (Caltrans) awarded VSS International, Inc. (VSSI) two contracts for road maintenance work. Each contract involved an expenditure over $25,000, and for each, VSSI obtained a payment bond from the Western Surety Company (Western).

Titan DVBE Inc. (Titan) was a subcontractor for both projects. For most years it operated, Titan employed its workers directly. But after learning its insurance carrier would no longer offer workers’ compensation insurance in California, Titan turned to K&S Staffing Solutions, Inc. (K&S) to fulfill its staffing needs. After entering into an agreement with K&S, Titan continued to supervise the same workers as it had before and continued to find new workers when needed. But now K&S paid the workers’ wages, payroll taxes, vacation pay, sick pay, and unemployment insurance. Over time, K&S’s charges for its services cut into Titan’s profitability, leading eventually, according to Titan’s owner, to Titan becoming too "upside down … to save." In the end, Titan never paid K&S all amounts it was owed for the Caltrans projects.

K&S later sued VSSI and Western (together, respondents) to recover these amounts. It asserted it was a "laborer" within the meaning of the mechanics’ lien law and had a right to recover against the payment bonds for the two projects. But the trial court disagreed. It noted that the term "laborer" is defined in the mechanics’ lien law to mean "a person who, acting as an employee, performs labor upon, or bestows skill or other necessary services on, a work of improvement." (§ 8024, subd. (a).) It then concluded that K&S was not a "laborer" because it failed to show it was the employer of the laborers here, noting among other things that K&S failed to show that it hired, trained, or supervised the workers.

After the trial court entered judgment in respondents’ favor, respondents moved for attorney fees under a provision in the mechanics’ lien law requiring trial courts to award attorney fees to the prevailing party in any "action to enforce the liability on [a] [payment] bond." (§ 9564, subd. (c).) K&S opposed the motion. It argued that respondents could not receive attorney fees under this provision because the payment bonds here were not "payment bonds" within the meaning of the mechanics’ lien law. It reasoned as follows: (1) The mechanics’ lien law defines "payment bond" to mean "a bond required by Section 9550" (§ 8030); (2) section 9550 generally requires a payment bond for public works contracts involving expenditures over $25,000, but it provides an exemption if the contract is with a state department or certain other state entities (§ 9550, subds. (a), (e)); (3) the contracts here were with a state department, Caltrans; and (4) therefore, section 9550 did not require a payment bond for these contracts. The trial court rejected K&S’s argument and awarded attorney fees to respondents.

K&S timely appealed both the trial court’s judgment and its later award of attorney fees.

DISCUSSION

I Laborer

K&S first challenges the trial court’s finding that it was not a "laborer" within the meaning of the mechanics’ lien law. It asserts that it was a "laborer" because it took on the legal responsibilities of an employer for those who worked for Titan. Respondents counter that being the workers’ employer was not enough; K&S also needed to furnish workers for the project, but it never did so. Considering the statutory text, we conclude that both parties misunderstand the meaning of the term "laborer." But we agree with respondents’ bottom line: K&S was not a "laborer" within the meaning of the mechanics’ lien law.

[1] In interpreting a statute, " ‘ " ‘[o]ur fundamental task … is to determine the Legislature’s intent so as to effectuate the law’s purpose.’ " ’ " (Brennon B. v. Superior Court, (2022) 13 Cal.5th 662, 673, 296 Cal.Rptr.3d 360, 513 P.3d 971.) "Because statutory language ‘generally provide[s] the most reliable indicator’ of that intent," we consider first "the words themselves, giving them their ‘usual and ordinary meanings’ and construing them in context." (People v. Castenada (2000) 23 Cal.4th 743, 747, 97 Cal.Rptr.2d 906, 3 P.3d 278.) In general, absent an ambiguity in the statutory text, " ‘ " ‘the Legislature is presumed to have meant what it said, and the plain meaning of the language governs.’ " ’ " (Ibid.; see also Brennon B., at p. 673, 296 Cal.Rptr.3d 860, 513 P.3d 971 [" ‘ " ‘courts must generally follow [a statute’s] plain meaning unless a literal interpretation would result in absurd consequences the Legislature did not intend’ " ’ "].)

Applying these well-established principles here, we start with the relevant statutory language. Section 9100 describes certain persons who are entitled to assert a claim against a payment bond. (§ 9100, subd. (a); see also § 9554, subd. (b)(1).) One of those persons is a "laborer." (§ 9100, subd. (a)(2).) Section 8024 defines that term. It provides that "‘[l]aborer’ means a person who, acting as an employee, performs labor upon, or bestows skill or other necessary services on, a work of improvement." (§ 8024, subd. (a); see § 8000.)²

[2] K&S was not a "laborer" under this definition. K&S repeatedly equates a "laborer" with an employer, arguing, for instance, that it "was readily entitled to payment for the labor it provided" because "any ‘laborer,’ i.e., employer, is entitled to collect on the payment bonds." But as section 8024’s plain text provides, a laborer is not a person who, acting as an employer, bestows labor on a work of improvement. It is instead "a person who, acting as an employee, performs labor upon, or bestows skill or other necessary services on, a work of improvement." (§ 8024, subd. (a), italics added.) K&S is not a person who was "acting as an employee" in any capacity, nor does it even allege as much.

K&S nonetheless maintains that it was a "laborer" based on old case law discussing prior versions of the mechanics’ lien law. It first cites a case from over a century ago, Sweet v. Fresno Hotel Co. (1917) 174 Cal. 789, 164 P. 788. In its view, that case established that "an employer is entitled to collect on payment bonds for labor provided to a project." But the relevant statute there is not the relevant statute here. The statute in Sweet concerned "‘the labor done and materials furnished by all persons except the contractor’" and allowed these persons "‘a lien for the value thereof’" in certain circumstances. (Id. at p. 792, 164 P. 788.) The court ultimately found an employer was entitled to the benefit of this statute when it agreed "to bestow labor [for the construction of a] building, hiring the men himself and paying their wages." (Id. at pp. 796-797, 164 P. 788.) But the court never defined the term "laborer," and its decision offers no help in interpreting the current statutory definition of "laborer"—a definition initially added over 50 years after Sweet. (Stats. 1969, ch. 1362, § 2, p. 2754.)

Nor is another case K&S cites—Contractors Labor Pool, Inc. v. Westway Contractors, Inc. (1997) 53 Cal.App.4th 152, 61 Cal.Rptr.2d 715—helpful in understanding this definition. Although the term "laborer" had been defined by the time of this case, the court never mentioned it. And although the court said that "an entity which takes upon itself the legal responsibilities of an employer is entitled to a mechanic’s lien and related remedies if it furnishes the labor of its employees to a work of improvement" (id. at p. 162, 61 Cal.Rptr.2d 715), it never characterized such an entity as a "laborer" itself. It instead said this type of an entity would be covered under the mechanics’ lien law as then written, which covered, among others, "‘all persons and laborers of every class performing labor upon or bestowing skill or other necessary services on, or furnishing materials or leasing equipment to be used or consumed in or furnishing appliances, teams, or power contributing to a work of improvement.’" (Id. at pp. 158-159, 61 Cal.Rptr.2d 715.) But the mechanics’ lien law has not used this language in over a decade. (See Stats. 2010, ch. 697, § 20 [adding § 9100].) And while an employer that bestows labor may have been considered a "person[ ] … bestowing skill or other necessary...