Craib v. Bulmash , 49 Cal. 3d 475 ( 1989 )

KAUFMAN, J., Concurring and

Dissenting.—“If we are to continue a government of limited powers, [ ] agencies of regulation must themselves be regulated .... The rights of the citizen against them must be made plain.” (Root, Public Service By the Bar (1916) 2 A.B.A. J. 736, 750.)

I reluctantly concur in the conclusion that the subpena enforcement order does not violate the Fourth Amendment to the United States Constitution, because I recognize there is no reasonable expectation of privacy as to records that are required to be made and maintained for inspection by a regulatory agency. However, I respectfully dissent from the holding of the majority as to defendant’s Fifth Amendment claim. Although the United States Supreme Court has held that the Fifth Amendment to the Constitution of the United States does not apply when a regulatory agency subpenas an individual’s records which may provide self-incriminating evidence (Shapiro v. United States (1947) 335 U.S. 1 [92 L.Ed. 1787, 68 S.Ct. 1375]), I am not persuaded that the analysis and reasoning of that decision is sound. Thus, in my view we should invoke the authority of article I, section 15 of our state Constitution and provide greater protection against self-incrimination than that provided by the wartime influenced, result-oriented Shapiro case.

While I recognize the state’s need to verify compliance with valid police power regulations, I am troubled that, in many cases, the Shapiro rule gives regulatory agencies virtually the unchallengeable power to enforce its regulations by criminal prosecution based on compelled self-disclosure. It is wholly contrary to the state and federal guaranties against compelled self-incrimination to allow government the unbridled authority to compel an individual to provide self-incriminating testimonial evidence without at the same time preventing its use as evidence in the prosecution of that individual for any crimes disclosed therein. Accordingly, I would order defendant to produce the records the Division of Labor Standards Enforcement (Division) seeks to carry out its regulatory function, but require the government to forego their use in any subsequent criminal prosecution.

The principles which underlie the privilege against self-incrimination are deep and longstanding. “The privilege . . . prevents the debasement of the citizen which would result from compelling him to ‘accuse’ himself before the power of the state. The roots of the privilege are deeper than the rack and the screw used to extort confessions. They go to the nature of a free man and his relationship to the state.” (United States v. Wade (1967) 388 U.S. 218, 261 [18 L.Ed.2d 1149, 1176-1177, 87 S.Ct. 1926] [conc. and dis. opn. of Portas, J.].) Indeed, the privilege has long been considered fundamental to the values upon which our nation was founded. “[A]ny compulsory discovery by . . . compelling the production of [a party’s] private books and papers to convict him of crime ... is abhorrent to the instincts of an American. It may suit the purposes of despotic power; but it cannot abide the pure atmosphere of political liberty and personal freedom.” (Boyd v. United States (1886) 116 U.S. 616, 631-632 [29 L.Ed. 746, 751, 6 S.Ct. 524].) Further, the privilege has been considered an important device to ensure complete and accurate investigation of suspected criminal activity. “ ‘The real objection is that any system of administration which permits the prosecution to trust habitually to compulsory self-disclosure as a source of proof must itself suffer morally thereby. The inclination develops to rely mainly upon such evidence, and to be satisfied with an incomplete investigation of other sources. The exercise of the power to extract answers begets a forgetfulness of the just limitations of that power.’ ” (8 Wigmore, Evidence (McNaughton ed. 1961) § 2251, p. 296, fn. 1, italics omitted.)

Moreover, Shapiro's required-records doctrine poses an extreme danger of governmental abuse. “The doctrine invites the government to require individuals to keep the kinds of records it most wants to subpoena and to claim that these ‘required records’ are not privileged, thereby circumventing constitutional limitations on compulsory record-keeping and production of documents.” (Saltzburg, The Required Records Doctrine: Its Lessons for the Privilege Against Self-Incrimination (1986) 53 U.Chi.L.Rev. 6, 10 [hereafter Saltzburg].) The “protection against compulsory self-incrimination, guaranteed by the Fifth Amendment, is nullified to whatever extent [the Shapiro majority] holds that [government] may require a citizen to keep an account of his deeds and misdeeds and turn over or exhibit the record on demand of government inspectors, who then can use it to convict him. ... It would, no doubt, simplify enforcement of all criminal laws if each citizen were required to keep a diary that would show where he was at all times, with whom he was, and what he was up to.” (Shapiro, supra, 335 U.S. at pp. 70-71 [92 L.Ed. at pp. 1826-1827] [dis. opn. of Rutledge, J.].)

Three facts pervade this case which are, in my view, dispositive: First, by statute it is a criminal offense to (a) fail to pay minimum wage or overtime premium as established by the Industrial Welfare Commission (Lab. Code, § 1199, subds. (b), (c));¹ (b) fail or refuse to produce employee wage and hour records as required by the Division (§ 1175, subd. (a)); and (c), fail to keep employee wage and hour records as required by section 1174 (§ 1175, subd. (d)). Second, in support of its motion to compel production of defendant’s employee wage and hour records, the Division submitted a declaration “alleging] that [defendant] is probably in violation of certain sections of the labor code with respect to payment of wages for hours worked by [defendant’s] employees . . . .” Third, the Division has throughout these proceedings attempted to justify compelling the production of defendant’s employee wage and hour records on the ground that its ability to obtain these records enhances the performance of its regulatory function. As I explain below, since the Division seeks to compel defendant to provide records that likely prove the elements of several misdemeanors the Division believes he has committed, if the purpose of requiring production of the records is truly regulatory the government ought to be willing to and should be required to forego the use of such records in any subsequent criminal prosecution.

The majority decision incorporates into California law the “required records doctrine” of Shapiro, a judicially created exception to the privilege against compelled self-incrimination, and by so doing denigrates the privilege and the principles upon which it is based. Such a decision, in my view, is unnecessary, unwarranted and ill-advised. As the Division averred at oral argument, criminal prosecution for failure to create and retain the wage and hour records (§ 1174) or to pay prescribed wages (§ 1199) is rarely pursued (see maj. opn., ante, fn. 5 at p. 479). Thus, criminal prosecution is apparently not essential to enforcement of the wage and hour laws. If criminal prosecution is not necessary in this case to accomplish the valid regulatory purpose of the wage and hour laws, then elimination of the privilege against self-incrimination in the regulatory context is wholly unwarranted. Just as important, by authorizing government compulsion to produce employment records without delimiting their use to noncriminal regulatory purposes, the majority encourages individuals such as defendant to “lose” such wage and hour records to avoid self-incrimination, and thus make it difficult, if not impossible, for it to carry out its regulatory purposes.

Clearly, the majority presents defendant with the “cruel trilemma of self-accusation, perjury or contempt.” (Murphy v. Waterfront Comm’n. (1964) 378 U.S. 52, 55 [12 L.Ed.2d 678, 681, 84 S.Ct. 1594].) Defendant may comply with the subpena, which may well establish the essential elements of a misdemeanor, i.e., violation of wage and hour laws; or he may confess that he either never created, or has since disposed of, the records required by section 1174, itself a misdemeanor (§ 1175); or he may lie and risk prosecution for perjury, perhaps asserting the records were lost, misplaced or destroyed, and then assert the privilege against compelled oral testimony (see, e.g., Curdo v. United States (1957) 354 U.S. 118, 124 [1 L.Ed.2d 1225, 1230, 77 S.Ct. 1145]; United States v. Daisart Sportswear (2d Cir. 1948) 169 F.2d 856, 862 [oral testimony as to content of lost or destroyed records may not be compelled], revd. on other grounds sub nom. Smith v. United States (1949) 337 U.S. 137 [93 L.Ed. 1264, 69 S.Ct. 1000]); or he may refuse to comply with the subpena, which subjects him to charges of contempt. It is a cruel irony that while the possibility of criminal prosecution is apparently not essential to enforce the wage and hour regulatory scheme, the possibility of criminal prosecution, indeed multiple prosecutions, based on what the compelled production of the records may disclose, virtually assures noncompliance with the only elements of the scheme that are essential to the Division’s regulatory function—the keeping of records and reporting. If the Division’s objective is truly regulatory enforcement of the wage and hour laws, as opposed to punishing their violation, we should enforce the subpena and confer use immunity on the contents of the records thus obtained rather than adopt Shapiro’s required-records doctrine.

In Shapiro, the United States Supreme Court was called upon to determine the scope of the immunity provisions of the Emergency Price Control Act (50 U.S.C., Appen. § 922(g)), which provided that the immunity provisions of the Compulsory Testimony Act of February 11, 1893 (27 Stat. 443, former 49 U.S.C. § 46 (1934 ed.)) would govern. The Court determined that immunity would apply only to evidence covered by the privilege against self-incrimination, a reasonable result. Relying upon dictum in Wilson v. United States (1911) 221 U.S. 361, 380 [55 L.Ed. 771, 779, 77 S.Ct. 538], the Court analogized “ ‘records required by law to be kept in order that there may be suitable information of transactions which are the appropriate subjects of governmental regulation and the enforcement of restrictions validly established’ ” to public documents in public offices. (Shapiro, supra, 335 U.S. at p. 17 [92 L.Ed. at p. 1799] italics and internal quotation marks omitted.) Since the holder of such required records could be considered merely a custodian for the state {ibid.), the high court reasoned that the administrative regulations which required the individual to retain his “customarily kept” business records imbued such records with “public aspects.” {Id. at p. 34 [92 L.Ed. at p. 1808].) In dissent, however, Justice Frankfurter found “the notion that whenever [government] requires an individual to keep in a particular form his own books dealing with his own affairs his records cease to be his when he is accused of crime . . . startling.” {Id. at p. 54 [92 L.Ed. at p. 1818] [dis. opn. of Frankfurter, J.].) I share his wonderment. This circular reasoning—that a governmental recordkeeping requirement could cause private records to become public records over which the recordkeeper lost control—was not lost on the other three dissenting justices. (See id. at pp. 70-71 [92 L.Ed. at p. 1827] [dis. opn. of Jackson and Murphy, JJ.], pp. 75-76 [92 L.Ed. at p. 1829] [dis. opn. of Rutledge, J.].)

As the dissenting justices noted, such logic could lead to recordkeeping requirements so broad as to consume entirely the guaranty against self-incrimination found in the Fifth Amendment. {Shapiro, supra, 335 U.S. at pp. 54, 70-71, 75-76 [92 L.Ed. at pp. 1818, 1826, 1829].) “Fortunately, [however,] although record keeping requirements are common . . . neither [the federal nor state governments] have seemed inclined to push the [required-records] doctrine to the limits of its logic.” (McKay, Self-Incrimination and the New Privacy, 1967 Sup.Ct.Rev. 193, 215 [hereafter McKay].)

While Shapiro has been criticized for its questionable logic (see, e.g., Saltzburg, supra, 53 U.Chi.L.Rev. 6; McKay, supra, 1967 Sup.Ct.Rev. 193; Mansfield, The Albertson Case: Conflict Between the Privilege Against Self-Incrimination and the Government’s Need for Information, 1966 Sup.Ct.Rev. 103 [hereafter Mansfield]; Note, Constitutional Limits on the Admissibility in the Federal Courts of Evidence Obtained from Required Records (1954) 68 Harv.L.Rev. 340), the high court’s lapse of reason has been explained as perhaps due to the majority’s perception of the need for strong governmental regulatory authority during wartime. (Shapiro, supra, 335 U.S. at pp. 8-15 [92 L.Ed. at pp. 1793-1797]; see Saltzburg, supra, 53 U.Chi.L.Rev. at p. 15; Mansfield, supra, 1966 Sup.Ct.Rev. at p. 149.) Chief Justice Vinson for the majority in Shapiro noted that the compelling interest in the national safety, as promoted by the Emergency Price Control Act, outweighed whatever denigration of the Fifth Amendment the required-records exception caused because “there is a sufficient relation between the activity sought to be regulated and the public concern so that the Government . . . can constitutionally require the keeping of particular records, subject to inspection by the Administrator.” (Shapiro, supra, 335 U.S. at p. 32 [92 L.Ed. at pp. 1806-1807].)

I find the notion of balancing the governmental interest in obtaining compelled self-incriminating evidence against a claim for Fifth Amendment protection to be highly questionable. I have always thought the privilege to be absolute. Indeed, even in cases of the most compelling nature, the trial of an accused serial killer for example, it has never occurred to this court or the United States Supreme Court to allow the state to use evidence obtained in violation of the Fifth Amendment because the need is compelling.

Citing California v. Byers (1971) 402 U.S. 424 [29 L.Ed.2d 9, 91 S.Ct. 1535], however, the majority appear to endorse such a balancing approach. (See maj. opn., ante, at pp. 488-489.) Accordingly, the majority holds, we should “ ‘balanc[e] the public need’ for disclosure against ‘the individual claim to constitutional protections.’ ” {Ante, at p. 488, citation omitted.) In Byers, the existence of an individual claim to constitutional protection was determined by evaluating the likelihood of criminal prosecution based on the compelled self-incriminating disclosure. (Byers, supra, 402 U.S. at p. 428 [29 L.Ed.2d at p. 17].) The “mere possibility of incrimination” does not sufficiently outweigh the policies in favor of statutorily compelled disclosure; rather, to invoke the privilege one must “show that the compelled disclosures will themselves confront the claimant with ‘substantial hazards of self-incrimination.’” {Id. at pp. 428-429 [29 L.Ed.2d at p. 18], citing Albertson v. SACB (1965) 382 U.S. 70 [15 L.Ed.2d 165, 86 S.Ct. 194]; Marchetti v. United States (1968) 390 U.S. 39 [19 L.Ed.2d 889, 88 S.Ct. 697]; Grosso v. United States (1968) 390 U.S. 62 [19 L.Ed.2d 906, 88 S.Ct. 709]; Haynes v. United States (1968) 390 U.S. 85 [19 L.Ed.2d 923, 88 S.Ct. 722].) According to Byers, in order to determine if such a substantial hazard of self-incrimination exists, the court must determine if disclosures were sought from a “ ‘highly selective group inherently suspect of criminal activities [involving] an area permeated with criminal statutes [instead of] an essentially noncriminal and regulatory area of inquiry.’ ” (402 U.S. at p. 430 [29 L.Ed.2d at p. 18], citations omitted.) The majority in this case adopt this analysis and conclude, as in Byers, that employers such as defendant are not presented with a hazard of self-incrimination substantial enough to outweigh the state’s interest in compelling disclosure of the records.

The fact that Chief Justice Burger was able to persuade only three other justices of the soundness of this approach is perhaps indicative of its weakness. As Justice Black pointed out in dissent, while the reporting statute in Byers posed no substantial hazard of self-incrimination in the abstract, such an approach ignored that the particular defendant in that case clearly would “have run a serious risk of self-incrimination by complying with the disclosure statute.” (402 U.S. at p. 461 [29 L.Ed.2d at p. 36] [dis. opn. by Black, J.].) That is the case here. It cannot seriously be argued that “no substantial hazard of self-incrimination” is posed by compelling defendant to produce the wage and hour records which document transactions specifically suspected by the Division as being “in violation of certain sections of the Labor Code [concerning] payment of wages for hours worked” and intended to be used to determine whether the asserted violations occurred. That the Division assures us it rarely pursues criminal remedies is no answer: the statute makes any of several violations criminal and the courts have no control over which cases the Division may choose for criminal prosecution.

Even if such balancing were deemed appropriate in cases where records are required to be kept, in this case the balance would clearly point toward precluding use of the records in a criminal prosecution. As noted earlier, the Division represented in oral argument that criminal prosecution was rarely, if ever, pursued for violation of the provisions governing overtime pay and employer-kept wage and hour records. It may therefore be presumed that the Division is able to accomplish its regulatory functions without resorting to criminal prosecution. Thus the state has limited, if any, interest in preserving the use of the records as evidence in a criminal action and defendant’s Fifth Amendment claim should clearly prevail unless use immunity is given.

In the context of Fourth Amendment claims where a regulatory purpose is asserted as justification for a search, we insist that the targets of such a search be selected on the basis of neutral criteria in order to assure that the purpose is indeed regulatory and not based on an individualized suspicion of criminal conduct. (See Ingersoll v. Palmer (1987) 43 Cal.3d 1321 [241 Cal.Rptr. 42, 743 P.2d 1299].) Such an approach would also have value in determining the merits of Fifth Amendment claims regarding required records. For instance, if the Division in carrying out its regulatory function were to subpena records from every fiftieth or one-hundredth employer withholding state income taxes, I would have no objection to the use in criminal prosecution of records so obtained. Indeed, the Byers analysis would make sense in such a situation because, instead of focusing on an individual suspected of having violated the law and thus obviously posing to that individual a substantial hazard of self-incrimination, the agency would merely be evaluating compliance with wage and hour laws of a randomly selected group not inherently suspect of engaging in criminal activity. We adopted such an approach in the context of sobriety checkpoints to assure that police stops were conducted for essentially regulatory, as opposed to criminal investigation, purposes. (Ibid.) Although our concern in Ingersoll was assuring compliance with Fourth Amendment search and seizure constraints, such an approach would also help assure that the purpose of the compelled disclosure of wage and hour records is regulatory and not to gather evidence for a criminal prosecutor. Where the purpose in obtaining such records is thus demonstrated to be truly regulatory in nature, it can truly be said the risk of self-incrimination is minimal. However, as noted, in this case we are presented with as pointed individualized suspicion of criminal activity as can be imagined, without any objective evidence of regulatory purpose.

In sum, if Shapiro’s required-records doctrine mandates that we weigh the state’s interest in compelling self-incriminating disclosures against the Fifth Amendment guaranty against such self-incrimination, then absent an affirmative showing by the regulatory agency that criminal prosecution is essential to enforce a valid regulatory scheme, the agency’s obtaining such records by compulsion must be conditioned on their unavailability for use in a criminal prosecution. In the absence of an applicable immunity provision, to avoid violation of the Constitution and to preserve the ability of the Division to perform its regulatory function, we should provide such immunity judicially. (See Adams v. Maryland (1954) 347 U.S. 179, 181 [98 L.Ed. 608, 612, 74 S.Ct. 442].)

1 All further statutory references are to the Labor Code unless otherwise indicated.