(CN) - California Gov. Arnold Schwarzenegger illegally furloughed about 500 lawyers and hearing officers who work for the State Compensation Insurance Fund, the largest provider of workers' compensation insurance in the state.
The 1st District Court of Appeal in San Francisco upheld a trial court's ruling that Schwarzenegger and the director of the Department of Personnel Administration violated the law by ordering the State Fund employees to take two days off without pay each month.
In December 2008, Schwarzenegger ordered furloughs of most state employees beginning in February 2009 as a means of tackling the state's multimillion-dollar budget deficit.
Last January, the California Attorneys, Administrative Law Judges and Hearing Officers in State Employment (CASE) sued Schwarzenegger to prevent the furloughs.
California law exempts employees of the State Fund from "any hiring freezes and staff cutbacks," the ruling states. Schwarzenegger said the statute only prohibited firing employees, not reducing their hours, but the trial court ruled that reducing hours equaled cutbacks.
The appeals court agreed.
"Defendants' suggestion that the exemption for SCIF employees from 'staff cutbacks' prevents layoffs but not a reduction in hours is not sensible. Staff is 'cut back' whether hours are reduced or employees are terminated," Justice Stuart Pollak wrote.
Even if the furloughs went through, they would not help California get out of its financial rut, the court said.
"Any cost savings realized from a furlough of SCIF employees would accrue not to the benefit of the state's general fund, but to the ledger account maintained for the exclusive use of SCIF," Pollak wrote.
The insurance fund, which provides workers' compensation insurance for many California employers, is funded by premiums paid by employers, not the state budget.
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