BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
SB 705
Senator Lowenthal
As Amended March 31, 2009
Hearing Date: April 28, 2009
Labor Code
GMO:jd
SUBJECT
Employee Rights: Exhaustion of Administrative Remedies
DESCRIPTION
This bill would provide that an aggrieved employee, whether in
the public or private sector, need not exhaust his or her
employer's internal administrative process or remedies prior to
seeking relief in a civil action, if the complaint involves a
right that the Legislature determines to be based on a
fundamental public policy of the state. It would make the
results of an administrative adjudication involving
substantially the same rights and the same parties admissible in
a subsequent civil action.
BACKGROUND
The sponsor of this bill is the California Employment Lawyers
Association. See Comment 2 below for additional information.
CHANGES TO EXISTING LAW
Existing law recognizes that seeking and holding employment free
from discrimination based on race, religion, color, national
origin, ancestry, physical or mental disability, medical
condition, marital status, sex, age, sexual orientation, or any
other basis enumerated in the Unruh Civil Rights Act is a civil
right. (Gov. Code Sec. 12921.)
Existing case law recognizes a strong public policy against
wrongful employment actions. (Tameny v. Atlantic Richfield Co.
(1980) 27 Cal.3d 167, 176-177, where the court established that
(more)
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an employer who terminates an employee for refusing to commit an
illegal act commits a tort, limited an employer's ability to
discharge at will in consideration of "fundamental public
policies," and emphasized that a tort cause of action could be
brought even when, as in the case of Tameny, no statute was
identified that expressly prohibited discharge from employment.)
Existing case law requires plaintiff-employees to exhaust
administrative remedies when the Legislature expressly provides
for exhaustion by statute and when employers design their own
grievance procedures. (Abelleira v. District Court of Appeal
(1941) 17 Cal.2d 280.)
Existing law , the Fair Employment and Housing Act, provides
employees with administrative procedures and remedies for
employment discrimination actions against public and private
employers. (Gov. Code Sec. 12940 et seq.)
Existing law provides state employees and employees of the
University of California, the California State University, and
the California Community Colleges a process and a procedure for
the prosecution of complaints of employment discrimination or
other wrongful employment actions. (Gov. Code Sec. 8547 et seq.,
19683 et seq.)
Existing case law provides conflicting decisions relating to the
exhaustion of administrative remedies in employment actions
involving public employees. (Cf. Schifando v. City of Los
Angeles (2003) 31 Cal.4th 1074; Johnson v. City of Loma Linda
(2000) 24 Cal.4th 61; Campbell v. Regents of the University of
California (2005) 35 Cal.4th 311; Williams v. Housing Authority
of the City of Los Angeles (2004) 121 Cal.App.4th 708; Miller v.
County of Los Angeles (2008) 169 Cal.App.4th; Ahmadi-Kashani v.
Regents (2008) 159 Cal.App.4th 449; Westlake Community Hosp. v.
Superior Court (1976) 17 Cal.3d 465, 482-485; Ortega v. Contra
Costa Community College Dist. (2007) 156 Cal.App.4th 1073, 1083;
Miklosy v. Regents of the University of California (2008) 44
Cal.4th 876; State Chiropractic Examiners, et al. v. Superior
Court of Sacramento County (Carole M. Arbuckle, Real Party in
Interest) (2009) 45 Cal.4th 963.)
This bill would provide that exhaustion of an employer's
internal administrative remedies, or judicial review of a
decision of an administrative agency, is not a precondition for
a civil action alleging a violation of a right that the
Legislature determines to be based on a fundamental public
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policy of the state, unless the Legislature provides otherwise
in the statute that established the civil action.
This bill would make admissible as evidence in a subsequent
civil action the result of an administrative adjudication by an
employer regarding an allegation of a violation of an employee
right that the Legislature determined to be based on a
fundamental public policy, where the civil action involves
substantially the same rights and substantially the same
parties, unless otherwise provided by the Legislature or by a
collective bargaining agreement.
COMMENT
1. Stated need for the bill
The author writes:
The employee's path from being the subject of illegal
employment practices to court redress should be clear. Where
the Legislature has provided the necessary steps before filing
a lawsuit, employers and employees know what is expected. But
in the absence of legislative guidance, courts have created
rules which are based on a case-by-case review, often
inconsistent, unclear, and ill-defined. As a result,
employers and employees are uncertain about whether the
employee must exhaust internal remedies and what, if any, are
the consequences of doing or not doing so.
Courts are required to spend limited judicial resources
sorting out or attempting to clarify and apply the law in this
area and litigants, on risk of losing their access to the
court system, must guess at whether or not to participate in
internal grievance and administrative procedures. As a
consequence, workers avoid internal processes for fear of
losing their day in court or, worse yet, they inadvertently
forfeit their right to civil court because they participated
in their employer's internal process.
This bill ensures that employees can utilize internal
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administrative procedures without fear of giving up court
access although the results of administrative determinations
can be used as evidence later.
2. Conflicting cases involve public, not private, employment
SB 705 would add a section to the Labor Code to clarify an
employee's right to bring a civil action without exhausting
administrative remedies, including internal grievance
procedures, for the alleged violation of a
statutorily-designated civil right by an employer. The language
of the bill would make it applicable to all employers, whether
private or public.
a. Published cases on exhaustion of administrative remedies
all involve public employers
It is true, as the author notes, that the numerous decisions
involving exhaustion of administrative remedies prior to
bringing of a civil action in employment cases are conflicting.
A sampling of those cases are as follows:
Schifando v. City of Los Angeles (2003) Cal.4th 1074 holds that
a plaintiff-employee bringing a FEHA claim need only exhaust
administrative remedies provided for by the FEHA statute and is
not required to fulfill an employer's or public agencies'
internal administrative procedures when a FEHA claim is raised.
(supra at 1085-86.)
Johnson v. City of Loma Linda (2000) 24 Cal.4th 61 provides that
if an employee opts to pursue his or her employer's internal
administrative remedies for a claim of FEHA violation, the
employee must fully exhaust the administrative remedies, and
must have an adverse decision set aside in a mandamus action
before bringing a FEHA claim to court. (See below for a
discussion of the harsh results of Johnson.) (Supra, at 71, 76.)
Williams v. Housing Authority of Los Angeles (2004) 121
Cal.App.4th 708 leaves unsettled the question of whether
employees' non-statutory public policy claims, i.e., those based
on a strong public interest to prohibit wrongful employment
actions, are exempt from any requirement of exhaustion of
administrative remedies.
Ahmadi-Kashani v. Regents of the University of California (2008)
159 Cal.App.4th 449 holds that employees may abandon internal
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processes prior to conclusion and bring their actions directly
to court.
Miller v. County of Los Angeles (2008) 169 Cal.App.4th 1373
holds that an employee who exhausts administrative remedies to
some extent, including presentation of evidence and testimony,
but who withdraws from the process prior to finality may
nonetheless be precluded from court action absent reversal in a
mandamus proceeding.
Miklosy v. Regents of the University of California (2008) 44
Cal.4th 876 holds that a civil action is available only when an
employee has first filed a complaint with the University and the
University has failed to reach a timely decision on the
complaint. Here the court stated that the Legislature could
reasonably have intended the University to resolve whistleblower
retaliation claims by way of its own internal procedures,
reserving the alternative remedy of a damages action for those
instances when the University fails to complete its process in a
timely manner.
State Chiropractic Examiners, et al. v. Superior Court of
Sacramento County (Carole M. Arbuckle, Real Party in Interest)
(2009) 45 Cal.4th 963, on the other hand, made it clear that a
University of California employee may bring a parallel damages
action in court while pursuing the administrative remedies
available through the internal processes established by the
University.
While there may be a way to reconcile all of these cases, which
are only the tip of the iceberg as there are hundreds of cases
involving the exhaustion of administrative remedies question
prior to litigation of the substantive merits of the underlying
civil action, the author believes that a clear and concise
statement in statute would do away with the confusion and
establish a bright line when it comes to violations involving
fundamental public policies.
The sponsor, California Employment Lawyers Association, explains
the murky field thus:
Schifando and cases it cites seemed to say that a public
employee need not exhaust administrative remedies for a FEHA
claim; Johnson says that, if the employee does exhaust such
remedies, and loses, those findings must be overturned
judicially. Confusing that straightforward rule is the recent
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decision of Page v. Los Angeles County Probation Department
(2004) 123 Cal.App.4th 1135. In Page, the employee had
claimed discrimination through her employer's grievance and
civil service procedures, as well as pursuing administrative
agency exhaustion through the DFEH (Department of Fair
Employment and Housing). The civil service hearing was
adverse to her. In confusing language, the court of appeal
held that "We conclude that since Page failed to exhaust
administrative and judicial remedies, she cannot pursue this
action for damages." (emphasis added.) The employee, however,
had exhausted "administrative" remedies with both DFEH and
with her employer. The opinion is either inconsistent with
Schiafando's rule that employees need not exhaust their
employer's administrative processes, or advances a rule not
previously stated, i.e., that an employee must exhaust the
employer's administrative procedures before exhausting the
agency's (DFEH's) administrative procedures. Either way, the
decision is inconsistent with Schifando, which is cited
throughout the opinion. A third possibility is that the court
did not understand or differentiate between "administrative"
and "judicial" exhaustion. The decision could easily have
rested on Johnson's requirement that employees exhaust
judicial remedies before filing a lawsuit based on the FEHA,
and not confused matters by claiming a failure to exhaust
"administrative" procedures.
It is also true that application of the Johnson rule has had
some harsh results. In Castillo v. City of Los Angeles (2001)
92 Cal.App.4th 477, the court held that the 29-year old employee
could not pursue his FEHA claim because it was barred when his
petition for a writ of mandate was denied. The employee, while
pursuing his administrative remedy at DFEH by appealing an
unfavorable decision by the City of Los Angeles on a FEHA claim,
had filed a petition for a writ of mandate and at the same time
filed a complaint in superior court. Because both actions (the
petition for writ and the complaint in superior court) involved
the same "primary right," being the issue of the wrongfulness of
the discharge, the court said that the issue had been raised and
lost by the employee in the petition for writ, and thus the
employee was barred from relitigating the same issue in a FEHA
case in court.
b. Federal cases do not require exhaustion of administrative
remedies, but they also involve public employees
The sponsor of SB 705 cites federal law that does not require
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exhaustion of administrative remedies, such as U.S.C. Section
1983 actions. (Patsy v. Board of Regents (1982) 457 U.S. 496.)
They also cite U.S.C. Section 2000e-16(e) that allows federal
employees to bring discrimination, harassment, and retaliation
claims under the Rehabilitation Act. "When an agency issues a
notice of final action to a federal employee alleging employment
discrimination, the claimant may seek de novo review of the
disposition of his administrative complaint by filing a civil
action in district court within 90 days."
As in the state cases, the federal decisional law on exhaustion
of administrative remedies involved cases against employers that
were public agencies. (Cf. Farrell v. Principi, Secretary to
Department of Veterans Affairs (9th Circuit, May 11, 2004) 366
F.3d 1066.)
Suggested amendment: In light of the compelling evidence that
the state courts have rendered conflicting decisions regarding
exhaustion of administrative remedies as applied to employees of
public agencies, but little or no evidence that employees in the
private sector are involved in litigation of this issue, the
author may wish to consider limiting SB 705 to affect only
employees of public agencies.
c. FEHA allows private sector employees to file a FEHA claim
with DFEH without exhausting the private employer's internal
grievance procedures
The Fair Employment and Housing Act (Act) was enacted in order
to "protect and safeguard the right and opportunity of all
persons to seek, obtain, and hold employment without
discrimination or abridgment on account of race, religious
creed, color, national origin, ancestry, physical disability,
mental disability, medical condition, marital status, sex, age,
or sexual orientation." The Act contains declarations that the
practice of discrimination based on these enumerated
characteristics is against public policy and that the Act is an
exercise of the state's police power for the protection of the
welfare, health, and peace of the people.
To promote the purposes of the Act, both private and public
employees are permitted to file a claim against their employer
for violating the anti-discrimination statutes. While public
sector employees may have elaborate personnel grievance
procedures such as those adjudicated by the State Personnel
Board that state employees must first exhaust, private sector
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employees are free to bypass their private employers' internal
grievance procedures and file a FEHA claim directly with the
Department of Fair Employment and Housing. A verified complaint
filed with the DFEH then becomes subject to the administrative
process by which the department investigates and attempts to
resolve the complaint. If after 150 days the department does
not file an accusation or if the department finds, at any
earlier time, that there is insufficient evidence for an
accusation to issue, the plaintiff-employee may request a
right-to-sue notice, which is the green signal for the filing of
a complaint in superior court.
The FEHA also allows a complainant to withdraw a complaint at
any time after the complaint was filed. Generally, the reason
employees from the private sector go to the DFEH with their FEHA
discrimination complaint is to take advantage of the less costly
administrative process in trying to resolve a dispute with their
employer, and to take advantage of the investigative powers of
the state agency, the results of which they can use when they
later go to court.
With public agency employees however, the process is more
cumbersome and at times confusing, because a public agency
generally has an internal grievance process that by ordinance or
statute an employee is required to exhaust before seeking
redress in court. When a FEHA claim is involved, an employee
can become mired in the administrative procedures, which could
also involve the federal Equal Employment Opportunity Commission
for a federal employment discrimination claim, and the State
Personnel Board for a retaliation claim by a state employee.
3. Other pending legislation to permit parallel actions in
administrative and judicial fora
In SB 705, the sponsor and the author emphasize the need to
resolve the well-documented exhaustion of administrative
remedies quagmire in the appellate courts, so that litigation
may be focused on the substance of these complaints rather than
on whether administrative remedies have been exhausted. This
has a lot of merit, of course, for public employees, because
they are the ones with the mandatory exhaustion of
administrative remedies problem. Administrative review and
adjudication could take almost as long as a court action, and
could end up costing the employee a lot of money if he or she is
paying attorney's fees for representation at that level. The
approach taken by this bill is only one of several that have
been presented over the years.
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For example, current pending legislation relating to
whistleblower retaliation cases would cut through the
administrative process at the State Personnel Board by allowing
a plaintiff-employee to request, as early as at the same time a
verified complaint for a violation of the California
Whistleblower Protection Act is filed with the SPB, a
right-to-sue notice, and requiring the SPB then to issue one
within 10 days of the receipt of the request (SB 220, Yee).
Perhaps the author may wish to consider looking at FEHA instead
of the Labor Code and evaluating whether the FEHA procedure for
administrative review may be truncated in the same manner as the
CWPA is being amended by SB 220. Thus a complainant may seek
redress in both the administrative and judicial fora
concurrently.
4. Bill would instead establish that neither exhaustion of
administrative remedies nor judicial review of an
administrative decision is a precondition for filing a civil
suit
It is undeniable that the process of getting a case into court,
when an administrative review process is invoked first, has
become extremely complex at times, and quite frustrating at all
times. The cases cited in Comment 2 all involved internal
grievance procedures mandated by the public agency, sometimes
the DFEH administrative review process, sometimes the SPB
review. And some cases involved filing a complaint in court
after an adverse ruling in an administrative setting, in which
case, there is a writ petition for review of the administrative
ruling that must first be brought and granted to allow the
filing of the lawsuit.
This bill would bypass all of these proceedings to allow the
filing of a civil action in superior court when the alleged
violation involves an employee's right that the Legislature
determines to be based on a fundamental public policy of the
state. Even though the "fundamental public policy of the state"
from which an employee draws a right as an employee brings to
mind "employment discrimination" immediately, there are other
public policies such as the policy to protect whistleblowers
(affecting both private and public employers), the policy to pay
fair wages, and others.
Under this bill, an exception to the avoidance of the exhaustion
of administrative remedies and/or judicial review that this bill
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would establish would be where the Legislature expressly
requires these steps to be taken. Thus, if this bill were
enacted, there may have to be conducted a study of the statutes
affecting employment rights in order to determine where a
statement of the Legislature's intent must be added to require
exhaustion of administrative remedies or judicial review of an
adverse administrative ruling first before a civil action is
filed.
Another exception would be where a collective bargaining
agreement expressly provides that exhaustion of administrative
remedies is required. How this fits into contracted-for
grievance procedures is not clear.
5. Results of employer's administrative review would be
admissible in a subsequent civil proceeding involving same
parties, same rights
This bill would provide that the results of an employer's
administrative review process shall be admissible in a
subsequent civil action involving the same rights and the same
parties.
In general, a court reviewing an administrative decision would
base its decision on the sufficiency of the evidence that was
presented, the due process involved in the review, and whether
the result was arrived at fairly and according to the legal
constructs of applicable law. However, this part of SB 705
would apply to a court action, filed in superior court, either
before, during, or after an internal administrative review
process, which is supposed to be a de novo hearing, with the
parties presenting their case as if it had not been heard by
another forum prior.
While this new rule would certainly expedite the judicial
process and perhaps reduce costs, it may be a good idea to
examine the ramifications of making the evidence in a prior
administrative hearing admissible in toto in a subsequent de
novo hearing more closely.
6. Arguments in support, opposition
In support of this bill, the Consumer Attorneys of California
state that "[a]mbiguities in existing law have resulted in the
unpredictable interpretation of illegal employment practice
rules. These inconsistent and unclear guidelines have confused
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employees and prompted additional litigation concerning the
acceptance of administrative determinations. SB 705 helps to
provide consumers clarity in the resolution of illegal
employment claims. ? By permitting the employees to engage in
internal administrative procedures without fear of losing their
access to the courts, SB 705 facilitates pre-litigation dispute
resolution and effectively lightens court loads."
On the other hand, the California Chamber of Commerce states
that SB 705 "would reverse long-established California Supreme
Court precedent upholding the rule of exhaustion of
administrative remedies. The rule is that unless there is a
statute expressly providing otherwise, administrative remedies
must be exhausted. This rule extends to internal employer
administrative remedies as well, such as grievance procedures,
where the Legislature has not specifically mandated its own
administrative review process. ... SB 705 proposes to do just
the opposite - employees would never have to exhaust
administrative remedies unless the Legislature has expressly
provided otherwise. ...SB 705 would violate public policies
recognized by the Supreme Court in support of exhaustion of
administrative remedies, including promotion of judicial economy
and mitigation of damages. Moreover, many employers provide
internal procedures in order to promote and facilitate early
resolution of workplace issues and problems. SB 705 would
encourage employees to bypass these procedures and go straight
to the courts. ... We believe SB 705 will result in unnecessary
and wasteful litigation which will hurt California employers and
further burden our court system with workplace disputes that
could have been resolved outside of the courts."
Support : Consumer Attorneys of California
Opposition : California Chamber of Commerce
HISTORY
Source : California Employment Lawyers Association (sponsor)
Related Pending Legislation :
SB 220 (Yee) would allow a state employee with a retaliation
complaint for whistleblowing to request a right-to-sue notice at
the same time or after the filing of a complaint with the State
Personnel Board, and require the SPB to issue such a notice if
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requested.
Prior Legislation : None Known
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