Lower Court Extends Application of State Supreme Court Holding which Limits Requirement of Exhaustion of Public Entity Employer’s Internal Remedies in FEHA-Type Cases

In 2003, the California Supreme Court, in Schifando v. City of Los Angeles (2003) 31 Cal.4^th 1074, removed an administrative hurdle faced by public sector employees suing on discrimination claims under the California Fair Employment and Housing Act (“FEHA”).  The Court held that public sector employees were not required to utilize the internal administrative procedures made available by their employer before suing under FEHA, although these employees must comply with FEHA’s own pre-lawsuit administrative requirements, which include the timely filing of a discrimination complaint with the Department of Fair Employment and Housing (“DFEH”) and the receipt of a right to sue letter from that agency.  Schifando did not address how this rule would apply when public sector employees are suing on both FEHA and non-FEHA claims arising out of the same set of facts; however, this question was answered more recently by a lower court in Williams v. Housing Authority of the City of Los Angeles (“HACLA”), a case that issued on August 12, 2004.

In HACLA, the plaintiff, a public sector employee, sued his employer alleging that he had been demoted and later constructively discharged for unlawful reasons.  Two of his claims were non-FEHA claims, while the third alleged retaliation under FEHA.  The trial court agreed with the employer that the plaintiff’s failure to utilize the employer’s internal remedies, which included administrative hearing and appeal procedures, presented a bar to his lawsuit under a well settled legal principle that a plaintiff must first exhaust available administrative remedies before seeking judicial relief.  The appeals court only partially affirmed the trial court’s decision.  The appeals court essentially held that, as to non-FEHA claims, public sector employees would have to exhaust their employer’s internal administrative remedies only if the use of those remedies would not have a “preclusive effect” on any FEHA claim that the employee also is suing on.  In other words, if there was a risk that the internal remedies could result in findings that barred further litigation of the issues under FEHA by reason of collateral estoppel or res judicata principles, then the employee would not be required to pursue those internal remedies.

In reaching this decision, the HACLA court looked to the factors that formed the basis of the Supreme Court’s holding in Schifando.  There, the high court reasoned that, to require the employee to first use the employer’s internal procedures to resolve a FEHA claim would deprive the employee of certain procedural safeguards under FEHA that insured a full and fair review of the claim by an independent agency; i.e., the DFEH.  Such a requirement also could result in barring any further prosecution of the claim under the “issue or claim preclusion” principles of collateral estoppel and res judicata.  For public sector employees, such preclusion effects could lead to unfair results, because employees who are not happy with the employer’s disposition of their internal appeals have only limited judicial review of that action.  Such review is obtained by the filing of a petition for writ of administrative mandamus, a proceeding under which the court must give deference to the public entity’s administrative findings, even though those findings may have been made without the benefit of discovery or the full presentation of evidence that might be available in a FEHA lawsuit.

After giving consideration to these factors, the court in HACLA concluded that the Supreme Court would extend the Schifando holding to non-FEHA claims if those claims were nevertheless based on alleged violations of FEHA.  For example, a public sector employee suing on a claim for wrongful discharge in violation of public policy would not be required to first utilize the employer’s internal administrative remedy if the alleged basis for the claim was that the discharge was racially motivated.  On the other hand, a claim that the employee’s termination breached a contract to terminate only for good cause would be subject to the requirement that the employee exhaust his or her internal remedies, because any findings concerning the contractual issue do not necessarily turn on the question of racially motivated discrimination or other FEHA-proscribed considerations.

Persons wishing further information or who have questions or comments about either this case or any of the cases that have appeared on this website can contact any of the attorneys at Epstein, Turner & Song.