Older Workers Dealt Setback by State Court

Employers can discriminate against older workers in awarding job benefits without violating state law, the California Supreme Court ruled unanimously Monday.

The court said the state protects workers over 40 from age discrimination only in hiring, termination, demotion and suspension, not in the awarding of benefits. The decision is expected to apply to benefits and working conditions, including sick leave, job scheduling, vacation and stock options.

For 19 years, a state regulation had prohibited age discrimination in benefits for employees over 40, who make up nearly half of the state’s work force. But the high court said the antidiscrimination law on which the regulation was based provides no such protection.

“The Legislature has prohibited employers from discriminating in the terms and conditions of employment on the basis of a variety of factors,” Justice Joyce L. Kennard wrote for the court. “But the employee’s age notably is not one of those factors.”

Workers over 40 are not without recourse, however.

They will still be able to sue under U.S. law, although federal court is a less favorable forum for plaintiffs because of ceilings on monetary damages and a unanimous jury requirement. In a state court, only nine of the 12 jurors must agree on a verdict in a civil case.

William J. Emanuel, a Los Angeles employment lawyer who represents management, said he expects that California employers will follow federal age discrimination rules even if workers are less likely to prevail in lawsuits in federal court.

Monday’s ruling “is surprising a lot of people, but once you read the statute, it is clear that the state’s age discrimination law does not apply to benefits,” Emanuel said.

The case already has spurred introduction of a bill in Sacramento to restore protections for older workers’ benefits. An aide to Assemblywoman Gloria Negrete McLeod (D-Chino), the bill’s author, said Monday that the Legislature probably will pass the legislation this summer.

The Legislature passed another bill in 1998 to expand protections for older workers, but then-Gov. Pete Wilson vetoed it. Wilson said at the time that older workers already were protected by the state’s antidiscrimination law.

Gov. Gray Davis has taken no position on the new bill. A spokesman said Monday that his legal advisors are studying the court’s decision.

William C. Quackenbush, who helped argue Monday’s case for workers, said the court’s ruling could have major consequences for California employees.

“The court is basically saying that under state law it is not illegal to single out those over 40 and say you don’t get these benefits,” said Quackenbush, a San Mateo lawyer. “The concept of benefits would probably extend to any employee benefit other than wages.”

Even if workers sued in federal court, the federal age discrimination law exempts certain claims over employee benefit plans, Quackenbush said.

The ruling came in a case in which an Orange County worker was denied access to corporate assistance for education because of his age.

Dan Esberg of Corona was hired at age 42 by Union Oil Co. of California as a telecommunications specialist. The company paid his expenses to obtain an undergraduate degree.

At 56, Esberg told his supervisor that he and another colleague were planning to obtain master’s degrees in business administration and would finance their education through the company’s education benefits program. Esberg’s supervisor was not encouraging.

“You’re too old to invest in,” the supervisor told him.

A few months later, the company denied funding for Esberg’s graduate degree. Three younger employees, including a 42-year-old, received the assistance.

Esberg sued, and a jury voted 11 to 1 to award him $51,000 in economic damages and $35,000 in noneconomic damages, including emotional distress. Esberg’s employer had a policy against age discrimination, and the jury found that it had violated this policy--a contract--with Esberg.

But violation of a contract can not be penalized with emotional distress damages. The trial judge struck down the $35,000 emotional distress award on the grounds that the state’s Fair Employment and Housing Act, which does allow for such damages, offers no protections against age discrimination in the awarding of job benefits. A Court of Appeal agreed.

Unocal Corp., the parent company of Union Oil, denied discriminating against Esberg because of his age. Esberg, 64, has left Union Oil and now works for a construction company.

“We don’t believe we discriminated in this case, and our policy is not to discriminate,” said Barry Lane, a Unocal spokesman. He said the firm refused to pay for the costs of Esberg’s graduate education because of his work performance, not his age.

In upholding the lower court decisions in Esberg’s case, the California Supreme Court said the state’s antidiscrimination law bars bias in working conditions and benefits on the basis of race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, marital status, sex or sexual orientation--but not age.

“Although as individuals we may applaud plaintiff’s efforts at self-improvement through education,” Kennard wrote in Esberg v. Union Oil (SO96524), “as judges we find nothing ... that obliges employers to ignore an employee’s age in deciding whether to fund such efforts.”

Dale M. Fiola, an attorney for Esberg, said the ruling gives employers more “leeway” to discriminate.

The decision means that corporations can say, “ ‘We want the older workers to work graveyard,’ ” Fiola said. “They can do that.”

Quackenbush, who represents workers in employment cases, said the ruling invalidates a regulation that has been on the books in California since 1983.

“I would worry about things such as stock options,” Quackenbush said. “Stock options are an employee benefit, and if they want to get rid of older employees, maybe they will just stop giving them new options.”