SAN FRANCISCO — In a sharp setback to the state's civil rights agency, the California Supreme Court held Monday that the Fair Employment and Housing Commission may not award punitive damages against employers for job discrimination.
The court substantially limited the enforcement authority of the commission, holding 6 to 1 that the agency had exceeded its power under state statutes to punish bias.
Granting a major victory to employers, the justices rejected contentions by the commission that the threat of punitive damages was the only effective deterrent to the worst instances of job discrimination.
The commission may still order that victims be hired, reinstated or awarded back pay and may also seek criminal charges against employers who violate its orders, the court noted. And if victims want "potentially more lucrative redress," they may still go the courts to seek punitive damages, the justices said.
If those measures do not prove effective, wrote Justice Edward A. Panelli for the majority, "it is for the Legislature, rather than this court, to remedy this defect (in the law)."
Appeals Ruling Reversed
The justices reversed a ruling by a state Court of Appeal upholding a punitive award of $7,500--the first of its kind--to a female employee of a Southern California company she charged with sex discrimination.
The firm, Dyna-Med Inc. of Carlsbad, was joined by the California Chamber of Commerce and other state and national business organizations challenging the authority of the commission to make such awards, saying that if the awards were upheld it would open the way for scores of other administrative agencies to assert similar powers.
The business groups contended that it was unfair to subject employers to such penalties because the commission--made up of gubernatorial appointees not required to be attorneys--lacked the strict procedural safeguards found in the courts, such as trial by jury.
Commission attorneys, backed by civil rights groups, argued that back-pay awards were often inadequate and that hiring or reinstatement orders were ineffective in the frequent instances where complainants had since obtained other jobs.
State statutes give the commission specific authority to make punitive awards of up to $1,000 for acts of housing discrimination. The commission began making punitive awards in job cases in 1980, under a provision of the law saying it may take actions that will "effectuate the purpose" of anti-bias statutes. The agency has awarded punitive damages of $1,000 to $50,000 in about 20 cases since then.
The court's ruling Monday drew praise from lawyers backing the firm.
"The amount at stake was relatively small but there was a sense of moral outrage and anger about this," said Michael Wischkaemper, an attorney for Dyna-Med. "The commission was trying to take unto itself more authority than the Legislature had intended."
"This decision still leaves the commission with considerable authority to deal with serious concerns," Wischkaemper said.
However, the attorney who represented the commission in the case said the decision could invite discrimination by employers.
"What will be lost will be the deterrent effect," said state Deputy Atty. Gen. Marian M. Johnston. "Punitive damages have been the remedy used to combat intolerable behavior by employers--and now that is no longer available to the commission."
Johnston noted, however, that the decision left the way clear for the Legislature to amend the law if it wished and also did not rule out compensatory damages in such cases, such as for mental distress. The commission's authority to make compensatory awards is at issue in another case pending before the justices.
The dispute at issue arose in 1978 after a complaint to the commission by Linda Olander of San Diego, who said she had been unfairly denied a promotion. According to testimony, a settlement was reached in which Dyna-Med agreed to retain Olander and train her for other promotional opportunities--but within hours of the agreement, the woman was fired.
The commission later awarded Olander $4,470 in back pay and $7,500 in punitive damages for what it said was "deliberate, egregious and inexcusable" retaliation against the woman. The company then brought suit, challenging the commission's authority.
Panelli's majority opinion was joined by Chief Justice Malcolm M. Lucas and Justices Stanley Mosk, John A. Arguelles, David N. Eagleson and Marcus M. Kaufman. Justice Allen E. Broussard dissented, adopting as his own a 1985 opinion by a state Court of Appeal panel upholding the award.
The court rejected the commission's contention that the broad provisions of the law allowing it to "effectuate" its purpose was meant to allow punitive damages.
"Taken to its logical conclusion, (that) would authorize every administrative agency granted remedial powers to impose punitive damages so long as the statute directs that its provisions are to be liberally construed to effectuate its purposes," Panelli wrote.
A review of state statutes indicates that when the Legislature wants to authorize punitive damages, it does so expressly, as in the case of housing discrimination, the court said.
It noted that several courts in other states also have ruled that administrative agencies may not impose punitive damages without express authority.
Victims who want to go to court to seek punitive damages may do so, the justices stressed.