Title: Esberg v. Union Oil Co.

State: california

Issuer: California Supreme Court

Document:

1
Filed 6/24/02
IN THE SUPREME COURT OF CALIFORNIA
DAN ESBERG,
)
)
Plaintiff and Appellant,
)
)
S096524
v.
)
)
Ct.App. 4/3 G022069
UNION OIL COMPANY OF 
)
CALIFORNIA,
)
)
Orange County
Defendant and Appellant,
)
Super. Ct. No. 751082
)
JEFF WINSTON et al.,
)
)
Defendants and Respondents.
)
__________________________________ )
In this case, a 53-year-old employee, with the employer’s approval, pursued an
undergraduate degree at company expense.  Three years later, he sought employer-
paid postgraduate education.  When the company denied funding, plaintiff brought
suit claiming unlawful age discrimination.
This case does not involve any cause of action related to wrongful termination.
Instead, plaintiff raises two novel issues related to age discrimination in the
furnishing of employee benefits.  First, he contends that the California Fair
Employment and Housing Act (the FEHA) (Gov. Code, § 12900 et seq.)1 prohibits
an employer from discriminating on the basis of age in the terms, conditions, or
privileges of employment.  Second, he contends that an employer’s denial of
                                                
1 
All statutory references are to the Government Code unless otherwise
mentioned.
2
educational assistance to an employee over the age of 40 because of that employee’s
age violates a fundamental policy against age discrimination in employment and is
therefore a common law tort for which an employee may recover damages under our
decisions in Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167 (Tameny) and
Rojo v. Kliger (1990) 52 Cal.3d 65 (Rojo).
After a thorough review of the relevant statutory provisions, we conclude, as
did both the trial court and the Court of Appeal, that the FEHA’s prohibition against
age discrimination in employment extends to hiring, discharging, suspension, and
demotion, but not to the furnishing of employee benefits such as educational
assistance.  Because the FEHA is the source of the fundamental public policy against
age discrimination in employment, that public policy is subject to the substantive
limits set by the FEHA.  Although as individuals we may applaud plaintiff’s efforts at
self-improvement through education, as judges we find nothing in either statutory or
common law that obliges employers to ignore an employee’s age in deciding
whether to fund such efforts.
I.  FACTS
In February 1980, Union Oil Company of California (UNOCAL) hired plaintiff
Dan Esberg, then 42 years old, as a telecommunications specialist.  In 1991,
supervisor Jeff Winston told a group of employees, including plaintiff, that any of
them who had not received an undergraduate degree should obtain one.  Plaintiff did
not have a college degree at that time.  Manager Nellis Freeman explained that
through its educational aid program, UNOCAL would reimburse plaintiff’s tuition
and other costs for each undergraduate course as plaintiff completed it.  Plaintiff
obtained approval for educational aid and enrolled in the Bachelor of Science
program at the University of Redlands.  UNOCAL eventually paid all the expenses
that plaintiff incurred in obtaining his undergraduate degree.
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In early 1994, plaintiff and coworker John Marble discussed the advantages of
obtaining a Master of Business Administration (MBA) degree from the University of
Redlands.  In May 1994, plaintiff told his immediate supervisor, Walter Aldrich, that
he and Marble were planning to enroll in the MBA program and to fund the expenses
through UNOCAL’s education aid program.  Aldrich’s response was:  “You’re too
old to invest in.”  Plaintiff was then 56 years old.  In August 1994, UNOCAL
formally denied funding for plaintiff’s proposed graduate degree.  UNOCAL granted
educational aid for the MBA program to three younger employees, including the 42-
year-old Marble.
In 1995, plaintiff filed a complaint with the Department of Fair Employment
and Housing (DFEH) based on UNOCAL’s refusal to fund an advanced degree for
plaintiff because of his age.  The DFEH chose not to prosecute plaintiff’s case, but it
gave him a “right to sue” letter that authorized him to file a private action in court.
After plaintiff received the right-to-sue letter, he brought this action against
UNOCAL.  Plaintiff’s complaint alleged, among other things, breach of contract, age
discrimination in violation of the FEHA, and denial of benefits in violation of
fundamental public policy.
After trial of the merits of plaintiff’s complaint, the jury returned a special
verdict finding that UNOCAL had wrongfully denied plaintiff educational assistance
benefits for the MBA program because of his age.  The jury also found that
UNOCAL breached an agreement it had with plaintiff that it would not discriminate
because of age.  The jury awarded plaintiff $35,000 in noneconomic damages and
$51,000 in economic damages.
UNOCAL moved for judgment notwithstanding the verdict, contending that
denial of an employment benefit such as educational assistance violated neither the
FEHA nor the fundamental public policy against age discrimination in employment.
The trial court agreed and set aside the jury’s $35,000 award of noneconomic
4
damages.  Because plaintiff had prevailed on his contract claim, the trial court
entered judgment awarding plaintiff $51,000 in economic damages.
Plaintiff appealed, alleging that UNOCAL’s refusal to reimburse him for the
costs of obtaining a master’s degree violated the FEHA prohibition against age
discrimination in employment, and that public policy supported a common law tort
claim for denial of employment benefits based on age.  The Court of Appeal rejected
these contentions and affirmed the trial court’s judgment.  We granted plaintiff’s
petition for review.
II.  DISCUSSION
A.  Overview of the FEHA’s Anti-discrimination Provisions
The Legislature enacted the FEHA to establish a comprehensive scheme to
eliminate certain discriminatory practices in employment and housing.  An overview
of the relevant employment discrimination provisions provides the background for
the discussion of plaintiff’s FEHA and common law public policy tort claims.
Section 12920 outlines the FEHA’s general policy against employment
discrimination:  “It is hereby declared as the public policy of this state that it is
necessary 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.”
Section 12935, subdivision (a) authorizes the Fair Employment and Housing
Commission (FEHC) to “adopt . . . suitable rules, regulations, and standards . . . to
interpret, implement, and apply all provisions of [the FEHA].”
The FEHA has two separate provisions—sections 12940 and 12941—
prohibiting various forms of workplace discrimination and identifying the classes
that are protected against these forms of discrimination.  Section 12940 prohibits an
5
employer from discriminating, among other things, in the “terms, conditions, or
privileges of employment” because of an employee’s “race, religious creed, color,
national origin, ancestry, physical disability, mental disability, medical condition,
marital status, sex, or sexual orientation.”  Notably, section 12940 does not prohibit
employment discrimination on the basis of age.
Section 12941, the specific FEHA provision addressing age discrimination in
employment, makes it “an unlawful employment practice for an employer to refuse
to hire or employ, or to discharge, dismiss, reduce, suspend, or demote, any
individual over the age of 40 on the ground of age, except in cases where the law
compels or provides for such action.”  (Italics added.)  Notably, section 12941 does
not prohibit discrimination in the terms, conditions, or privileges of employment.
B.  Plaintiff’s Contentions
Plaintiff contends that by denying his application for educational assistance for
an MBA degree his employer violated sections 12940 and following of the FEHA
prohibiting employment discrimination.  As we have observed, however, neither
section 12940 nor section 12941 prohibits discrimination in the terms, conditions,
or privileges of employment on the basis of age.  Section 12940 prohibits
discrimination in the terms, conditions, or privileges of employment on various
bases, but not on the basis of age, while section 12941 prohibits some forms of
employment discrimination on the basis of age, but not discrimination in the terms,
conditions, or privileges of employment.
Under well-established rules of statutory construction, we must ascertain the
intent of the drafters so as to effectuate the purpose of the law.  (Preston v. State
Bd. of Equalization (2001) 25 Cal.4th 197, 213.)  Because the statutory language is
generally the most reliable indicator of legislative intent, we first examine the words
themselves, giving them their usual and ordinary meaning and construing them in
context.  (People v. Lawrence (2000) 24 Cal.4th 219, 230.)  When statutory
6
language is clear and unambiguous, “ ‘there is no need for construction and courts
should not indulge in it.’ ”  (People v. Benson (1998) 18 Cal.4th 24, 30, quoting
People v. Overstreet (1986) 42 Cal.3d 891, 895.)
Of the various FEHA provisions, only sections 12941 and 12941.1 address age
discrimination in the workplace.  Section 12941, subdivision (a), provides in
pertinent part:  “It is an unlawful employment practice for an employer to refuse to
hire or employ, or to discharge, dismiss, reduce, suspend, or demote, any
individual over the age of 40 on the ground of age, except in cases where the law
compels or provides for such action.”  (Italics added.)  In section 12941.1, the
Legislature stated:  “[T]he use of salary as the basis for differentiating between
employees when terminating employment may be found to constitute age
discrimination if use of that criterion adversely impacts older workers as a group,
and . . . the disparate impact theory of proof may be used in claims of age
discrimination.”  (Italics added.)  Neither section 12941 nor section 12941.1
prohibits age discrimination in the terms, conditions, or privileges of employment.
The FEHA provision that does prohibit discrimination in the terms of
employment, section 12940, notably fails to include age as a protected category.
As pertinent here, it prohibits an employer from discriminating against an employee
“in terms, conditions, or privileges of employment” because of an employee’s
“race, religious creed, color, national origin, ancestry, physical disability, mental
disability, medical condition, marital status, sex, or sexual orientation.”  Although
section 12940 expressly prohibits discrimination in the terms and conditions of
employment on the basis of race, religion, sex, and other expressly mentioned
criteria, we cannot construe it, contrary to its plain meaning, as encompassing a
statutory prohibition against discrimination in the terms and conditions of
employment on the basis of age.
7
Section 12940 prohibits employment discrimination in the furnishing of
benefits, but not employment discrimination based on age, while section 12941
prohibits employment discrimination based on age, but not employment
discrimination in the furnishing of benefits.  Because the language of these sections
is unambiguous, we need not consider various extrinsic aids, such as the purpose of
the statute, the evils to be remedied, the legislative history, public policy, or the
statutory scheme encompassing the statute.  (Torres v. Parkhouse Tire Service, Inc.
(2001) 26 Cal.4th 995, 1003.)  Thus, we attach no significance to the Legislature’s
unsuccessful attempt to amend section 12941 to expressly declare it an unlawful
employment practice for an employer to discriminate against an employee over the
age of 40 in compensation or in other “terms, conditions, or privileges” of
employment absent a business necessity.  Although the Legislature passed Senate
Bill No. 1098 in 1998 to so amend section 12941, the Governor vetoed the bill, and
it did not become law.  (See Governor’s veto message to Sen. on Sen. Bill No. 1098
(July 9, 1998) 3 Sen. J. (1997-1998 Reg. Sess.) pp. 5514-5515.)  Thus, based on the
unambiguous language of the relevant FEHA provisions, we conclude that the FEHA
does not prohibit employment discrimination in the furnishing of employee benefits
on the basis of age.
Notwithstanding the clear language of sections 12940 and 12941, plaintiff
would have us consider subdivision (a) of section 7295.2 of title 2 of the California
Code of Regulations (regulation 7295.2(a)), which states:  “Discrimination on the
basis of age may be established by showing that a job applicant’s or employee’s age
over forty was considered in the denial of an employment benefit.”  (Italics added.)
If this regulation were valid, defendant employer would likely have to pay for
plaintiff’s postgraduate education.  Indeed, plaintiff’s central argument is that this
administrative regulation is both valid and reasonably necessary to effectuate the
purposes of the FEHA.  But a review of the law governing administrative regulations
8
reveals that regulation 7295.2(a) is invalid insofar as it purports to prohibit age
discrimination in employment benefits.
California administrative agencies routinely adopt quasi-legislative regulations
under express statutory authority.  “For such regulations to be valid in this state, they
must be consistent ‘with the terms or intent of the authorizing statute.’ ”  (Green v.
Ralee Engineering Co. (1998) 19 Cal.4th 66, 82, quoting California Assn. of
Psychology Providers v. Rank (1990) 51 Cal.3d 1, 11.)  A regulation that is
inconsistent with the statute it seeks to implement is invalid.  (Mooney v. Pickett
(1971) 4 Cal.3d 669, 679.)  Although regulation 7295.2(a) apparently would allow
plaintiff to establish age discrimination based on a denial of employment benefits,
the FEHA—the statute it seeks to implement—would not.  Because regulation
7295.2(a) is inconsistent with sections 12940 and 12941, which set the boundaries
of the FEHA’s employment discrimination prohibition, it is not “ ‘reasonably
designed to aid a statutory objective.’ ”  (Credit Ins. Gen. Agents Assn. v. Payne
(1976) 16 Cal.3d 651, 657.)
Plaintiff insists that subdivision (a) of section 12935, which authorizes the
FEHC to “adopt . . . suitable rules, regulations, and standards . . . to interpret,
implement, and apply all provisions of [the FEHA],” compels the conclusion that
regulation 7295.2(a) is valid.  We reject this argument, however, because regulation
7295.2(a), insofar as it purports to prohibit age discrimination in employment
benefits, is inconsistent with the FEHA, and a regulation that is inconsistent with the
authorizing statute does not implement its provisions.
Plaintiff further suggests that regulation 7295.2(a) is necessary to implement
section 12920, in which the Legislature has declared that “as the public policy of
this state . . . it is necessary to protect and safeguard the right and opportunity of all
persons to seek, obtain, and hold employment without discrimination or abridgment
on account of . . . age . . . .”  Section 12920 is a general provision that simply
9
outlines the public policy behind the FEHA statutory scheme as a whole.  As we have
previously noted, when a statute’s language is clear, courts need not consider the
public policy or statutory scheme encompassing the statute.  (Torres v. Parkhouse
Tire Service, Inc., supra, 26 Cal.4th at p. 1003.)
Plaintiff’s argument that regulation 7295.2(a) is reasonably necessary to
effectuate the FEHA is unpersuasive.  As discussed earlier, neither section 12940
nor section 12941 prohibits age discrimination in the terms, conditions, or
privileges of employment.  Education benefits fall within this category.  We do not
review the wisdom of the Legislature’s decision not to include employees over the
age of 40 as a protected class in section 12940, or the wisdom of its decision not to
include allocation of employee benefits among the employer decisions to which the
age discrimination prohibition of section 12941 applies.  Our role in construing a
statute is simply to ascertain and to declare what is in terms or in substance
contained in the statute, not to insert what has been omitted.  (See Code Civ. Proc.,
§ 1858.)
C.  Plaintiff’s Common Law Tort Claim
Plaintiff alleges that an employer’s denial of educational assistance to an
employee over the age of 40 because of the employee’s age violates a fundamental
public policy and thus constitutes a common law tort for which damages are
recoverable under our decisions in Tameny, supra, 27 Cal.3d 167, and Rojo, supra,
52 Cal.3d 65.  We disagree.  Both Tameny and Rojo involved tortious discharge
claims, and neither involved age discrimination.  By contrast, plaintiff’s suit does
not allege wrongful discharge, but instead seeks to extend the FEHA prohibition
against discrimination in employment benefits to the class of workers over 40.
In Tameny, the plaintiff alleged that his employer had fired him for refusing to
participate in an illegal price fixing scheme.  We held that “an employer’s obligation
10
to refrain from discharging an employee who refuses to commit a criminal act . . .
reflects a duty imposed by law upon all employers in order to implement the
fundamental public policies embodied in the state’s penal statutes.”  (Tameny,
supra, 27 Cal.3d at p. 176, italics added.)  We concluded that such a violation of
public policy would support a common law cause of action in tort.  (Ibid.)
In Rojo, we held that the two plaintiffs had suffered tortious constructive
discharge because their employer’s sexual harassment forced them to leave their
employment.  (Rojo, supra, 52 Cal.3d at pp. 70-71.)  Our holding in Rojo was
grounded in the determination that our state Constitution (Cal. Const., art. I, § 8)
declared a fundamental public policy against sex discrimination in employment
(Rojo, supra, at pp. 89-90), and that this fundamental public policy “ ‘inure[d] to the
benefit of the public at large’ ” and was firmly established at the time of the
plaintiffs’ discharge (id. at pp. 90-91).
Some two years after Rojo, supra, 52 Cal.3d 65, this court refined the scope of
the common law tortious discharge claim in Gantt v. Sentry Insurance (1992) 1
Cal.4th 1083 (Gantt).  There, the plaintiff was constructively discharged for
resisting an employer’s pressure to lie during the investigation of a coworker’s
sexual harassment claim.  This court held that there was direct statutory support for
the jury’s express finding that the employer violated a fundamental public policy
when it constructively discharged the plaintiff employee, in view of section 12975,
which specifically prohibited any obstruction of an investigation by the DFEH.
Distinguishing between matters genuinely involving public policy and those that
concern merely ordinary disputes between employer and employee, we observed that
“[a] public policy exception carefully tethered to fundamental policies that are
delineated in constitutional or statutory provisions strikes the proper balance among
the interests of employers, employees and the public.”  (Gantt, supra, at p. 1095.)
11
As we later explained in Stevenson v. Superior Court (1997) 16 Cal.4th 880,
889 (Stevenson), “[i]n the context of a tort claim for wrongful discharge, tethering
public policy to specific constitutional or statutory provisions serves not only to
avoid judicial interference with the legislative domain, but also to ensure that
employers have adequate notice of the conduct that will subject them to tort liability
to the employees they discharge.”  (Italics added.)
In Stevenson, an employee who had been discharged at the age of 60 after 30
years of employment alleged that her former employer wrongfully terminated her
employment in violation of the public policy against age discrimination.
(Stevenson, supra, 16 Cal.4th at pp. 885-886.)  We recognized that the FEHA
establishes a general public policy against age discrimination in employment, but we
acknowledged the limitations of allowing common law tort claims based on public
policy articulated in a statute.  We said:  “[W]hen a plaintiff relies upon a statutory
prohibition to support a common law cause of action for wrongful termination in
violation of public policy, the common law claim is subject to statutory limitations
affecting the nature and scope of the statutory prohibition, but the common law
claim is not subject to statutory procedural limitations affecting only the availability
and scope of nonexclusive statutory remedies.”  (Stevenson, supra, at p. 904, italics
added.)  Applying that reasoning here, a common law tort claim based on the public
policy against age discrimination articulated in the FEHA is subject to the FEHA’s
limitations on the nature and scope of the statutory prohibition against age
discrimination.  (Stevenson, supra, at p. 904; see also Jennings v. Marralle (1994)
8 Cal.4th 121, 130 [public policy against employment discrimination does not apply
to employers who are statutorily exempt under the FEHA because they do not
regularly employ five or more persons].)  If, as we have concluded, the FEHA does
not prohibit employers from denying educational benefits on the basis of age, then
12
plaintiff may not ground a common law claim for denial of the same benefits in the
FEHA’s prohibition against age discrimination.
In Stevenson, we noted that a historical survey of tortious discharge decisions
established four requirements that a policy must meet in order to support a claim:
“First, the policy must be supported by either constitutional or statutory provisions.
Second, the policy must be ‘public’ in the sense that it ‘inures to the benefit of the
public’ rather than serving merely the interests of the individual.  Third, the policy
must have been articulated at the time of the discharge.  Fourth, the policy must be
‘fundamental’ and ‘substantial.’ ”  (Stevenson, supra, 16 Cal.4th at pp. 889-890.)
With respect to the first requirement, no constitutional or statutory provision
supports a claim for a wrongful denial of educational benefits to workers over the
age of 40.  As we noted earlier, the plain language of sections 12940 and 12941
reveals that the FEHA does not prohibit an employer from denying educational
benefits based on age.  Here, plaintiff employee’s interest in obtaining funding from
defendant employer to pursue a postgraduate degree at company expense without
regard to his age is not an interest “tethered to fundamental policies that are
delineated in constitutional or statutory provisions.”  (Gantt, supra, 1 Cal.4th at p.
1095.)
Failure to meet the first requirement of Stevenson, supra, 16 Cal.4th 880, is
fatal to plaintiff’s common law tort claim.  Therefore, we need not discuss the other
three requirements, and we reject plaintiff’s common law tort claim.
CONCLUSION
The California Legislature has established the public policy of this state for
employment discrimination generally and for age discrimination in employment in
particular.  In no uncertain terms, the Legislature has prohibited employers from
discriminating in the terms and conditions of employment on the basis of a variety
of factors, but the employee’s age notably is not one of those factors.  In equally
13
clear language, the Legislature has prohibited employers from discriminating on the
basis of age when they make decisions about hiring, discharging, suspension, and
demoting.  Under no reasonable construction, however, does the statutory language
of the FEHA extend the age discrimination prohibition beyond these matters to
encompass all employment decisions relating to the terms and conditions of
employment, such as the furnishing of educational assistance.  Because the FEHA
embodies this state’s general public policy against age discrimination in
employment, defendant employer’s action in denying plaintiff employee educational
assistance for postgraduate studies neither violated the FEHA nor gave rise to a
common law tort cause of action for violation of public policy.  Accordingly,
plaintiff has no cause of action for which he may recover noneconomic damages, and
the trial court’s judgment awarding plaintiff $51,000 in damages for economic loss
caused by his employer’s breach of contract represents the extent of his authorized
recovery.
The judgment of the Court of Appeal is affirmed.
KENNARD, J.
WE CONCUR:
GEORGE, C.J.
BAXTER, J.
WERDEGAR, J.
CHIN, J.
BROWN, J.
MORENO, J.
14
See next page for addresses and telephone numbers for counsel who argued in Supreme Court.
Name of Opinion Esberg v. Union Oil Company
__________________________________________________________________________________
Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted XXX 87 Cal.App.4th 378
Rehearing Granted
__________________________________________________________________________________
Opinion No. S096524
Date Filed: June 24, 2002
__________________________________________________________________________________
Court: Superior
County: Orange
Judge: Raymond J. Ikola
__________________________________________________________________________________
Attorneys for Appellant:
Law Offices of Dale M. Fiola, Dale M. Fiola, Mark Boling, Roger McCaffrey, William M. Pate, Ken R. Easey;
Quackenbush & Quackenbush and William C. Quackenbush for Plaintiff and Appellant.
__________________________________________________________________________________
Attorneys for  Respondent:
La Follette, Johnson, De Haas, Fesler & Ames, La Follette, Johnson, De Haas, Fesler, Silberberg & Ames,
Alfred W. Gerisch, Jr., Dorothy B. Reyes, David J. Ozeran, Michelle M. Wolfe; and Richard Ettensohn for
Defendant and Appellant and for Defendants and Respondents.
15
Counsel who argued in Supreme Court (not intended for publication with opinion):
Dale M. Fiola
Law Offices of Dale M. Fiola
200 North Harbor Boulevard, Suite 217
Anaheim, CA  92805
(714) 939-1600
David Ozeran
La Follette, Johnson, De Haas, Fesler, Silberberg & Ames
865 Figueroa Street, Suite 3100
Los Angeles, CA  90017-5433
(213) 426-3600