Lowry v. Port San Luis Harbor District

Facts

The statutory framework. Two statutory schemes intersect in this case. The Fair Employment and Housing Act makes it unlawful for an employer, “because of the … physical disability [or] mental disability … of any person, to refuse to hire or employ the person … or to bar or to discharge the person from employment … or to discriminate against the person in compensation or in terms, conditions, or privileges of employment.” (Gov. Code, § 12940, subd. (a), quoted in Lowry, supra, 109 Cal.App.5th at p. 64.) But FEHA’s protection has a built-in boundary: it “does not prohibit an employer from refusing to hire or discharging an employee who is unable to perform their essential duties even with reasonable accommodations because of a disability.” (Ibid., citing § 12940, subd. (a)(1).) Separately, the Public Employees’ Retirement Law provides disability retirements for designated state employees and local safety members of contracting agencies. (Id. at p. 63, citing §§ 20420, 21151, subd. (a).) An eligible member is entitled to a disability retirement if “incapacitated for the performance of duty” (§ 21150, subd. (a)), meaning “disability of permanent or extended duration, which is expected to last at least 12 consecutive months or will result in death.” (Lowry, at p. 63, quoting § 20026.) For a contracting agency like the District, CalPERS asks the employing agency itself to determine incapacity based on “competent medical opinion” (id. at pp. 63–64, citing §§ 21154, 20026, 21156, subd. (a)(2)), and section 21153 forbids the end-run of firing instead of retiring: an employer “may not separate because of disability a member otherwise eligible to retire for disability but shall apply for disability retirement of any member believed to be disabled.” (Id. at p. 64, quoting § 21153.)

The accident and the whipsaw. John Lowry worked for the Port San Luis Harbor District as a harbor patrol officer. Descending a ladder at a pier in the course of his duties, his legs became entangled and his head and upper body were submerged; he suffered physical, psychiatric, and emotional injuries, and his treating psychiatrist concluded he had posttraumatic stress disorder, was not fit to return to work, and should be medically retired. (Lowry, supra, 109 Cal.App.5th at p. 61.) Lowry stopped working after the District’s workers’ compensation insurer wrote that it “received information that your industrial injury has resulted in permanent disability and [the District] is unable to offer you work within your permanent limitations/restrictions.” (Id. at p. 62.) The District told him that “it appears that you are not fit to return to work in the Harbor Patrol Department” and that, because of his “inability to return to work,” his “single option is retirement.” (Ibid.) He applied for a disability retirement.

Then the District reversed course. “Despite its earlier statements that Lowry was permanently disabled and unable to return to work,” it denied the application, saying it did “not have enough information to make a determination of disability.” (Lowry, supra, 109 Cal.App.5th at p. 62.) CalPERS followed with a letter: “In accordance with Government Code section 21156, your employer has determined that you are not incapacitated for the performance of your duties as a Harbor Patrol Officer III. Therefore, your application for industrial disability retirement has been denied.” (Ibid.) The District then terminated Lowry on the ground that he had “voluntarily resigned” by accepting work performing home-improvement inspections for a homeowners association — a characterization the District admitted during litigation was false. (Ibid.)

Procedural history

Lowry did not appeal the District’s incapacity determination to the Office of Administrative Hearings, the route the Public Employees’ Retirement Law prescribes; he instead “followed the repealed statutory procedure of appealing to the District,” which did not respond, and then sued under FEHA. (Lowry, supra, 109 Cal.App.5th at p. 64.) After abandoning causes of action for wrongful discharge, failure to engage in the interactive process, failure to provide reasonable accommodation, and retaliatory discharge, his first amended complaint alleged a single claim: disability discrimination under section 12940, subdivision (a), on the theory that the denial of a disability retirement was discrimination in a “term[], condition[], or privilege[] of employment.” (Id. at p. 62.)

On summary judgment, the parties agreed that Lowry “is not able to perform the essential job duties of Harbor Patrol Officer III with or without accommodation.” (Lowry, supra, 109 Cal.App.5th at p. 62.) The trial court granted judgment for the District, reasoning that disability retirement “does not qualify as a term, condition, or privilege of employment contemplated by the act” and that FEHA was “not the appropriate statutory vehicle for [pursuing] Lowry’s disability retirement claim.” (Ibid.) At oral argument on appeal, Lowry conceded there was no evidence he would be able to return to work at the District within 12 months of his injury, and he did not contend he could return after 12 months. (Id. at pp. 62–63.) Division Six affirmed, reviewing the summary judgment de novo. (Id. at p. 63.)

Issue

Whether the denial of CalPERS disability-retirement payments to an employee who cannot perform his essential job duties with or without reasonable accommodation constitutes an adverse employment action in the “terms, conditions, or privileges of employment” actionable as disability discrimination under section 12940, subdivision (a) — and, relatedly, whether FEHA’s protections in this respect extend to employees who are not “qualified individuals.” (Lowry, supra, 109 Cal.App.5th at pp. 64, 66.)

Holding

Reasoning

Adverse employment actions protect working, not post-employment income. The court began from FEHA’s purpose — “to protect and safeguard the right and opportunity of all persons to seek, obtain, and hold employment without discrimination or abridgment” (Lowry, supra, 109 Cal.App.5th at pp. 64–65, quoting § 12920) — and from the Yanowitz standard: FEHA “protects an employee against unlawful discrimination with respect not only to so-called ultimate employment actions such as termination or demotion, but also the entire spectrum of employment actions that are reasonably likely to adversely and materially affect an employee’s job performance or opportunity for advancement in [their] career.” (Id. at p. 65, quoting Yanowitz v. L’Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1053–1054.) The recognized examples — negative evaluations, unwarranted public criticism, denial of resources, assignments, promotions and demotions, layoff selection (id. at p. 65, citing Yanowitz, at pp. 1055, 1060, and Janken v. GM Hughes Electronics (1996) 46 Cal.App.4th 55, 64–65) — share a common feature: “These prohibitions against adverse employment actions allow qualified employees with disabilities to continue working without being subjected to discrimination.” (Ibid.)

Disability retirement is an exit, not a term of employment. Drawing on Miller v. Department of Corrections & Rehabilitation (2024) 105 Cal.App.5th 261 — the recent employer-side summary-judgment decision on PERS retirement as an accommodation — the court explained that “the purpose of a disability retirement under [CalPERS] is not to facilitate a disabled employee’s eventual return to work,” but to permit the disabled employee to be “‘replaced by more capable employees’” while alleviating “‘the harshness that would accompany the termination of an employee who has become medically unable to perform [their] duties.’” (Lowry, supra, 109 Cal.App.5th at p. 65, quoting Miller, at p. 281.) From that premise the conclusion followed: “In our view, postemployment retirement benefits, such as disability retirement benefits to persons who are not qualified employees, do not fall within the ‘terms, conditions, or privileges of employment’ contemplated by FEHA. … Retirement benefits begin when employment ends.” (Id. at p. 66.) Nor could the benefits help a permanently incapacitated employee “hold employment” within the meaning of sections 12920 and 12921. (Ibid.) The court closed the point with Featherstone: “[A]n adverse employment action is one that affects an employee, not a former employee, in the terms, conditions or privileges of [their] employment, not in the terms, conditions or privileges of [their] unemployment.” (Ibid., quoting Featherstone v. Southern California Permanente Medical Group (2017) 10 Cal.App.5th 1150, 1162.)

The qualified-individual limit forecloses the claim. Lowry argued that FEHA’s protection of “terms, conditions, or privileges of employment” is not limited to qualified individuals. The court was “not persuaded,” holding itself bound by Green v. State of California: “plaintiffs must prove, like their federal counterparts under the ADA, that they are qualified individuals under the FEHA in order to prevail in their lawsuits,” and so “the plaintiff employee bears the burden of proving he or she was able to do the job, with or without reasonable accommodation.” (Lowry, supra, 109 Cal.App.5th at p. 66, quoting Green, supra, 42 Cal.4th at pp. 260, 262.) Both FEHA and the ADA “limit their protective scope to those employees with a disability who can perform the essential duties of the employment position with reasonable accommodation” (id. at p. 67, quoting Green, at p. 264), and the Civil Rights Department’s own regulation places the burden of proving qualified-individual status on the employee (ibid., citing Cal. Code Regs., tit. 2, § 11066, subd. (a)). Because the parties stipulated Lowry could not perform his essential duties with or without accommodation, Miller controlled the endgame: “where an employee’s disability renders [them] unable to perform the essential functions of [their] job, section 12940, subdivision (a)’s prohibition against changing the terms, conditions or privileges of employment because of disability does not apply and there is no occasion to scrutinize the employer’s motive for taking such actions.” (Id. at p. 67, quoting Miller, supra, 105 Cal.App.5th at p. 275, fn. 6.)

The remedy runs through the Office of Administrative Hearings. The court agreed with Lowry on one point: the trial court erred in suggesting traditional mandamus was the remedy, “because the District’s determination that Lowry was not disabled was discretionary rather than ministerial.” (Lowry, supra, 109 Cal.App.5th at p. 67.) But the error was harmless. Lowry could have appealed the District’s determination to an administrative law judge under section 21156, subdivision (b)(2), and challenged an adverse decision by petition for writ of administrative mandamus under Code of Civil Procedure section 1094.5 — the path he skipped. (Id. at pp. 67–68.) “Thus, ‘[o]ur conclusion does not render an employee who believes [they have] been wrongfully denied a disability retirement without remedy.’” (Id. at p. 68, quoting Miller, supra, 105 Cal.App.5th at p. 282, fn. 9.) The court also rejected the argument that mandamus is inadequate because it carries no attorney fees: “the law does not provide the reverse, i.e., that a statutory remedy is available whenever mandamus is unavailable or inadequate.” (Ibid.)

Significance

Lowry is the Second District’s companion to Miller v. Department of Corrections & Rehabilitation, and together they now police both sides of the PERS-retirement/FEHA border: Miller holds that a disability retirement is not a “reasonable accommodation” an employer must provide under FEHA, because it is a separation from work rather than a means of returning to it; Lowry holds that the denial of the retirement is not an “adverse employment action” a non-qualified employee may challenge under FEHA. (Lowry, supra, 109 Cal.App.5th at pp. 65–67; Miller, supra, 105 Cal.App.5th at pp. 280–282.) The channeling principle underneath both is the same: disputes over public-employee disability-retirement eligibility belong in the Public Employees’ Retirement Law’s administrative machinery — employing-agency determination, OAH appeal, section 1094.5 writ — not in a FEHA damages action. (Lowry, at pp. 63–64, 67–68.)

For the plaintiff’s bar, the case’s boundaries matter as much as its holding. First, the holding is expressly tied to claimants who are not qualified individuals: the court framed both the rule and its reasoning around “persons who are not qualified employees” (Lowry, supra, 109 Cal.App.5th at p. 66), and Lowry’s stipulation that he could not perform his essential duties, coupled with his oral-argument concession on the 12-month horizon, decided the appeal before the merits briefing was dry (id. at pp. 62–63). Second, Lowry says nothing about employees who can work: an employee denied benefits or subjected to benefit-related discrimination while still a qualified employee remains squarely within Yanowitz’s “entire spectrum.” (Id. at p. 65.) Third, the opinion does not disturb section 21153’s command that an employer “may not separate because of disability a member otherwise eligible to retire for disability but shall apply for disability retirement” (id. at p. 64) — a duty whose enforcement simply runs through the administrative route rather than FEHA. The uncomfortable subtext, candidly acknowledged nowhere in the opinion, is the District’s whipsaw: it told Lowry retirement was his “single option,” denied him that option for want of information, then terminated him on a resignation theory it later admitted was false. (Id. at p. 62.) On this doctrine, none of that conduct is examined for motive — Miller’s “no occasion to scrutinize the employer’s motive” language forecloses it once qualified-individual status fails. (Id. at p. 67.)

Key quotes

“We hold that an individual who is not a qualified employee cannot bring a disability discrimination claim under FEHA for the denial of disability retirement payments.” (Lowry, supra, 109 Cal.App.5th at p. 61.)

“In our view, postemployment retirement benefits, such as disability retirement benefits to persons who are not qualified employees, do not fall within the ‘terms, conditions, or privileges of employment’ contemplated by FEHA. … Retirement benefits begin when employment ends.” (Id. at p. 66.)

“Thus, ‘[o]ur conclusion does not render an employee who believes [they have] been wrongfully denied a disability retirement without remedy.’” (Id. at p. 68, quoting Miller, supra, 105 Cal.App.5th at p. 282, fn. 9.)

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Practice pointer

Open questions

Qualified employees denied disability retirement. The holding is framed around “an individual who is not a qualified employee” and benefits “to persons who are not qualified employees.” (Lowry, supra, 109 Cal.App.5th at pp. 61, 66.) Whether the denial of disability-retirement benefits to an employee who remains able to perform essential duties could ever constitute an adverse employment action is not decided.

Enforcement of section 21153. The opinion quotes the statute’s command that an employer “shall apply for disability retirement of any member believed to be disabled” rather than separate the member (Lowry, supra, 109 Cal.App.5th at p. 64), but the decision does not address what claim lies — or in what forum — when an employer violates that duty outright.

Post-employment discrimination beyond retirement benefits. The court applied Featherstone’s employee/former-employee line to retirement payments. (Lowry, supra, 109 Cal.App.5th at p. 66.) How that line interacts with other post-separation conduct — references, rehire eligibility, benefits administration for qualified individuals — remains governed by the general adverse-action cases rather than anything decided here.

The fees gap. The court rejected Lowry’s argument that mandamus is an inadequate remedy because it “does not provide for attorney’s fees,” declining to stretch FEHA to fill the gap. (Lowry, supra, 109 Cal.App.5th at p. 68.) Whether the Legislature closes that gap for meritorious retirement-denial challenges is a policy question the opinion leaves untouched.