Opinion
A117206
4-28-2008
JOSEPH MYERS et al., Plaintiffs and Appellants, v. CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM et al., Defendants and Respondents.
NOT TO BE PUBLISHED
Joseph Myers, Clifford P. Record, Terry Sutherland and Kenneth Matson, on behalf of themselves and similarly situated individuals (appellants), appeal from a judgment entered after the trial court sustained a demurrer to their second amended complaint without leave to amend. They assert the trial court erred in ruling that respondents — California Public Employees Retirement System (CalPERS), the Board of Administration of CalPERS and the Boards members, the State of California (State) and each of the States agencies and subdivisions — are protected from liability for age discrimination under California Code of Regulations, Title 2, section 7286.7, subdivision (f) (Regulation 7286.7), which provides: "Notwithstanding a showing of discrimination, such an employment practice is lawful where required by state or federal law . . . ." We conclude there was no error and affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
The facts are taken from the second amended complaint. In 1998, CalPERS, which manages retirement benefits for State employees, reduced the States required contribution to the CalPERS pension fund for the 1998-1999 fiscal year, due in part to high investment returns the fund had experienced in recent years. As a result, the State saved approximately $750 million that fiscal year. In 1999, noting that CalPERS members and retirees should also benefit from the high returns, CalPERS sponsored a Senate bill that sought to increase benefits for certain CalPERS members and retirees.
In 1999, the Legislature enacted Government Code section 21354.1 (Section 21354.1), which set forth a new formula for State agencies to use in calculating a retirees pension benefits. The new formula provided an overall increase in the amount of benefits payable to all affected members and retirees, but it increased benefits for members retiring at age 55 at a higher rate than it increased benefits for members retiring after age 55.
Section 21354.1 provides that effective January 1, 2000, certain CalPERS members shall receive, upon retirement, benefits calculated using a formula in which a multiplier is applied to the members final compensation and number of years of service. The multiplier corresponds to the members retirement age, ranging from 0.55 for members retiring at age 50 to 1.25 for those retiring at age 63. (Id., subd. (a).) Section 21354.1 superseded Government Code section 21353, which set forth the same method for calculating benefits but had lower multipliers for all ages, e.g., 0.546 instead of 0.55 for members retiring at age 50, and 1.209 instead of 1.25 for those retiring at age 63. Under both statutes, the multiplier consistently increases as the members age increases from age 50 to age 63 and thus, the benefits a member receives upon retirement increases as the members age at retirement increases. (See Gov. Code, §§ 21353, subd. (a), 21354.1, subd. (a).)
Appellants, who are active or retired State employees who contributed to or are currently contributing to CalPERSs retirement system, commenced the underlying action on behalf of themselves and a class, which they define in their second amended complaint as "all state employees over the age of 55 who have contributed part of their salaries to CalPERS and who have retired, or who will retire, from State service after January 1, 2000 . . . ." They alleged that respondents engaged in age discrimination in violation of the California Fair Employment and Housing Act (FEHA), Government Code section 12900 et seq., by calculating and paying retirement benefits in accordance with Section 21354.1, an allegedly discriminatory statute.
Respondents filed a demurrer to appellants original complaint, relying in part on Regulation 7286.7, which sets forth an affirmative defense and protects employers who engage in discrimination as "required by state or federal law." Respondents argued that even if the new formula is discriminatory, they are not liable because they calculated and paid benefits "as required by state . . . law," i.e., in accordance with Section 21354.1. The trial court sustained the demurrer with leave to amend for appellants to "allege facts sufficient to support a cause of action that demonstrates that the use of the formula at issue resulting in the discrimination alleged is not `required by state or federal law. Cal. Code Regs. Title 2, § 7286.7(f)."
Appellants filed an amended complaint on August 21, 2006, and a second amended complaint on September 1, 2006. Respondents demurred to the second amended complaint on the same grounds on which they had based their original demurrer. The trial court sustained the demurrer without leave to amend. Judgment was entered against appellants, and appellants filed a timely notice of appeal.
DISCUSSION
Standard of Review
"The standard of review for an order overruling [or sustaining] a demurrer is de novo. The reviewing court accepts as true all facts properly pleaded in the complaint in order to determine whether the demurrer should be overruled. [Citation.] A general demurrer will lie where the complaint `has included allegations that clearly disclose some defense or bar to recovery. [Citation.]" (Casterson v. Superior Court (2002) 101 Cal.App.4th 177, 182-183.)
Respondents cannot be held liable for complying with state law.
Appellants contend that respondents violated FEHA by calculating and paying retirement benefits in accordance with Section 21354.1. This contention fails because respondents had no discretion to disregard the mandates of a statute.
The California Constitution, article III, section 3.5, provides: "An administrative agency . . . has no power: [¶] (a) To declare a statute unenforceable, or to refuse to enforce a statute, on the basis of it being unconstitutional unless an appellate court has made a determination that such statute is unconstitutional; [¶] (b) To declare a statute unconstitutional; [¶] (c) To declare a statute unenforceable, or to refuse to enforce a statute on the basis that federal law or federal regulations prohibit the enforcement of such statute unless an appellate court has made a determination that the enforcement of such statute is prohibited by federal law or federal regulations." (See Valdes v. Cory (1983) 139 Cal.App.3d 773, 780 [state controller, the public employees retirement system board of administration and the school-employer have a constitutional duty to comply with a challenged statute unless and until an appellate court declares the statute unconstitutional], citing Cal. Const., art. III, § 3.5.)
CalPERS is an administrative agency. (Gov. Code § 20002 [CalPERS is a unit of the State and Consumer Services Agency].)
Here, it is undisputed that Section 21354.1 was enacted by the Legislature and sets forth a mandatory formula for State agencies to follow in calculating and paying benefits to qualifying employees. There is nothing in Section 21354.1 indicating that State agencies have any discretion in paying certain employees more or less in pension benefits based on any factors other than those listed in the statute. In addition, appellants have not asserted, either in their second amended complaint or in their briefs, that the statute is invalid on constitutional grounds. Because there has been no determination by an appellate court that Section 21354.1 is unconstitutional, and appellants have not challenged the statute on constitutional grounds, respondents are required to comply with the provisions of Section 23154.1 and cannot be held liable for doing so.
Regulation 7286.7, on which the trial court relied, accords with the principle that respondents had no discretion to disregard the mandates of a state statute. As noted, the regulation states: "Notwithstanding a showing of discrimination, such an employment practice is lawful where required by state or federal law or where pursuant to an order of a state or federal court of proper jurisdiction." The plain meaning of this regulation is that there can be no liability on the part of any employer, whether governmental or private, for following the mandates of state or federal law. Appellants contend the Fair Employment and Housing Commission (FEHC) acted outside the scope of its authority in enacting Regulation 7286.7 because the regulation is overbroad and "validates . . . illegal employment practices." Their contention is without merit because the FEHC, as the agency charged with adjudicating FEHA enforcement actions and interpreting FEHA by regulation, has broad authority to "adopt, promulgate, amend, and rescind suitable rules, regulations, and standards." (Gov. Code, § 12935, subd. (a).) Further, the regulation does not "validate[] . . . illegal employment practices" because an employer is protected from liability only if it acts legally, i.e., "as required by state or federal law."
We will not address whether the trial court should have provided appellants with an opportunity to amend the complaint because appellants have not presented us with any argument as to how they would be able to amend to avoid dismissal. (See Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126 [the plaintiff has the burden of proving there is a reasonable possibility that a defect in the complaint can be cured by amendment].)
DISPOSITION
The judgment is affirmed. Respondents shall recover their costs on appeal.
We Concur:
McGuiness, P. J.
Siggins, J.