Wrongful Medical Terminations Under PERS and CERA


How the Continued Refusal of Public Employers to Abide by Their Statutory and Constitutional Obligations Creates Havoc and Injury to Both Themselves and their Employees

The Problem

All too often, a California public employer separates one of its employees from his or her job after concluding the employee is no longer medically capable of continuing to perform his or her job. Although the employee had previously been satisfactorily performing the job without injury to him- or herself or others1, the employer concludes2 it can no longer permit the employee to remain on the job as a result of recently acquired permanent medical restrictions concerning the employee. At the time of separation, management may simply advise the employee that he or she can no longer work there because of the work restrictions, or it may advise the employee orally or in writing of any or all of the following options:

1. you can return to work if your doctor revises his or her opinion and removes the "permanent" work restrictions, or
2. you can seek vocational rehabilitation (assuming there's a workers' compensation claim pending), or
3. you can apply for a service or disability retirement, or
4. you can resign3.

In separating the employee from his or her job, wages, and benefits, the employer, and all too often the employee, act as though the employer has the unfettered right to unilaterally terminate the employee without providing the employee with any process to contest the employer's decision. Although most human resource managers are well aware of the Skelly4 mandate, when it comes to terminating an employee for medical reasons, the notion that employees are entitled to due process in connection with the employees' termination flies out the window. Management consistently fails to provide employees with the process employees are due to challenge the employer's conclusion that (a) she/he is disabled, and (b) she/he should be terminated. After all, the employee is, in management's opinion, disabled and can't work. Management often takes the perspective that the disabled employee has many other rights to which they can avail themselves, such as SDI, social security, LTD benefits, workers' compensation, or even a disability pension.

The problem is, employers do not have the right or power to summarily remove, separate, or terminate an employee they consider to be disabled. In fact, employers have a duty to refrain from doing so because the power to make such determinations is vested exclusively with the applicable public employee retirement board. Under the clearly defined due process system, jurisdiction for determining whether a permanent public employee is disabled and accordingly entitled to either a disability retirement or their continued employment, is delegated by statute to the applicable retirement system's retirement board. (See, for example, California Government Code (CGC) §31725. "Permanent incapacity for the performance of duty shall in all cases be determined by the board.")

Unfortunately, however, public employers routinely fail to afford their medically impaired workers the process to which they are statutorily and constitutionally due. Employers routinely remove or separate their medically impaired workers without exhausting the due process procedures established under the retirement system for determining disability. Thereby, employers breach the legislative mandate prohibiting such conduct and also open themselves up to liability under CGC §815.6 and 42 U.S.C. §1983. Until such time as employers comply with and afford their medically impaired workers with the full panoply of due process rights to which they are entitled before separating them, employers will continue to subject themselves to liability and cause injury to their workers.

California's Retirement System

The following description of the Public Employees' Retirement System, codified at California Government Code (CGC) §§2200 et seq. (PERS), and the 1937 County Employees' Retirement Act, codified at CGC §§3145 et seq.(CERA) is set forth briefly below5.


PERS administers a trust fund valued in excess of $160 billion, is over-funded for most of its employer members, and covers in excess of one million workers. Participants include all state employees, state university employees (except teachers), and most local agencies (e.g. cities, special districts, and nearly all non CERA counties). Employee members are divided into various categories (see CGC §20370).


CERA covers the following twenty California counties: Alameda, Contra Costa, Fresno, Imperial, Kern, Los Angeles, Marin, Mendocino, Merced, Orange, Sacramento, San Bernardino, San Diego, San Joaquin, San Mateo, Santa Barbara, Sonoma, Stanislaus, Tulare, and Ventura.

In addition to the above-named counties, which are governed by CERA, public agencies within these counties may enter into contracts with the applicable county retirement systems to provide retirement benefits for their employees. For example, the Orange County Employees' Retirement Association contracts with the Orange County Transit Authority to cover OCTA's employees.

CERA members are divided into two broad categories; they are either "safety" or "miscellaneous" members. Several of the counties have established multiple tiers of members, such as the Los Angeles County Employees' Retirement Association which has created five different tiers, each with different rights and benefits.

The Legislature's Intent in Creating the System

PERS and CERA were established by the Legislature to provide a means for removing incapacitated workers for the good of the public service to ensure against a continuing financial drain on tax payers. The second purpose, flowing directly from the first, was to create a system whereby the employees removed would not suffer prejudice or economic hardship.

In 1970, the Legislature amended PERS and CERA, emphasizing its purpose establishing an economic safety net to ensure that when an employee becomes incapacitated, she/he is not left in the position of being without either a job or a disability pension; that is, the employee will remain on paid status with the employer until such time as she/he is found to be disabled. If found by the retirement board to be disabled, the employee moves from the employer's payroll to the retired employee's payroll and begins receiving a disability retirement.

As to PERS, the Legislature declared its purpose in creating it as, "...to effect economy and efficiency in the public service by providing a means whereby employees who become superannuated or otherwise incapacitated may, without hardship or prejudice, be replaced by more capable employees, and to that end provide a retirement system consisting of retirement compensation and death benefits." CGC §20001.

As to CERA, the Legislature declared its purpose as, "...[T]o recognize a public obligation to county and district employees who become incapacitated by age or long service in public employment and its accompanying physical disabilities by making provision for retirement compensation and death benefit as additional elements of compensation for future services and to provide a means by which public employees who become incapacitated may be replaced by more capable employees to the betterment of the public service without prejudice and without inflicting a hardship upon the employees removed." (emphasis added) CGC §31451.

Proving Disability: The Due Process Paradigm

The "means" or due process procedures mandated by PERS and CERA, and by which the issue of disability is determined, consist of three phases: (1) the application phase, (2) an administrative evaluation phase, including an administrative evidentiary hearing if necessary, and (3) the right to seek judicial review.

Phase One: As to CERA, the application process or "Phase One" is governed by CGC §31721(a). This section includes a "permissive" and a "mandatory" application process. Under the "permissive" section, the Legislature provided all parties with the right to file, meaning the employer may file even though the employee believes she/he can do the job, and the employee may also file without the employer's permission. The statute provides: "A member may be retired for disability upon the application of the member, the head of the office or department in which he is or was last employed, the board or its agents, or any other person on his behalf..." (CGC §31721(a)). Similar language appears under PERS. See CGC §21152.

Where, however, the employer seeks to separate or terminate an employee for medical reasons, the Legislature imposed upon the employer a mandatory obligation to file a disability application with the retirement system on the employee's behalf. CGC §31721(a) of CERA provides, "...[E]xcept that an employer may not separate because of disability a member otherwise eligible to retire for disability but shall apply for disability retirement of any eligible member believed to be disabled, unless the member waives the right to retire for disability and elects to withdraw contributions or to permit contributions to remain in the fund with rights to service retirement as provided in Article 9 (commencing with §31700)." (emphasis added)

The clear and unambiguous language of CGC §31721(a) is that an employer "... may not separate ... but shall apply for disability retirement. ..." This language describes a mandatory duty.

The courts have construed identical language under PERS, specifically CGC §21153, holding that such language means what it says, namely, that an employer has a mandatory duty to refrain from separating an employee perceived to be disabled, and instead of separating the employee, the employer is required to file the disability application for the employee. CGC §21153 provides in pertinent part, "Notwithstanding any other provision of law, 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, unless the member waives the right to retire for disability and elects to withdraw contributions or to permit contributions to remain in the fund with rights to service retirement as provided in section 20731."6(emphasis added)

The operative language of PERS's CGC §21153 is identical to the operative language of CERA's CGC §31721. Both statutes govern the rights of the disabled and the concomitant duties of their employers. Under both PERS and CERA, the Legislature imposed a clear mandatory duty upon the employer precluding it from separating the "disabled" worker and further imposing upon it the obligation to file an application for disability retirement with the applicable administrative body on the employee's behalf.7

The repercussions flowing from the employer's failure to comply with the above-noted mandatory duty can be economically and legally overwhelming for the employee. It is basic hornbook law that the moving party in a proceeding bears the burden of proving each essential element of his or her claim or defense.8 This is the law in disability proceedings.9

However, because the employer typically does not file the application on the employee's behalf, the evidentiary burden of proving disability is inverted and transferred to the employee, who is forced to file the application him- or herself to mitigate his or her losses. Under such a scenario, it is the employee now who has to prove the employer's claim that he or she can no longer perform his or her job. It is the employee now who has to call supervisors and management officials. The employee hopes the management officials will testify consistently with what they had previously told the employee in separating him or her from their job, to wit: the employee's medical restrictions are incompatible with the employer's declared job requirements. It is the employee who must now bear the significant cost of having to procure medical reports and potentially produce the physicians who have issued the medical restrictions. In some cases, the employee, left without a job and economic resources, simply cannot clear such an economic hurdle.

Additionally, because the employer has not filed the application, the employer typically fails to appear at the hearing. This leaves the employee appearing alone before the applicable retirement board. With no employer present, the retirement board usually assumes an adversarial role to its own member/beneficiary. Such conduct violates the retirement board's fiduciary duty to the member; however, this topic is beyond the scope of this article.

Phase Two: Phase two is the administrative process which may, if the application is initially denied10, move forward to a hearing. As noted above, the party filing the application bears the burden of proving that the employee is disabled. Under CERA, even if the employer has filed the application, it is the employee who bears the burden of proving that the disability was industrially related. CGC §31721(b). The effect of having the disability found to be industrial is substantial.11

To prove one is disabled, the retirement board must be convinced that the employee is substantially unable to perform the usual duties of his or her job. The fact that he or she is able to perform some other job for that employer or even the same job for another employer is not relevant12; rather, all that need be shown is that the employee is unable to perform the substantial duties of his or her last current job.13

Phase Three: This phase concerns the right to challenge the retirement board's findings as to whether the employee is or is not disabled. Under both PERS and CERA, if either the employee or the employer is dissatisfied with the retirement board's findings, then either party may seek review in the superior court by way of a writ of mandate pursuant to Code of Civil Procedure §1094.5.14

The significance of phase three lies in the preclusive effect said decision has on both the employee and employer. If the decision of the retirement board is a finding of disability and that decision is not timely contested, the employer may then separate or terminate the employee and the employee will, as envisioned by the Legislature, without interruption transfer from the employer's payroll to begin receiving a disability pension. If, however, the retirement board finds the employee to be not disabled and no writ is taken, then the employer's obligation is to reinstate the employee and make him or her whole. CGC §31725.15

Where reinstatement is appropriate, the employer's obligation is to reinstate to the employer's active payroll even if the employer honestly believes the employee is medically incapable of safely performing the job. In such a situation, the courts have been clear that the employer is obligated to reinstate the employee to paid status, even if that means the employee in fact does not return to work.16

In sum, it is in an employer's own best interest to refrain from separating the employee and instead to file an application for disability retirement on the employee's behalf. This is so not only because of the liability it potentially opens itself up to, but also because it will create less chaos for itself should the retirement board find the employee not disabled. If that occurs, then the employer is placed in the awkward position of paying the employee indefinitely, restructuring the job17, or by the filing of a new application by the employer. Simply put, it is in the employee's and employer's best interest for the employer to comply with the mandates of the statutes discussed herein.


As discussed earlier, an employer who fails to comply with the mandates of PERS and CERA opens itself up to liability not only in terms of a potential back pay award but also because as a public entity, it is under a mandatory duty to file the application and refrain from separating until disability is determined. If the employer fails to comply with that mandatory duty, it subjects itself to tort liability and the compensatory damages flowing therefrom.18

In addition, the employer may be held liable under 42 USC §1983. To establish liability under 42 USC §1983, a plaintiff need only show that (1) his or her employer was acting under color of law (i.e. a public official acting on behalf of the public entity), and (2) he or she was deprived of a constitutional right.19 Here, the wrongfully removed or terminated employee will argue that he or she was removed from his or her job, a constitutionally protected property right, without due process. He or she will point to the retirement board's process as the due process to which he or she was entitled and which was denied him or her by the employer when it took away the employee's property right (the job) by its act of terminating the employee prior to the retirement board's rendering its final decision.

An employee's continuing right to his or her job is constitutionally based. The Fourteenth Amendment to the United States Constitution places procedural constrains on the actions of government which cause a deprivation of interest that enjoy the stature of a property right within the meaning of the Due Process Clause20. These property interests, which are subject to due process protections, are not created by the federal constitution but rather are created and their dimensions defined by existing rules or understandings that stem from an independent source, such as state law.21

It is well settled in California that a public employee subject to discharge (separation) only for cause has a constitutionally protected property interest in continued employment.22 Permanent public employees are entitled to a pre-determination hearing23 and a post-termination evidentiary hearing bearing on the issue of the decision to terminate.24 There is no significant distinction for the purpose of constitutional due process analysis between forced disability retirement and discharge.25

When the employer seeks to "medically" terminate an employee, the source of the due process protection and the parameters of that protection emanate not only from the local employer's rules and regulations, but additionally from the applicable state disability retirement statutes, such as PERS and CERA. The entitlement to a disability retirement has been declared to be a property right protected by due process26, an entitlement which vests upon the commencement of employment27.

If employees fired for gross misconduct can still receive damages for deprivation of the job without due process, then surely a disabled worker terminated only because of his or her disability is entitled to at least the same protection. Moreover, where the employer takes the employee's job, a vested property right, without due process, it may be held liable for damages under 42 USC §1983. A prevailing plaintiff may recover not only his or her back pay and compensatory damages for emotional distress, and attorney's fees, but also potentially punitive damages against particular offending officials.28


Permanent public employees perceived to be disabled by their employers must be provided with the due process protections as are other permanent employees removed for cause. When the employer does not, it does so at its peril.

1 - In Echazabal v. Chevron, 213 F.3d 1098 (9th Cir. 2000), the court held that an employer was not permitted under the ADA to refuse to hire an employee (private sector) based on a perceived safety threat only to the employee, however the Supreme Court reversed the 9th Circuit and held that the threat to self defense is viable. See further the 9th Circuit's decisioon following remand at 336 F. 3rd 1023.
2 - See California Government Code (CGC) §19253.5 and footnote 6 infra.
3 - Serious negative repercussions will befall an employee who resigns; specifically, if the employee resigns and he or she is subsequently found not disabled by the retirement system, he or she is left without a job and no statutory ability to compel the employer to reinstate him or her. Allowing a public employee to resign can also have serious negative consequences for his or her attorney. See: Robinson v. McGinn, 195 Cal.3d 66 (1987) [employee's WCAB attorney sued for legal malpractice on the grounds he allowed City fire fighter to resign prior to resolution of PERS disability case].
4 - Skelly v. State Personnel Board, 15 Cal.3d 194, 206 (1975).
5 - There are five main statewide retirement statutes in California under which retirement systems are created:
  • Public Employees' Retirement System, CGC §§2000 et seq. (PERS)
  • 1937 County Employees' Retirement Act, CGC §§3145 et seq. (37 Act)
  • State Teachers' Retirement System, California Education Code §§22001 et seq. (STRS)
  • University of California Retirement System (UCRS)
  • Judges Retirement System, CGC §§75060 et seq.
In addition to these systems, various cities and special districts have charter or ordinance based pension systems. Examples of some of the larger cities and special districts with their own systems are the cities of Los Angeles, San Diego, Sacrament, Irvine, and the Los Angeles Transit Authority. The City and County of San Francisco have employees in PERS as well as in their own Charter systems.
6 - The provisions of the County Employees' Retirement Law (§31721 and §31725) and the Public Employees Retirement law (§21153) prohibiting separation of a disabled employee were adopted at the same time. (Statutes 1970, ch 1016 and ch 1447). As to state employees, CGC §19253.5 was amended effective January 1, 2000 to require an employer to file an application for disability retirement but, after notice to the employee and an opportunity to object by such employee, the employer may separate so long as the employer pays the employee at least the estimated disability retirement allowance.
7 - Boyd v. City of Santa Ana, 6 Cal.3d 393, 398, 99 Cal.Rptr. 38 (1971); Martinez v. Contra Costa County Fire Prot. Dist., 44 Cal.App.3d 321, 325, 118 Cal.Rptr. 614 (1975).
8 - California Evidence Code §500; Roddenberry v. Roddenberry, 44 Cal.4th 635, 654 (1992).
9 - Harmon v. Bd. of Retirement of San Mateo County, 62 Cal.App.3d 689, 691 (1976); CGC §31721(b).
10 - Some retirement boards require the applicant to obtain a medical verification. If the employee's doctor does not believe that the employee is disabled, and therefore the employee has no doctor willing to verify on the application that the employee is disabled, then the application will be rejected. If the employer has already separated/terminated the employee and the employee cannot get the doctor to verify his or her application, the employee is left with no job and no way to recover benefits.
11 - Under PERS and CERA, an industrial disability carries added benefits. First, it receives tax free treatment from both state and federal income taxation. Second, there is often a survivorship benefit. For example, under CERA, if a disabled retired member predeceases his or her spouse the spouse continues to receive the full disability retirement benefit for their life, tax-free. If the deceased spouse had a service or a non-industrial disability retirement, the surviving spouse would have received only 60% of the value of the pension. Third, there is also often medical insurance coverage provided for industrially disabled retirees. The service connected disability retirement can often exceed a million dollars in expected lifetime benefits.
12 - Such a determination is significantly different for an employee seeking to prove disability discrimination under the ADA, Sutton v. United Airlines, Inc. 527 U.S. 471 (1999), or as disability is usually defined under most LTD plans.
13 - For PERS, see: Mansperger v. Public Employees' Retirement System, 6 Cal.App.3d 873, 876-877 (1970); Thelander v. City of El Monte, 147 Cal.App.3d 736 (1983). For CERA, see: Curtis v. Bd. of Retirement of L.A. County Ret. Assoc., 177 Cal.App.3d 293, 297 (1986).
14 - CGC §31725 provides, "Permanent incapacity for the performance of duty shall in all cases be determined by the board. If the medical examination and other available information do not show to the satisfaction of the board that the member is incapacitated physically or mentally for the performance of his duties in the service and the member's application is denied on this ground the board shall give notice of such denial to the employer. The employer may obtain judicial review of such action of the board by filing a petition for a writ of mandate in accordance with the Code of Civil Procedure or by joining or intervening in such action filed by the member within thirty days of the mailing of such notice If such petition is not filed or the court enters judgment denying the writ, whether on the petition of the employer or the member, and the employer has dismissed the member for disability the employer shall reinstate the member to his employment effective as of the day following the effective date of the dismissal."
15 - CGC §31725 provides in pertinent part that if neither the employee nor the employer petitions the court to overturn the retirement board's decision within thirty days after the issuance of its decision, and "the employer has dismissed the member for disability, the employer shall reinstate the member to his employment effective as of the day following the effective date of dismissal." (emphasis added) See also: McGriff v. County of Los Angeles, 33 Cal.App.3d 394 (1973) (CERA) [writ of mandate issued ordering County to reinstate employee]; Haywood v. American River Fire Protection Dist., 67 Cal.App.4th 1292, 1305 (1998) (PERS).
16 - Raygoza v. County of Los Angeles, 17 Cal.App.4th 1240 (1993) [employer required to reinstate to paid status and cannot require employee to report to other job]. See also 57 Ops. Cal. Atty. Gen. 86 (1974) for a similar discussion relating to PERS.
17 - This argument may come at the employer in another way either through a workers' compensation rehabilitation consideration or through a charge of disability discrimination processed through the Department of Fair Employment and Housing or the Equal Employment Opportunity Commission.
18 - CGC §815.6; Haggis v. City of Los Angeles, 22 Cal.4th 490 (2000).
19 - Under Gomez v. Toledo, 446 U.S. 635, 639-640 (1980), a plaintiff seeking relief under 42 USC §1983 need only prove that defendants acted under color of law when they deprived the plaintiff of her constitutional right to procedural due process. Intent to deprive the employee of the constitutional right is not required. Jackson v. Gates, 975 F.2d 648, 656 (9th Cir. 1992), cert. den. 509 U.S. 996 (1993).
20 - Bostean v. L.A. Unified School District, 63 Cal.App.4th 95, 108, 73 Cal.Rptr.2d 523, 531 (1998), citing Coleman v. Dept. of Personnel Administration, 52 Cal.3d 1102, 1112, 278 Cal.Rptr. 346, 350 (1991).
21 - Bostean v.L.A. Unified, supra, Cal.App.4th at 108, Cal.Rptr.2d at 531.
22 - Mendoza v. Regents of the University of California, 78 Cal.App.3d 168, 175, 144 Cal.Rptr. 117, 121 (1978); Williams v. County of Los Angeles, 22 Cal.3d 731, 736, 150 Cal.Rptr. 475, 477-478 (1978).
23 - Skelly v. State Personnel Board, 15 Cal.3d 194, 206, 124 Cal.Rptr. 14, 32 (1975).
24 - Townsel v. San Diego Metropolitan Transit Development Board, 65 Cal.App.4th 940, 949-950, 77 Cal.Rptr.2d 231, 236 (1998).
25 - Bostean v. Los Angeles Unified School District, 63 Cal.App.4th 95, 111 (1998), citing Barberic v. City of Hawthorne, 669 F.Supp. 985 (C.D. Cal. 1987).
26 - Petrillo v. Bay Area Rapid Transit Dist., 197 Cal.App.3d 798, 807-808, 243 Cal.Rptr. 74, 79 (1998) (citations omitted).
27 - Thelander v. City of El Monte, 147 Cal.App.3d 736, 747, 195 Cal.Rptr. 318, 324 (1983). See also: Quintana v. Bd. of Administration, Public Emp. Retire. Syst., 54 Cal.App.3d 1018, 1023, 127 Cal.Rptr. 11, 14 (1976).
28 - Hafer v. Melo, 502 U.S. 21, 25 (1991).