The California Supreme Court issued an important decision on Monday regarding exhaustion of administrative and judicial remedies, which may impact those employers with internal administrative grievance and dispute processes.  In McDonald v. Antelope Valley Community College District, the Supreme Court held that when an employee voluntarily pursues an internal administrative remedy prior to filing a complaint under the FEHA, the statute of limitations on filing a FEHA claim is subject to equitable tolling.  This means that the time period during which the grievance is pending is not counted as part of the statute of limitations, provided that the employee is pursuing the internal process in good faith, there was timely notice of the precise claim to the employer, and the employer does not suffer prejudice.

In reaching its decision, the Supreme Court also focused on the collateral estoppel effect of the results of any internal administrative proceeding and the requirements of exhausting one’s remedies in an administrative or judicial forum.  First, the Supreme Court reaffirmed that a plaintiff alleging a FEHA claim may choose between the administrative remedy provided by the DFEH or the internal administrative process.  Further, the Supreme Court held that if a plaintiff begins an administrative process with regard to allegations of discrimination, harassment or retaliation, the plaintiff does not need to complete that process prior to filing an administrative charge with the DFEH.  Finally, the Supreme Court held that “[i]n the absence of quasi-judicial proceedings, [the plaintiff] was not required to seek judicial relief to set aside any findings or bear the consequences of their binding effect.”  In other words, because the plaintiff’s internal proceeding was not quasi-judicial in nature in this case, the findings were not entitled to collateral estoppel effect.

This final holding appears to follow several recent lower court cases that reduced the power of administrative agencies to shape, or even preclude, later court cases by resolving matters in internal grievance processes.  While the final word is yet to be written (another case called Board of Chiropractic Examiners v. Superior Court (Arbuckle) is still pending before the California Supreme Court on this topic), the power of agencies to preclude two bites at the apple may be limited.  We will provide a full assessment of these important issues once the Supreme Court has finally acted in Arbuckle.