Sonoma County leaders are blaming the rising cost of medical care for their decision to reduce health benefits to hundreds of employees and retirees.

County supervisors voted 5-0 Tuesday to cut back on medical benefits for 2,500 retirees and 650 non-union employees.

With the vote, Sonoma County will reduce by 20 percent annually over the next five years the amount of money it contributes to retiree and non-union health benefits.

County officials say they need to cut back on the payments to make up for a $15 million annual deficit in funding commitments for health care premiums.

But retirees and employees say they had previously accepted years of wage concessions in exchange for pledges of future health care benefits.

Evidence supports a San Francisco judge's findings that Raj Naidu's supervisor was motivated by prejudice when he belittled Naidu, threatened to fire him and sabotaged his work, said the First District Court of Appeal in San Francisco.

Among other things, the supervisor, an immigrant from Iran, told Naidu, "I was able to dismiss one Indian before. ... I will do it for you also," the court said.

Naidu, an engineer in the state PUC's water division since 2001, received strong job evaluations until he got Moshen Kazemzadeh as a new supervisor in 2004, the court said.

According to evidence presented at trial, Kazemzadeh prohibited Naidu from taking bathroom breaks without permission, withdrew previous supervisors' approval for telecommuting, frequently shouted at him and deliberately gave him incorrect job instructions, hurting his performance.

Based on the supervisor's assessments, the PUC reprimanded Naidu in 2005 and cut his pay by 5 percent for six months, the court said. Two other employees of Indian descent and a third commission employee testified that they had experienced or observed ethnic discrimination in the PUC.

A PUC equal employment officer found in 2004 that Kazemzadeh had threatened Naidu and had a history of angry outbursts, but said the supervisor was a valuable employee who had been counseled about his conduct. The commission later rejected Naidu's discrimination complaint and said he had been disciplined because of poor performance.

But Superior Court Judge Ronald Quidachay, after a non-jury trial in 2007, found both harassment and discrimination and awarded Naidu $2,100 for economic losses, $545,000 for emotional distress and $499,000 in attorney's fees. The appeals court agreed with Chan.

Evidence at the trial supported the judge's conclusion that the PUC's claim of poor performance was a pretext and that Naidu "was subjected to discipline because he was an Indian," said Presiding Justice Barbara Jones in the 3-0 ruling. She said Kazemzadeh "made an overtly racist remark to (Naidu) and threatened to have him fired" but was allowed to remain his supervisor for more than a year.

Naidu still works for the water division - now headed by one of the Indian American witnesses who backed his discrimination claim - and, according to his attorney, is involved in a project to get water utilities to move their maximum energy use to off-peak hours, adding that, "the PUC is pretty much in a state of denial about accepting the verdict."

PUC spokeswoman Terrie Prosper said the commission is reviewing the ruling.

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