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California Supreme Court To Decide Whether Whistleblower Protections Apply When The Employer Already Knows About The Violation

By: Jennifer Puza

The California Supreme Court has agreed to address whether the whistleblower statute, Labor Code section 1102.5, subdivision (b), applies to and protects from retaliation, an employee who discloses violations of law when that information is already known to the governing agency or person of authority at the employer. This question stems from the case People ex rel. Garcia-Brower v. Kolla’s Inc.

People ex rel. Garcia-Brower v. Kolla’s Inc.

In this case, the employee worked as a bartender at a night club. The employee told the owner of the night club that she had not been paid wages for her previous three shifts. The employee claimed the owner got upset after hearing her complaint, and he threatened to report her to immigration authorities, terminated her employment that same day, and warned her to never return to the establishment.

After being terminated, the former employee filed a retaliation complaint with the Division of Labor Standards Enforcement (DLSE). The DLSE conducted an investigation and the night club owner acknowledged that the former employee had complained to him about unpaid wages. The DLSE determined that the employer violated the law and ordered the employer to pay the former employee lost wages among other things. The Labor Commissioner then filed an enforcement action against the owners of the business, including a claim under Labor Code section 1102.5.

The trial court determined, however, that the Labor Commissioner had not stated a claim under section 1102.5. The trial court found that there could be no violation of the statute where the complainant had not approached a government agency, here the DLSE, about the employer’s conduct until after the termination. The Labor Commissioner appealed. The case went up on appeal following an entry of default judgment.

California Fourth District Court of Appeal

The Labor Commissioner urged the California Fourth District Court of Appeal to reverse the trial court’s conclusion regarding the section 1102.5 claim.

The appeals court found that the trial court applied an outdated version of section 1102.5. Under the amended statute in effect at the time of the employee’s complaint, an employee was no longer limited to reporting to an agency – they could now also disclose violations to a person with authority over them. Specifically, section 1102.5, subdivision (b) was amended to read:

An employer, or any person acting on behalf of the employer, shall not retaliate against an employee for disclosing information. . . to a government or law enforcement agency [or] to a person with authority over the employee. . . if the employee has reasonable cause to believe that the information discloses a violation of state or federal statute, or a violation of or noncompliance with a local, state, or federal rule or regulation, regardless of whether disclosing the information is part of the employee’s job duties.

The appeals court agreed that reporting the violation to the night club owner would be sufficient, since the owner had authority over the employee. However, the appeals court noted that their analysis did not end there, because they must also consider whether the Labor Commissioner adequately alleged protected activity in its showing in support of default judgment.

For this analysis, the appeals court noted that there must be sufficient factual allegations to support each element of the cause of action. Here, based on their analysis of the meaning of the word “disclosing,” the appeals court concluded that an essential element of the Labor Commissioner’s claim was missing. It determined that the word “disclose” meant “to make known,” or “to reveal in words something that is secret or not generally known.” It found that the state Legislature’s choice of the word “disclose” as opposed to “report” or “tell” was significant. According to the appeals court, an employer’s “state of awareness” regarding a wrongdoing was “absolutely necessary to establishing a violation of the statute.”

Thus, in analyzing the Labor Commissioner complaint on behalf of the former employee, the appeals court concluded that nowhere in the complaint did the Labor Commissioner allege that the former employee “disclosed” to her employer that she had unpaid wages. Rather, the appeals court determined that the facts of the complaint, which describe the employer’s angry reaction to the employee’s claim of unpaid wages, suggests that the employer was already aware of the non-payment of wages, if not responsible for it. As a result, the appeals court held that there was no actual “disclosure,” because the employer already knew about his wrongdoing. However, not all the judges agreed with the majority opinion.

Dissenting Opinion

In the dissenting opinion, the dissent took issue with the majority’s definition of a “disclosure.” According to the dissent, the majority opinion’s interpretation of section 1102.5, subdivision (b) was contrary to the intent of the Legislature and would unduly burden an aggrieved whistleblower employee’s right to relief under the statute, among other things. The dissent argued that section 1102.5 was intended to reflect the broad public policy interest in encouraging workplace whistleblowers to report unlawful acts without fearing retaliation and that the majority opinion’s narrow definition of “disclose” would impede this goal. Therefore, the dissent asked the California Supreme Court to grant review.

California Supreme Court

The California Supreme Court agreed to review this issue and will decide the question: Does Labor Code section 1102.5, subdivision (b), which protects an employee from retaliation for disclosing unlawful activity, apply when the information is already known to that person or agency?

What this means for employers

The California Supreme Court’s interpretation of “disclose” could affect the employer’s burden in defending against whistleblower claims – particularly those claims involving allegations of violations about which the employer already knew. For instance, if the Court were to uphold the majority opinion’s definition of “disclose,” this could lead to a plaintiff having to persuade the jury of what was in the mind of the employer or person of authority who received the complaint, in order to determine if a “disclosure” was actually made.

To date, this issue remains pending before the Court. LCW will continue to monitor this case.

View the full blog here.