?California workers who report violations of the law to their supervisors can qualify for whistleblower protections, even if the employer already knew about the violations, the California Supreme Court recently ruled.
The court “came to the common-sense conclusion that the Legislature meant what it said when it passed a law protecting people who tell their employers about corporate misconduct,” said Steve Hasegawa, an attorney with Phillips & Cohen in San Francisco. “There was nothing in the statute suggesting that whistleblower protections should depend upon whether the person who the whistleblower tells already knew of the misconduct.”
The purpose of California’s whistleblower law is “to protect workers, to encourage disclosure, and to promote compliance with employment-related laws and regulations,” the court said. An employee “may reasonably feel more willing to approach an employer about workplace safety hazards, unpaid wages, or overtime violations knowing that his or her co-workers were also disclosing the same unlawful activity. An employer may also be more likely to ameliorate violations, and less able to sweep them under the rug, when multiple employees have disclosed the same wrongdoing.”
Background
California law prohibits employers from retaliating against workers who report violations of local, state or federal laws. The reporting can be to a government agency or to a corporate manager who has the authority to investigate, discover or correct the violation.
In 2014, a bartender at Kolla’s Night Club in Lake Forest, Calif., reported that she had not been paid for her previous three shifts. The club owner immediately fired her and threatened to report her to immigration authorities, according to court documents.
The bartender filed a retaliation complaint with the California Division of Labor Standards Enforcement (DLSE). On Dec. 22, 2015, the DLSE determined the club and its owner had violated state laws prohibiting retaliation. On Oct. 17, 2017, the state labor commissioner filed an enforcement action against the club and the owner.
A trial court awarded a $10,000 civil penalty but denied injunctive relief because Kolla’s was, by that time, no longer in operation. The trial court also found the bartender wasn’t eligible for whistleblower protections because she didn’t report the violation to a government agency until after she was fired.
In 2021, a California Court of Appeal disagreed with the trial court and awarded an additional $20,000 in civil penalties for violations of the bartender’s whistleblower protections. It concluded that the firing and the threats to report the bartender to immigration authorities were two separate instances of illegal retaliation.
To assess whether whistleblower protections applied, the California Supreme Court sanctioned a broader definition of the term “disclose” to cover situations where the complainant reveals, in a particular context, information to which they tend to have special access. “Workplace wrongdoing is the type of information to which an employee tends to have special access, whether or not any particular recipient of such information has prior knowledge,” the high court said.
However, whistleblower protections only cover disclosures about legal violations, and they do not extend to disagreements over discretionary decisions, policy choices, interpersonal dynamics or other nonactionable issues in the workplace, the court noted.
Employers Must ‘Be Much More Vigilant’
The case shows why businesses should not make adverse employment decisions quickly or rashly, especially against an employee who has made a complaint.
Companies should “be much more vigilant about having their antenna up, having multiple reporting channels and treating every concern as if it needs to be investigated and remediated,” said Greg Keating, an attorney with Epstein Becker Green in Boston. “Invest in really robust HR practices so you take every complaint seriously.”
This is especially important because “[t]he rate of retaliation claims continues to rise in California and jurisdictions around the country, and the tripwire for employers has gotten lower and lower,” said Steve Pearlman, an attorney with Proskauer in Chicago. “Employers need to make extra efforts to prevent retaliation against employees by modernizing policies and codes of conduct and training and vetting employment decisions closely to ensure that they are not influenced in any way by retaliatory motives.”
Federal and State Laws Expand in Scope
Different federal laws apply to different types of whistleblowing. The Whistleblower Protection Act protects federal employees and federal contractors who disclose legal violations, while the Dodd-Frank Act protects individuals who assist with prosecution of securities and commodities fraud. As part of last year’s omnibus spending bill, Congress passed the Anti-Money Laundering Whistleblower Improvement Act, which increased rewards whistleblowers can receive for reporting money laundering. In addition, the IRS whistleblower program protects individuals who assist with prosecution of tax fraud.
State laws on whistleblower protections are changing rapidly, and the trend is toward affording greater protections for disclosures about broader categories of conduct, Keating said.