In a decision issued on May 22, 2023, the California Supreme Court sided with the state’s labor commissioner and held that the state’s whistleblower statute (Labor Code § 1102.5(b)) protects employees who disclose unlawful activity even if the recipient employer or agency already knows of the violation. This broad interpretation of the whistleblower statute is consistent with the federal whistleblower protections and will enable multiple employees to receive whistleblower protection for reporting the same violation to an employer or agency.

Background

In 2014, a bartender at an Orange County nightclub complained to the club owner that she had not been paid past wages. The club owner responded by threatening to report her to immigration authorities, terminating her employment and telling her to never return to the club. The bartender filed a complaint with the Division of Labor Standards Enforcement which determined that the club owner’s actions violated California law and proposed remedies. After the club declined to accept the proposed remedies, the labor commissioner filed an enforcement action, alleging violations of the Labor Code, including section 1102.5(b), the whistleblower statute which protects employees against retaliation for “disclosing information” about unlawful activity to their employer or government agency.

The trial court and appellate court found that a private employee’s report of unlawful activity directly to the wrongdoing employer is not a protected disclosure because such an employer would already know about his or her wrongdoing.

California Supreme Court Decision

The California Supreme Court reversed the appellate court decision and found that a protected “disclosure” within the meaning of section 1102.5(b) includes an employee report of unlawful activity to an employer or agency that already knows about the violation. Contrary to the findings of the appellate court, the Supreme Court held that a “disclosure” need not necessarily be the revelation of something new or previously unknown to the recipient and, instead, adopted a broader dictionary-based definition of “disclose” that includes “to make openly known” and “open to general knowledge”.

The Court also found that construing section 1102.5(b) to cover the bartender’s complaint is consistent with previous legislative amendments enacted to the statute’s text aimed at expanding whistleblower protections to cover internal disclosures. Additionally, the Court noted the appellate court’s holding would have had the effect of discouraging employee reporting by denying protection for multiple disclosures of the same violation and of causing employers and agencies to miss out on potentially corroborating information that could be valuable in investigating and confirming violations of the law.

Takeaways

California employers would be wise to take note that under this ruling, an employer’s prior knowledge of illegal activity no longer has any impact upon a whistleblower’s entitlement to protection from retaliatory behavior. Additionally, practically speaking, this will mean that employers can expect that multiple employees will be able to obtain whistleblower protection for reporting the same violation. Employers should take steps now to inform and educate their human resources and managerial staff of these broad whistleblower protections to ensure proper handling of employee disclosures going forward.

As always, DWT will continue to monitor these issues and provide updates as needed. 

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