Weekly Law Resume - February 7, 2013: Protection for Whistleblowers Extended From Employers to Violations by Third Parties, Including Employees

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Brian McVeigh v. Recology San Francisco et al.
Court of Appeal, First District (January 31, 2013)

Under the California False Claims Act (“CFCA”), whistleblowers are given protection when they disclose information to the government about suspected fraud. When those claims are filed complaints, they are referred to as “qui tam” actions. In this qui tam action, plaintiff Brian McVeigh appealed the grant of summary judgment in favor of his former employer, Recology San Francisco.

McVeigh worked as an Operations Supervisor for a Recology San Francisco recycling facility. Recology provides waste collection and related services to residents and businesses in the City of San Francisco. Recology also operates recycling buy back centers where it collects recyclables, pays customers the California Redemption Value (CRV) and receives reimbursements from the state. McVeigh uncovered a “tag inflation” fraud scheme and provided information to the police. He also informed Recology’s management of this fraud scheme and implemented a system that he believed saved Recology money. Recology deemed McVeigh’s claims of fraud not meritorious. Recology concluded that McVeigh’s claim was made in bad faith and fired him as a result. McVeigh sued, alleging wrongful termination in violation of Government Code Section 12653 (part of the CFCA) and Labor Code Section 1102.5(b), but Recology was granted summary judgment. The Court of Appeals stated that the CFCA protects whistleblowers that make claims of “possible,” but not necessarily actual wrongdoing. Therefore, McVeigh could state a claim for wrongful termination and retaliation even if the acts he alleged his employer had undertaken were not defrauding the government.

Labor Code Section 1102.5(b) provides

An employer may not retaliate against an employee for disclosing information to a government or law enforcement agency, where the employee has reasonable cause to believe that the information discloses a violation of state or federal statute, or a violation of noncompliance with a state or federal rule or regulation

This Section protects an employee from discrimination for reporting claims of illegal conduct by fellow employees, as well as by an employer. An employee’s report of illegal activity may constitute protected conduct under this Section, even if the employee was simply doing his/her job in making the report. Further, an employee engages in protected activity under this Section when he/she discloses reasonably based suspicions of illegal activity to a governmental agency, such as the police in this instance. Thus, the Court of Appeals decided that Recology was not entitled to summary judgment on McVeigh’s claim for wrongful termination.

COMMENT

Employers can learn from this case that a whistleblower is still a whistleblower even if it is a false alarm. In this case, McVeigh was accused of being on a “witch hunt;” however, for public policy reasons the courts protect whistleblowers even when they are mistaken about the existence of fraud. If an employee is not doing a good job, then be explicit in terminating him/her for poor performance, but do not terminate employees for whistleblowing.

For a copy of the complete decision see:

http://scholar.google.com/scholar_case?case=14226995093414771386&hl=en&as_sdt=2&as_vis=1&oi=scholarr