Will California Be The Next Battlefront For An Onslaught of Whistleblower Claims?


[co-author: Ellen Caro]

Last week, we identified five important questions employers should ask themselves to test whether they are ready for key changes in California law that are coming in 2014. Here, we take a closer look at one of those changes: additional whistleblower protections under Labor Code section 1102.5.

Internal Reporting Now Entitled to Protection

The most noteworthy amendment concerns the range of reporting activities that are entitled to whistleblower protection. Under current law, an employer may not adopt or enforce any rule, regulation, or policy preventing an employee from disclosing information to a governmental or law enforcement agency, nor may the employer retaliate against an employee who makes such an external report, if the employee has reasonable cause to believe the information discloses a violation of state or federal law.

Effective January 1, 2014, this protection will expand to include internal reporting to a person with authority over the employee or to another employee who has the authority to investigate, discover, or correct the violation. In addition the anti-retaliation provisions apply when the employer believes that the employee disclosed or may disclose such information. Employees may seize on this language and try to argue that their employer retaliated against them even where the employee did not make a protected disclosure, but the employer thought they “may.”

Local Laws Now Covered by Statute

Another change concerns the scope of potential violations covered by the statute. Whereas before the protections only extended to disclosure of suspected violations of federal and state law, now an employee is protected for disclosing or refusing to participate in an activity that would result in a violation of or noncompliance with a local rule or regulation. This change brings the Labor Code into alignment with other whistleblower protections provided under California law: both Education Code § 44112 and Government Code § 8547.2, for example, include violation of local law in the definition of what may constitute an “illegal order.” As California courts have previously dismissed retaliation claims based only on disclosed violations of local law, this amendment is likely to expand the number and range of whistleblower claims brought under the statute.

Reporting Protected Regardless of Employee’s Job Duties

Finally, the amended statute clarifies, consistent with prior case law, that an employee is entitled to protection regardless of whether disclosing the information is part of the employee’s job duties. This may foreclose arguments about the whistleblower’s motivation for disclosure, as even a disclosure made in routine performance of an employee’s job may be protected. From a practical standpoint, the change may lead to an increase in claims brought by general counsel and compliance officers whose job duties include disclosing alleged violations. However, these protections do not apply to actions by employers against employees who violate the statutory lawyer-client or physician-patient privilege or who disclose trade secrets.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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