California Supreme Court Says Whistleblower Statute Protects All Employees Who Report Wrongdoing And Not Just The First Employee To Report

CATEGORY: Nonprofit News, Private Education Matters
CLIENT TYPE: Nonprofit, Private Education
DATE: Aug 08, 2023

From May 2010 to April 2014, a woman with the initials ACR worked as a bartender at Kolla’s, a nightclub in Orange County. On April 5, 2014, ACR complained to the owner, Gonzalo Estrada, that she had not been paid wages owed for her previous three shifts of work. Estrada responded by threatening to report ACR to immigration authorities (hence the initials instead of her full name), terminating her employment, and telling her never to return.

In June 2014, ACR filed a complaint against Estrada and Kolla’s with the California Division of Labor Standards Enforcement (DLSE), which opened an investigation.  After determining that Estrada’s immigration-based threats and termination of ACR violated California law, DLSE notified Estrada and Kolla’s of proposed remedies, including payment of lost wages to ACR, reinstatement of ACR’s previous position, and payment of civil penalties to ACR and DLSE. After Estrada and Kolla’s declined to accept DLSE’s proposed remedies, the Labor Commissioner sued them for violations of the Labor Code, including retaliation in violation of Section 1102.5(b).

The trial court granted judgment for DLSE, but ruled against DLSE on the Section 1102.5(b) claim. The Court of Appeal upheld this ruling and the DLSE thereafter appealed to the California Supreme Court.

Labor Code Section 1102.5 prohibits employers from retaliating against employees for “disclosing information” concerning suspected violations of the law, either internally or to government or law enforcement agencies. The crux of this case revolved around what it means to disclose information.  Some California courts have held that the report of information that was already known does not constitute a protected disclosure because the ordinary meaning of the verb “to disclose” is to reveal something that was hidden and not known.

It is for this reason that the trial court and Court of Appeal held against DLSE; they both opined that because Estrada was the owner of Kolla’s, he already knew that he had not paid ACR and thus her telling him this was not a disclosure under Labor Code Section 1102.5(b).

On the other hand, other California courts have held that using this definition of “disclose” would defeat the legislative purpose of the law, which is to encourage and protect whistleblowing employees. If only the first employee to blow the whistle was protected, employees would be unwilling to report unlawful conduct for fear that another employee had already done so.

The California Supreme Court found that the Court of Appeal’s definition of “disclose” would defeat the law’s purpose.  The Court first noted that dictionary definitions of disclose include “to make openly known” and “to open up to general knowledge.”  The Court surmised that these definitions do not require that the topic of disclosure be unknown to the recipient.

The Court also made clear Labor Code Section 1102.5 was intended to protect every employee, not just the first employee to report.  The protection should also not be dependent on whether the information was already known to the wrongdoer.

People ex rel. Garcia-Brower v. Kolla’s, Inc. (Cal. 2023) 308 Cal.Rptr.3d 388.

Note: This case makes it clear that the protections of Labor Code Section 1102.5(b) extend to all reports of wrongdoing regardless of previous knowledge and whether another employee had reported the misconduct. Nonprofit organizations should openly receive and consider any information of potential misconduct or unlawful acts.

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