Plaintiff Was Not Required to File Complaint with Labor Commissioner Before Filing Suit for Whistleblower Retaliation Under Labor Code Section 1102.5

Category: Client Update
Date: Feb 23, 2015 12:36 PM

In 2010, the Doctor's Medical Center (DMC), which is owned by the West Contra Costa Healthcare District (District), hired Carolyn Satyadi into the position of Clinical Laboratory Director.  Satyadi alleges that over the course of approximately a year and a half, she informed the DMC and its executive staff about several practices relating to the laboratory's operations, such as the disposing of dangerous chemicals, that she believed violated state and federal law.  Satyadi also claims she refused to participate in the practices she believed were illegal. 

Satyadi asserts that in 2012, an executive at the DMC made derogatory comments about Satyadi in front of her subordinates.  Satyadi complained but was never contacted about her complaint.  Two months later, Satyadi was placed on administrative leave pending an investigation into allegations other employees made against Satyadi.  Satyadi claims that the DMC and a DMC executive intentionally withheld information from the investigator in order to create a pretext for the District's retaliatory termination of Satyadi.  Satyadi was terminated in June 2012 after a DMC hearing that, according to Satyadi, was intended to provide the "minimum level of due process" required by law.  She was informed that no further administrative appeals process existed by which she could challenge her termination. 

Satyadi filed suit against the District, the DMC, and two DMC officials (District) alleging retaliation in violation of Labor Code section 1102.5.  The District filed a demurrer, arguing that Satyadi failed to exhaust her administrative remedies by filing a complaint with the Labor Commissioner as required by Labor Code section 98.7. 

Labor Code section 98.7 states that any person who believes she has been discharged or discriminated against in violation of any law under the Labor Commissioner's jurisdiction may file a complaint with the division within six months after the violation.  The trial court agreed with the District, and dismissed Satyadi's lawsuit.  Satyadi appealed. 

After Satyadi filed her appeal, the Legislature amended the Labor Code.  It added section 244, which states that an individual is not required to exhaust administrative remedies or procedures in order to sue under the provisions of the Labor Code unless the specific provision under which the individual is suing expressly requires exhaustion of an administrative remedy.  In addition, Section 98.7 was amended to state that "[i]n the enforcement of this section, there is no requirement that an individual exhaust administrative remedies or procedures."  The Court of Appeal asked Satyadi and the District to brief the issue of whether these amendments should be applied retroactively to their case.  The parties agreed that if the amendments applied to their case, the trial court's judgment would have to be reversed.      

It is well established that statutes only apply prospectively unless they clearly express an intent to do otherwise.  However, if an amendment does not change existing law, but merely clarifies it, a court does not have to decide whether the law should apply retroactively as opposed to just prospectively. Because the meaning of the statute stays the same, a court does not have to address whether the amendment should affect prior cases.  The Court of Appeal then analyzed two prior decisions regarding Labor Code section 1102.5 and administrative remedies to determine the state of existing law. 

In Campbell v. Regents of University of California (2005) 35 Cal.4th 311, the California Supreme Court held that a University of California employee's lawsuit brought under section 1102.5 had to be dismissed because the employee failed to exhaust the University's administrative grievance process before filing suit.

In Lloyd v. County of Los Angeles (2009) 172 Cal.App.4th 320, the Court of Appeal held that an employee was not required to exhaust the section 98.7 remedy before filing suit under section 1102.5 because section 98.7 provides an additional remedy that an employee may choose to pursue, not a requirement that an employee must exhaust.

Because Campbell did not address, or even mention, Labor Code section 98.7, the Court of Appeal held that Lloyd, not Campbell, represents the state of existing law.  Because California case law did not require exhaustion of the section 98.7 remedy before filing suit under section 1102.5, the Court held that the Legislature's amendments to the Labor Code did not change existing law, but merely clarified it.  Therefore, the Court of Appeal did not have to address the question of retroactivity, and held that Satyadi was not required to exhaust section 98.7 before filing her lawsuit.  The Court of Appeal reversed the trial court's judgment, and remanded for further proceedings.  

Note:

This case establishes that an employee is not required to file a complaint with the Labor Commissioner before filing suit alleging retaliation in violation of Labor Code section 1102.5. That does not mean, however, that an employee is not required to follow an agency's internal administrative grievance procedure before filing a section 1102.5 retaliation suit. On that issue, Campbell v. Regents of University of California (2005) 35 Cal.4th 311, in which the California Supreme Court held that an employee's lawsuit brought under section 1102.5 had to be dismissed because she failed to exhaust her employer's internal grievance process before filing suit, is still good law.  Accordingly, an employee who claims retaliation may be required to exhaust an agency's internal grievance procedure if the procedure covers retaliation-type claims.

Satyadi v. West Contra Costa Healthcare District (2014) 232 Cal.App.4th 1022.

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