Seyfarth Synopsis: California Labor Code section 1102.5 protects employees who disclose what they believe to be violations of the law. The Supreme Court of California has ruled that such disclosures are protected even if the employer already knows of the alleged violation. The People ex rel. Lilia Garcia-Brower, v. Kolla's, Inc.

The Facts

The complainant (identified as "A.C.R." due to immigration concerns) worked as a bartender at Kolla's, Inc., a nightclub in Orange County, CA. When A.C.R. complained to Kolla's owner that she had not been paid for three shifts, Kolla's owner threatened to report A.C.R. to immigration authorities, and subsequently terminated her employment.

A.C.R. filed a complaint with the Division of Labor Standards Enforcement (DLSE). When Kolla's refused to comply with DLSE's proposed remedies (i.e., lost wages, reinstatement, and civil penalties), the Labor Commissioner brought a suit against Kolla's for violations of various Labor Code sections, including section 1102.5(b), which prohibits employers from retaliating against employees for "disclosing information" concerning suspected violations of the law.

The Lower Court Decisions

The trial court ruled against the Labor Commissioner on the section 1102.5 claim, holding that there was no valid cause of action because A.C.R. reported her complaint to her employer, rather than to a government agency.

The Court of Appeal disagreed with the trial court's reasoning—because the trial court relied on an outdated version of section 1102.5 that did not protect disclosures to one's employer—but nevertheless affirmed the trial court's holding because the Court of Appeal construed the term "disclose" in the statute to mean revelation of something new to the recipient of the disclosure. The court reasoned that an employee's report to the employer about the employer's wrongdoing is not a "disclosure," and, therefore, it is not a protected whistleblowing activity because the employer already knows about its alleged wrongdoing. In this case, Kolla's owner was at least aware of, if not responsible for, the nonpayment of wages to A.C.R.

The Supreme Court's Decision

California's highest court disagreed with the Court of Appeal's interpretation of the term "disclosure." The California Supreme Court concluded that a report of unlawful activities made to an employer or agency that already knew about the alleged violation is a protected "disclosure" within the meaning of section 1102.5(b).

The Labor Commissioner argued, and the Court agreed, that the term "disclose" did not require the information disclosed to be previously unknown to the recipient. The Court discussed the California Legislature's use of the term "disclosure" in other statutes, the text of section 1102.5(b) itself, and a parallel federal statute, the Whistleblower Protection Enhancement Act of 2012.

The Court found additional support for its conclusion in the legislative history. The Court specifically pointed out that section 1102.5(b) "reflects the broad public policy interest in encouraging workplace whistle-blowers to report unlawful acts without fearing retaliation." Additionally, the Court gave significant weight to the Legislature's stated aim to protect workers who "report concerns to their employer," noting that the statute did not limit its protection to a disclosure directed to a person with the authority to "discover" the alleged violation, but rather, protects disclosures made to a person with the authority to "investigate ... or correct" the violation.

The amicus curiae for Kolla's urged the Court to adopt the Court of Appeal's definition of "disclosure" (i.e., narrowly defining the word to only include transmission of previously unknown information to its recipient). Amicus counsel argued that encompassing known information within the meaning of "disclosure" would render section 1102.5 duplicative of Labor Code section 98.6, which prohibits retaliation against any employee based on violation of other sections of the Labor Code.

In rejecting this argument, the Court pointed out the different relief available under the two sections (e.g., penalties payable to the whistleblower under section 98.6 versus penalties payable to the government under 1102.5). The Court also noted that section 1102.5's internal safeguard of a requirement that the employee has "reasonable cause to believe that information discloses a [legal] violation," will prevent the section from turning every dispute about the workplace into a whistleblower case.

What Kolla's Means for Employers

Kolla's confirms that an employer cannot take adverse action against an employee for disclosing any known or unknown information to the employer, if the employee has a reasonable cause to believe that a legal violation exists. By embracing the broader reading of "disclose," the California Supreme Court has made it more likely that an employee complaining about perceived unlawful conduct will be able to pursue a whistleblower claim.

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