Why employers should never threaten whistleblowers

Supreme Court of California looks at case involving employer accused of failure to pay wages

Why employers should never threaten whistleblowers

A recent ruling concerned the application of section 1102.5(b) of California’s Labor Code, which prohibits employers from retaliating against employees for disclosing information about suspected violations of the law either internally or to government or law enforcement agencies.

Violators of this provision may be subject to various sanctions. The case of The People ex rel. Lilia Garcia-Brower, as Labor Commissioner, etc., v. Kolla’s Inc. discussed this provision.

Starting in 2010, the complainant worked as a bartender at Kolla’s, Inc., a nightclub in Orange County. In 2014, she reported to the club’s owner that she received no wages for her previous three work shifts. In response, Kolla’s fired her, told her never to return, and threatened to report her to immigration authorities.

Read more: California gentlemen’s club worker receives arbitration award

The complainant filed a complaint under the Labor Code against Kolla’s and the club’s owner with the Division of Labor Standards Enforcement (DLSE) of the Department of Industrial Relations.

Following an investigation, the DLSE found that the termination and the immigration-based threats violated California law. According to the DLSE, the proposed remedies included reinstating the complainant to her former position, paying her lost wages, and paying civil penalties to the complainant and DLSE.

Kolla’s and the club’s owner refused to accept these proposed remedies, which prompted the labor commissioner to sue them for Labor Code violations, including retaliation under section 1102.5(b).

The trial court rejected the labor commissioner’s section 1102.5(b) claim because it found that the complainant reported her complaints to her employer instead of to a government agency.

The California Court of Appeal affirmed this finding of the trial court. The appellate court said that:

  • Section 1102.5(b) did not protect an employee’s disclosure of unlawful activity directly to the wrongdoing employer
  • The term “disclose” required revealing something new or believed to be new to the recipient
  • An employee’s report to the supervisor about the supervisor’s wrongdoing did not amount to a “disclosure” or a protected whistleblowing activity because the employer would already know about its own wrongdoing
  • In this case, the club’s owner was aware of or responsible for the nonpayment of the complainant’s wages

Disclosure protected

The Supreme Court of California issued a judgment ruling that section 1102.5(b) protected the complainant’s disclosure. A report of unlawful activities made to an employer or agency was a protected disclosure under section 1102.5(b) even if the recipient already knew about the violation, the court said.

The court agreed with the labor commissioner’s argument that, according to dictionary definitions of the term “disclose,” the information disclosed need not be previously unknown to the recipient. The purpose of section 1102.5(b), its legislative history, and its placement within the statutory scheme that aimed to protect workers supported this broad reading of the word “disclose,” the court held.

The legislature’s 2013 amendments of the law expanded whistleblower/anti-retaliation protections to cover internal disclosures, the court said. This change protected employees and gave employers the opportunity to correct wrongdoing without government involvement, the court added.

The Court of Appeal’s interpretation went against the legislature’s aims and risked limiting internal disclosures, the court said. Its narrow interpretation might discourage employees from reporting wrongdoing to employers who might be aware of the alleged violations out of fear that section 1102.5(b) would not protect them, the court explained.

In the end, California’s Supreme Court returned the case to the appellate court for further proceedings consistent with the Supreme Court’s findings.

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