Avoid “Whistleblower” Liability Under Labor Code 1102.5

Imagine this scenario:

One of your employees receives an expensive ring for her 25th wedding anniversary. She wears the ring to work every day. On an otherwise normal Monday, the ring goes missing. The employee suspects a coworker and files a police report. On at least two occasions, officers show up to investigate and question you and your employees. Naturally, you worry about customers seeing police on site. You also worry about workplace disruption and employee morale. You decide to terminate the employee who filed the police report. The next day, the ring is found at the workplace. It’s unknown whether it was ever taken or just misplaced.

Has the employer acted lawfully? After all, a business’ reputation is critical, and suspicion among staff is hardly a recipe for success. In fact, the termination was illegal! Disciplining an employee who reports suspected wrongdoing to police is against the law. It is also one form of wrongful termination that can lead to an expensive lawsuit and a lot of heartache.

Wrongful Termination In “At-Will” California

California is an “at-will” state. In theory, California labor law allows employers and employees to end the employment relationship at any time, for any reason. In practice, there are limits. Employee discipline or termination is wrongful if it violates California law or federal law. Discipline or termination is also wrongful if it contradicts “public policy.”

Cardenas V. Fanaian

As you probably guessed, the scenario above is from a recent case, Cardenas v. M. Fanaian, D.D.S., Inc. The Cardenas plaintiff, a dental hygienist, filed a wrongful termination lawsuit on two grounds:

1. California “Whistleblower” Protection

Cardenas sued her employer for violating California Labor Code section 1102.5, one of California’s “whistleblower” labor laws. Whistleblower laws are intended to prevent retaliation against a person who shines a light on wrongdoing.

Section 1102.5:

• Prohibits workplace policies that prevent employees from disclosing information that discloses a violation of state or federal statute or a local, state, or federal rule or regulation:
  • to government or law enforcement agencies, i.e. the police,
  • to a person with authority over the employee or another employee who has authority to investigate or correct the non-compliance, or
  • through testimony before a public body
• Prohibits retaliation against employees who disclose, or who may disclose, information of possible violations of a state or federal statute or a local, state, or federal rule or regulation under the same scenarios above.

Section 1102.5 has been expanded over time, most recently in 2014. The law no longer requires would-be whistleblowers to file a labor board claim before a lawsuit. Also, a would-be whistleblower now need only have a “reasonable” belief that wrongdoing has occurred in order to qualify for 1102.5’s protections. In other words they can be wrong and still be protected.

The Cardenas employer argued section 1102.5, a law protecting whistleblowers, should not apply because the employer was not the suspected wrongdoer. In other words, what “whistleblowing” occurs, if the employer is not the one suspected of having broken the law?

The Court of Appeal disagreed. The court analyzed section 1102.5 and decided it’s irrelevant whether the employer is an alleged wrongdoer. The Court said:

An employee, Cardenas, reported to a law enforcement agency that she believed a theft had occurred at the workplace. The jury found that Cardenas was later terminated by the employer and that a motivating reason for her termination was the report she made to law enforcement.

And that’s that.

Take note the court implied termination might be unlawful if there’s any retaliation involved. If retaliation is “a” motivating reason for termination, an employer is at risk.

2. Violation of “public policy”

The Cardenas plaintiff also claimed her termination violated “public policy.” California courts have decided employee discipline or termination is wrongful if it contradicts a “fundamental public policy.”

The question, of course, is what “fundamental public policy” means. California courts have stated, a fundamental public policy must:

• Be predicated on a fundamental, well-established, substantial policy that concerns society at large rather than the individual interests of the employer or employee;
• be delineated in a constitutional or statutory provision of California or federal law.

Due to appeal rules, the Cardenas Court didn’t review whether termination for filing a police report violates public policy. But if the Cardenas Court had been faced with the issue, it most likely would have ruled “theft” of an employee’s personal property (like a wedding ring) in an employer’s workplace only impacts the personal interests of the employee/employer and not society at large.

The Cardenas employer attempted to make this same argument on the Labor Code section 1102.5 claim. But the Cardenas court ruled whether the alleged theft concerned only the individual employee’s or employer’s interest was irrelevant for 1102.5 purposes. That underscores how much broader Labor Code section 1102.5 “whistleblowing” liability is than for wrongful termination in violation of public policy.

The Consequences

Unfortunately, the sky’s the limit when it comes to wrongful discharge claims. In Cardenas, the jury awarded $117,768 for economic losses, including wages.

The Take Away

Employers may unwittingly terminate or discipline employees for reasons that violate California labor laws. Think twice before disciplining or terminating an employee who reports suspected wrongdoing. As much as your immediate reaction might be to get rid of the trouble maker, understand that’s called unlawful “retaliation” under employment law. When in doubt, check with an experienced and knowledgeable employment attorney. Also, remember labor laws can change. Stay on top of it to avoid costly mistakes.