California’s whistleblower statute, California Labor Code Section 1102.5, protects from retaliation employees who “blow the whistle” on conduct they perceive to be illegal. Before January 1, 2014, section 1102.5 prohibited employers from retaliating against employees who either: (1) disclosed information to a governmental or law enforcement agency based on a reasonable belief that the employer violated a statute, rule, or regulation; or (2) refused to participate in an employer activity that would result in a violation of a statute, rule, or regulation.

The legislature made several changes to the law for 2014, including: (1) prohibiting employers from retaliating against employees who report a violation to their employer, rather than the government; (2) protecting employees from “anticipatory retaliation”; (3) expanding the protections of the law to include individuals who disclose the information/make the complaint as part of their job duties; (4) covering employees who report violations of local laws; and (5) covering employees who provide information to public bodies.

Retaliation claims represent a substantial share of the lawsuits employees file in California. Employers should therefore understand the changes to the Labor Code and case law developments in this area.

Internal Reporting Now Covered

Under the pre-2014 law, only employees who disclosed information to a government or law enforcement agency were covered by section 1102.5. For example, an employee who complained to the Department of Social Services about the conditions of a pre-school was protected. Diego v. Pilgrim United Church of Christ Diego v. Pilgrim United Church of Christ.

Under new section 1102.5, employees are protected even if they do not “blow the whistle” to the government, and do so only internally Of course, common law claims for wrongful termination in violation of public policy have long applied to employees who make good faith, internal reports. The difference is that, unlike the common law claim, section 1102 .5 provides for a three-year statute of limitations, as well as penalties and the possibility of attorney’s fees.

Protection from Anticipatory Retaliation

Section 1102.5 now extends whistleblower protection to “anticipatory retaliation.” That is, the law prohibits employers from taking action against a worker whom the employer fears may disclose a violation of law in the future.

Before the recent amendments to section 1102.5, the law was unclear whether these employees were protected. For example, in Rope v. Auto-Chlor System of Washington, Inc. the court rejected an interpretation of section 1102.5 that would include liability for “‘anticipatory’ or ‘preemptive’ retaliation.” On the other hand, in the Diego decision discussed above (decided under former section 1102.5) the employee alleged she was terminated based on the employer’s mistaken belief that she had filed a complaint with the Department of Social Services. The appellate court assumed that the employer had discharged employee because it believed she made a complaint, and held that section 1102.5 applied. The new statute ends the debate.

Protection for a Broader Group of Employees

The legislature also expanded section 1102.5 to provide protection to employees who testify before public bodies, who complain of violations of local ordinances, and who are operating within “the scope of their job duties” when they make a complaint.

The new statute overturns Edgerly v. City of Oakland, in which the court held because the employee had not reported a violation of federal or state law (only local ordinances), she had not engaged in protected activity. The legislature also rejected the Edgerly court’s conclusion that the employee was not “whistleblowing” by reporting expense account irregularities because it was her job to report such matters. At the time, the court stated, “[I]f the claimed whistleblowing activities fall within general duties, they are not actionable.” That is no longer the case.

Now section 1102.5 explicitly provides protection “regardless of whether disclosing the information is part of the employee’s job duties.” Therefore, if an employer fires a human resource manager who reports to the CEO that an employee complained about sexual harassment, she gains protection from retaliation. So, employees who report wrongdoing as part of their jobs may argue that any negative action is an act of retaliation, because these employees are always “engaging in protected activity.”

Tips for Employers

There are a number of common sense steps employers can take to mitigate against the risk of more retaliation lawsuits. It is important to have an anti-retaliation policy that applies to more than reporting discrimination or harassment. But such a policy is not enough anymore. Management has to understand that the law gives employees the “right” to complain about illegal activities, even when they are mistaken. Managers must learn that reprisals against employees who make such reports are against policy and can result in significant liability. Those managers responsible for approving termination or other negative employment decisions must be aware of the risk of retaliation claims, and should ensure that retaliatory motive is not present.