California Legislature’s Changes to Labor Code Finally Paying Off for Whistleblowers

The Legislature has enacted several changes to the California Labor Code designed to protect employee-whistleblower activity. Many of these changes relate directly to areas in which CPM practices. The Legislature’s changes are beginning to pay real dividends to whistleblowers who expose the corporate wrongdoing of their employers.

California Labor Code Section 1102.5(b) makes it unlawful for an employer to retaliate against an employee for disclosing information to a law enforcement agency or internally to a person with authority over the employee, if the employee reasonably believes that the information discloses a violation of a state or federal statute or regulation.

For years, California employers relied on the “administrative exhaustion” defense to preclude whistleblowers from bringing meritorious retaliation lawsuits for their employer’s unlawful activity. The “administrative exhaustion” doctrine required whistleblowers (and other harmed individuals) to file claims with the Labor Commissioner on a shortened statute of limitations prior to filing civil litigation. These “claims” often languished with the Labor Commissioner without any real action or investigation by the government agency. Even worse, if an employee failed to comply with the doctrine and proceeded directly to litigation, that failure could preclude the lawsuit altogether, regardless of its underlying merits. Some courts had even interpreted the doctrine to require the harmed employee to go through the employer’s own internal grievance process. 

Recognizing this injustice and the important role employee-whistleblowers and their attorneys play in exposing misconduct, on January 1, 2014, the Legislature enacted California Labor Code Section 244. This section states that “administrative exhaustion” is not required unless the specific statutory section mandates it. 

Prior to enactment of California Labor Code Section 244, several courts had held that a retaliation claim for whistleblower activity under Section 1102.5(b) required “administrative exhaustion”—that is, the filing of a pre-lawsuit claim with the Labor Commissioner on a shortened statute of limitations. Now armed with Section 244, courts are holding that “administrative exhaustion” is not required for whistleblowers asserting retaliation under Section 1102.5, and that victims may proceed directly to court to vindicate these important legal rights.

In Howard v. Contra Costa County et al., Case No. 13-cv-03626, 2014 U.S. Dist. LEXIS 26908 (N.D. Cal., Feb. 28, 2014), a federal district court rejected the argument that Section 1102.5 whistleblower-retaliation claims require “administrative exhaustion” as a prerequisite to maintaining a civil lawsuit. The Court further held that the Legislature’s enactment of Section 244 was merely a “clarification” of existing California law. This means the statute may be applied retroactively to cases (and, potentially, decisions) filed before January 1, 2014. See also Melgar v. CSK Auto, Inc., Case No. 13-cv-3769, 2014 U.S. Dist. LEXIS 16639 (N.D. Cal., Feb. 7, 2014). This is welcome news to those victimized by retaliation for blowing the whistle on their employer.

Cotchett, Pitre & McCarthy represents employees and whistleblowers in litigation throughout California and the United States. If you believe you have been victimized by retaliation or whistleblower activities, contact CPM lawyer Adam J. Zapala