April 10th, 2014

New Law May Lead To Rise In Whistleblower Claims

On October 12, 2013, Governor Brown signed into law Senate Bill 496, which amended Labor Code Section 1102.5 (Section 1102.5), California’s general whistleblower statute, by expanding protections for employees who blow the whistle on employer misconduct. As a result of the amendments, which became effective January 1, 2014, employers are likely to see a significant increase in whistleblower litigation this year.

Before it was amended, Section 1102.5 already prohibited employers from retaliating against employees who reported (based on the employee’s reasonable belief) violations of state or federal laws, rules, or regulations to a government or law enforcement agency. The updated version of Section 1102.5 extends this protection to employees who report suspected illegal behavior: (1) internally to “a person with authority over the employee” or to another employee with the authority to “investigate discover, or correct” the reported violation; or (2) externally to any “public body conducting an investigation, hearing, or inquiry.” In addition, Section 1102.5 now prohibits employers from adopting or enforcing any rule, regulation, or policy that prevents the disclosure of reasonably-believed violations of any local (in addition to state and federal) laws, rules, or regulations.

Section 1102.5 also prohibits employers from retaliating against employees based on the employer’s belief that the employee has disclosed or may disclose information regarding the employer’s illegal activity, either externally or internally, and regardless of whether disclosing such information is part of the employee’s job duties.

The updated whistleblower statute is yet another potential trap for unwary employers. In light of the expanded protection for whistleblowers who report unlawful conduct to their employers, employers must be even more vigilant about investigating employee reports in a prompt, fair and thorough manner and taking appropriate corrective action. Employers also must be even more careful about documenting legitimate business reasons for making employment-related decisions such as terminations and discipline to defeat whistleblower claims. Finally, employers should update their anti-retaliation policies to reflect these new provisions and provide training to managers and supervisors regarding their compliance obligations.

If you would like to discuss the new provisions of Labor Code Section 1102.5, or employment law compliance in general, please contact Philip Cha or your regular Lim Ruger attorney.

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