A series of new laws passed by California significantly expand whistleblower and anti-retaliation protections for employees in the state, which could create de facto standards for all companies with a presence in California.
One of the laws, SB 496, amends the state's whistleblower protections under California's Labor Code by expanding the definition of those who qualify as whistleblowers. It also expands the pool of individuals who may be found liable for retaliation and the types of complaints that are covered.
Under California's Labor Code, companies have always been prohibited from retaliating against employees who have disclosed, or may disclose, a violation of state or federal law to a government or law enforcement agency. The new law, which took effect at the start of the year, amends the code to include violations of local rules or regulations as well.
The protections apply to any employee who lives, earn wages, or performs job duties in the state, says Heather Sager, a member of the labor and employment group at law firm Vedder Price.
The new laws are expected to result in a “substantial uptick in whistleblower litigation,” says Kenneth Sulzer, a partner in the labor and employment group at law firm Proskauer. Several of the provisions will make whistleblower cases “more difficult to litigate and more difficult to settle,” he says.
The new law also extends protections to internal whistleblowers, in addition to external whistleblowers. Specifically, SB 496 prohibits any person with “authority over the employee,” or with “authority to investigate, discover, or correct the violation” from retaliating against employees who engage in protected whistleblower activity.
This new provision effectively means any internal complaint made to just about any authority figure at the company who then retaliates against the whistleblower creates the basis for a claim, says Sulzer.
The new laws mean that companies may have to increase protections for whistleblowers and review policies on how concerns and complaints are handled. “We're recommending our clients review and revise their anti-retaliation and whistleblower policies,” Sulzer adds. Companies may also consider providing additional training to managers and supervisors about how to properly respond when an employee makes a complaint, he says.
Prior to disciplining or terminating an employee, employers must first carefully review whether that person engaged in any activity that could be construed as whistleblowing under the new law, says Stephen Berry, a partner and chair of the employment law group at law firm Paul Hastings. “If so, ensure that the disciplinary action is supportable and unrelated to any potential whistleblowing activity,” he says.
That means managers and supervisors should also maintain thorough records by documenting any employee performance issues from the outset. “You want to document historical problems that are unrelated to any whistleblowing activity,” says Berry.
Broad Application
The new law further clarifies that whistleblower protections apply regardless of whether making a disclosure is part of the employee's job duties. “It creates a whole new class of people who can now be whistleblowers,” says Sulzer. Even though compliance and legal officers are required in the course of their job to report potential violations of law, for example, they are not exempt from whistleblower protections.
According to Sulzer, California now has one of the broadest whistleblower protection laws in the country, broader than some federal laws such as the Dodd-Frank whistleblower provisions. California law, for example, applies to employees of private and public companies, while Dodd-Frank only applies to public companies.
“Now you'll have a whole new class of cases that could survive summary judgment simply by an employee claiming that they were fired because they raised concerns about unpaid wages.”
—Stephen Berry,
Partner,
Paul Hastings
California has no materiality threshold that could limit the number of whistleblower reports made. Any disclosure could trigger potential exposure for a company that “wouldn't necessarily be triggered under many of the other whistleblower laws,” says Sulzer.
The new law could further resolve a split of opinion that has emerged among federal courts as to whether an individual must first report a violation of securities laws to the Securities and Exchange Commission in order to receive whistleblower protection against retaliation under Dodd-Frank. Under California law, employees will be protected regardless of whether they first report the activity to a government or law enforcement agency.
Immigration Protections
Two other laws, which also took effect Jan. 1, further amend California's Labor Code by establishing new anti-retaliation protections for employees, intended to prevent unfair immigration-related practices.
Sager says that the passage of the new laws is part of a wider national effort aimed at expanding whistleblower protections. “You're now seeing categories of employees who are being afforded traditional workplace protections that weren't previously available to them,” she says.
One law, AB 263, expands the state's labor code by prohibiting employers from retaliating against employees who update—or attempt to update—their “personal information” with their employer, “unless the changes are directly related to the skill set, qualifications, or knowledge required for the job.”
An undocumented employee who provides false documentation at the time of hire, for example, but who later receives a work permit, can provide corrected information to their employer without fear of retaliation.
If an employer takes any adverse action—such as disciplines, terminates, or reports an employee—within 90 days of a complaint being lodged for any labor code violation, the law presumes such conduct to be retaliatory. “That's an incredible hurdle for an employer to have to get over,” says Sager.
CALIFORNIA WHISTLEBLOWER AMENDMENTS
Below is an excerpt from Assembly Bill No. 263, which explains of the recent amendments.
Existing law prohibits an employer from discharging an employee or in any manner discriminating against any employee or applicant for employment because the employee or applicant has engaged in prescribed protected conduct relating to the enforcement of the employee's or applicant's rights. Existing law provides that an employee who made a bona fide complaint, and was consequently discharged or otherwise suffered an adverse action, is entitled to reinstatement and reimbursement for lost wages. Existing law makes it a misdemeanor for an employer to willfully refuse to reinstate or otherwise restore an employee who is determined by a specified procedure to be eligible for reinstatement.
This bill would also prohibit an employer from retaliating or taking adverse action against any employee or applicant for employment because the employee or applicant has engaged in protected conduct. The bill would expand the protected conduct to include a written or oral complaint by an employee that he or she is owed unpaid wages. The bill would provide that an employee who was retaliated against or otherwise was subjected to an adverse action is entitled to reinstatement and reimbursement for lost wages. The bill would subject a person who violates these provisions to a civil penalty of up to $10,000 per violation. The bill would also provide that it is not necessary to exhaust administrative remedies or procedures in the enforcement of specified provisions. Because the willful refusal by an employer to reinstate or reimburse an employee who suffered a retaliatory action under these provisions would be a misdemeanor, the bill would expand the scope of a crime and impose a state-mandated local program.
Existing law declares that an individual who has applied for employment, or who is or has been employed in this state, is entitled to the protections, rights, and remedies available under state law, regardless of his or her immigration status. Existing law declares that an inquiry into a person's immigration status for purposes of enforcing state labor and employment laws shall not be permitted, unless a showing is made, by clear and convincing evidence, that the inquiry is necessary in order to comply with federal immigration law.
This bill would make it unlawful for an employer or any other person to engage in, or direct another person to engage in, an unfair immigration-related practice, as defined, against a person for the purpose of, or with the intent of, retaliating against any person for exercising a right protected under state labor and employment laws or under a local ordinance applicable to employees, as specified. The bill would also create a rebuttable presumption that an adverse action taken within 90 days of the exercising of a protected right is committed for the purpose of, or with the intent of, retaliation.
The bill would authorize a civil action by an employee or other person who is the subject of an unfair immigration-related practice. The bill would authorize a court to order the appropriate government agencies to suspend certain business licenses held by the violating party for prescribed periods based on the number of violations. The bill would require the court to consider prescribed circumstances in determining whether a suspension of all licenses is appropriate.
Source: California Legislative Information.
AB 263 effectively means that employers cannot request additional documentation, use e-Verify, threaten to file a police report, or contact immigration authorities on employees who exercise their statutory rights.
“It doesn't have to be a formal complaint with a government agency or court,” adds Sager. Internal complaints raised to human resources, for example, are also protected.
Another law, SB 666, prohibits employers from making a report—or threatening to report—to a federal, state, or local government agency regarding the suspected citizenship or immigration status of a current employee, prospective employee, or their family members. Employers that are found to have violated this provision may have their business license suspended or revoked by the appropriate government agency.
The law may encourage employees who have had performance issues in the past, or have falsified work authorization documents from an immigration standpoint, to take advantage of this provision to get a 90-day safe harbor, says Sager. This is not to say employers cannot report an employee's immigration or citizenship status after someone has lodged a labor violation complaint, “but you better have a slam-dunk objectively legitimate reason for doing so,” she says.
Both AB 263 and SB 666 also create new anti-retaliation protections for employees who make either a written or oral complaint to their employer about unpaid wages. “Immigration status is not relevant to the ability to make claims for unpaid wages, or to recover those penalties,” says Sager.
Traditionally, the law protected only employees who filed a complaint for unpaid wages through an administrative labor board, but now an employee has only to raise such a complaint to their employer. “Now you'll have a whole new class of cases that could survive summary judgment simply by an employee claiming that they were fired because they raised concerns about unpaid wages,” says Berry.
“That means in many circumstances employees will now be able to go directly to court and sue their employer,” says Sager. “That will have a significant effect on employers.”
Employers that are found in violation of these laws face civil penalties up to $10,000 per employee per violation, “which is a significant penalty,” says Sager. Those penalties are in addition to the reinstatement and reimbursement for lost wages that employees are entitled to seek.
To succeed against a retaliation claim, employers need to keep careful documentation and make sure they have an objective explanation in the event that they do terminate an employee who has engaged in protective whistleblower activity, she says.
As long as managers, HR staff, and other decision makers are aware of employees' rights under these new laws, Sager adds, “they should already be in good shape to prevent claims under these new statutes.”
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