Whistle-blower claim prerequisite

Do whistle-blowers have to file with the Labor Commissioner before going to court?

On March 30, 2015, the Third District Court of Appeal took up the issue of whether a complaint with the Labor Commissioner is a necessary prerequisite to filing a whistle-blower case in court. In Gallup v. Superior Court (2015) 235 Cal. App. 4th 682, the appellate court decided that it is when the retaliation occurred prior to 2014.

Ms. Gallup alleged that her employer, the Superior Court of Nevada County, retaliated by terminating her after she reported that the Family Court Services Department was not providing services in compliance with the law. The trial court overruled the Superior Court’s request to dismiss the case early in the proceedings (demurrer). The trial court made its decision on grounds Ms. Gallup could take her whistle-blower claim directly to court, relying on a Second District Court of Appeal decision (Lloyd v. County of Los Angeles (2009) 172 Cal.App.4th 320). The matter eventually went to a jury trial, the conclusion of which was a jury verdict in favor of Ms. Gallup for over $300,000 in damages.

The Superior Court appealed, asserting that the trial court’s demurrer decision was erroneous. The appellate court first looked to a California Supreme Court decision (Campbell v. Regents of University of California (2005) 35 Cal.4th 311) that an employee was required to use her employer’s internal procedure before going to court with her whistle-blower claim. That decision was based on a legal doctrine known as exhaustion of administrative remedies: the use of non-court procedures that are required by law before going to court.

The court in Gallup noted that the law under which Ms. Gallup brought her claim (Labor Code section 1102.5) does not require any administrative remedy. But it also looked to another law (Labor Code section 98.7) that covers such claims (“Any person who believes that he or she has been discharged or otherwise discriminated against in violation of any law under the jurisdiction of the Labor Commissioner”), and which refers to an administrative procedure: “may file a complaint with the division within six months after the occurrence of the violation.”

Because the California Legislature changed the law in this area after the jury made its decision1, the appellate court first had to determine whether the changes affected its decision. The general rule is that a law (statute) operates going forward, not backward, in time, unless (1) the law specifically provides for retroactive effect, or (2) the Legislature intended such retroactivity, e.g., when the change is to clarify existing law. The court in Gallup noted that the newly amended laws do not refer to any retroactive coverage. It also concluded that the Legislature’s references to clarifying existing law in some, but not all, analyses of the bill, were not definitive. This conclusion stands in contrast to a recent First Appellate District decision that the changes were a clarification of existing law (Satyadi v. West Contra Costa Healthcare Dist. (2014) 232 Cal. App. 4th 1022). The difference of opinion between the two courts came down to whether the Lloyd v. County of Los Angeles or Campbell v. Regents of University of California decision was more persuasive.

The impact of this case depends on when the retaliation occurs and where an employee files her case. If the retaliation took place in 2014 or later, the employee may proceed directly to court with a whistle-blower claim under Labor Code section 1102.5. (Note: public sector employees have other pre-lawsuit requirements for whistle-blower claims under other laws.) If the retaliation occurred before 2014 and the employee worked in an area covered by the First District’s jurisdiction, filing a Labor Commissioner complaint may not be required. Nevertheless, for these employees and those working in other areas, filing an administrative complaint is the safest approach.

1Effective January 1, 2014, exhaustion of administrative remedies is not required for any claim brought under the California Labor Code unless the particular law covering the claim specifically requires it (California Labor Code section 244). Also effective the same day, Labor Code section 98.7 specifically provides that there is no administrative exhaustion requirement.

Posted by deanroyerlaw