Employee Disclosure of Already Known Illegal Activity is Protected by Whistleblower Statute

Whistleblowing is a critical mechanism that helps promote transparency and accountability within companies. Whistleblowing involves an employee reporting unlawful or unethical activities that happen in a workplace. Whistleblowers are vital as they help uncover misconduct that might otherwise remain hidden. Unfortunately, whistleblowers often face significant risk, including retaliation from the employer, including being terminated or demoted. Fortunately, there are laws in place that protect whistleblowers. 

In California, the whistleblower statute, Labor Code Section 1102.5, protects California workers who decide to report unlawful or unethical conduct. These protections apply even if the employee or agency already knew the reported illegal or unethical activity. Unfortunately, some employees may not know this, meaning they may not realize they have legal recourse if an employer retaliates against them for reporting an already-known unlawful or unethical activity. Keep reading to learn more.

A decision by the California Supreme Court in May last year established that employee disclosures of unlawful activities, even if already known to the employer or agency, are protected under the whistleblower statute. This decision has gone a long way toward ensuring that employees are protected from retaliation even when they report already known unethical or unlawful activities.

Background of the Case

In 2014, a bartender at a nightclub in Orange County reported to the club’s owner that she had not received past wages. Instead of addressing the complaint, the owner threatened the bartender with deportation. On top of that, the bartender was fired and banned from returning to the club. In an attempt to seek justice and compensation, the afflicted bartender filed a complaint with the Division of Labor Standards Enforcement (DLSE). The DLSE sided with the bartender and suggested remedies. However, the club did not accept the proposal, resulting in the DLSE taking legal action against the club for violating labor laws, including the whistleblower statute.

The claim was rejected by the trial court and court of appeal after the courts found that the bartender’s complaint was not a protected “disclosure” under Labor Code Section 1102.5. The lower courts argued that a “disclosure” needed to involve revealing something new, or something the discloser (the employee) believes to be new, to the person or agency receiving the disclosure. In other words, since the club’s owner knew that the bartender had not been paid her wages, the complaint did not qualify as a “disclosure” as required by the whistleblower statute.

After the California Supreme Court heard the case, it overturned the previous decisions made by the lower courts. According to the California Supreme Court, whistleblower protection under Labor Code Section 1102.5 includes reports of activity that an employer or agency already knows about. The Supreme Court explained that a “disclosure” does not have to be the revelation of new information. In its decision, the Supreme Court used a wider definition of the term “disclose.” According to the dictionary, the term “disclose” means to reveal something that was hidden or make something publicly known (regardless of whether it was known or unknown).

In summary, according to the above ruling, if you report an unlawful or unethical activity, even if your employer or agency already knows about it, you are protected from retaliation. You have the right to file a retaliation claim if you are fired or another adverse employment action is taken against you for disclosing already-known information.