California Court of Appeal Upholds Whistle-Blower Protections on Basis of Employer’s Mistaken Belief of Employee Report to Governmental Agency

On November 21, 2014, a California Appellate Court ruled that an employer may not retaliate against an employee suspected of disclosing a violation of law to a governmental agency, even if it is later discovered that the employee did not in fact report a violation.  (Diego v. Pilgrim United Church of Christ, D063734.)

The decision arises out of Cecilia Diego’s suit against Pilgrim United Church of Christ for wrongful termination in violation of public policy.  Diego alleged she was terminated from her employment as a result of the director’s mistaken belief that she had lodged a complaint with the Community Care Licensing Division of the Department of Social Services which resulted in an inspection of the preschool.  Specifically, Diego alleged that Pilgrim United’s termination of her was retaliatory in violation of California public policy.

Pilgrim United filed a motion for summary judgment on the basis that no constitutional or statutory authority extended whistleblower protections to employees who were merely believed to have engaged in protected activity.  The trial court granted summary judgment in favor of Pilgrim United based on the fact that Diego had not in fact made a complaint to the Department of Social Services and thus her termination did not violate public policy as a matter of law.

The Court of Appeal reversed the trial court’s ruling concluding that Diego did in fact present a cause of action for wrongful termination in violation of public policy.  The Court of Appeal found that Diego’s cause of action was well-established and tethered to a constitutional or statutory provision, namely that of former Labor Code section 1102.5(b) which was enacted to encourage workplace whistle-blowers to report unlawful acts without fear of retaliation.  The Court noted that even when the termination of employment is based on an employer’s mistaken belief that the employee might disclose or has disclosed a violation of state regulations to a governmental agency, the result has a tendency to be injurious to the public and violates public policy.

This decision is directly in line with the 2014 amendments made to Labor Code section 1102.5.  Labor Code 1102.5 now prohibits retaliation against an employee for disclosing information, or because the employer believes that the employee disclosed or may disclose information to a government or law enforcement agency.  It is clear that both the legislature and the Courts will continue to encourage workplace whistle-blowers to report unlawful acts without fear of retaliation from the employer.

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