California Supreme Court Expands Scope of Whistleblower Protections

The California Supreme Court issued its unanimous decision on May 22, 2023 in People ex rel. Garcia-Brower v. Kolla’s, Inc., which expanded the definition of “disclose” under California Labor Code Section 1102.5. The court held that whistleblowers are protected from retaliation under Section 1102.5 even if the alleged misconduct they are reporting is already known to the recipient of the report.

Labor Code Section 1102.5 prohibits an employer from retaliating against an employee for disclosing to the government or to an employer conduct that the employee reasonably believes to be a violation of law. Prior to Kolla’s, the case law interpreting “disclose” under Section 1102.5 had defined the term as “to reveal something that was hidden and not known.” Mize-Kurzman v. Marin Cmty. Coll. Dist., 202 Cal. App. 4th 832, 858-59 (2012).

Under the Mize-Kurzman standard, an employee’s reporting conduct to their employer that the employer already knew was not considered protected activity under the statute.

Kolla’s Decision

In People ex rel. Garcia-Brower v. Kolla’s, Inc., A.C.R.[1] worked as bartender for Kolla’s Inc. (Kolla’s), a nightclub. A.C.R. complained to her manager, who also was the club owner, that she was owed wages for her prior three shifts. Her manager responded by threatening to report her to immigration authorities, terminating her employment, and telling her to not return to the nightclub. A.C.R. filed a complaint with the California Labor Commissioner in the Division of Labor Standards Enforcement (DLSE).

After Kolla’s rejected the DLSE’s proposed resolution, the Labor Commissioner filed suit for California Labor Code violations, including Labor Code Section 1102.5. Kolla’s did not participate in the proceedings. The trial court granted in part the Labor Commissioner a default judgment against Kolla’s, but held that the Labor Commissioner failed to state a cause of action under Section 1102.5(b).

In a split decision, the California Court of Appeal affirmed, reasoning that A.C.R.’s report of unlawful activity to the nightclub’s owner was not a “disclosure” under the law because the owner already was aware of the wrongdoing. Relying on Mize-Kurzman, the appellate court found that the term “disclose” requires “the revelation of something new, or at least believed by the discloser to be new, to the person or agency to whom the disclosure is made.”

The California Supreme Court subsequently granted review.

California Supreme Court Analysis

In the unanimous opinion authored by Justice Liu, the California Supreme Court held that “a protected disclosure under section 1102.5(b) encompasses reports or complaints of a violation made to an employer . . . even if the recipient already knows of the violation.”

The court reasoned that Mize-Kurzman’s definition of “disclose,” revealing something that was not previously known, was too narrow and inconsistent with the purpose of Section 1102.5, which is “to protect workers, to encourage disclosure, and to promote compliance with employment-related laws and regulations.” As the court noted, interpreting “disclose” in such a way would amount to a “first known report rule,” which would exclude from the whistleblower law’s protections an employee who was the second to report an issue of workplace misconduct—regardless of whether the employee was aware the employer had prior knowledge of the issue.

Instead, the court found that the term “disclose” also is defined as “bringing into view in a particular context a type of information to which the disclosure tends to have special access.” The court reasoned that interpreting “disclose” in this way is consistent with the statute’s text and with the legislative purpose and history of Section 1102.5.

Practical Implications for Employers

Following on the heels of the California Supreme Court’s decision last year in Lawson v. PPG Architectural Finishes, Inc., which relaxed the burden of proof for employees seeking to establish retaliation under Section 1102.5, the court’s decision in Kolla’s represents another expansion of employers’ potential liability under Section 1102.5 claims.

In light of the Kolla’s decision, employers should continue to take reports of misconduct seriously, including to investigate and to consider whether adverse action has been taken against the reporting employee, regardless of whether the employee is the first to report or whether the employer is already aware of the reported information.