Punitive protection for whistleblowers

Employment lawyers are familiar with the full spectrum of remedies available to employees under the Fair Employment and Housing Act, including punitive damages. Less kFnown is the availability of punitive damages under the increasingly popular Labor Code Section 1102.5, also known as the whistleblower protection statute. The statute itself says nothing about punitive damages. But that did not stop the 6th District Court of Appeal in Mathews v. Happy Valley Conference Center, Inc., 2019 DJDAR 11609 (Cal. Ct. App., Dec. 16, 2019) from becoming the first state appellate court to affirm the availability of punitive damages under the whistleblower statute. The decision is important for employees and employers alike.

Labor Code Section 1102.5 broadly prohibits an employer from retaliating against an employee who discloses information, or because the employer believes an employee has or may disclose information (i.e., preemptive retaliation), to a governmental agency or a person with authority over the employee, or to another employee who has the authority to investigate and correct a violation, if the employee has reasonable cause to believe that the information discloses a violation of, or noncompliance with, a federal, state, or local rule or regulation.

The jury in Mathews found that the plaintiff-employee was terminated in retaliation for assisting another employee to report and file a complaint for sexual harassment. The plaintiff brought claims under FEHA, Title VII and the whistleblower protection statute. The jury returned a substantial verdict and awarded $500,000 in punitive damages against the defendant-employer. The employer appealed on several grounds and sought to invalidate or reduce the punitive damages award. The employer argued it was exempt from FEHA, that the award exceeded that available under Title VII (as Title VII caps punitive damages), and that punitive damages cannot be recovered under the whistleblower statute. The court found for the employer on the issue of FEHA exemption (i.e., religious corporation), leaving the issue whether the full amount of punitive damages could still be upheld under the whistleblower statute before being reduced under Title VII.

The court applied familiar principles of statutory interpretation to uphold the punitive damages award in full. In so doing, the court affirmed the right of an employee to recover punitive damages for a violation of the whistleblower statute. In rejecting the employer's argument that the whistleblower statute limited recovery to contract damages, the court held that a statute which provides a cause of action for a violation of a right generally entitles the aggrieved party to all forms of relief, including punitive damages, unless a contrary intent in the statute appears.

Here, however, the court found no contrary intent. While the court acknowledged the absence of language identifying precisely "what damages are recoverable if [the statute] is violated," the court found that the statute's expansive language militated against a limiting construction. The court also pointed to Section 1105 for support, which states "nothing" shall prevent an employee from recovering "damages from his employer for injury suffered" for a violation of Section 1102.5. This broad language, coupled with federal authority applying the whistleblower statute to uphold punitive damage awards, led the court to "conclude that punitive damages are recoverable for a violation of the whistleblower statute."

The decision clarifies and expands the remedies available to employees who have suffered retaliation for disclosing information or reporting conduct believed to be unlawful. Employees and their advocates will welcome the availability of punitive damages as a means to prevent and further deter whistleblower retaliation. Moreover, while employers will not likely view this development positively, it is important to note that the decision did not alter the rigorous standard necessary to merit an award of punitive damages, which requires a finding of oppression, fraud or malice. Employers would be wise to review their anti-retaliation policies and procedures and train their personnel how to handle whistleblowers to avoid liability. 