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The Expansion of Whistleblower Protection: What Every Employer Should Know

Over the last few years, California courts have been flooded with wrongful discharge lawsuits. We noted in an earlier article that California appellate courts have expanded the situations in which employees may bring claims against their employers, particularly in retaliation lawsuits. Recent cases further exemplify the growing trend to liberalize wrongful discharge lawsuits. Because the California Supreme Court has declined to review these cases, it is not immediately clear what long term impact these decisions will have on at-will employment principles. What is clear is that employers should take steps to understand current regulations and case law to avoid a wrongful discharge lawsuit.

Public Policy In A Wrongful Discharge Suit
An employee may bring a wrongful discharge suit against the employer if the employee can demonstrate that the discharge violated fundamental and substantial public policy. The California Supreme Court has held that a wrongful termination action based on violation of public policy must be grounded on some constitutional, statutory, or regulatory basis. In the past, courts interpreted that requirement to mean the violation must inure to the public interest—simply put, such violations were required to affect the public at large and not just private individuals.

It is unclear if this remains true given a recent case that resulted in a favorable outcome to an employee based on his individual claim of unsafe working conditions. In that case, a maintenance mechanic was terminated after refusing to clean up a containment area. While the containment area did not violate any safety standards, the area did store corrosive materials that could have been fatal if not handled correctly. The employee argued that the clean up of that area was not part of his job description, he was not trained in such tasks, and he believed the assignment was unsafe. He premised his belief that the area was unsafe on one past incident where another employee was injured from touching the chemicals.

The employee was discharged following his refusal to perform the assigned task. After his termination, the employee sued, claiming that the termination violated public policy. After the lower court proceedings resulted in an appeal, the appellate court ruled in favor of the employee, noting that the employee had a reasonable “good faith” belief that the assignment was unsafe.

What Is Good Faith?
Traditionally, the phrase “good faith” is understood to denote an act that is honest in purpose, free from intent to defraud, and generally speaking, faithful to one’s duty or obligation. This definition is generally broad and often left for the jury to decide.

The appellate court’s approach to the definition of good faith in this case was even more relaxed and gives employers cause to be worried. The appellate court’s decision, read broadly, means that an employee need not show that the actual work that he is complaining about is unsafe, just that he, in good faith, believes that it is unsafe. While the employee’s belief must also be reasonable, the employee can simply point to past unsafe conditions and complaints to demonstrate that he has a reasonable fear that the current condition is unsafe.

Although the California Supreme Court has refused to review this case, past decisions seem to support the appellate court’s ruling. In 1991, the California Supreme Court stated that an employee need not prove an actual violation of law in order to establish wrongful termination. The fact that he reasonably believed that the activity was illegal sufficed to demonstrate that he was wrongfully terminated. That decision implied that no actual harm or violation must exist, only that the employee in good faith believed that it did at the time.

How Does This Affect Employers?
Naturally, this liberal construction of good faith will contribute to the already growing number of lawsuits. As a result, employers should be prepared to update current termination policies in order to prevent a claim. Here are a few simple steps an employer should take in order to avoid litigation.

Make sure employment handbooks discuss anti-retaliation policies. Talk about these policies with employees (particularly supervisors/managers), make clear that the company does not tolerate retaliation, and stress that any perceived retaliation should be immediately reported. If an employee refuses to work, ask the employee why he is refusing to perform. Document these discussions. If the refusal is based on the employee’s concern that it would violate a law, regulation, or pose health concerns, seek legal advice before terminating the employee. Keep complaints confidential and investigations discreet. This minimizes unnecessary third party involvement and makes it easier for employers to show that no one involved in the decision leading to the termination had a retaliatory motive.

Natural Disasters and the Employer’s Duty to Pay Employees

Recent natural disasters such as Hurricane Katrina and fears of a potentially devastating earthquake or levee break in California have left employers wondering whether they would be required to pay their employees during a temporary closure caused by a natural disaster. The answer varies for exempt and non-exempt employees.

Under the federal Fair Labor Standards Act (FLSA), non-exempt employees need not be paid for hours not worked. If a natural disaster prevents non-exempt employees from reporting to work or there is no work to report for, the non-exempt employees do not get paid. The exception to this is if there is a labor contract in place between the employer and employee or labor union providing that the employees will be paid notwithstanding the natural disaster.

The situation is different for exempt employees. The FLSA suggests that exempt employees must be paid even during temporary closures caused by natural disasters. The FLSA makes clear that if an exempt employee is ready, willing, and able to work, an employer cannot make deductions from her pay even when work is not available. The prohibition against deductions is subject to a few listed exceptions, but interruption of work due to a natural disaster is not one of them.

In California, the Division of Labor Standards Enforcement (DLSE) has stated that when work is interrupted by an “Act of God” or other cause not within the employer’s control, there is no obligation to pay employees. The DLSE’s Enforcement Policies and Interpretations Manual does not distinguish between exempt and non-exempt employees. However, the DLSE Manual is intended for internal use only and has no official authority. The opinion of the DLSE is not entitled to a great deal of deference if its interpretation and/or decision is invoked in a court proceeding.

When California and federal labor laws are not in harmony, the courts will apply the law that is most favorable to the employee. The issue of whether an employer needs to pay employees during a natural disaster has not been litigated in California, and the DLSE interpretation of California law appears to favor employers. As such, the federal law would likely be applied, and employers would probably be liable for wages to exempt employees but not non-exempt employees.