Court of Appeal: Exhaust Administrative Remedies Before Filing Suit Under Former Labor Code Section 1102.5

Labor Code Section 1102.5 is California's general "whistle blower" law. Here is the current version, in pertinent part.

(b) An employer, or any person acting on behalf of the employer,
shall not retaliate 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, to a
person with authority over the employee or another employee who has
the authority to investigate, discover, or correct the violation or
noncompliance, or for providing information to, or testifying before,
any public body conducting an investigation, hearing, or inquiry, if
the employee has reasonable cause to believe that the information
discloses a violation of state or federal statute, or a violation of
or noncompliance with a local, state, or federal rule or regulation,
regardless of whether disclosing the information is part of the
employee's job duties.

(c) An employer, or any person acting on behalf of the employer,shall not retaliate against an employee for refusing to participate in an activity that would result in a violation of state or federal statute, or a violation of or noncompliance with a local, state, or federal rule or regulation.

As per the Court of Appeal in Gallup v. Superior Court of Nevada County,

Section 1102.5 is silent regarding administrative remedies, but another section of the Labor Code, section 98.7, subdivision (a), provides in part: “Any person who believes that he or she has been discharged or otherwise discriminated against in violation of any law under the jurisdiction of the Labor Commissioner may file a complaint with the division within six months after the occurrence of the violation.”

Some courts had decided that before proceeding under section 1102.5, a plaintiff had to file a claim with the Labor Commissioner, exhausting these administrative remedies before proceeding under the statute. In a new statute, effective January 1, 2014, the Legislature clarified that one does not have to do so.

But what about pre-1/1/2014?  That's what the Court of Appeal addressed in this Gallup case.  The plaintiff was a court employee, who served as a family law mediator. She claims retaliation after she raised some concerns with family law court procedures.

After Gallup filed suit, the defendant court demurred to her complaint, arguing she did not exhaust administrative remedies before the Labor Commissioner per Labor Code section 98.7, quoted above. The trial court overruled the demurer, relying on Lloyd v. County of Los Angeles (2009) 172 Cal.App.4th 320, a court of appeal decision that held exhaustion was not required.  Gallup then took her case to trial and won.

On appeal, the employer argued that the trial court erred by failing to sustain the demurrer because Gallup did not exhaust her administrative remedies. The Court of Appeal agreed, rejecting the Lloyd court's holding.

The Court held that the 1/1/14 amendments were not retroactive.  The Court also decided that Lloyd was wrongly decided in light of the California Supreme Court's holding in Campbell v. Regents of University of California (2005) 35 Cal.4th 311.  In Campbell, the California Supreme Court held that exhaustion of the UC's internal remedies were required before proceeding under section 1102.5 .

The Court here also noted that its decision here conflicts with Satyadi v. West Contra Cost Healthcare Dist. (2014) 232 Cal.App.4th 1022, which held that exhaustion was not required and that the Legislature's recent statute is merely "clarification" of existing law and retroactive.  But the Gallup Court disagreed with Satyadi. 

Bottom line is that Gallup won her jury trial, but then lost her case because she was not entitled to that trial in the first place.  It may be that the Supreme Court must decide whether Satyadi or Gallup is correct.  Or the Court may decide that these cases have limited shelf-life, because cases filed after 1/1/2014 are clearly subject to the new statute.

What's the point of all this, you ask? If you have a pending lawsuit that includes a section 1102.5 claim, which was filed before January 1, 2014, you may wish to test whether the 1/1/2014 revision to the statute applies to your case. If it does not, the employee plaintiff may be out of court if he or she did not timely exhaust with the Labor Commissioner.  You're welcome!  However, those cases filed after 1/1/2014 are out of luck on the exhaustion argument.

This case is Gallup v. Superior Court of Nevada County and the opinion is here.

Court of Appeal Limits Meal Break Waivers in Healthcare Industry

Here's one of those cases where California's labyrinth of employment laws conflict, the employer chooses to rely on one of them, and the employer finds out it made the wrong choice.  The lesson arises in the context of a meal break class action.

Many health care workers work 12-hour shifts, often as part of an alternative workweek arrangement.  And many of this 12-hour shift workers prefer to keep the day 1/2 hour shorter, and, therefore, waive a second meal period.  Otherwise, they are going to be at work for at least 13 hours for each 12-hour shift, because they have to take two meal periods of at least 30-minutes each.  It seems to me the employer does not gain financially from permitting employees to waive the second meal period; the meal period is unpaid.  Only the employee benefits, because the employee can go home 1/2 hour earlier.  

Fortunately, the Industrial Welfare Commission Wage Orders include one applicable to the health care industry.  This is Wage Order 5-2001.  Section 11(D) of that Wage Order says:

Notwithstanding any other provision of this order, employees in the health care industry who work shifts in excess of eight (8) total hours in a workday may voluntarily waive their right to one of their two meal periods.” 

Relying on that provision, Orange Coast Memorial Medical Center issued a policy allowing health care workers to voluntarily waive second meal periods. Employees duly signed waivers authorizing this waiver. However, because of the language in Section 11(D), the waiver applied even when employees occasionally worked more than 12 hours. 

So, what's the problem?  Well, the Labor Code also contains meal period requirements, enacted as part of AB 60, that 1999 law that created the penalties for meal period violations, among other things.

Labor Code Section 512(a) provides in pertinent part:

 “An employer may not employ an employee for a work period of more than 10 hours per day without providing the employee with a second meal period of not less than 30 minutes, except that if the total hours worked is no more than 12 hours, the second meal period may be waived by mutual consent of the employer and the employee only if the first meal period was not waived.” (Italics added.) 

Furthermore, section 516 explains: “Except as provided in Section 512, the [IWC] may adopt or amend working condition orders with respect to break periods, meal periods, and days of rest for any workers in California consistent with the health and welfare of those workers.” (Italics added.) 

Rejecting the hospital's arguments, the Court of Appeal held that Section 11(D) of the Wage Order could not stand because section 512 of the Labor Code was controlling.  Therefore, under Section 512 and 11(D) employees could waive second meal periods. But, because of Section 512's limitations, the waiver is valid only if the total hours worked were 12 or less. 

That means 

- if an employee has to work 12 1/2 hours, the meal period waiver is invalid, and
- the employee must either take a second meal period or be paid one extra hour of premium pay.

Given that employees' shifts sometimes will go longer than 12 hours because of unanticipated issues that arise after the 10th hour of work, employers will have to be nimble to schedule second meal periods or pay the one-hour premium.

More bad news, the hospital argued that the decision should not be retroactive, because the hospital relied on the Wage Order, which has the force of law.   The Court of Appeal decided that prior decisions of the courts held that no Wage Order could grant any waivers or vary the meal period structure set forth in section 512.  Therefore, Section 11(D) of the Wage Order was invalid from the beginning, waiting only for a court to expressly say so.  The Court held that the hospital would be liable for meal period premiums resulting from its employing health care workers for more than 12 hours without providing a second meal period.

So, this case applies only to the health care industry, and only to meal period waivers allowing a waiver for shifts > 12 hours.  But it's also precedent that precludes employers from relying on Wage Order provisions that are more employer-friendly than AB 60 allows.

This case is Gerard v. Orange Coast Memorial Med. Ctr. and the opinion is here.