Legislation Special Report: Empoyee Complaints And Lawsuits

Employee Enforcement of Labor Code

Under SB 796, which has been dubbed the “bounty-hunter law,” employees may file private lawsuits against their employers, on behalf of themselves and other employees, for labor code violations when the responsible state agency doesn’t pursue the violations. The law provides employees with various financial incentives to file suit, as follows: 1) an employee may recover attorney’s fees and costs if the lawsuit is successful, and 2) the employee is entitled to a portion of the recovered penalties. The law also sets civil penalties for labor code violations for which there previously weren’t any specified fines and encourages employees to bring class action lawsuits to recover penalties.

Because this new law gives employees new incentives to sue their employers, it will be more important than ever for employers to make sure their workplace policies and practices, particularly for wage and hour issues, are in order. Consider conducting a full compliance review of your policies and practices, before you get hit with an expensive lawsuit under this new law.

Join us this fall in San Francisco for the California Employment Law Update conference, a 3-day event that will teach you everything you need to know about new laws and regulations, and your compliance obligations, for the year ahead—it’s one-stop shopping at its best.

Whistleblower Protections

Two new laws, SB 777 and SB 523, take aim at corporate corruption. Here’s an overview.

  • Extra Protections for Whistleblowers. The legislation beefs up existing labor code whistleblower protections by making it illegal to retaliate against an employee who 1) discloses a possible state or federal law violation to a government agency, 2) refuses to participate in an activity that would result in a violation of state or federal law, or 3) exercised whistleblower rights in a former job. These retaliation protections apply to the reporting of just about any violation of state or federal law, not just securities or financial fraud.

    Violations carry a new civil penalty of up to $10,000. And the existing labor code provisions—which remain in effect—make all whistleblower violations a misdemeanor, allow employees to sue your company for damages, and hold you responsible for the actions of your managers, supervisors, and other employees. What’s more, to avoid damages and penalties under the new law, you must demonstrate you would have taken the adverse action in the absence of the employee’s report—a heavy burden for employers.

    The legislation directs the California attorney general to set up a hotline to receive whistleblower reports so employees can contact the state about possible violations more easily.

    Plus, all employers must prominently display a notice detailing employees’ rights and employer responsibilities under the whistleblower law along with the hotline phone number. The lettering of the notice must be larger than 14-point type. State agencies that were already required to display a workplace whistleblower rights notice can meet the new posting requirement by adding the hotline number to their existing posters.


  • Penalties for Corporate Corruption. The legislative package also creates a staggering new civil penalty of up to $1 million for a publicly traded corporation or limited liability company that knows of internal misconduct and doesn’t report it. In general, the fine applies if 1) the company knows an officer, director, manager, or agent made or intends to make an oral or written false statement or omission to affect the market value of the company’s stock; and 2) the company doesn’t notify the appropriate government agency and shareholders in writing within 30 days of learning about the misconduct. The penalty can be avoided if the company abates the misconduct before the 30-day reporting period is up.