Whistleblower Protections Keep Expanding

whistleTwo weeks from today, a bill will take effect that expands protection for whistleblowing employees in California. While only applicable to companies operating in the Golden State, one new wrinkle in the legislation should perk up the ears of employers everywhere.

On Jan. 1, 2014, California’s Senate Bill 496 will increase whistleblower protections for employees who have made internal reports alleging illegal behavior internally to a person with authority over the employee or to another employee with the authority to investigate, discover or correct the reported violation.

Interestingly, the law also subjects employers to liability for “anticipatory retaliation,” meaning companies can be held accountable for retaliating against an employee based on the mere belief that he or she might be a whistleblower.

Kenneth Sulzer, co-head of the California labor and employment law group with international law firm Proskauer, offers up an example.

“Say you have an employee who prepares an expense report for their manager, and that employee suspects the expenses were fudged a bit. That employee asks some questions, and is later fired for something else,” explains Sulzer. “But that employee has emails including those questions, and believes the supervisor anticipated he or she was going to make a complaint. Those emails record that the employee asked the questions, and, legally speaking, the employee has a factual leg to stand on.”

Again, such a claim could only be made in California at this point, and whether other states pursue similar legislation remains to be seen. But the enactment of the California bill signals the latest state-level move to provide a wider safety net for whistleblowers, and employers throughout the U.S. should take note, says Sulzer.

“We expect to see a substantial expansion in whistleblower protections in states around the country,” says Sulzer. “Driving this trend are several high-profile cases that have stoked the interest of the plaintiff’s bar, feeding on the public’s distrust of institutions, disparity of income and federal legislation such as the False Claims Act, Sarbanes-Oxley and Dodd-Frank, and the SEC whistleblower bounties.”

Provisions that leave employers potentially liable for “anticipatory retaliation,” however, could be “more problematic for employers than many other whistleblower protection laws,” says Sulzer, “as it provides a cause of action where an employee does not actually engage in whistleblowing, but is merely expected to do so, and provides a cause of action even where the employee’s job is to point out flaws and review quality of work.”