Court Whistles Play Dead: No Labor Code 1102.5 Individual Liability

Seyfarth Synopsis: California plaintiffs cannot sue individual managers or supervisors for retaliation under Labor Code section 1102.5. The California Court of Appeal concluded that the  statute’s “any person” language is ambiguous, and that the California Supreme Court’s reasoning rejecting supervisor liability for retaliation under California’s Fair Employment and Housing Act (FEHA) applied equally to Section 1102.5. The Court of Appeal also concluded that nothing in the legislative history indicates that the Legislature intended to impose individual liability on supervisors under Section 1102.5. Chaudhry v. State of California, A173501.

The Facts

Farzana Chaudhry worked as a dental assistant for the California Department of Corrections and Rehabilitation at a prison medical facility in Vacaville. Beginning in 2018, she complained to her supervisor and to Cal/OSHA about contaminated protective equipment and other safety issues. Chaudhry alleged that management retaliated against her with a letter of instruction, an unpaid suspension, two terminations, and efforts to obstruct her work.

Chaudhry eventually resigned and then sued the State of California, the Department, and three of her supervisors. Among other things, Chaudhry asserted a claim for retaliation under Labor Code section 1102.5. Commonly referred to as California’s “whistleblower” statute, Section 1102.5 makes it unlawful for “[a]n employer, or any person acting on behalf of the employer” to retaliate against an employee that has disclosed what the employee has “reasonable cause to believe” constitutes a violation of state, federal, or local law or regulation.

The trial court granted judgment on the pleadings for all defendants, including the three supervisors, on procedural grounds.

The Court of Appeal’s Decision

On appeal, the supervisors offered an alternative basis for affirming the trial court’s decision: section 1102.5 does not make individual supervisors personally liable for claims of retaliation. The Court of Appeal agreed with the supervisors, and affirmed the judgment in their favor. This  was the first California court to decide the issue.

Following the language of the statute, Chaudhry argued that the reference to “any person” imposed individual liability on supervisors. The Court of Appeal acknowledged that the text could be read that way, but it concluded that Section 1102.5 is ambiguous when “examined in the context of the statutory scheme of which it is a part.” The Court of Appeal pointed to one provision makes the employer responsible for the acts of its managers, yet another provision preserves an injured employee’s right to recover damages only from the employer. Furthermore, Section 1102.6—which establishes the burdens of proof for Section 1102.5 claims and related defenses—articulates a defense that is solely available to the employer (i.e., it is silent as to “any person”). The Court of Appeal saw no conceivable reason why the Legislature would give employers a defense denied to supervisors.

To resolve the ambiguity, the Court of Appeal turned to the California Supreme Court’s decisions in Reno v. Baird and Jones v. Lodge at Torrey Pines Partnership. Those cases held that supervisors cannot be personally liable for discrimination or retaliation under FEHA—even though FEHA’s retaliation provision, like section 1102.5, reaches any “person.” This conclusion was necessitated by the fact that supervisors are those who must make the personnel decisions that give rise to retaliation claims. Exposing them to personal liability would add little to a plaintiff’s recovery, but would certainly chill supervisors’ judgment and create a conflict of interest between supervisors and their employers.

The legislative history of Section 1102.5 pointed to the same conclusion. Section 1102.5 initially only prohibited retaliation by an “employer.” The Legislature added the “any person” language in 2013, in response to employers—and their attorneys—threatening to report workers to immigration authorities when those employees were exercising other employment rights. Nothing in that history suggested an intent to hold supervisors personally liable. And, the Court of Appeal concluded it was unlikely that the Legislature would try to impose supervisor liability through “any person” language after Jones had held that similar language was not clear enough to do so.

The Court of Appeal also noted that its conclusion is consistent with more than thirty federal district court decisions addressing the issue of supervisor liability under Section 1102.5. The Court of Appeal rejected the two contrary federal decisions, reasoning that those decisions relied on the phrase “any person” without considering section 1102.6 or Jones. Additionally, the Court of Appeal disagreed that the “any person” language would be meaningless unless it reached supervisors. That language could still apply to individuals who are not supervisors, such as the attorneys described in the legislative history.

What Chaudhry Means for Employers

Employee-plaintiffs often name individual supervisors to increase settlement pressure or to defeat diversity jurisdiction, so as to keep cases in State court. Prior federal decisions had declined to treat supervisors as fraudulently joined when conducting a diversity analysis, reasoning that no California court had addressed the meaning of “any person” under Section 1102.5. Chaudhry now provides a basis for California’s federal district courts to conclude that individual defendants to Section 1102.5 claims are insufficient to defeat diversity jurisdiction.