California Whistleblower Laws and Penalties

February 28th 2024

This article covers:

What Even is Whistleblowing in the US?
Whistleblower Retaliation in California
California Whistleblowing Laws
Specific Laws and Codes to Protect Against Whistleblower Retaliation in California
California Whistleblowing Cases
Important Steps to Consider Before Whistleblowing in California

What Even is Whistleblowing in the US?

Whistleblowing is the act of a person (usually an employee/contractor/supplier of the company), revealing information about wrongdoing within an organisation. Examples of wrongdoing include fraud, misconduct, corruption or illegal/unsafe activity. The passing on of such knowledge is called “blowing the whistle”.

There are two types of whistleblowing based on the methods used to communicate allegations or information:

  1. Internal whistleblowing – the reporting of wrongdoing using the channels within the organisation, such as to Senior Human Resources Officers or other higher ups
  2. External whistleblowing – the reporting of wrongdoing to people outside of the organisation, such as media, the police or government officials

Whistleblowers play a key role in informing and protecting consumers, communities and the general-public from harm and misconduct, sometimes revealing classified or private information.

As a result, whistleblowers often find themselves in difficult situations, risking their career and personal safety for the greater good. Consequently, there are specific laws and protections to encourage people with knowledge to come forwards, whilst safeguarding them from mistreatment, job termination and personal detriment.

In addition, companies often have their own whistleblowing policies in place, outlining how to report on misconduct or breaches of the law.

Whistleblowing in California 

In the State of California there are whistleblower laws in place which enable employees to report actions committed by their employers such as misconduct, violation of laws and regulations, activity putting the general public at risk, fraudulent activity etc. In addition it is prohibited in California for employers to retaliate against employees for whistleblowing.

In California, even if a whistleblower turns out to be wrong with their accusations, as long as they reasonably believed the information reported, they still cannot be retaliated against. Reasonable belief means that any rational person would have believed this evidence to exist and be truthful.

In addition, California’s Whistleblower Statute provides protection for information disclosed about employer violations, regardless of whether the employer or a government agency was already aware of the information or not. This is in line with the Federal Whistleblower Protection Act

Examples of protected complaints under California Laws include:

  • The reporting of suspected illegal activity by an employer to a government agency or law enforcement
  • The reporting of suspected violation of a law, regulation or misconduct using internal channels, e.g. to a supervisor or other person within the company who has the authority to investigate or correct the misconduct
  • The refusal to participate in actions that would break state or federal law
  • Complaints regarding violations of wage or hour laws to the Labor Board

The statute of limitations (meaning the time limit to file a complaint) for whistleblowing in California varies depending on the laws or agencies used to file a complaint:

  • The statute of limitations for filing a complaint using the California Whistleblower Protection Act is 1 year from the occurrence of an adverse action or retaliation
  • Whistleblowers using the Qui tam section of the California False Claims Act, have to report a violation within 6 years of the occurrence. However, in certain situations this may be extended to 10 years

Whistleblower Retaliation in California

Whistleblower retaliation is when an employer takes adverse action against an employee or fires an employee for blowing the whistle. Employer retaliation is one of the main consequences of whistleblowing in California. An adverse action is something which would negatively impact an employee and prevent them from engaging in protected whistleblower activity. Adverse actions are not always easy to recognise as they can be subtle, such as excluding an employee from training or meetings.

Whistleblower retaliation/adverse actions include:

  • Wrongful termination
  • Bullying
  • Demotion
  • Intimidation
  • An unfair write-up or performance review
  • Ostracising
  • Making threats
  • Denying overtime
  • Denying merit-earned promotion
  • Denying training or professional development opportunities
  • Denying access to resources required to conduct your work
  • Refusing to hire or re-hire
  • Reducing pay or hours
  • Reporting or threatening to report an employee to immigration authorities or the police
  • Blacklisting – intentionally reducing the employee’s ability to be employed in the future

Many of the adverse actions outlined above can lead to an employee resigning because the employer has made the working conditions and environment unbearable. This type of whistleblower retaliation is known as constructive discharge. The different whistleblowing laws in California offer protection against employer retaliation.

California Whistleblowing Laws

California is one of the most progressive states in terms of protecting the rights of whistleblowers, encouraging citizens to come forward to prevent fraudulent activity committed by employers. It has established Acts and Laws developing on the Federal whistleblowing laws which provide further rights and entitlements to whistleblowers. The California laws are outlined below.

The California Whistleblower Protection Act (CA WPA)

The California Whistleblower Protection Act (WPA) is a state law following on from the Federal Whistleblower Protection Act (WPA) of 1989, established to ensure that whistleblowers are free from the threat of reprisal if they engage in protected disclosure of employer violations and illegal acitvity. 

The phrase ‘if they engage in protected disclosure’ highlights the importance of gaining legal advice before reporting, to ensure you are acting in alignment with the protection laws.

The CA WPA is a law declaring: 

“…[E]mployees should be free to report waste, fraud, abuse of authority, violation of law, or threat to the public without fear of retribution. The [California] Legislature further finds and declares that public servants best serve the citizenry when they can be candid and honest without reservation in conducting the people’s business.” California Government Code Section 8547.1.

Types of protected disclosure include:

  • Testifying
  • Cooperating with the investigation of the authorities
  • Refusing to carry out actions given by an employer that would violate a law, rule or regulation
  • Exercising the right to appeal or make a complaint or grievance
  • Helping another person to exercise their rights in a lawful manner

It is prohibited under the CA WPA for employers to retaliate against an employee for lawful disclosures of illegal activity carried out by employers. Employees are entitled to file a claim against employer retaliations. If employers are found to have threatened or taken action against an employee for whistleblowing, they will be liable to pay penalties and damages. The anti-retaliation provisions entitle whistleblowers to compensation for lost wages and benefits resulting from employer retaliation and reinstatement to their previous position if they have been fired. A whistleblower can also reclaim attorney fees and legal costs up to a reasonable amount.

The statute of limitations for filing a complaint under the CA WPA is 1 year from the occurrence of an adverse action or retaliation committed by an employer.

General Whistleblower Protection under Labour Code § 1102.5

California Labor Code § 1102.5 is the most general law in California prohibiting employer retaliation against whistleblowers. This law forbids employers to retaliate against employees for:

  • Disclosing in good faith what is believed as a violation of a law or regulation to a government agency/law enforcement or an employee with authority to investigate
  • Testifying or providing information about the believed violation before any public body conducting an investigation, inquiry or hearing

Under this Labor Code, employer retaliation against a whistleblower can result in the employer having to: 

  • Pay lost wages and benefits to the employee
  • Reinstate the employee to their previous position
  • Reinstate the employee’s benefits
  • Any other actions required by the law

Whistleblowers are also protected from employer retaliation if it is found that the employer did not actually break the law but the whistleblower reasonably believed they had. Reasonable belief means that any rational person would have believed evidence of illegal activity existed and was truthful. 

Moreover, under California Labor code 1102.5, protection is provided even if the employer already knew about the suspected violations.

Every violation of Labor code 1102.5 results in a $10,000 penalty. These penalties can add up to a large amount if an employer commits numerous violations against whistleblowers.

California False Claims Act (CA FCA) and ‘Qui tam’

Based on the Federal False Claims Act (FCA), the California False Claims Act – GOV § 12650 or qui tam statute, deals with fraud cases involving California State contracts.

Qui tam originates from Latin and is an abbreviation for a longer phrase meaning “Who sues on behalf of the King as well as for himself.” Put simply, qui tam means that a private citizen initiates legal action on behalf of the state.

The ‘qui tam’ section of the CA FCA enables citizens, on behalf of the government, to file lawsuits against the state, county, local government, a public school, or a government agency for instances of theft, fraud, or embezzlement of government funds. Employers who are found to have violated the CA FCA are liable to pay civil penalties and triple the amount of actual damage. Each violation of the CA FCA can result in a penalty of up to $10,000. 

The qui tam provision of the CA FCA provides both rewards and protection to whistleblowers:

  • If funds are recovered by the state due to the whistleblower’s Qui tam lawsuit, whistleblower rewards can range from 15-33%. Rewards can be even greater if the whistleblower wins the case on their own without the intervention of the state or government, increasing to between 25-50% of the recovered funds
  • Due to the anti-retaliation provisions of the CA FCA, instances of employer retaliation allow an employee to sue for ‘Qui tam Whistleblower Retaliation’. The whistleblower may be compensated for adverse impacts such as reasonable attorney fees, lost wages, employment benefits and damages to their emotional state

Under the qui tam section of the CA FCA, whistleblowers have to report an employer violation of the law within 6 years of the occurrence. However, in certain situations this may be extended to 10 years.

Specific Laws and Codes to Protect Against Whistleblower Retaliation in California

There are various labour codes and laws related to specific work sectors and violations, which protect against employer retaliation for whistleblowing. A number of these codes are detailed below.

Labor Violations:

California Labor Code § 98.6 provides whistleblowers protection for reporting Labor Code violations to the California Labor Commissioner, e.g. wage or hour violations. 

Employer retaliation against whistleblowers is also prohibited under this law for:

  • Family members of those who reported labor violations;
  • Job applicants who reported labor violations about their previous employers. 

California Labor Code § 1197.5 forbids employer retaliation against employees for filing complaints or taking legal action on wage discrimination due to sex, race, or ethnicity. 

Workplace Harassment and Employment Discrimination:

The California Fair Employment and Housing Act (FEHA) § 12900-12906 is the law to turn to in California for claims of workplace harassment and employment discrimination. FEHA prohibits retaliation from employers against employees for either reporting or opposing violations of the law. 

California’s anti-discrimination statute provides protection for: 

  • Current or former employees
  • Job applicants
  • Business partners

Occupational Health and Safety violations:

California Labor Code § 6310 prevents employer retaliation against whistleblower for reporting on the breaking of health and safety regulations to the California Division of Occupational Safety and Health (Cal OSHA).

This protection also extends to family members of whistleblowers. 

Healthcare Workers and Patients:

California Health and Safety Code § 1278.5 protects whistleblowers who inform government agencies about suspected unsafe or harmful patient care and conditions. Criminal and civil fines can be brought against administrators or staff who retaliate against any type of healthcare worker, including patients, nurses and members of the medical staff, for whistleblowing. 

When reporting on patient safety issues, it is not required to go through the internal processes before suing under this code. This is because it is possible that internal hospital appeal processes could hinder allegations of employer retaliation.

School or Educational Employees:

California Education Codes § 44110 – 44115 protect school employees for reporting improper governmental activities. Public School administrators who retaliate against whistleblowers for disclosing information regarding improper governmental activities, are at risk of receiving both criminal and civil penalties. 

Public Employees:

Public or state employees are protected by the California Whistleblower Protection Act when:

  • Reporting on employer violations of laws & regulations, corruption, fraud etc.
  • Shedding light on wasteful, incompetent and inefficient economic government activity
  • Reporting on employer activity that threatens the safety of the general public or employees

Employees of Publicly-traded Companies:

Employees of publicly traded companies experiencing employer retaliation for whistleblowing, have the right to file a lawsuit under the Sarbanes-Oxley or Dodd-Frank Whistleblower Laws. 

The Sarbanes-Oxley Act (SOX) and the Dodd-Frank Wall Street Reform and Consumer Protection Act aim to protect investors from corruption and illegal activities of publicly-traded companies, such as fraudulent accounting, securities fraud and fraud against shareholders.

California Whistleblowing Cases

The state of California encourages whistleblowing activity. A few of the most famous California Whistleblower cases are outlined below. Lessons can be learned from these cases, including the importance of acting under the protection of whistleblowing laws when disclosing information and to always have clear well documented evidence of illegal activity/wrongdoings and employer retaliations. It is also important to note that in certain circumstances it can take years to reach a settlement in whistleblowing cases, therefore, whistleblowers need to be prepared for their lives being heavily impacted during this time. 

1. $102 million settlement agreed upon by BP after whistleblowers accused the company of overcharging the state of California 

In 2012 a lawsuit was filed by a whistleblower against the MultiNational Energy Company BP (formerly British Petroleum). The whistleblower was an ex-employee and accused BP of massively overcharging the state of California when purchasing natural gas. BP were found to have knowingly overcharged the state of California by exceeding the price caps specifically stated in the contracts. In 2014, the California Attorney General’s Office joined the case. Eventually in 2018, after years of litigation and just days before a four week jury trial was set to begin, a $102 million settlement was agreed upon. The funds returned to the California government, cities, counties, agencies and educational institutes that had used BP as their supplier of natural gas. In accordance with the qui tam provisions of the CA FCA, the whistleblower received an undisclosed share of the settlement, potentially up to $51 million. This was the largest Oil Company whistleblower settlement in the history of California.

2. The University of Phoenix was fined $67.5 million after whistleblowers disclosed information about the fraudulent student recruitment practices taking place

In 2009, having been found to have violated the CA FCA due to fraudulent student recruitment policies, the University of Phoenix agreed to pay the US government $67.5 million. Allegations of fraudulent recruitment activities were brought forward by two whistleblowers, both ex-employees of the University of Phoenix. 

The whistleblowers alleged that the University of Phoenix accepted federal student financial aid while in violation of statutory and regulatory provisions prohibiting post-secondary schools from paying admissions counselors certain forms of incentive-based compensation tied to the number of students recruited’ (US Department of Justice – University of Phoenix Settles False Claims Act Lawsuit for $67.5 Million).

Although the government did not intervene in this case, they did provide adequate support to the whistleblowers and formed a working relationship. As a result of their actions, the whistleblowers were awarded $19 million from the recovered funds.

3. Whistleblowers uncovered the unlawful billing practices of Tenet Healthcare Corporation, leading to a $900 million fine

In 2006, Tenet Healthcare Corporation, the 2nd largest hospital chain at the time, was issued with a $900 million settlement to the United States for unlawful billing practices. Unlawful billing practices were carried out to receive higher payments from the US Medicare Programme. 

Unlawful practices included:

  • Manipulation of outlier payments to Medicare (cases of extraordinarily costly care)
  • Kickbacks to physicians to get Medicare patients referred to its facilities to receive greater sums from Medicare
  • Bill padding – billing for services and supplies not provided to patients
  • Upcoding – incorrect diagnosis codes were assigned to patient records to increase reimbursement to Tenet hospitals

The government pursued this case after several lawsuits were filed by whistleblowers. Therefore, according to the qui tam provisions of the CA FCA, the whistleblowers were able to receive up to 25% of the settlement recovery. The quantity awarded to the whistleblowers was undisclosed, however, it could have potentially been up to $225million).

This case was one of the biggest CA FCA cases of all time.

Important Steps to Consider Before Whistleblowing in California

Figuring out the whistleblowing process can be complicated and success of cases can vary. Therefore, it is crucial to have a full understanding before proceeding with such actions, to ensure that protection is in place. If unsure, it is always best to seek legal advice from an experienced Whistleblower Attorney

Here are some key steps to follow when reporting wrongdoing, to enhance the chances of a successful whistleblower or retaliation case:

  • Collect Evidence: carefully gather relevant information that supports the allegation of wrongdoing, such as documents and records 
  • Meticulous Documentation: remember to document and maintain a record of everything involved in the process, such as all communications, responses and actions taken. Sometimes this may seem unnecessary, however, it can prove to be extremely useful if validity is questioned
  • Internal Reporting: be fully informed of a company’s disclosure procedures before following these to disclose wrongdoings to the appropriate authoritative figure. 
  • External Reporting: report to the appropriate government agency if using the internal channels is unsuccessful
  • Retaliation Protection: Make sure to be aware of the rights and protections afforded to whistleblowers in California under various laws. Ensuring safety from retaliation is extremely important
  • Legal Advice: if unsure or the situation deems necessary, get legal counsel; to provide support through the process.
  • Anonymous Reporting: remember that anonymous reporting is offered by some agencies and is a way to protect identity 

Learn more about California Labor Laws through our detailed guide.

Important Cautionary Note

The information provided in this article is intended to be informative but should not be considered legal advice. Laws and regulations can change, so it’s advisable to consult employment attorneys or consultants for current and personalised guidance in your circumstances and jurisdiction.