Case Name: Reilly v. Morgan Hill Unified School District, et al.
Case No.: 16CV303125

I. Factual Background

This action arises from a dispute over defendant Morgan Hill Unified School District’s (“Defendant”) purported failure to pay plaintiff Denise Reilly (“Plaintiff”) longevity pay. As alleged in the Second Amended Complaint (“SAC”), Plaintiff began working for Defendant in 1977. (SAC, ¶ 7.) Under the terms of a continuing agreement between the Morgan Hill Educational Leaders Association (“MHELA”) and Defendant, Plaintiff was entitled to longevity pay. (Id. at ¶ 9.)

In 2006, Plaintiff made an irrevocable election to maintain her “Extended Longevity Bonus Pay” in the amount of $12,000 instead of accepting standard longevity pay and increased health benefits. (Id. at ¶ 11.) This election was memorialized by a signed agreement between the parties. (Ibid.)

Several years later, Defendant discontinued Plaintiff’s longevity pay without her permission in breach of their agreements. (Id. at ¶¶ 10-11.) Plaintiff believed this violated the Labor Code and Education Code and apprised Defendant of the same. (Id. at ¶ 13.) Her belief was shared by another of Defendant’s employees, Barbara Neal (“Neal”), the secretary for MHELA, who was later instructed to not discuss the issue with her. (Id. at ¶ 14.)

Subsequently, Defendant advised Plaintiff that her longevity pay agreement would not be honored unless she elected to take a pay cut. (SAC, ¶ 15.) Plaintiff continued to inquire about her longevity pay and, for a brief period of time, began to receive it again. (Id. at ¶ 16.) Shortly thereafter, Defendant suspended Plaintiff for an alleged overpayment of wages related to the longevity pay and placed her on paid administrative leave. (Id. at ¶ 17.) It also threatened her with criminal prosecution when she refused to surrender her longevity pay. (Id. at ¶ 18.) During a meeting between the parties, Defendant threatened to call the police in an attempt to further intimidate Plaintiff. (Id. at ¶ 19.) These efforts to scare Plaintiff furthered her belief Defendant knew its failure to pay her longevity pay violated the law. (Id. at ¶ 20.) The District Attorney declined to prosecute her, which was further proof of Defendant’s bad faith. (SAC, ¶ 21.) Defendant eventually terminated Plaintiff and illegally excluded longevity pay from her final pay. (Id. at ¶ 22.)

The SAC asserts causes of action against Defendant for breach of contract and retaliatory action in violation of Labor Code section 1102.5 (“Section 1102.5”).

Currently before the Court is Defendant’s demurrer to the second cause of action for violation of Section 1102.5, which Plaintiff opposes.

II. Demurrer

Defendant demurs to the Section 1102.5 claim on the ground of failure to state facts sufficient to constitute a cause of action. (See Code Civ. Proc., § 430.10, subd. (e).)

Under Section 1102.5, otherwise known as California’s whistleblowing statute, an employer may not “retaliate against an employee for disclosing information…to a person with authority over the employee or another employee who has the authority to investigate, discover, or correct the violation or noncompliance” if the employee has reasonable cause to believe there is a state or federal statute, rule or regulation that is being violated. (Lab. Code., § 1102.5, subdivision (b).) “To establish a prima facie case for whistleblower liability, a plaintiff must show that he or she was subjected to adverse employment action after engaging in protected activity and that there was a causal connection between the two. [Citation.]” (Edgerly v. City of Oakland (2012) 211 Cal.App.4th 1191, 1199, internal quotation marks and citations omitted.) An employee engages in protected activity when he or she discloses reasonably based suspicions of illegal activity. (Mokler v. Cty. of Orange (2007) 157 Cal.App.4th 121, 138.)

Plaintiff’s claim is predicated on Defendant’s termination of her employment after she reported its failure to pay longevity pay to various employees including her immediate supervisor. Defendant argues no Section 1102.5 claim has been stated because: (1) Plaintiff does not identify the specific statute, rule or regulation she believed was being violated; and (2) she did not establish a causal link between the protected activity she engaged in and the adverse employment action. Both of these arguments were raised in connection with Defendant’s prior demurrer to this cause of action and the demurrer was sustained on the basis Plaintiff failed to plead the state or federal statute, rule or regulation she believed was violated.

A. Identification of Specific Legal or Regulatory Violation

Defendant contends the SAC does not resolve the deficiency in the prior pleading. Specifically, Defendant asserts Plaintiff merely amended the pleading to include general references to the Labor Code and Education Code without citation to specific provisions therein.

In opposition, Plaintiff contends an employee is not required to know what statute or rule is being violated or be correct in his or her conclusion and there only needs to be a “reasonable belief that a wrong occurred.” (Opp. at p. 5:1-11.) In support, she points out that the public policy behind the enactment and subsequent amendments to Section 1102.5 was to encourage employees to report all suspected violations of the law. Though not clearly articulated, she also seems to argue her pleading is sufficient because the original version of her complaint alleged violations of Labor Code section 200 et seq. Plaintiff’s arguments are not persuasive.

As a general rule, statutory causes of action must be pled with particularity. (Covenant Care, Inc. v. Superior Court (2004) 32 Cal.4th 771, 790.) As such, the plaintiff must set forth facts in his or her complaint that are “sufficiently detailed and specific to support an inference that each of the statutory elements of liability is satisfied.” (Mittenhuber v. City of Redondo Beach (1983) 142 Cal.App.3d 1, 5, internal citations omitted.) Labor Code section 1102.5, subdivision (b) prohibits retaliation against whistleblowers who have a reasonable belief some “violation of state or federal statute, or a violation of or noncompliance with a local, state, or federal rule or regulation” has occurred. Courts have held the employee must be able to point to some legal foundation for his suspicion – some statute, rule or regulation which may have been violated by the conduct he or she disclosed. (See, e.g., Jadwin v. Cty. of Kern (E.D. Cal. 2009) 610 F.Supp.2d 1129, 1154; Love v. Motion Indus., Inc. (N.D. Cal. 2004) 309 F.Supp.2d 1128, 1135.) In other words, referring to an entire statutory scheme without reference to specific provisions therein is insufficient.

Here, as Defendant rightly points out, Plaintiff vaguely alleges she had a reasonable belief provisions of the Labor Code and Education Code were being violated but does not point to a specific code provision implicating Defendant’s conduct. Though Plaintiff is correct that Section 1102.5 does not require the employee to have actual knowledge of the statute being violated at the time of reporting, the reasonableness of his or her belief is determined by the existence of a law that could form the basis for such belief. Where no such law is identified, the claim has not been pled with sufficient particularity.

Plaintiff’s reference to a previous version of her complaint alleging violations of Labor Code sections 200 et seq. does not aid her argument. The pleading at issue is the SAC, which superseded any prior pleading. (See Vallejo Development, Co. v. Beck Development Co. (1994) 24 Cal.App.4th 929, 946.) Therefore, the fact something was alleged in a prior complaint is immaterial to whether the SAC sufficiently identifies a specific statute, rule or regulation Plaintiff believes was violated. Further, even if the SAC alleged Plaintiff believed Labor Code sections 200 et seq. was violated, this would still be insufficiently specific as the term “et seq.” encompasses numerous statutes and Plaintiff surely does not believe all of them are implicated in this case.

Accordingly, the demurrer is sustainable on the basis the second cause of action does not allege a statute that may have been violated.

B. Causal Link

Defendant also argues the Section 1102.5 claim does not establish a causal link between the protected activity and the retaliatory action because almost a year elapsed between Plaintiff’s last inquiry about her failure to receive longevity pay and her termination. (Dem. at p. 7:4-12.) In support, it cites various federal cases for the proposition that more evidence of causation is required where the temporal proximity between an act of whistleblowing and the adverse employment action exceeds more than a few months. This argument lacks merit.

In the cases cited by Defendant – Gutierrez v. Kaiser Found. Hosps., Inc. (N.D. Cal. Oct. 30, 2012) No. C 11-3428 CW, 2012 WL 5372607 (“Gutierrez”) and Clark Cty. Sch. Dist. v. Breeden (2001) 532 U.S. 268 (“Clark”) – the courts did not address the issue of what facts of causation must be alleged to survive a pleading challenge. Instead, they discussed what constituted sufficient evidence to establish causation for purposes of summary judgment. (See Gutierrez, supra, 2012 WL 5372607 at * 8; Clark, supra, 532 U.S. at 273-74.) Because a motion for summary judgment is evidentiary in nature, the standard of review differs from that on demurrer which is concerned only with the sufficiency of the pleading. (See, e.g., Doe v. California Lutheran High Sch. Ass’n (2009) 170 Cal.App.4th 828, 835; Caliber Bodyworks, Inc. v. Superior Court (2005) 134 Cal.App.4th 365, 384.) As such, Defendant’s reliance on these cases is misplaced.

The Court otherwise observes that, for purposes of demurrer, a causal link is sufficiently stated where there is an allegation the retaliatory action was taken because of the protected activity. (See, e.g., Ferrick v. Santa Clara Univ. (2014) 231 Cal.App.4th 1337, 1358.) Here, Plaintiff alleges that “defendant retaliated against her because defendant believed that Plaintiff disclosed or may disclose information internally or externally.” (SAC, ¶ 33.) This allegation is sufficient for pleading purposes to establish a causal link between her whistleblowing activity and the adverse employment action taken against her.

Accordingly, the demurrer is not sustainable on the basis Plaintiff did not establish a causal link between the protected activity she engaged in and the adverse employment action.

C. Conclusion

The demurrer to the second cause of action on the ground of failure to state sufficient facts is SUSTAINED with 10 days’ leave to amend on the sole basis Plaintiff failed to specify any state or federal statute or local, state or federal rule or regulation she believed Defendant was violating.