Whistle-blowers Beware: Employment Violations of a Charter City’s Municipal Law Are Not Within the Purview of Whistle-blower Statute Section 1102.5

A California Court of Appeal recently decided an issue of first impression: should alleged violations of a charter city’s municipal law be deemed violations of state law for purposes of Labor Code section 1102.5? (Edgerly v. City of Oakland (2012) 211 Cal.App.4th 1191.) Upon examining the plain language of section 1102.5 and the public policy considerations of the statute, the Court of Appeal held on December 12, 2012 that city charter and local rules and ordinances are not within the purview the whistle-blower statute.

Deborah Edgerly was the city of Oakland’s Finance Director in 1997. She was appointed as the City Manager in 2003, and renamed as the City Administrator in 2004. Pursuant to the city charter, she could be discharged at any time and for any reason. (Id. at 1195.) Part of her duties included designating and appointing directors, department heads, or assistants, executing all city laws and ordinances, and controlling and administering the financial affairs of the city. She could address all concerns about the allocation of city funds with the city attorney’s office.

When Mayor Dellums was appointed in 2007, things started to change for Ms. Edgerly. She questioned several of the Mayor’s expense reimbursement requests (including his personal expenses, payments for his wife’s cell phone, overtime pay for his driver, and utility costs associated with his residence.) Ms. Edgerly sought an opinion from the city attorney’s office as to whether the Mayor’s utility costs were permissible, and informed the Mayor that she could not reimburse him for the improper requests. (Id. at 1196.)

Besides these expense issues, Ms. Edgerly claimed that the Mayor attempted to usurp her authority by directing personnel to report to him directly rather to her. When her nephew was involved in a police incident in 2008, Ms. Edgerly claimed that the Mayor directed her to work solely on a competitive bidding service contract in response to the incident, as the Mayor saw the police incident as a distraction and an appearance of a conflict of interest. (Id. at 1197.) Finally, when the Mayor asked Ms. Edgerly to sign documents giving control of the police department to an interim director, she refused to appoint the Mayor’s designee.

On July 1, 2008 the Mayor terminated Ms. Edgerly’s employment. (Id. at 1197-1198.) Ms. Edgerly then filed a complaint against the City of Oakland alleging three causes of action for retaliation under the whistle-blower statute, and one cause of action for gender discrimination under Government Code section 12900 et seq. (Id. at 1194.) The complaint was met with a demurrer as to all whistle-blower causes of action which the trial court sustained with leave to amend as to the first two causes of action, stating that Ms. Edgerly did not identify any violation of state law. (Id. at 1194-1195.)

The City demurred again to her First Amended Complaint as to all three whistle-blower statutes, and this time the trial court sustained the demurrer as to the first and second causes of action without leave to amend. (Id. at 1195.)

Summary adjudication was subsequently granted as to the third cause of action because evidence was not produced which showed that a state statute was violated. An appeal followed after a verdict was rendered in the City’s favor for the gender discrimination cause of action. (Id. at 1195.)

The Court of Appeal examined the language and purpose of Labor Code section 1102.5, stating the statute “prohibits employers from retaliating against an employee ‘for refusing to participate in an activity that would result in a violation of state or federal statute, or a violation or noncompliance with a state or federal rule or regulation.’ ” (Id. at 1199 [quoting Labor Code, § 1102.5(c).) “The purpose of section 1102.5(c) is ‘to ‘ “encourag[e] workplace whistle-blowers to report unlawful acts without fearing retaliation.’ ” (Id. [internal citation omitted].)

The Court of Appeal determined that Ms. Edgerly was unable to prove a prima facie case for retaliation. It said:

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.]” ( Hansen, supra, 171 Cal.App.4th at p. 1546, 90 Cal.Rptr.3d 381.) Protected activity is the disclosure of or opposition to “a violation of state or federal statute, or a violation or noncompliance with a state or federal rule or regulation.” (§ 1102.5(b) & (c), italics added.) In other words, “[s]ection 1102.5 of the Labor Code requires that to come within its provisions, the activity disclosed by an employee must violate a federal or state law, rule, or regulation. [Citation.]” ( Mueller v. County of Los Angeles (2009) 176 Cal.App.4th 809, 821–822, 98 Cal.Rptr.3d 281 ( Mueller ).)

(Edgerly, 211 Cal.App. at 1199 [emphasis in original].)

The Court examined the scope of Labor Code section 1102.5 and noted that unlike other whistle-blower statutes which included “local laws” in their language, such language was omitted from section 1102.5. (Id. at 1201 [compare with Education Code, § 44112 and Gov. Code, § 8547.2].) Thus, the Court declared that the “omission of the term ‘local laws’ is indicative of legislative intent to exclude such laws from the purview of section 1102.5.” (Id.) While it is true that the whistle-blower statute does apply to city charter employees when the retaliation involves activities that violate a state law, here Ms. Edgerly’s claims were premised on alleged violations of local laws.

The Court also reasoned that public policy considerations weigh against the adoption of having the statute include whistle-blowers of local laws. For example, “there is no reason to micromanage the employment practices of a charter city, which is ‘specifically authorized by our state Constitution to govern [itself], free of state legislative intrusion, as to those matters deemed municipal affairs.[’]” (Id. at 1204.)

Because the plain language of section 1102.5 and public policy considerations did not support Ms. Edgerly’s claims, and because her opposition to the mayor’s reimbursement requests was not protected activity under the whistle-blower statute, the court affirmed the trial court’s findings.