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TURNING EMPLOYER WRONGS INTO EMPLOYEE RIGHTS

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WORKERS MAY BRING A CIVIL SUIT UNDER THE CALIFORNIA LABOR CODE WITHOUT ADMINISTRATIVE EXHAUSTION

New laws for California employees clarify that employees do not need to exhaust administrative remedies before the California Department of Labor Standards Enforcement before bringing claims in court, unless the claim expressly requires exhaustion. Cal. Labor Code Section 244(a)(SB 666). No administrative exhaustion is required for claims of unlawful discharge or discrimination. (Cal. Labor Code Section 98.7(g) (AB 263). Effective January 1, 2014, AB 263 amends Labor Code Section 98.7 to provide that an employee need not exhaust administrative remedies or procedures to enforce the Labor Code unless the provision in question requires exhaustion.  Also effective January 1, 2014, SB 666 creates Labor Code Section 244. Section 244 also provides that it is not necessary for an employee to exhaust administrative remedies in order to bring a civil action for violation of any provision of the Labor Code unless the provision specifically requires exhaustion. Our state wide employee-only law firm routinely files dozens of lawsuits each year under code sections that until now, required that we first file an administrative claim with the state agency and then wait for the agency to decide if they would pursue the claim themselves.

The prior rule from MacDonald v. State of California was that a Plaintiff must file an administrative Labor Code Complaint  with the Labor Commissioner before going to  Court.  On August 27, 2013,  the Third District Court of Appeal ruled in MacDonald v. State of California et. al. (Third District Court of Appeal Case No. C069646) that a plaintiff must exhaust the Labor Commissioner’s administrative remedies before filing whistle blower retaliation claims under Labor Code sections 1102.5 and 6310. This decision is in direct conflict with a 2009 decision from the Second District Court of Appeal, Lloyd v. County of Los Angeles, setting up a Supreme Court showdown on the exhaustion issue. The complaint alleged a simple set of facts. Plaintiff Aaron MacDonald was employed in the district office of a State Assembly member. A few months after he was hired, he complained to his supervisors about one of them smoking too close to the door to the office building. Less than two weeks after his last complaint, he was fired. In the case of Aaron MacDonald v. State of California et al., the Court of Appeals held that an employee must exhaust the administrative remedy set forth in Labor Code section 98.7 prior to filing suit in Superior Court for retaliatory discharge under Labor Code Sections 1102.5 and 6310. California Labor Code section 98.7(a) provides, in pertinent part, anyone who believes that he or she has been discharged or otherwise discriminated against in violation of California Labor laws may file a complaint with the California Labor Commissioner within six months of the occurrence. The Labor Commissioner will investigate the alleged violations and may hold a hearing to determine if the allegations are true. If the commissioner determines a violation has occurred, the employee is notified and the commissioner may take any action on behalf of the employee necessary to remedy the violation, including but not limited to reinstatement, reimbursement for lost wages, and payment of attorney’s fees. If the commissioner finds no violation has occurred, the complaint will be dismissed and the employee may subsequently bring a civil action in Superior Court to pursue his or her claim for damages. Labor Code section 98.7 allows any person to file a complaint with the Labor Commissioner when the person “believes that he or she has been discharged or otherwise discriminated against in violation of any law under the jurisdiction of the Labor Commissioner.” Because the Labor Commissioner has jurisdiction over Labor Code sections 1102.5 and 6310, MacDonald could have filed a complaint under section 98.7. Instead he proceeded directly to superior court. The issue before the court of appeal was whether MacDonald had to exhaust the Labor Commissioner’s complaint process before filing his lawsuit. The court noted that in Campbell v. Regents of the University of California (2005) 35 Cal.4th 311, the California Supreme Court reaffirmed the long-standing rule that a plaintiff must exhaust available statutory administrative remedies before filing a lawsuit alleging a statutory cause of action. Applying this 70+-year-old rule, the court easily held that because Labor Code section 98.7 provides an administrative remedy for violations of sections 1102.5 and 6310, MacDonald’s failure to file a complaint with the Labor Commissioner barred his lawsuit. MacDonald urged the court to follow Lloyd, but it refused to do so for two reasons: (1) Lloyd incorrectly interpreted the language of Labor Code section 98.7; and (2) Lloyd did not even mention Campbell, the controlling case on exhaustion, instead citing to two pre-Campbell court of appeal decisions that held exhaustion was not required. The court noted that no published California decision has followed Lloyd and cited 15 federal district court decisions holding that exhaustion is required for section 1102.5 claims. MacDonald also argued that, because the Supreme Court did not address Labor Code section 98.7, the Campbell holding is limited to an employer’s internal administrative remedies. The court of appeal rejected this argument, finding that Campbell applies “where an administrative remedy is provided by statute.”

MacDonald requires a plaintiff to file a complaint with the Labor Commissioner before pursuing a court action under any of the whistleblower retaliation provisions in the Labor Code. But it also requires such exhaustion whenever the claim involves alleged discharge or discrimination “in violation of any law under the jurisdiction of the Labor Commissioner.” Therefore, upon receiving a complaint in a newly filed lawsuit, an employer should ask: (1) does the complaint allege unlawful discharge or discrimination; (2) if so, does the Labor Commissioner have jurisdiction over the code section(s) alleged to provide the cause(s) of action? If the answer to both questions is “yes,” and the plaintiff did not file a complaint with the Labor Commissioner, the lawsuit may be barred by this decision. However, as noted above, this new decision directly conflicts with Lloyd, another published decision. Given the two conflicting decisions, a petition for review to the Supreme Court may be forthcoming. Until the Supreme Court resolves this conflict there will be some uncertainty in this area, as courts will be asked to follow either Lloyd or MacDonald. Stay tuned!     However, California Courts then split on exhausting whistleblower claims Under the Labor Code   The MacDonald  decision dealing with whistleblower-retaliation claims under Labor Code that begs for a judicial or legislative response. In MacDonald, the court held that an employee must exhaust the administrative remedy set forth in section 98.7 before filing suit in superior court for retaliatory discharge in violation of Labor Code sections 1102.5 and 6310. The court recognized that its decision directly and deliberately conflicts with the Second Appellate District’s decision in Lloyd v. County of Los Angles (2009) 172 Cal. App. 4th 320, which holds that no such requirement exists.    Labor Code section 98.7 provides a statutory scheme that allows any person to file a complaint with the Labor Commissioner if that person “believes that he or she has been discharged or otherwise discriminated against in violation of any law under the jurisdiction of the Labor Commissioner.” The plain language of the code is discretionary, allowing that an aggrieved employee “may file a complaint” within six months of the alleged adverse action.

Over the years, federal district courts have taken conflicting positions on whether an employee who has been a victim of whistle blower retaliation under section 1102.5 must first file a complaint with the Labor Commissioner under section 98.7. See MacDonald, Slip op. 6, n.4. But federal courts can only speak persuasively regarding the requirements of California Law.   Some employees and their counsel have treated the complaint process as permissive, and for good reason. In 2007, the DLSE issued an opinion letter advising that: “The DLSE’s position is that the wiser course is not to require exhaustion of Labor Code section 98.7 procedures prior to raising a statutory claim in a civil action.” Later, in Lloyd v. County of Los Angles (2009) 172 Cal. App. 4th 320, the Second Appellate District held that “[t]here is no requirement that a plaintiff pursue the Labor Code administrative procedure prior to pursuing a statutory cause of action” for retaliation; rather, section 98.7 “merely provides the employee with an additional remedy, which the employee may choose to pursue.”   According to the court in MacDonald, the Second Appellate District got it wrong in Lloyd (and by extension, so did the DLSE in its 2007 opinion letter), by failing to consider Campbell v. Regents of University of California (2005) 25 Cal.4th 311. The Third Appellate District held:   The rule of exhaustion of administrative remedies is well established in California jurisprudence. “In brief, the rule is that where an administrative remedy is provided by statute, relief must be sought from the administrative body and this remedy exhausted before the courts will act.” (Campbell, supra, 35 Cal.4th at p. 321, quoting Abelleira [v. District Court of Appeal (1941)] 17 Cal.2d [280], 292). This is so even where the administrative remedy is couched in permissive, as opposed to mandatory, language. (See Williams v. Housing Authority of Los Angeles (2004) 121 Cal.App.4th 708, 734.) Here, an administrative remedy is provided in section 98.7. Thus, in accordance with Campbell, we conclude that plaintiff was required to exhaust that remedy prior to pursuing the underlying action.  Slip op. at 6.)

With the passage of AB666 and Governor Brown’s signature, the issue is now settled that exhaustion is only required when the specific code so requires it. However, this is not the end of the issue as it is anything but clear what may or may not be a call for exhaustion in a statute. For example, many statutes state that an employee (or other aggrieved person) “may” file a claim with the DLSE. Our best advise to most clients is to file a claim if they are still within the six months’ allowed for such a claim