Coworker Theft: A New Exception to At-Will Termination A Tale of Statutory Interpretation
In Cardenas v. M. Fanaian, D.D.S., (2015) 240 Cal. App. 4th 1167, an employee reported the theft of her personal property to the local police department. As a result of filing a report with the police department, the employee was terminated. This case gives rise to an interesting question as to whether the law that allowed the employee to sue her employer for wrongful termination for filing a police report required that the reported illegal activity be of public interest.
In 2009, Mrs. Cardenas began working for Dr. Fanaian. In 2010, Mrs. Cardenas’ husband gave her an expensive wedding ring in celebration of their 25th wedding anniversary. Mrs. Cardenas would always wear her ring to work, but she would place it in her blouse pocket at the start of each workday.
On October 11, 2010, when Mrs. Cardenas left work, she realized that she did not have her ring. She remembered removing her ring and placing it on the breakroom table that morning, along with her cell phone and other personal belongings, while she placed her lunch in the refrigerator. When Mrs. Cardenas collected her belongings, she noticed the ring was not there but thought she had already placed it in her blouse pocket.
Upon discovering her loss, Mrs. Cardenas began calling coworkers to ask if they had seen the ring, and she returned to the office to search for her ring. Mrs. Cardenas also searched her car, her home, and the parking lot; however, she was unable to find her ring.
Mrs. Cardenas believed that her ring was stolen by a coworker, and she informed Dr. Fanaian that she wanted to report her ring stolen to the police. Dr. Fanaian, according to Mrs. Cardenas, was not supportive of her decision to report a theft and even asked her not to tell the police that her ring was left on the breakroom table.
On October 21, 2010, a report was made to the local police department, and Mrs. Cardenas statement was taken on October 24, 2010. During this statement, Mrs. Cardenas also explained to the police why she believed a coworker had stolen her ring. As part of their investigation, the police officers investigating the reported theft went to Dr. Fanaian’s office and questioned employees about the ring.
By November 10, 2010, the police had been to Dr. Fanaian’s office a second time. While the appellate record is silent as to certain facts, it can be presumed that having police officers enter Dr. Fanaian’s office during regular hours and question employees was causing some disruption to the work day. One could easily imagine police officers entering a waiting room full of clients and demanding to speak to an employee. It is no stretch of the imagination to see Dr. Fanaian’s concern over the impact the police presence would have on his business. Which is perhaps why on November 10, 2010, he met with Mrs. Cardenans and explained to her that the situation was causing tension and discomfort between the staff and that he was firing Mrs. Cardenas. Mrs. Cardenas was given her last paycheck and allowed to collect her personal belongings from her desk.
The day after Mrs. Cardenas was allegedly fired, her ring was found at Dr. Fanaian’s office.
Close to a year later, Mrs. Cardenas filed a civil complaint for damages for her alleged wrongful termination. Mrs. Cardenas alleged in her complaint that her firing was in violation of Labor Code section 1102.5 and that her firing was in violation of public policy. She essentially alleged that she was fired from her employment because she reported the theft of her ring to the police department.
During the litigation of this matter, Dr. Fanaian argued, through his counsel, that reporting the theft of personal property was insufficient grounds under both Labor Code section 1102.5 and the common law claim. Dr. Fanaian argued that the reporting of the theft of the ring was for Mrs. Cardenas’ personal reason to either recover the ring or make a claim on her home owner’s insurance policy and not a matter of public policy. The trial court disagreed with these assertions and allowed the trial of this matter to move forward. At the conclusion of the trial, the jury found that Mrs. Cardenas was indeed fired because she reported the theft of her ring, and she was wrongfully terminated for reporting the theft to the police. The jury awarded Mrs. Cardenas $117,768 for damages including lost earning.
On appeal, Dr. Fanaian argued that Mrs. Cardenas did not have a viable cause of action for wrongful termination because, as a matter of law, there was no fundamental public policy violation in connection with her termination.
As the dissent in this case recognized, the analysis of whether Mrs. Cardenas was wrongfully terminated should begin with an understanding that an employer has the right to terminate an at-will employee for any reason not otherwise prohibited by law. Thus, the question become whether Mrs. Cardenas termination was otherwise prohibited by law.
In 1980, the Supreme Court of California recognized a common law cause of action for wrongful termination when an employee is terminated for reporting suspected illegal conduct that harms the public as well as the employer. Thereafter, the State Legislature codified what is now section 1102.5 of the Labor Code which prohibits the termination of an employee for reporting a suspected violation of the law. However, the statue itself was silent as to whether the suspected violation has to concern a matter of public concern.
The Court found that section 1102.5 should be broadly construed and that there was no requirement that the suspected activity that was reported to the police had to concern public policy. The Court looked to the language of section 1102.5 as it existed at the time of the alleged violation. The section stated, “An employer may not retaliate against an employee for disclosing information to a government or law enforcement agency, where the employee has reasonable cause to believe that the information discloses a violation of state or federal statute, or a violation or noncompliance with a state or federal rule or regulation.” Labor Code §1102.5 (2003).
The Court agreed that under the common law claim a matter of public policy must be involved; however, the Court could not find such a requirement with regards to a claim under section 1102.5. The Court reasoned to include such a requirement, where not apparent in the statue itself, would transform the Court’s activity from judicial to legislative.
However, Dr. Fanian and the dissent argued that the uncodified preamble to the statute states clearly that “The Legislature finds and declares that it is the public policy of the State of California to encourage employees to notify an appropriate government or law enforcement agency when they have reason to believe their employer is violating laws enacted for the protection of corporate shareholders, investors, employees and the general public. It is the intent of the Legislature to protect employees who refuse to act at the direction of their employer or refuse to participate in activities of an employer that would result in a violation of law.” Cardenas, supra, 240 Cal. App. 4th at 1187.
Because an uncodified section is part of statutory law, the dissent cannot understand how the majority in their opinion could ignore the preamble which makes it clear that the violation alleged under section 1102.5 must involve a matter of public policy. The majority found that because the preamble did not expressly state an intention to limit the statutory reach, anything gleaned from the preamble would be uncertain at best. Furthermore, because there was no limiting language in the statute itself, the Court would not require that the suspected activity be in relation to public policy. “The preamble’s expression of concern about corporate wrongdoing does not overturn the statute’s unambiguously broad terms, nor does it permit us to insert a special limiting provision that the Legislature left out.” Id. at 1184.
The dissent points out that by ignoring the preamble and the legislative intent expressed therein, the majority has acted legislatively by creating an exception to at-will termination where none existed. “Former section 1102.5, subdivision (b) represents an exception to the general rule of at-will employment and should be interpreted in accordance with the legislative intent of furthering the important public policy of protecting “whistle-blowers” from unfair retaliation.” Id. at 1188. “Labor Code section 1102.5 is a whistle blower statute, the purpose of which is to encourage workplace whistle-blowers to report unlawful action without fearing retaliation.” Id. Obviously, Mrs. Cardenas was not acting as a whistle-blower when she reported the suspected theft of her ring.
For the time being this matter is not settled. Recently, on December 16, 2015, the California Supreme Court has granted review of this case. It will be interesting to see which side the Supreme Court agrees with in this matter. Perhaps more interesting will be if the Legislature reacts to this case in 2016 and codifies parts of the preamble as part of section 1102.5, thereby preventing the addition of another exception to the termination of an at-will employee in California.