On March 30, 2015, the Third Appellate District of the California Court of Appeal issued a published decision in Gallup v. Superior Court of Nevada County ruling that a plaintiff must exhaust the Labor Commissioner’s administrative remedies before filing a whistleblower retaliation claim under Labor Code section 1102.5. This case is contrary to the First Appellate District’s recent decision in Satyadi v. West Contra Costa Healthcare Dist. (2014) 232 Cal.App.4th 1022, which held that Senate Bill 666 – alleviating any requirement to exhaust administrative remedies with the Labor Commissioner as of January 1, 2014 – was declaratory of existing law.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff Emily Gallup was a mediator in the Family Court Services department of the Superior Court of Nevada County (SCNC), who was terminated for violating the confidentiality of family court litigants. Gallup alleges that her termination was in retaliation for raising concerns that SCNC was failing to follow applicable legal and ethical mandates in the performance of family court mediations. It was undisputed that Gallup did not file an administrative complaint with the Labor Commissioner before bringing a civil action against the SCNC under Labor Code section 1102.5(b) (retaliation for whistleblowing). SCNC filed a demurrer on the ground that Gallup had failed to exhaust administrative remedies with the Labor Commissioner, which the trial court overruled. After a three-week trial on the Labor Code section 1102.5(b) claim, a jury awarded Gallup $313,206. However, the SCNC filed an appeal asserting that Gallup should have exhausted her administrative remedies before filing her civil complaint.
THE COURT OF APPEAL’S DECISION
In a unanimous decision, the Third Appellate District reversed the trial court’s decision on the demurrer, holding that under Campbell v. Regents of the University of California (2005) 35 Cal.4th 311, Gallup was required to exhaust administrative remedies under Labor Code section 98.7 before bringing suit.
In 2013, the Legislature enacted SB 666, which added section 244 to the Labor Code, and amended Labor Code section 98.7, to provide that, effective January 1, 2014, a plaintiff need not exhaust administrative remedies before the Labor Commissioner unless the Labor Code section upon which the claim is based requires exhaustion. Thus, the court first had to decide whether SB 666 applied to claims, like Gallup’s, filed before January 1, 2014.
Gallup argued that the Legislature’s action in passing SB 666 was meant to “clarify” existing law as set out in Lloyd v. County of Los Angeles (2009) 172 Cal.App.4th 320, which held that filing a complaint with the Labor Commissioner under Labor Code section 98.7 was permissive. The court recited the general rule that statutes typically operate prospectively only, and found no express declaration in SB 666 that it was intended to apply retroactively. The court also found no evidence that the Legislature was merely clarifying existing law, as nothing in the statute or legislative history indicated such an intent. The court declined to follow the contrary holding in Satyadi, noting that a court of appeal decision does not bind other appellate districts.
Turning to the question of exhaustion, the Third District refused to follow
Lloyd, citing case law holding that, “if an administrative remedy is available it must be exhausted, even if couched in permissive language.” The court concluded that
Campbell provided the applicable rule of law – a plaintiff must exhaust available administrative remedies provided by statute before bringing suit under Labor Code section 1102.5. In doing so, the court cleared up a misconception that
Campbell only requires exhaustion of an employer’s internal remedies, noting that
Campbell’s holding is based on the unique nature of the University of California’s internal grievance procedure, which has the force of statute. Finally, the court found that Gallup’s pre-termination grievance arbitration and presentation of a claim pursuant to the Government Claims Act did not satisfy the exhaustion requirement.
Although the issue of administrative exhaustion as to Labor Code claims will eventually become moot due to SB 666, there are a significant number of existing cases involving claims that pre-dated the passage of SB 666. Because it conflicts with Satyadi, Gallup potentially sets up a showdown at the California Supreme Court regarding the requirement of administrative exhaustion that could have a substantial effect on the disposition of these pre-2014 cases. Stay tuned!
For further information, contact Tim Yeung (916.258.8803, email@example.com), Steve Shaw (415.678.3836, firstname.lastname@example.org) or Erich Shiners (916.258.8804, eshiners @rshslaw.com).