In Diego v. Pilgrim United Church of Christ, a California appellate court held that an employee was protected from retaliation under the California Labor Code (former section 1102.5(b)) when her employer mistakenly believed that she reported violations of state regulations by her employer to a government agency.

Cecilia Diego was a “mentor teacher” at Pilgrim United’s preschool. Her supervisor, and director of the preschool, was Anne Lewis. Responding to an anonymous complaint about conditions at the preschool that allegedly violated various California regulations, the Community Care Licensing Division of the California Department of Social Services (“Licensing”) made an unannounced visit to the preschool to conduct an inspection. Diego’s coworker (Cynthia Saldana) had told Diego before the inspection that she (Saldana) had made the complaint.

A few days after the inspection, Lewis called Diego and discussed the anonymous complaint and inspection. Lewis asked Diego why she was “doing this” and whether she wanted Lewis “gone,” informed her that people had been telling her “things,” and made other vague references to the complaint and inspection. It soon became clear to Diego that Lewis believed Diego had made the complaint. Later that day, Lewis called Diego again and asked her to attend a meeting the following day. Diego asked to reschedule the meeting due to a planned vacation. A few days later, before the meeting could take place, Lewis called Diego and terminated her employment. Her termination occurred within days of the Licensing inspection.

Diego sued Pilgrim United for wrongful termination in violation of public policy under former section 1102.5 of the California Labor Code, which protects employees from retaliation for refusing to participate in an activity that would result in a violation of state or federal statute, or a violation of or noncompliance with a local, state, or federal rule or regulation. The company sought to dismiss the case through summary judgment. The lower court granted its motion on the basis that Diego was not protected by the Labor Code because she did not actually make the complaint to Licensing. Reversing summary judgment for Pilgrim United, the court held that Diego was protected under the Labor Code even though she did not make the complaint because, as she alleged, her employer mistakenly believed she made the complaint and retaliated against her by terminating her employment within days of the Licensing inspection. The court noted that the legislative intent and public policy behind the Labor Code protection of whistleblowers is to encourage employees to report violations and protect those who do. The fact that her employer mistakenly believed she made the complaint was sufficient to afford her this protection.

This decision significantly expands the scope of retaliation protection for employees under Labor Code section 1102.5.