Opinion
G050892
06-18-2015
SHAWN BENNETT, Plaintiff and Appellant, v. RANCHO CALIFORNIA WATER DISTRICT, Defendant and Respondent.
Law Offices of Douglas F. Walters and Douglas F. Walters for Plaintiff and Appellant. Gresham Savage Nolan & Tilden, Bradley E. Neufeld and Jamie E. Wrage for Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. RIC1218298) OPINION Appeal from a judgment of the Superior Court of Riverside County, Paulette Durand-Barkley, Commissioner. Affirmed in part and reversed in part. Law Offices of Douglas F. Walters and Douglas F. Walters for Plaintiff and Appellant. Gresham Savage Nolan & Tilden, Bradley E. Neufeld and Jamie E. Wrage for Defendant and Respondent.
* * *
INTRODUCTION
Plaintiff Shawn Bennett appeals after the trial court sustained Rancho California Water District's (the District) demurrer to his first amended complaint without leave to amend. The first amended complaint contained a claim for willful misclassification as an independent contractor in violation of Labor Code section 226.8 and a claim for retaliation in violation of Labor Code section 1102.5. (All further statutory references are to the Labor Code unless otherwise specified.)
We affirm in part and reverse in part. Bennett's first cause of action for willful misclassification as an independent contractor fails because section 226.8 does not apply to a public entity such as the District. We therefore affirm the judgment as to the dismissal of the willful misclassification claim.
We reverse the judgment as to the dismissal of the retaliation in violation of section 1102.5, subdivision (b) claim because the first amended complaint stated sufficient facts to show Bennett had reasonable cause to believe the information he gave to the District disclosed a violation of state or federal law.
SUMMARY OF ALLEGATIONS OF THE FIRST AMENDED COMPLAINT
The District is "a public entity which provides water and wastewater services in its service area which is generally located in the Southwest area of Riverside County." In July 2008, Bennett entered into a "Professional Services Agreement" (the agreement) with the District "to fulfill the IT Help Desk Services position." The District classified Bennett as an independent contractor.
The first amended complaint does not summarize the terms of the agreement except to allege that the agreement "listed [Bennett's] scope of activities as 'As directed by the IT Manager.'" A copy of the agreement is not attached to the complaint and our record does not otherwise contain a copy of the agreement.
The District exercised complete control of Bennett's activities. Bennett was "under the direction and control of not only the IT Manager, but the Systems Administrator, and Datacenter Operation's Supervisor." His "duties were as directed and included but were not limited to all internal IT systems, setting up new employees in the system, providing [the District-]provided equipment to other employees and troubleshooting issues as they arose." He was authorized to act on the District's behalf in interacting with outside vendors. Bennett's daily work was randomly assigned to him and the District's employees through the "Help Desk" which received requests. Bennett "performed all the services of an employee and in fact worked side by side in performing his work with other [of the District's] employees."
Bennett's hours were set by the District and he was required to work 40 hours each week. His "place of employment was at the [District's] offices and he was provided all the tools of his job by [the District]." Bennett was listed on the District's employee phone list and was provided a cell phone.
In June 2012, Bennett began to question whether he had been improperly classified as an independent contractor. After he researched the issue, on June 21, 2012, he advised one of his supervisors, Dale Badore, that he believed that he had been misclassified and requested that he be made an employee of the District. Around the same time, the District requested that Bennett sign a new "Professional Services Agreement."
On July 26, 2012, Bennett was asked to report to the District's chief financial officer's office. Bennett met with the chief financial officer, Jeff Armstrong, and the IT manager, Jason Martin. Bennett was informed that "the 'Board wanted to continue his relationship as a contractor'" and presented him with "a modified Statement of Objectives [that was] significantly different from what he had been asked to sign earlier but carrying the same date and identified as the same version."
Two days later, Bennett sent an e-mail to Armstrong, advising him that Bennett believed he had been knowingly misclassified and again explained his reasoning. He asked the District to reevaluate the situation and reconsider its demand that he continue working as an independent contractor. He included the District's head of human resources, Eileen Dienzo, on his e-mail to Armstrong.
At Bennett's request, Dienzo met with him. Bennett advised her that he felt the issue of his misclassification was a human resources issue. Bennett was assured that the District was taking the matter seriously and looking into the situation.
On August 13, 2012, Bennett was notified that the District had decided to terminate the agreement. Bennett believed the District "ha[d] engaged in a pattern and practice of knowingly hiring 'contractors' to perform work done by employees and ha[d] knowingly mis-classified those persons to avoid paying taxes and benefits."
BACKGROUND
In December 2012, Bennett filed a complaint against the District, asserting claims for (1) improper classification as an independent contractor in violation of sections 2750 and 3357; (2) recovery of overtime compensation pursuant to section 510, and California Code of Regulations, title 8, section 11040; (3) failure to provide properly itemized wage statements in violation of section 226; (4) failure to compensate for all hours worked; and (5) retaliatory employment termination. The District demurred to all the causes of action on the ground the complaint failed to allege facts sufficient to state any cause of action. The District also demurred to the misclassification claim on the ground "there is no statutory basis for relief," and further demurred to all the other claims on the ground each claim "cannot be alleged against a public agency, as a matter of law." The District demurred to the retaliation claim on the additional ground Bennett failed to identify a statutory basis for liability. The District concurrently filed a motion to strike certain "legally improper and factually and legally irrelevant matter" contained in the complaint.
Our record does not include the trial court's rulings on the demurrer and the motion to strike portions of the complaint, or show whether any such rulings were made.
In February 2013, Bennett filed a first amended complaint for damages against the District, asserting claims for (1) willful improper classification as an independent contractor in violation of section 226.8 and Government Code section 53060, and (2) retaliatory employment termination in violation of section 1102.5, subdivision (b).
The District demurred to the first amended complaint, as to the willful improper classification of an independent contractor cause of action, on the ground it "fail[ed] to state facts sufficient to constitute a cause of action because a claim for violation of Labor Code section 226.8 cannot be alleged against a public agency as a matter of law, and Plaintiff has failed to allege any basis for liability under Government Code section 53060." The District demurred to the first amended complaint, as to the retaliatory employment termination cause of action, on the ground it "fail[ed] to state facts sufficient to constitute a cause of action because Plaintiff has failed to allege that he engaged in any 'protected activity' within the meaning and scope of Labor Code section 1102.5."
In the first amended complaint, Bennett's first cause of action for willful misclassification as an independent contractor was based in part on a violation of Government Code section 53060, which provides: "The legislative body of any public or municipal corporation or district may contract with and employ any persons for the furnishing to the corporation or district special services and advice in financial, economic, accounting, engineering, legal, or administrative matters if such persons are specially trained and experienced and competent to perform the special services required. [¶] The authority herein given to contract shall include the right of the legislative body of the corporation or district to contract for the issuance and preparation of payroll checks. [¶] The legislative body of the corporation or district may pay from any available funds such compensation to such persons as it deems proper for the services rendered." Bennett does not challenge the trial court's order sustaining the demurrer to the first amended complaint as to the Government Code section 53060 basis for his first cause of action; he has not mentioned that code section in his appellate briefs. We therefore do not further refer to it.
The District's demurrer to the first amended complaint was sustained without leave to amend. Bennett prematurely filed a notice of appeal before the trial court signed the order dismissing the action with prejudice. We have discretion to treat the notice of appeal as filed immediately after entry of judgment, and we exercise that discretion in this case. (Cal. Rules of Court, rule 8.104(d)(2).)
A dismissal "in the form of a written order signed by the court and filed in the action" is considered a judgment (Code Civ. Proc., § 581d) and thus is appealable under Code of Civil Procedure section 904.1, subdivision (a)(1).
DISCUSSION
I.
STANDARD OF REVIEW
"We independently review the ruling on a demurrer and determine de novo whether the pleading alleges facts sufficient to state a cause of action. (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415 . . . .) We assume the truth of the properly pleaded factual allegations, facts that reasonably can be inferred from those expressly pleaded, and matters of which judicial notice has been taken. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081 . . . .) We construe the pleading in a reasonable manner and read the allegations in context. (Ibid.) 'We affirm the judgment if it is correct on any ground stated in the demurrer, regardless of the trial court's stated reasons. [Citation.]' (Las Lomas Land Co., LLC v. City of Los Angeles (2009) 177 Cal.App.4th 837, 848 . . . .)" (Entezampour v. North Orange County Community College Dist. (2010) 190 Cal.App.4th 832, 837.)
II.
THE TRIAL COURT DID NOT ERR BY SUSTAINING THE DEMURRER AS TO BENNETT'S
CLAIM FOR WILLFUL MISCLASSIFICATION AS AN INDEPENDENT CONTRACTOR IN
VIOLATION OF SECTION 226.8.
The District demurred to the cause of action for willful misclassification as an independent contractor in violation of section 226.8 on the ground, inter alia, that section 226.8 does not apply to a public employer. Bennett expressly alleged in the first amended complaint that the District is a public entity, namely, a water district. For the reasons we will explain, the demurrer was properly sustained as to the first cause of action because section 226.8 does not apply to public entities such as the District.
A.
Governing Rules of Statutory Interpretation
Because our analysis of the trial court's order sustaining the District's demurrer to the willful misclassification as an independent contractor claim depends on our interpretation of section 226.8, we begin our discussion by reviewing the governing rules of statutory interpretation.
"'[O]ur fundamental task in construing a statute is to ascertain the intent of the lawmakers so as to effectuate the purpose of the statute.' [Citation.] In this search for what the Legislature meant, '[t]he statutory language itself is the most reliable indicator, so we start with the statute's words, assigning them their usual and ordinary meanings, and construing them in context. If the words themselves are not ambiguous, we presume the Legislature meant what it said, and the statute's plain meaning governs. On the other hand, if the language allows more than one reasonable construction, we may look to such aids as the legislative history of the measure and maxims of statutory construction. In cases of uncertain meaning, we may also consider the consequences of a particular interpretation, including its impact on public policy.'" (Martinez v. Combs (2010) 49 Cal.4th 35, 51.) "'[S]tatutes governing conditions of employment are construed broadly in favor of protecting employees.'" (Bearden v. U.S. Borax, Inc. (2006) 138 Cal.App.4th 429, 435.)
In Wells v. One2One Learning Foundation (2006) 39 Cal.4th 1164, 1192 (Wells), the Supreme Court explained: "A traditional rule of statutory construction is that, absent express words to the contrary, governmental agencies are not included within the general words of a statute." (See Campbell v. Regents of University of California (2005) 35 Cal.4th 311, 330 [quoting the Senate Committee on Industrial Relations, Analysis of Assembly Bill No. 3486 (1991-1992 Reg. Sess.) as amended April 21, 1992, page 2, as follows: "'These provisions are silent as to their applicability to public employees. Generally, however, provisions of the Labor Code apply only to employees in the private sector unless they are specifically made applicable to public employees.'"].)
The Supreme Court in Wells, supra, 39 Cal.4th at page 1192, acknowledged "a more recent exception to this principle, i.e., that government agencies are excluded from the operation of general statutory provisions 'only if their inclusion would result in an infringement upon sovereign governmental powers. . . . Pursuant to this principle, governmental agencies have been held subject to legislation which, by its terms, applies simply to any "person."'" The Supreme Court explained, "the premise that public entities are statutory 'persons' unless their sovereign powers would be infringed is simply a maxim of statutory construction. While the 'sovereign powers' principle can help resolve an unclear legislative intent, it cannot override positive indicia of a contrary legislative intent." (Id. at p. 1193.)
In light of the standards of interpretation set forth by the Supreme Court, we first address whether the language of section 226.8 itself suggests any legislative intent that it would apply to public employers, and then analyze whether applying section 226.8 to the District would infringe on its sovereign powers.
B.
Section 226.8 Is Silent as to Its Application to Public Employers.
Section 226.8, which establishes a penalty scheme for employers who, inter alia, willfully misclassify any individual as an independent contractor, does not expressly provide that it applies to public employers. Section 226.8 does not refer to public employers at all, and does not otherwise suggest any intent on the part of the Legislature that it would apply to public employers. Section 226.8 provides, in pertinent part, as follows: "(a) It is unlawful for any person or employer to engage in any of the following activities: [¶] (1) Willful misclassification of an individual as an independent contractor."
Section 226.8 provides:
"[(a)](2) Charging an individual who has been willfully misclassified as an independent contractor a fee, or making any deductions from compensation, for any purpose, including for goods, materials, space rental, services, government licenses, repairs, equipment maintenance, or fines arising from the individual's employment where any of the acts described in this paragraph would have violated the law if the individual had not been misclassified.
"(b) If the Labor and Workforce Development Agency or a court issues a determination that a person or employer has engaged in any of the enumerated violations of subdivision (a), the person or employer shall be subject to a civil penalty of not less than five thousand dollars ($5,000) and not more than fifteen thousand dollars ($15,000) for each violation, in addition to any other penalties or fines permitted by law.
"(c) If the Labor and Workforce Development Agency or a court issues a determination that a person or employer has engaged in any of the enumerated violations of subdivision (a) and the person or employer has engaged in or is engaging in a pattern or practice of these violations, the person or employer shall be subject to a civil penalty of not less than ten thousand dollars ($10,000) and not more than twenty-five thousand dollars ($25,000) for each violation, in addition to any other penalties or fines permitted by law.
"(d)(1) If the Labor and Workforce Development Agency or a court issues a determination that a person or employer that is a licensed contractor pursuant to the Contractors' State License Law has violated subdivision (a), the agency, in addition to any other remedy that has been ordered, shall transmit a certified copy of the order to the Contractors' State License Board. [¶] (2) The registrar of the Contractors' State License Board shall initiate disciplinary action against a licensee within 30 days of receiving a certified copy of an agency or court order that resulted in disbarment pursuant to paragraph (1).
"(e) If the Labor and Workforce Development Agency or a court issues a determination that a person or employer has violated subdivision (a), the agency or court, in addition to any other remedy that has been ordered, shall order the person or employer to display prominently on its Internet Web site, in an area which is accessible to all employees and the general public, or, if the person or employer does not have an Internet Web site, to display prominently in an area that is accessible to all employees and the general public at each location where a violation of subdivision (a) occurred, a notice that sets forth all of the following: [¶] (1) That the Labor and Workforce Development Agency or a court, as applicable, has found that the person or employer has committed a serious violation of the law by engaging in the willful misclassification of employees. [¶] (2) That the person or employer has changed its business practices in order to avoid committing further violations of this section. [¶] (3) That any employee who believes that he or she is being misclassified as an independent contractor may contact the Labor and Workforce Development Agency. The notice shall include the mailing address, email address, and telephone number of the agency. [¶] (4) That the notice is being posted pursuant to a state order.
"(f) In addition to including the information specified in subdivision (e), a person or employer also shall satisfy the following requirements in preparing the notice: [¶] (1) An officer shall sign the notice. [¶] (2) It shall post the notice for one year commencing with the date of the final decision and order.
"(g)(1) In accordance with the procedures specified in Sections 98 to 98.2, inclusive, the Labor Commissioner may issue a determination that a person or employer has violated subdivision (a). [¶] (2) If, upon inspection or investigation, the Labor Commissioner determines that a person or employer has violated subdivision (a), the Labor Commissioner may issue a citation to assess penalties set forth in subdivisions (b) and (c) in addition to any other penalties or damages that are otherwise available at law. The procedures for issuing, contesting, and enforcing judgments shall be the same as those set forth in Section 1197.1. [¶] (3) The Labor Commissioner may enforce this section pursuant to Section 98 or in a civil suit.
"(h) Any administrative or civil penalty pursuant to subdivision (b) or (c) or disciplinary action pursuant to subdivision (d) or (e) shall remain in effect against any successor corporation, owner, or business entity that satisfies both of the following: [¶] (1) Has one or more of the same principals or officers as the person or employer subject to the penalty or action. [¶] (2) Is engaged in the same or a similar business as the person or employer subject to the penalty or action.
"(i) For purposes of this section, the following definitions apply: [¶] (1) 'Determination' means an order, decision, award, or citation issued by an agency or a court of competent jurisdiction for which the time to appeal has expired and for which no appeal is pending. [¶] (2) 'Labor and Workforce Development Agency' means the Labor and Workforce Development Agency or any of its departments, divisions, commissions, boards, or agencies. (3) 'Officer' means the chief executive officer, president, any vice president in charge of a principal business unit, division, or function, or any other officer of the corporation who performs a policymaking function. If the employer is a partnership, 'officer' means a partner. If the employer is a sole proprietor, 'officer' means the owner. [¶] (4) 'Willful misclassification' means avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.
"(j) Nothing in this section is intended to limit any rights or remedies otherwise available at law." (§ 226.8, subds. (a)(2)-(j).)
C.
Subjecting the District to the Penalties Established by Section 226 .8
Would Infringe on the District's Sovereign Powers.
"A statute infringes upon a public entity's sovereign powers if the statute affects the entity's governmental purposes and functions." (Johnson v. Arvin-Edison Water Storage Dist. (2009) 174 Cal.App.4th 729, 738 (Johnson).) In Johnson, the plaintiff employee asserted claims for overtime pay and meal period violations, pursuant to sections 510 and 512, respectively, against his employer, a public water storage district. (Johnson, supra, at p. 733.) The employee argued that enforcing those statutes against the water storage district would not infringe on its sovereign powers because "overtime and meal period provisions have nothing to do with the District's functions." (Id. at p. 738.) Rejecting the employee's argument, the appellate court stated: "[T]he District can only perform its purposes and functions through its employees. As the Attorney General has opined, '"[i]t is manifest that the relationship between a public employer and its employees affects the fundamental purposes and functions of the governmental body."'" (Id. at pp. 738-739.)
The Johnson court further stated: "One of the statutory powers granted to the District to enable it to accomplish its purposes is the power to set employees' compensation. (Wat. Code, §§ 39059, 43152, subd. (c).) Sections 510 and 512 address matters of employee compensation. [Citation.] Accordingly, sections 510 and 512 would affect the District's power to accomplish its purposes and thus would infringe upon its sovereign powers. Therefore, the trial court correctly concluded that the District was exempt from the requirements of sections 510 and 512." (Johnson, supra, 174 Cal.App.4th at p. 739.)
The Johnson court's holding was based on, inter alia, Wells, supra, 39 Cal.4th 1164, in which the Supreme Court held that a school district was not subject to civil liability under the California False Claims Act (CFCA) (Gov. Code, § 12650 et seq.). In Wells, the Supreme Court considered the argument that the CFCA should apply to the public school district because "'no governmental agency has the power, sovereign or otherwise, knowingly to present a false claim.'" (Wells, supra, at pp. 1192-1193.) The court rejected that analysis, stating, "[o]f course school districts have no 'sovereign' power or right to submit false claims against the public treasury. Nonetheless, we cannot accept [the] determination that application of the CFCA to public school districts would infringe no sovereign powers." (Id. at p. 1193.) The court explained, "in light of the stringent revenue, appropriations, and budget restraints under which all California governmental entities operate, exposing them to the draconian liabilities of the CFCA would significantly impede their fiscal ability to carry out their core public missions." (Ibid.)
The Wells court further explained that given "[t]he Legislature is aware of the stringent revenue, budget, and appropriations limitations affecting all agencies of government . . . , we cannot lightly presume an intent to force such entities not only to make whole the fellow agencies they defrauded, but also to pay huge additional amounts, often into the pockets of outside parties. Such a diversion of limited taxpayer funds would interfere significantly with government agencies' fiscal ability to carry out their public missions." (Wells, supra, 39 Cal.4th at pp. 1195-1196.) The court stated, "[o]f course, where liability otherwise exists, public entities must pay legal judgments from their limited revenues and appropriations, even if they cannot exceed their tax or appropriations ceilings to do so and must therefore cut spending in other areas. [Citations.] This obligation, in and of itself, does not infringe their 'sovereign powers.' But we may consider the effect on sovereign powers when we are determining whether the Legislature intended, by mere implication, to expose a public entity to a particular statutory liability. [¶] For the reasons we have detailed, we conclude the Legislature did not intend to subject financially constrained school districts—or any agency of state or local government—to the treble-damages-plus-penalties provisions of the CFCA. We conclude that such entities are not 'persons' subject to suit under that statute." (Id. at pp. 1196-1197.)
Here, as in Johnson, it is undisputed the District is a water district and a municipal corporation with sovereign powers of its own. (Johnson, supra, 174 Cal.App.4th at pp. 740-741.) Applying section 226.8 would infringe on the District's sovereign powers, including its powers to set employee compensation pursuant to Water Code section 40356, and to "[e]mploy and appoint such agents, officers, and employees as may be required, and prescribe their duties" within the meaning of Water Code section 43152, subdivision (c) (italics added).
Section 226.8 penalizes an employer that violated its terms in an amount of not less than $5,000 and not more than $15,000 "for each violation." (§ 226.8, subd. (b).) If it is found that the employer had engaged in a "pattern or practice of these violations," the employer "shall be subject to a civil penalty of not less than ten thousand dollars ($10,000) and not more than twenty-five thousand dollars ($25,000) for each violation." (§ 226.8, subd. (c).) Subjecting the District to section 226.8 would "interfere significantly" with the District's "fiscal ability to carry out [its] public mission[]" through the diversion of limited taxpayer funds to pay section 226.8 penalties. (Wells, supra, 39 Cal.4th at p. 1196.) In light of the analyses and holdings of Wells and Johnson, we conclude the Legislature did not, "by mere implication," intend to expose the District to the statutory liability established by section 226.8. (Wells, supra, at p. 1196.)
In his opening brief, Bennett argues that section 226.8's imposition of liability on not just employers (as in other code sections) but on persons and employers suggests that public employers are included within its reach. Bennett does not offer any legal authority to support his assertion. The Legislature's choice of penalizing persons and employers can be explained by its concurrent codification of section 2753, subdivision (a), which provides: "A person who, for money or other valuable consideration, knowingly advises an employer to treat an individual as an independent contractor to avoid employee status for that individual shall be jointly and severally liable with the employer if the individual is found not to be an independent contractor." Section 226.8's inclusion of the term "person" does not reflect a legislative intent that the statute would apply to public employers.
Subdivision (b) of section 2753 provides: "This section does not apply to the following persons: [¶] (1) A person who provides advice to his or her employer. [¶] (2) An attorney authorized to practice law in California or another United States jurisdiction who provides legal advice in the course of the practice of law."
Bennett also argues that section 220 evidences the Legislature's intent that section 226.8 should apply to public entities. Section 220, subdivision (a) provides that specified Labor Code sections do not apply to the payment of wages of employees directly employed by the State of California. Section 220, subdivision (b), as directly pertinent here, provides that a broader set of specified preceding Labor Code sections "do not apply to the payment of wages of employees directly employed by any county, incorporated city, or town or other municipal corporation. All other employments are subject to these provisions."
Bennett argues: "What is clear from the Legislative history of Labor Code § 220 is that the legislature considered § 220 to create exemptions to the applicability of sections of the Labor Code to certain entities. Such exemptions would not be necessary if the provisions of Division 2, Part 1[,] Chapter 1 of the Labor Code never applied to the State or municipal entities in the first place. None of the enumerated sections in Labor Code § 220 by their terms appl[ies] to municipal entities. To apply the 'general rule' of statutory construction would simply mean that § 220 was and is now unnecessary and surplusage. Clearly the legislature knew how to exempt governmental entities from the application of provisions of the Labor Code, and when it passed § 226.8 it did not do so nor did it amend § 220 to include § 226.8 as an exemption." Section 226.8 became effective in 2012 and section 220 was last amended in 2008.
In California Correctional Peace Officers' Assn. v. State of California (2010) 188 Cal.App.4th 646, 649-650, the plaintiff union sought to pursue a claim for violation of section 226.7 against a state employer. The union argued the Legislature's intent that section 226.7 should be applied to public employers was evidenced by section 220's express provision that certain Labor Code sections (not including section 226.7) would not apply to public employers. (California Correctional Peace Officers' Assn. v. State of California, supra, at p. 653.) The union argued, "because the Legislature expressly exempted public entities from these specific Labor Code provisions referred to in . . . section 220, the Legislature must have intended the entirety of division 2, part 1, chapter 1 to be generally applicable to public entities." (Ibid.)
The appellate court rejected the union's argument, noting that the union had "provide[d] no argument or authority to support its position." (California Correctional Peace Officers' Assn. v. State of California, supra, 188 Cal.App.4th at p. 653.) The court concluded the specific exemptions contained in section 220 "cannot, by implication, be read as making division 1, part 1, chapter 1 of the Labor Code generally applicable to public entities. 'Such an interpretation would violate the maxim that "[w]hen the Legislature 'has employed a term or phrase in one place and excluded it in another, it should not be implied where excluded.'" [Citation.]'" (California Correctional Peace Officers' Assn. v. State of California, supra, at p. 654.) The appellate court held that section 226.7 did not apply to the state employer. (California Correctional Peace Officers' Assn. v. State of California, supra, at p. 650.)
We agree that section 220's express exemptions for state and municipal employers regarding certain Labor Code sections referred to in section 220 fail to evidence a legislative intent that section 226.8 applies to public employers. As a panel of this court noted in Sheppard v. North Orange County Regional Occupational Program (2010) 191 Cal.App.4th 289, 307, "[o]ur review of the Labor Code revealed that it is not a model of uniformity in its references to public employees. Some sections expressly include public entities. (See, e.g., §§ 432.7, subd. (a) ['No employer, whether a public agency or private individual or corporation'], 2808, subd. (a) ['It is the responsibility of all employers, whether public or private, to provide to all eligible employees an outline of coverage . . . .'], 2809, subd. (a) ['Any employer, whether private or public'].) Other sections expressly exclude public employees. (See, e.g., §§ 220, subd. (a) ['Sections 201.3, 201.5, 201.7, 203.1, 203.5, 204, 204a, 204b, 204c, 204.1, 205, and 205.5 do not apply to the payment of wages of employees directly employed by the State of California.'], 432.2, subd. (a) ['The prohibition of this section does not apply to the federal government . . . or the state government or any agency or local subdivision thereof . . . .'].)"
We therefore conclude that because section 226.8 does not apply to the District, the trial court did not err by sustaining the demurrer to the willful misclassification of an independent contractor in violation of section 226.8 claim alleged against it.
III.
CLAIM FOR RETALIATION IN VIOLATION OF SECTION 1102.5, SUBDIVISION (b).
"In 1984, the Legislature added the 'Whistleblower Protection Statute' to the Labor Code by adopting section 1102.5." (Edgerly v. City of Oakland (2012) 211 Cal.App.4th 1191, 1199.) Bennett's claim for retaliation in violation of section 1102.5 was brought under subdivision (b), which provides: "An employer, or any person acting on behalf of the employer, shall not retaliate against an employee for disclosing information, or because the employer believes that the employee disclosed or may disclose information, to a government or law enforcement agency, to a person with authority over the employee or another employee who has the authority to investigate, discover, or correct the violation or noncompliance, or for providing information to, or testifying before, any public body conducting an investigation, hearing, or inquiry, if the employee has reasonable cause to believe that the information discloses a violation of state or federal statute, or a violation of or noncompliance with a local, state, or federal rule or regulation, regardless of whether disclosing the information is part of the employee's job duties." (§ 1102.5, subd. (b), italics added.)
Section 1106 provides, in part, that, for purposes of section 1102.5, the term "'employee' includes, but is not limited to, any individual employed by the state or any subdivision thereof, any county, city, city and county, including any charter city or county, and any school district, community college district, municipal or public corporation, political subdivision, or the University of California." We note that "[i]n contrast to an employee of a private employer, a plaintiff employed by a governmental agency . . . does not need to inform another governmental agency of the unlawful acts in order to qualify for whistleblower protection. [Citation.]" (Edgerly v. City of Oakland, supra, 211 Cal.App.4th at p. 1199.)
In order to prove a claim under section 1102.5, the plaintiff must establish a prima facie case of retaliation. (Mokler v. County of Orange (2007) 157 Cal.App.4th 121, 138.) "'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.]' [Citation.] 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, subds. (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.]'" (Edgerly v. City of Oakland, supra, 211 Cal.App.4th at p. 1199.) Section 1102.5, subdivision (e) provides, "[a] report made by an employee of a government agency to his or her employer is a disclosure of information to a government or law enforcement agency" that is protected by subdivisions (a) and (b) of section 1102.5. (See Mize-Kurzman v. Marin Community College Dist. (2012) 202 Cal.App.4th 832, 856-857.) "In circumstances where the supervisor is not the alleged wrongdoer (i.e., the supervisor's own conduct is not the asserted wrongdoing that is being disclosed to that supervisor), it cannot categorically be stated that a report to a supervisor in the normal course of duties is not a protected disclosure." (Id. at p. 858.)
The District demurred to Bennett's claim for retaliation in violation of section 1102.5 on the ground Bennett "fail[ed] to state facts sufficient to constitute a cause of action because Plaintiff has failed to allege that he engaged in any 'protected activity' within the meaning and scope of Labor Code section 1102.5." The first amended complaint alleged, "when Plaintiff raised concerns that [the District] was violating the law and wrongfully mis-classifying him as an independent contractor, he was engaging in a right protected . . . under the law of the State of California and reporting a potential violation of statutory rights and obligations specifically applicable to [the District]."
In its respondent's brief, the District argues, inter alia, the trial court properly sustained the demurrer as to the section 1102.5 claim because Bennett failed to plead exhaustion of administrative remedies. We do not address the District's argument because the District did not demur to the claim on that ground.
Before oral argument, we invited Bennett to file a supplemental brief identifying any and all laws, rules, or regulations he contends the District violated by misclassifying him as an independent contractor, and explaining why any such laws, rules, or regulations apply to the District as a public employer. We also invited the District to file a responsive supplemental brief. We have considered both briefs.
In his supplemental brief, Bennett identified several laws that would be violated if he had been misclassified as an independent contractor instead of classified as an employee, including 26 United States Code section 3402(a)(1) (employer requirement to withhold federal income tax that is applicable to public employees under 26 United States Code section 3401(c)), and Labor Code sections 3210 and 3300 (requiring public employers to provide workers' compensation benefits).
The first amended complaint alleged facts showing the reasons why Bennett believed he had been misclassified, including that he worked under the direction and control of the District's supervisors; he performed all the services of an employee alongside other employees; he was required to work 40 hours a week at the District's office; and the District provided him with the tools he required to perform his functions. The first amended complaint also alleged Bennett reported or disclosed his misclassification to one of his supervisors (Badore), the District's chief financial officer (Armstrong), and the District's head of human resources (Dienzo). The first amended complaint further alleged that after Bennett asserted he had been misclassified as an independent contractor when he was truly an employee, the agreement was terminated.
Although the first amended complaint is bareboned, it stated facts sufficient to show Bennett had reasonable cause to believe the information he provided the District disclosed that he had been misclassified by the District as an independent contractor, which resulted in a violation of the law, and that the District terminated the agreement with him after he made that disclosure. The trial court therefore erred by sustaining the demurrer as to this claim.
DISPOSITION
The judgment is affirmed as to the dismissal of the claim for willful misclassification as an independent contractor in violation of section 226.8. The judgment is reversed as to the dismissal of the claim for retaliation in violation of section 1102.5, subdivision (b). In the interests of justice, neither party shall recover costs on appeal.
FYBEL, J. WE CONCUR: O'LEARY, P. J. THOMPSON, J.