We are confident that employers already take employee reports of potentially unlawful activity seriously.  Such internal reports can help employers investigate and eliminate unlawful conduct in the workplace.  The Ninth Circuit Court of Appeals recently held that retaliating against an employee for making an internal report of potentially unlawful activity—not a report to an external agency—is unlawful whistleblower retaliation.

What Happened

In Brunozzi v. Cable Communications, Inc., an employee complained several times to his supervisor that he was not being properly paid for working overtime.  On one occasion the employee refused to work on a Saturday “[b]ecause [he was] not being paid overtime, as far as [he could] tell.”  The company terminated him two days later.

Internal Reports Are Protected Whistleblower Activity

After his termination, the employee brought a whistleblower retaliation claim against the company.  ORS 659A.199 prohibits private employers from retaliating against an employee who “has in good faith reported information that the employee believes is evidence of a violation of a state or federal law, rule[,] or regulation.”  To sustain that claim, the employee must show she engaged in “protected activity.”  Until Brunozzi, it was unclear whether “protected activity” included internal reports of unlawful activity, or was instead limited to reports to external authorities.

In considering whether internal reports are protected under ORS 659A.199, the Ninth Circuit found that the statute was broad and placed no limits “on the individual to whom the employee’s information must be ‘reported.'”  The Court also found that comments by Oregon legislators in enacting the statute revealed their legislative intent.  One legislator said explicitly that the statute’s protections were designed to encourage “‘more internal reporting’ by employees ‘so that the company, maybe even higher up the food chain than whoever is the bad actor, can deal with it internally and [the company] can right [its] own ship without the involvement of the government.”  Thus, the Ninth Circuit concluded that internal reports of conduct employees believe in good faith are violations of law are protected by ORS 659A.199.  Consequently, employees cannot be retaliated against for making such an internal report.

What This Means For Employers

Don’t retaliate against employees for any good faith reports of potentially unlawful activity.  Use extreme caution—and maybe contact your employment attorney—before disciplining employees whose complaints are of potentially unlawful activity.