Filed 6/13/19 (unmodified opn. attached)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
SHAWN BENNETT,
Plaintiff and Respondent, G054617
v. (Super. Ct. No. RIC 1218298)
RANCHO CALIFORNIA WATER ORDER MODIFYING OPINION
DISTRICT, AND DENYING PETITION FOR
REHEARING; NO CHANGE IN
Defendant and Appellant. JUDGMENT
It is ordered that the opinion filed herein on May 29, 2019, be modified as
follows:
On page 15, following the end of the second full paragraph, add the
following paragraphs:
In support of his petition for rehearing, Bennett cites
Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903
(Dynamex). His reliance is misplaced as Dynamex does not assist him.
Bennett argues that “all Bennett had to do to satisfy the first element of his
section 1102.5 claim was to demonstrate that he had provided services to
the District, a fact which the District never contested.” (Italics omitted.)
Bennett’s argument continues: “In light of that undisputed predicate fact, it
was therefore the District’s burden in that subsequent section 1102.5 action
to prove that Bennett was not its presumed employee, but was instead an
independent contractor”—rendering the burden on the District “the exact
same in both proceedings.” (Italics omitted.)
Bennett’s arguments miss the point. In our analysis of
burdens, we are concerned with the applicability of the doctrine of
collateral estoppel to the administrative law judge’s determination the
District failed to carry its burden of proving Bennett was an independent
contractor in the CalPERS proceeding. Dispositive to our analysis is the
administrative law judge’s express statement that, from the outset, the
District had “the burden of demonstrating by a preponderance of the
evidence that Mr. Bennett was an independent contractor.” As discussed
ante, we apply the express language of section 1102.5 and California
Supreme Court authority interpreting that language in concluding it was
Bennett’s initial burden in the trial court to show that he was an employee,
by whatever modicum of proof may be required, to prove his section
1102.5(b) claim. Therefore, the burden applied by the administrative law
judge and Bennett’s initial burden with regard to employment status in
proving the section 1102.5(b) claim were not identical for purposes of
collateral estoppel applicability.
Dynamex does not cite section 1102.5, much less analyze the
burdens of proof relevant to section 1102.5(b) claims. In Dynamex, the
Supreme Court stated: “The issue in this case relates to the resolution of
the employee or independent contractor question in one specific context.
Here we must decide what standard applies, under California law, in
2
determining whether workers should be classified as employees or as
independent contractors for purposes of California wage orders, which
impose obligations relating to the minimum wages, maximum hours, and a
limited number of very basic working conditions (such as minimally
required meal and rest breaks) of California employees.” (Dynamex, supra,
4 Cal.5th at pp. 913-914, first italics added.)
This modification does not effect a change in judgment. The petition for
rehearing is DENIED.
FYBEL, J.
I CONCUR:
O’LEARY, P. J.
I DISSENT: I am of the opinion the petition for rehearing should be GRANTED.
THOMPSON, J.
3
Filed 5/29/19 (unmodified version)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
SHAWN BENNETT,
Plaintiff and Respondent, G054617
v. (Super. Ct. No. RIC 1218298)
RANCHO CALIFORNIA WATER OPINION
DISTRICT,
Defendant and Appellant.
Appeal from a judgment and postjudgment order of the Superior Court of
Riverside County, Angel M. Bermudez, Judge. Judgment reversed and remanded with
directions. Postjudgment order affirmed. Request for Judicial Notice. Granted.
Horvitz & Levy, Barry R. Levy, Mark A. Kressel; Meyers Fozi, Neal S.
Meyers, Golnar J. Fozi and Athena B. Troy for Defendant and Appellant.
Williams Iagmin and Jon R. Williams for Plaintiff and Respondent.
* * *
INTRODUCTION
Plaintiff Shawn Bennett sued defendant Rancho California Water District
(the District) for whistleblower retaliation in violation of Labor Code section 1102.5,
1
subdivision (b). At the jury trial, the trial court excluded evidence showing Bennett’s
relationship with the District was anything other than an employment relationship. Citing
an administrative law judge’s prior finding Bennett had been the District’s employee for
purposes of retirement benefits eligibility through the California Public Employees’
Retirement System (CalPERS), the trial court concluded the doctrine of collateral
estoppel applied and established Bennett had been the District’s employee.
We reverse and remand to the trial court with directions to conduct a new
trial. We hold a party is not collaterally estopped from litigating an issue when, in a prior
proceeding, a dispositive finding had been made, but only by imposing a lesser burden of
proof on the party invoking collateral estoppel than that which would have been applied
in the subsequent proceeding. To prevail on a section 1102.5(b) claim, the plaintiff must
prove employment status. In the prior CalPERS proceeding, the administrative law judge
expressly assigned to the District the burden of proving Bennett had been its independent
contractor and thereby entirely relieved Bennett of the burden of proof on that issue. The
trial court therefore erred by finding the doctrine of collateral estoppel applicable and
precluding litigation of Bennett’s employment status. At the retrial, for the reasons we
explain, the common law definition of employee will apply to Bennett’s section
1102.5(b) claim.
1
All further statutory references are to the Labor Code unless otherwise specified. We
refer to section 1102.5, subdivision (b) as “section 1102.5(b).” Since Bennett initiated
this lawsuit, section 1102.5, including subdivision (b), has been amended, effective
January 1, 2014. (Stats. 2013, ch. 781, § 4.1.) Because the amendments to section
1102.5 do not affect the issues in the present appeal, we uniformly refer to the statute as
section 1102.5 and, in so doing, cite to the applicable prior version of that statute that was
in effect January 1, 2004 through December 31, 2013.
2
The court did not err, however, by denying the District’s motion for
judgment notwithstanding the verdict (JNOV) brought on the ground insufficient
evidence supported the findings Bennett had been employed by the District and had made
disclosures within the meaning of section 1102.5(b). We reject the District’s contention
its proposed statutory definition of the term “employee” applied to the section 1102.5(b)
claim. Because the trial court’s erroneous evidentiary ruling severely limited the
presentation of evidence, the District was not entitled to judgment entered in its favor
notwithstanding the verdict.
BACKGROUND
I.
THE FIRST AMENDED COMPLAINT
In February 2013, Bennett filed the first amended complaint for damages
against the District. He asserted 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(b). We summarize relevant allegations of the first amended complaint as follows.
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 and the District entered into a “Professional Services
Agreement” (the agreement) for Bennett “to fulfill the IT Help Desk Services position.”
The District classified Bennett as an independent contractor.
Bennett alleged that: The District “exercised complete control” over his
activities. Bennett was “under the direction and control of not only the IT Manager, but
the Systems Administrator, and Datacenter Operation’s Supervisor.” 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.”
3
In June 2012, Bennett questioned whether he had been improperly
classified as an independent contractor. After conducting research on 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 classified as an employee of the District.
Around the same time, the District asked Bennett to sign a new “Professional Services
Agreement.”
In July 2012, Bennett was asked to report to the office of the District’s
chief financial officer. He 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 as an independent contractor and
again explaining his reasoning. He asked the District to 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 Bennett. He advised Dienzo 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 the District had decided to
terminate its agreement with him. 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.”
4
II.
THE TRIAL COURT SUSTAINS THE DISTRICT’S DEMURRER WITHOUT
LEAVE TO AMEND; WE REVERSE THE ORDER SUSTAINING THE
DEMURRER AS TO THE SECTION 1102.5(B) CLAIM.
The District demurred to the first amended complaint as to the willful
improper classification of an independent contractor cause of action and the
section 1102.5(b) claim each on the ground, inter alia, it “fail[ed] to state facts sufficient
to constitute a cause of action.” The District’s demurrer to the first amended complaint
was sustained without leave to amend. Bennett appealed.
In our prior nonpublished opinion Bennett v. Rancho California Water
District (June 18, 2015, G050892), we affirmed in part and reversed in part. We held that
Bennett’s first cause of action for willful misclassification as an independent contractor
failed because section 226.8 does not apply to a public entity such as the District and
therefore affirmed the dismissal of the willful misclassification claim. We reversed the
dismissal of section 1102.5(b) claim, however, 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.
III.
TWO SEPARATE ADJUDICATIONS YIELD CONTRARY FINDINGS: BENNETT IS DENIED
UNEMPLOYMENT BENEFITS ON THE GROUND HE WAS NOT THE DISTRICT’S EMPLOYEE,
BUT IS AWARDED CALPERS RETIREMENT BENEFITS ON THE GROUND HE WAS SUCH AN
EMPLOYEE.
After Bennett was informed of the termination of his contract with the
District, he applied to the California Employment Development Department (EDD) to
receive unemployment benefits. Although the EDD determined Bennett was eligible for
benefits under the Unemployment Insurance Code, the Unemployment Insurance Appeals
5
Board reversed that determination on the ground Bennett had not been the District’s
2
common law employee and thus was not eligible to receive unemployment benefits.
Bennett also pursued retirement benefits through CalPERS, contending he
had been employed by the District and was therefore eligible for such benefits. CalPERS
determined that Bennett had provided services as a common law employee of the District
and the District appealed from that determination. The District’s appeal resulted in a
hearing before an administrative law judge who received oral and documentary evidence
and briefing from the parties. The administrative law judge issued a decision setting
forth the applicable standard and burden of proof in determining the employment issue as
follows: “Absent statutory or case law establishing a different standard, the standard of
proof is ‘a preponderance of the evidence.’ [Citation.] In this proceeding, [the District]
had the burden of demonstrating by a preponderance of the evidence that Mr. Bennett
was an independent contractor rather than an employee during the time period in
question.”
In the decision, the administrative law judge observed that “[e]xtensive
evidence” had been presented describing in detail the relationship between Bennett and
the District, stating: “Some of the factors weigh towards an employee relationship and
some against it. At least in the 2010 and 2011 contracts, [the District] and Strange PC
[Bennett’s company] identified Strange PC as an independent contractor. As to the issue
of control, the evidence was inconclusive. The control issue focuses on the employer’s
‘authority to exercise complete control, whether or not that right is exercised.’ While [the
District’s] management asserted that it did not exercise control over Mr. Bennett’s work,
there was some evidence that it had authority to exercise control. Further, the evidence
did not support a finding that Mr. Bennett had the complete ability to control the manner
2
The Unemployment Insurance Appeals Board held Bennett “is not an employee of the
putative employer under [Government C]ode sections 621 and 926. The claimant is
ineligible for unemployment benefits under [Labor C]ode section 1253(a).”
6
or means of providing the services he was contracted to perform. . . . As to this issue,
[the District] did not meet its burden by a preponderance of the evidence.”
The administrative law judge ultimately concluded: “Upon consideration
of all relevant factors, and despite the fact that [the District] and Mr. Bennett signed
contracts on two occasions that stated Strange PC was an independent contractor, [the
District] did not satisfy its burden of proving by a preponderance of the evidence that
3
Mr. Bennett was an independent contractor.” The decision stated that the District’s
appeal from the prior CalPERS decision was therefore denied because Bennett had been
the District’s employee and was therefore eligible for membership in CalPERS from
July 1, 2010 through August 28, 2012. The District was ordered to pay all arrears costs
for member contributions for that time period and a $500 administrative cost.
IV.
BEFORE THE LIABILITY PHASE OF TRIAL IN THE SECTION 1102.5(B) ACTION, THE TRIAL
COURT GRANTS BENNETT’S MOTION IN LIMINE FOR AN ORDER EXCLUDING EVIDENCE
ON THE EMPLOYMENT ISSUE BASED ON THE DOCTRINE OF COLLATERAL ESTOPPEL.
Bennett filed a motion in limine (motion in limine No. 1) in which he
sought an order that would exclude the admission of evidence showing that Bennett was
anything other than the District’s common law employee. Motion in limine No. 1 sought
to preclude the District “from introducing any evidence which establishes, tends to
establish, suggests, or tends to suggest, that Plaintiff was not a common law employee of
3
The administrative law judge rejected the District’s argument that collateral estoppel
applied as to the Unemployment Insurance Appeals Board’s determination that Bennett
was not the District’s employee because “[t]he relationship between EDD/UIAB and
CalPERS is not sufficiently close to justify estopping CalPERS from litigating the issue
of whether, for CalPERS membership purposes, Mr. Bennett is a common law
employee.” In any event, Unemployment Insurance Code section 1960 provides that
“[a]ny finding of fact or law, judgment, conclusion, or final order” made by an
administrative law judge “shall not be conclusive or binding in any separate or
subsequent action or proceeding, and shall not be used as evidence in any separate or
subsequent action or proceeding, between an individual and his or her present or prior
employer brought before an arbitrator, court, or judge of this state.”
7
Defendant.” It stated it was “brought on the grounds that the issue of whether or not
Plaintiff was properly or improperly classified as an independent contractor has already
been ruled on in an administrative decision that may be used for its preclusive effect
under the doctrine of collateral estoppel. Thus, any attempt to introduce such evidence
would be highly prejudicial, would most certainly mislead the jury to confuse the issues,
and most importantly, would necessitate undue consumption of the [c]ourt’s time.”
The trial court’s minute order did not record the court’s ruling on motion in
limine No. 1 but instead states: “Court’s ruling given as stated on the record.” The
reporter’s transcript from the hearing on the motion contains a lengthy discussion
between the trial court and counsel regarding the parties’ respective motions in limine,
including Bennett’s motion in limine No. 1. It is clear the court concluded that the
administrative law judge’s finding in the CalPERS proceeding that Bennett had been the
District’s employee was controlling in the section 1102.5(b) action and that the District
was collaterally estopped from challenging that finding at trial. The court also ruled,
however, that evidence regarding Bennett’s employment status would be admitted for
limited purposes including whether Bennett reasonably believed the District was
violating the law.
V.
THE JURY IS INSTRUCTED WITH A VERSION OF CACI NO. 4603 MODIFIED TO DELETE THE
EMPLOYMENT RELATIONSHIP ELEMENT OF A SECTION 1102.5(B) CLAIM; THE JURY
RETURNS A SPECIAL VERDICT FINDING THE DISTRICT LIABLE ON THAT CLAIM.
During the liability phase of trial, the jury was instructed on the elements of
a section 1102.5(b) claim with CACI No. 4603. That instruction was modified by the
trial court to eliminate the first element contained in the standard instruction that would
have required the jury to initially find whether the defendant had been the plaintiff’s
8
4
employer. During deliberations, the jury submitted the following question to the court:
“Do we need to understand the employment law that distinguishes an employee from a
contractor (state or federal) [¶] — Can we see it?” The court responded: “Please refer to
Instruction 4603.”
The jury thereafter returned the following special verdict as reported in the
5
trial court’s minute order:
“1) Did [the District] believe that [Bennett] disclosed to [the District] that
[the District] had engaged in unlawful business practices by misclassifying [Bennett] as
an independent contractor when he should have been an employee.
“Answer: Yes. [¶] . . . [¶]
“2) Did [Bennett] have reasonable cause to believe that the information he
reported disclosed a violation of a state and/or [federal] statu[t]e and/or noncompliance
with a state and/or federal rule or regulation?
“Answer: Yes. [¶] . . . [¶]
“3) Did [the District] discharge [Bennett] or terminate STRANGE PC?
4
The standard version of former CACI No. 2730 (now CACI No. 4603) similarly
required the jury to make a finding as to whether Bennett was employed by the District as
an element of the claim for a violation of section 1102.5(b). The modified version of
CACI No. 4603 given to the jury in this case omitted the initial element that an
employment relationship existed between the parties, instead stating in part: “SHAWN
BENNETT claims that RANCHO CALIFORNIA WATER DISTRICT discharged
SHAWN BENNETT or terminated STRANGE PC’s contract in retaliation for his
disclosure of information of an unlawful act or practice of RANCHO CALIFORNIA
WATER DISTRICT. In order to establish this claim, SHAWN BENNETT must prove
all of the following: [¶] 1. That RANCHO CALIFORNIA WATER DISTRICT believed
that SHAWN BENNETT disclosed to the RANCHO CALIFORNIA WATER
DISTRICT that the RANCHO CALIFORNIA WATER DISTRICT had engaged in
unlawful business practices by misclassifying SHAWN BENNETT as an independent
contractor when he should have been classified as an employee.”
5
The jury’s special verdict form appears to have been based on the standard
CACI No. VF-4602, modified to eliminate the first question contained in the standard
form: “1. Was [name of defendant] [name of plaintiff]’s employer?”
9
“Answer: Yes. [¶] . . . [¶]
“4) Was [Bennett’s] disclosure of information a contributing factor in [the
District’s] decision to discharge [Bennett] or terminate STRANGE PC’s contract?
“Answer: Yes. [¶] . . . [¶]
“5) Would [the District] have discharged [Bennett] or terminated
STRANGE PC’s contract anyway at that time, for legitimate, independent reasons?
“Answer: No.”
During the damages phase of trial, after further evidence was admitted on
the issue of damages, the jury returned its verdict awarding Bennett damages in a total
amount of $794,000 for past and future economic loss.
The District filed a motion for new trial on several grounds, including that
the trial court’s application of collateral estoppel on the employment issue constituted
legal error. The District also filed a JNOV motion on the grounds the evidence presented
at trial established Bennett was not an employee of the District for purposes of
section 1102.5(b) liability and Bennett did not make any disclosures protected by
section 1102.5(b).
The trial court denied both motions. Final judgment was entered, awarding
Bennett $794,000 in damages and $29,637.18 in costs, for a total judgment against the
District in the amount of $823,637.18. The District appealed from the judgment and the
postjudgment order denying the JNOV motion.
JUDICIAL NOTICE
The District filed a motion for judicial notice requesting that this court take
judicial notice of portions of the legislative history of section 1102.5. Bennett has not
filed opposition to the request. The District’s request is granted. (See Evid. Code,
§§ 452, subd. (c), 459, subd. (a); Soukup v. Law Offices of Herbert Hafif (2006) 39
Cal.4th 260, 279, fn. 9 [“[t]he legislative history in this case is . . . limited to various
10
versions of the legislation and committee reports, all of which are indisputably proper
subjects of judicial notice”]; Mooney v. County of Orange (2013) 212 Cal.App.4th 865,
872.)
DISCUSSION
I.
THE TRIAL COURT ERRED BY DETERMINING THE DOCTRINE OF COLLATERAL ESTOPPEL
APPLIED TO ESTABLISH BENNETT WAS THE DISTRICT’S EMPLOYEE WITHIN THE
MEANING OF SECTION 1102.5(B).
A.
The Doctrine of Collateral Estoppel Does Not Apply When a Party Obtains a Favorable
Finding Based on a Lesser Burden of Proof in a Prior Proceeding than the Party Would
Bear in the Subsequent Proceeding.
The doctrine of collateral estoppel “prohibits the relitigation of issues
argued and decided in a previous case, even if the second suit raises different causes of
action.” (DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 824.) “[I]ssue
preclusion applies (1) after final adjudication (2) of an identical issue (3) actually
litigated and necessarily decided in the first suit and (4) asserted against one who was a
party in the first suit or one in privity with that party.” (Id. at p. 825.) A party who
asserts collateral estoppel as a bar to further litigation bears the burden of proving that the
requirements of the doctrine have been satisfied. (Hong Sang Market, Inc. v. Peng
(2018) 20 Cal.App.5th 474, 489.)
Whether an issue is “identical” to a previously adjudicated issue for
purposes of collateral estoppel depends on the burden and standard of proof applicable in
each proceeding or action in relation to the party who obtained a favorable finding in the
prior action and who then invokes collateral estoppel in the subsequent proceeding with
regard to that finding. In The Grubb Co., Inc. v. Department of Real Estate (2011) 194
Cal.App.4th 1494, 1503, the appellate court stated: “[C]ollateral estoppel does not apply
when the factual finding in the prior proceeding was arrived at based on a lower standard
11
of proof than the one required in the subsequent proceeding.” (See People v. Esmaili
(2013) 213 Cal.App.4th 1449, 1463 [“collateral estoppel does not apply where the two
proceedings at issue have different burdens of proof [citations] or where the burden of
proof falls on a different party in each proceeding”].)
In Holt v. Department of Food & Agriculture (1985) 171 Cal.App.3d 427,
433, the appellate court rejected the argument that an administrative proceeding was
barred by application of collateral estoppel following an acquittal in a prior criminal
proceeding. The court explained: “In a criminal case the burden of proof is higher and
different and consequently the issue decided in the criminal proceeding is not identical to
the one to be litigated in the subsequent administrative hearing.” (Ibid.) That different
burdens apply in different proceedings, however, is not dispositive in determining
whether collateral estoppel applies: “[A]n administrative adjudication may be given
collateral estoppel effect in a subsequent criminal action, even though the standards of
proof remain different . . . because if the administrative agency ‘fails to prove its
allegations by a preponderance of the evidence at the [administrative] hearing, it follows
a fortiori that it has not satisfied the beyond a reasonable doubt standard.’” (Ibid.) The
court concluded in the administrative proceeding following an acquittal in a criminal
proceeding: “Since the converse is not true, the doctrine of res judicata does not apply.”
(Ibid.; see Younan v. Caruso (1996) 51 Cal.App.4th 401, 409-410, fn. 4 [“[c]ollateral
estoppel will not ordinarily apply if the party sought to be bound by a previous factual
determination faced a higher burden of proof in the first proceeding than is required by
the current proceeding”].)
These legal principles were applied in Wimsatt v. Beverly Hills Weight etc.
Internat., Inc. (1995) 32 Cal.App.4th 1511, 1523 (Wimsatt), in which a panel of this court
reversed the trial court’s determination that collateral estoppel precluded the plaintiffs
from challenging a forum selection clause in state court after a federal court had
previously rejected the plaintiffs’ challenge to that clause. The court stated: “[T]he
12
difference in burdens is dispositive here. The earlier litigation in federal court in San
Diego imposed a heavy burden on the plaintiffs to show that they would be without a
‘day in court’ to escape the forum selection clause. As related above, the logic of the
antiwaiver provision of California’s Franchise Investment law requires that the burden be
on the defendant to show that litigation in the contract forum will not diminish any of the
plaintiffs’ rights under California law.” (Id. at p. 1524.)
The Wimsatt court relied on In re Nathanial P. (1989) 211 Cal.App.3d 660,
670, 672, noting in that case, the appellate court “squarely held that collateral estoppel
effect should not have been given the earlier findings because they were made using a
different standard of proof than required for the later hearing. At the jurisdictional
hearing the standard was tougher against the father: the state had to show by only a
preponderance of the evidence he had abused his children. At the termination hearing the
state was required to show by clear and convincing evidence he had abused them. The
difference in burdens was dispositive even though the same factual question was
involved.” (Wimsatt, supra, 32 Cal.App.4th at pp. 1523-1524, italics omitted.)
The Wimsatt court held: “We reverse because the issue litigated in the
federal proceeding is not identical to the one presented by this case. The federal court’s
ruling was a matter of federal procedural law, in which there is indeed a heavy burden of
proof on the party opposing the enforcement of a forum selection provision. This action,
by contrast, turns on state substantive law in which the burden is on franchisors to show
that enforcement of a forum selection clause will not subvert substantive rights afforded
California citizens. Different sovereignties, different rules, different burdens: no
collateral estoppel.” (Wimsatt, supra, 32 Cal.App.4th at p. 1514.)
13
B.
In Order to Prevail on His Section 1102.5(b) Claim, Bennett Has the Burden of Proving
He Was the District’s Employee.
Bennett’s sole claim in the section 1102.5(b) action is based on his
allegation the District violated section 1102.5(b), the version of which that was in effect
during his employment provided: “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.”
In order to prove a claim under section 1102.5(b), the plaintiff must
establish a prima facie case of retaliation. (Mokler v. County of Orange (2007) 157
Cal.App.4th 121, 138.) It is well-established that such a prima facie case includes proof
of the plaintiff’s employment status. In Soukup v. Law Offices of Herbert Hafif, supra,
39 Cal.4th at pages 287 to 288, the California Supreme Court explained: “‘“‘To establish
a prima facie case of retaliation, a plaintiff must show that she engaged in protected
activity, that she was thereafter subjected to adverse employment action by her employer,
and there was a causal link between the two.’”‘ [Citation.] [¶] Thus, it appears that a
prerequisite to asserting a violation of Labor Code section 1102.5 is the existence of an
employer-employee relationship at the time the allegedly retaliatory action occurred.”
(Italics added; see Hansen v. Department of Corrections & Rehabilitation (2008) 171
Cal.App.4th 1537, 1546 [“a prerequisite to asserting a Labor Code section 1102.5
violation is the existence of an employer-employee relationship at the time the allegedly
retaliatory action occurred”]; Patten v. Grant Joint Union High School Dist. (2005) 134
Cal.App.4th 1378, 1384 [prima facie case of retaliation in violation of section 1102.5
requires showing by the plaintiff his or her employer subjected the plaintiff to an adverse
employment action].)
14
The principle that the plaintiff has the burden of proving his or her
employment status in a section 1102.5(b) action is reiterated in CACI No. 4603, the
standard jury instruction defining the essential elements for a section 1102.5(b) claim.
CACI No. 4603 begins: “[Name of plaintiff] claims that [name of defendant]
[discharged/[other adverse employment action]] [him/her] in retaliation for [his/her]
[disclosure of information of/refusal to participate in] an unlawful act. In order to
establish this claim, [name of plaintiff] must prove all of the following: [¶] 1. That
[name of defendant] was [name of plaintiff]’s employer.”
Therefore, in this section 1102.5(b) action, Bennett has the burden of
proving he was the District’s employee in order to prevail on his claim.
C.
The Trial Court Erred by Concluding the District Was Collaterally Estopped From
Challenging Bennett’s Employment Status.
In ruling on Bennett’s motion in limine No. 1, the trial court concluded the
doctrine of collateral estoppel applied to the administrative law judge’s finding in the
CalPERS proceeding that Bennett was the District’s employee. The court’s ruling was in
error because in the prior proceeding, the District had the burden of proving Bennett had
been its independent contractor in order to avoid liability with regard to Bennett’s claim
for retirement benefits. The administrative law judge concluded the District failed to
carry its burden and therefore found Bennett had been the District’s employee. As
discussed ante, in the section 1102.5(b) action it is Bennett’s burden to prove his
employment status with the District. Bennett’s burden of proof was necessarily heavier
as to that issue in the section 1102.5(b) action; indeed, he did not have any burden of
proof as to employment status in the CalPERS proceeding. Therefore, the employment
status issue resolved in the CalPERS proceeding was not identical to the employment
15
status issue presented in the section 1102.5(b) action and thus collateral estoppel doctrine
6
did not apply.
The prejudice resulting from the trial court’s error is evident. The
administrative law judge in the CalPERS decision noted the existence of evidence on
both sides of the issue. The administrative law judge’s decision came down to which
party had the burden of proof. Here, the trial court ordered that evidence regarding
Bennett’s employment status be excluded at trial except for limited purposes to prove
Bennett’s reasonable belief. The trial court removed the issue of employment status from
the jury’s consideration by modifying CACI No. 4603 and the special verdict form to
delete the language asking the jury to decide whether Bennett was employed by the
District. The jury itself questioned whether it should be considering Bennett’s
employment status, but was referred to the modified version of CACI No. 4603, which
did not ask the jury to make that determination. The jury ultimately found in favor of
Bennett.
Because collateral estoppel did not apply, the parties should have been
allowed to present evidence on the issue of Bennett’s employment status and the jury
should have been instructed to make a finding on that issue. We therefore remand with
directions to hold a new trial.
6
We note that in the CalPERS proceeding, the administrative law judge applied a
rebuttable presumption of employment status; that presumption does not apply in a
section 1102.5(b) action. That Bennett enjoyed the presumption of employment status in
the CalPERS proceeding, which resulted in the employment finding that was favorable to
him, further supports our conclusion that the employment issue adjudicated in the
CalPERS proceeding was not identical to the one presented in the section 1102.5(b)
action for purposes of collateral estoppel.
16
II.
THE TRIAL COURT DID NOT ERR BY DENYING THE DISTRICT’S JNOV MOTION AND
REJECTING THE DISTRICT’S ARGUMENT A STATUTORY DEFINITION OF “EMPLOYEE”
APPLIED TO THE SECTION 1102.5(B) CLAIM.
The District argues the trial court erred by failing to grant its JNOV motion
on the ground insufficient evidence supported the finding Bennett was its employee. The
District argues the trial court erroneously acquiesced to the administrative law judge’s
adoption of the common law definition of employee instead of applying a statutory
definition of employment. As for the statutory definition, the District asserts “[f]or
public entities, the test for an ‘employee’ under section 1102.5 is whether the plaintiff
obtained a duly authorized employee position in compliance with the entity’s applicable
statutory and regulatory procedures.” The District would have been entitled to a directed
verdict had a statutory definition of employee been applied, it further argues, because
Bennett would be unable to prove he came within the statutory definition. The District’s
argument fails because the common law definition of employee applies to
section 1102.5(b) claims.
The District’s argument the statutory definition and not the common law
definition of employee applies is rooted in the Supreme Court’s analysis in Metropolitan
Water Dist. v. Superior Court (2004) 32 Cal.4th 491, 500 (Metropolitan) in which the
defendant public agency (a water district) contracted with CalPERS to provide retirement
benefits to its employees. The defendant had employed “many employees under a merit
system set forth in its administrative code, which establishes procedures for the selection
of employees and provides those employees with various benefits.” (Id. at p. 497.)
Those employees hired by defendant through its established procedures were provided
CalPERS retirement benefits. (Ibid.) The defendant also entered into contracts with
private labor suppliers to provide the defendant with workers who the defendant
classified as “consultants” or “agency temporary employees.” (Ibid.) The defendant did
17
not enroll those workers in CalPERS retirement plans or provide them with the benefits
provided to its employees under its administrative code. (Ibid.)
The issue before the Supreme Court was whether the defendant was
required to enroll in CalPERS those workers provided and paid by the private labor
suppliers and who were not hired according to the defendant’s procedures under its
administrative code. (Metropolitan, supra, 32 Cal.4th at p. 497.) The Supreme Court
stated: “Our question, then, is what the [Public Employees Retirement Law (PERL)
(Gov. Code, § 20000 et seq.)] means by ‘employee.’” (Id. at p. 500.) The Supreme
Court answered this question: “As to contracting agencies, the PERL gives the term no
special meaning, stating simply that ‘employee’ means ‘[a]ny person in the employ of
any contracting agency.’ ([Gov. Code] § 20028, subd. (b).) In this circumstance—a
statute referring to employees without defining the term—courts have generally applied
the common law test of employment. ‘“[W]here Congress uses terms that have
accumulated settled meaning under . . . the common law, a court must infer, unless the
statute otherwise dictates, that Congress means to incorporate the established meaning of
these terms.” [Citations.] In the past, when Congress has used the term “employee”
without defining it, we have concluded that Congress intended to describe the
conventional master-servant relationship as understood by common-law agency
doctrine.’ [Citations.] California courts have applied this interpretive rule to various
statutes dealing with public and private employment. The federal courts have applied it
specifically to the question of qualification for retirement benefits. Unless given reason
to conclude the Legislature must have intended the term to have a different meaning in
[Government Code] section 20028, subdivision (b), we also can only adhere to the
common law test.” (Id. at pp. 500-501, fns. & italics omitted.)
The Supreme Court concluded: “[T]he PERL’s provision concerning
employment by a contracting agency ([Gov. Code] § 20028, subd. (b)) incorporates a
common law test for employment, and that nothing elsewhere in the PERL, in [the
18
defendant]’s administrative code, or in statutes and regulations addressing joint
employment in other contexts supports reading into the PERL an exception to mandatory
enrollment for employees hired through private labor suppliers.” (Metropolitan, supra,
32 Cal.4th at p. 509.)
In its opening brief, the District argues: “The District’s Administrative
Code, a legislative enactment, states that the Board will set the District’s annual budget
after presentation at a public noticed hearing, and then new hires must be authorized by
the appropriate department manager, the Human Resources Department, and the General
Manager. . . . The District’s Employee Policy & Procedural Manual, promulgated by the
Board under Government Code section 61040, subdivision (a), states that the Board
retains responsibility to determine the number of positions authorized, as well as the
salary and benefits strategy. [Citation.] The manual also sets forth a specific procedure
for hiring employees, which includes posting the opening publicly, accepting
applications, interviewing candidates, and selecting the most qualified person.” The
District further argues: “It is undisputed here that the Board exercised its legislative
authority under the Water Code to reject the request to authorize a new employee position
that would replace Strange PC’s contract. [Citations.] It is also undisputed that Bennett
never underwent any of the steps necessary to become an employee under the applicable
regulations.”
The District contends section 1106’s “definition” of employee demonstrates
a legislative intent to reject the common law definition of employee for purposes of
section 1102.5(b) claims and instead limit that definition in the context of such claims to
employees who have been duly hired pursuant to the District’s Administrative Code and
Employee Policy & Procedure Manual. Section 1106, however, does not say that, but
instead provides: “For purposes of Sections 1102.5 . . . ’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,
19
community college district, municipal or public corporation, political subdivision, or the
University of California.”
A plain reading of sections 1102.5 and 1106 shows neither statute suggests
the term “employee” in section 1102.5 be assigned a “special meaning.” (Metropolitan,
supra, 32 Cal.4th at p. 500.) The District apparently reads into the phrase “employed by”
various public entities in section 1106 as limiting the standing of public employees to
pursue a section 1102.5(b) claim to those who have been hired in accordance with the
administrative code and manual. The term “employed by” is indistinguishable from
language contained in portions of the PERL held by the Supreme Court in Metropolitan
to incorporate the common law definition of employee, including but not limited to
Government Code section 20281 providing that CalPERS members include “‘all
employees of a contracting agency.’” (Id. at p. 499.) The Supreme Court did not express
concern that the application of the common law definition of employee to a section
1102.5(b) claim brought against a public entity might infringe on its sovereign powers to
decide whom it shall employ. The defendant in that case was a public water district like
the District in the instant case. The District’s argument, recast—there is no such thing as
a common law employee plaintiff who may sue its public employer for a violation of
section 1102.5(b)—is directly undermined by Metropolitan itself.
The District cites Holmgren v. County of Los Angeles (2008) 159
Cal.App.4th 593, 605 (Holmgren) to show that the term “employed by” is not the same as
the term “employees of” because the former “means employed pursuant to the public
entity’s statutes and regulations.” Holmgren does not support the District’s argument.
Holmgren is distinguishable because it involved the definition of the term
“employee” under a different statute, which itself had a definition of employee. The
Holmgren court stated: “In [Metropolitan], the statute stated only that an ‘employee’ was
‘“[a]ny person in the employ of any contracting agency.”‘ [Citation.] In our case, by
contrast, [Government Code] section 31469, subdivision (a), and Los Angeles County
20
Code section 5.20.010 [each] quite clearly and unequivocally define a CERL-eligible
employee as a person employed by the county whose compensation is ‘fixed by the Board
of Supervisors’ and ‘paid by the County.’” (Holmgren, supra, 159 Cal.App.4th at p. 605,
fn. omitted, italics in original.) The court noted the county’s civil services rules were
consistent with that statute and county code section. (Ibid.) The Holmgren concluded on
this point: “It follows ineluctably that this is not a case in which the statute refers to
employees without defining the term, that eligibility for CERL benefits is entirely
dependent on the statutory definition, and that the common law doctrine does not apply in
this context.” (Ibid.) Notably in Holmgren, the statute at issue itself contained a
definition of employee that went beyond simply referring to persons employed by or in
the employ of a public entity. Holmgren is inapposite.
Mendoza v. Town of Ross (2005) 128 Cal.App.4th 625 (Mendoza), which is
also cited by the District, is similarly distinguishable. In Mendoza, the plaintiff, a
volunteer community service officer, sued for disability discrimination under the Fair
Employment and Housing Act (Gov. Code, § 12900 et seq.) (FEHA). The appellate court
concluded that section 7286.5, subdivision (b) of title 2 of the California Code of
Regulations, which was part of the set of regulations enacted by the Department of Fair
Employment and Housing to implement FEHA itself, provided a workable definition of
employee for purposes of entitlement to FEHA protection as including “‘[a]ny individual
under the direction and control of an employer under any appointment or contract of hire
or apprenticeship, express or implied, oral or written.’” (Id. at pp. 632-633.) Because the
plaintiff was never appointed as an employee or apprentice by the defendant, and did not
otherwise receive any form of compensation to his efforts, he was not an employee under
FEHA. (Id. at p. 637; see Estrada v. City of Los Angeles (2013) 218 Cal.App.4th 143,
148-149 [following Mendoza in concluding a city’s volunteer police reserve officers were
not employees for purposes of FEHA]; but see Bradley v. Department of Corrections &
Rehabilitation (2008) 158 Cal.App.4th 1612, 1617, 1626 & fn. 2 [distinguishing
21
Mendoza on ground the plaintiff was not a volunteer, appellate court held the plaintiff
was an employee within the meaning of FEHA “even though she was not an official
employee state for civil service and benefit purposes”].) Neither Mendoza, supra, 128
Cal.App.4th 625, nor its progeny addresses the appropriate definition of the term
employee under section 1102.5(b). Unlike the plaintiff in Mendoza, Bennett was
compensated for the services he provided to the District.
The trial court, therefore, did not err by denying the District’s JNOV
motion brought on the ground the statutory definition of employee applied. At the retrial
following remand, the common law definition of employee shall be applied for the
section 1102.5(b) claim. We do not intend by our holding to express an opinion
regarding the applicable definition of employee in the context of any statute other than
section 1102.5(b).
III.
THE TRIAL COURT DID NOT ERR BY DENYING THE DISTRICT’S JNOV MOTION
BROUGHT ON THE GROUND INSUFFICIENT EVIDENCE SHOWED BENNETT
MADE A PROTECTED DISCLOSURE.
The District argues the trial court erred by denying its JNOV motion
brought on the ground insufficient evidence showed he made a protected “disclosure”
within the meaning of section 1102.5(b). The District contends Bennett did not make a
protected disclosure but only complained about publicly known facts that had been
debated and voted on in a public hearing. The District argues, in the alternative, the trial
court erred in instructing the jury as to the disclosure element, warranting a new trial in
this matter.
“‘“A motion for judgment notwithstanding the verdict of a jury may
properly be granted only if it appears from the evidence, viewed in the light most
favorable to the party securing the verdict, that there is no substantial evidence to support
the verdict. If there is any substantial evidence, or reasonable inferences to be drawn
22
therefrom, in support of the verdict, the motion should be denied.”‘“ (Clemmer v.
Hartford Insurance Co. (1978) 22 Cal.3d 865, 878.)
As discussed ante, the trial court erred in ruling on motion in limine No. 1
by concluding the administrative law judge’s prior ruling that Bennett was the District’s
employee would be given collateral estoppel effect in the section 1102.5(b) action.
Thereafter, the court took the issue of employment status away from the jury and ordered
that evidence pertaining to Bennett’s employment status be excluded from trial.
Complicating matters further, the court’s minutes do not record the court’s ruling on
motion in limine No. 1 or otherwise describe the scope of the evidence excluded by the
ruling. The transcript from the hearing on motion in limine No. 1 shows the trial court
engaged in a wide-ranging discussion of trial issues with the parties’ counsel, including
issues implicated by motion in limine No. 1. But the transcript does not show the
parameters of the court’s evidentiary ruling other than to suggest a few carve-outs from
the prohibition, including that evidence would be permitted to prove Bennett’s reasonable
belief.
At a minimum, evidence that would have been relevant to prove Bennett
had been the District’s employee might have been relevant to prove other elements of the
section 1102.5(b) claim, particularly given that the alleged retaliation was based on his
alleged reports he had been wrongfully classified as an independent contractor instead of
an employee. The trial court’s erroneous evidentiary ruling necessarily restricted the
parties’ respective presentations of evidence at trial. The District, therefore, was not
entitled to judgment entered in its behalf notwithstanding the verdict based on the state of
the erroneously limited evidence presented at trial. On remand, both parties will have the
opportunity to present evidence relevant to every element of Bennett’s section 1102.5(b)
claim. Because we reverse the judgment and remand for a new trial, we do not reach the
District’s arguments regarding instructional error on this issue.
23
DISPOSITION
The judgment is reversed. The order denying the JNOV motion is
affirmed. The matter is remanded for a new trial. In the interest of justice, each party
shall bear its own costs on appeal.
FYBEL, J.
I CONCUR:
O’LEARY, P. J.
24
THOMPSON, J., Concurring and dissenting. I respectfully disagree with the majority’s
conclusion the trial court incorrectly applied the doctrine of collateral estoppel and
prohibited the District from relitigating the prior determination that Bennett was an
employee. However, I agree the trial court correctly denied the District’s JNOV motion.
Accordingly, I would affirm the judgment and the postjudgment order.
The trial court concluded all the elements of collateral estoppel were satisfied. I
agree. There was a “final adjudication” of an “identical issue” (Bennett’s employee
status); that issue was “actually litigated and necessarily decided” in the prior action in
favor of Bennett; and he “asserted” it in this action against the District, “a party” to the
prior action. (DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 825.)
The majority reaches the opposite conclusion, reasoning the identical issue
element was not satisfied, because the District had the burden of proving Bennett was not
an employee in the prior action, and Bennett had the burden of proving he was an
employee in this action. This is a distinction without a difference, based on the logical
fallacy of equivocation—using the term “burden of proof” in more than one sense.
The term burden of proof can be used in the sense of identifying the quantum or
standard of proof which is required, such as beyond a reasonable doubt. The term burden
of proof can also be used in the sense of identifying which party bears the burden of
going forward to prove the elements of a claim or defense. While the former sense of the
term is relevant in the collateral estoppel context, the latter sense is not.
Collateral estoppel would not apply if the quantum of proof required in the prior
action was less than in the subsequent action. (See, e.g. The Grubb Co., Inc. v.
Department of Real Estate (2011) 194 Cal.App.4th 1494 [preponderance of the evidence
vs. clear and convincing evidence].) But that was not the case here. The quantum of
proof required in the prior and subsequent actions was the same. In both actions Bennet’s
1
employee status had to be proven or disproven according to the preponderance of the
evidence standard. Thus, the issue was identical for collateral estoppel purposes.
Wimsatt v. Beverly Hills Weight etc. Internat., Inc. (1995) 32 Cal.App.4th
1511 (Wimsatt) does not support the majority’s contrary conclusion. There, the court
held collateral estoppel did not apply because the issue litigated in the prior federal
action, was not identical to the one presented in the subsequent state action. “The federal
court’s ruling was a matter of federal procedural law, in which there is indeed a heavy
burden of proof on the party opposing the enforcement of a forum selection provision.
This action, by contrast, turns on state substantive law in which the burden is on
franchisors to show that enforcement of a forum selection clause will not subvert
substantive rights afforded California citizens. Different sovereignties, different rules,
different burdens: no collateral estoppel.” (Id. at p. 1514.) But here, both actions turn on
the same substantive law and quantum of proof. Therefore, collateral estoppel applies.
Wimsatt also misapplied the holding of In re Nathaniel P. (1989) 211 Cal.App.3d
660 (Nathaniel P.). In Nathaniel P. the prior action was a hearing in a dependency case
which decided whether a father had abused his children. The subsequent action was a
hearing in the dependency case which decided whether the father’s parental rights should
be terminated. The appellate court held the factual findings in the prior hearing should
not be given collateral estoppel effect because they were made using a different standard
of proof than the one required for the later hearing. (Id. at pp. 670-672.) Specifically, at
the prior hearing the state only had to meet the preponderance of evidence standard,
while at the subsequent hearing the state had to meet the clear and convincing evidence
standard of proof. (Id. at p. 672.) Hence, the quantum of proof, not the party with the
burden of going forward on the issues, was dispositive.
Wimsatt stated, “the difference in burdens [in Nathaniel P.] was dispositive even
though the same factual question was involved.” (Wimsatt, supra, 32 Cal.App.4th at p.
1524.) “Likewise the difference in burdens is dispositive here. The earlier
2
litigation . . . imposed a heavy burden on the plaintiffs to show . . . .” (Ibid.) However,
the subsequent action required “that the burden be on the defendant to show . . . .” (Ibid.)
In this way Wimsatt’s application of Nathaniel P. conflated the quantum of proof
in the prior action with the burden of going forward in the subsequent action. The result
was an unwarranted extension of the holding in Nathaniel P.
But even if Wimsatt was correctly decided, it is not binding on us (People v.
Dimacali (2019) 32 Cal.App.5th 822, 838) and I would not follow it here. Wimsatt is an
outlier. Following Wimsatt here improperly limits the application of collateral estoppel
and does needless violence to the bedrock principles of this long-established doctrine.
Finally, strong public policies support the trial court’s application of collateral
estoppel in this case. Collateral estoppel is designed “‘“‘“(1) to promote judicial
economy by minimizing repetitive litigation; (2) to prevent inconsistent judgments which
undermine the integrity of the judicial system; and (3) to provide repose by preventing a
person from being harassed by vexatious litigation.”’”’” (Murphy v. Murphy (2008) 164
Cal.App.4th 376, 404.) These policies were all vindicated by the trial court’s ruling.
Bennet’s employee status was fully and fairly litigated in the prior action. Requiring
Bennet to relitigate it in this action would have been repetitive. It would have demoted
judicial economy, risked inconsistent judgments and undermined the integrity of the
judicial system, and forced him to incur unnecessary litigation expenses.
The judgment and the postjudgment order should be affirmed.
THOMPSON, J.
3