As 2013 drew to a close, would-be tipsters across California received tidings of great joy in the form of new laws that took effect Jan. 1, 2014, greatly expanding whistleblower protections in their state. Meanwhile, their New Jersey counterparts received a resounding “bah-humbug” via a late December ruling from a New Jersey appeals court (see link at page 7) that had the opposite effect. These parallel events highlight the need for employers and their in-house and outside counsel to account for potentially significant differences in whistleblower protections from state-to-state when planning for and initiating internal investigations triggered by whistleblower complaints.

 The new California statutes — which modify an already robust set of whistleblower protections in that state — are designed to encourage employees to identify potentially illegal activity without fear of retaliation. Among other things, California’s amended whistleblower regime now protects employees (including internal auditors) from retaliation for reporting suspected activity internally, as well as externally. The changes also expand the scope of what constitutes prohibited retaliation, particularly emphasizing anticipatory retaliation against a potential or suspected whistleblower. It is hoped that these changes will encourage more internal reporting, allowing organizations to address potential issues in an earlier and less disruptive fashion than would occur via an external report of concerns.

By contrast, in State v. Saavedra, the Superior Court of New Jersey, Appellate Division ruled that state whistleblower protections did not apply to an employee charged criminally for taking confidential documents related to the alleged wrongdoing. The defendant, a Board of Education clerk, filed a complaint against her employer alleging, inter alia, retaliation due to her highlighting pay irregularities. She provided her civil lawyer with a number of confidential documents in support of her allegations, which the board reported to a county prosecutor, who secured an indictment. Relying on an earlier decision of the state’s Supreme Court holding that an employer could not terminate an employee for the unauthorized taking of documents to support an employment discrimination case, the defendant moved to dismiss the indictment. The appeals court agreed with the trial court that this ruling did not extend to criminal cases. The court’s opinion expressed serious concerns about self-help measures supplanting the judicially supervised discovery process in discrimination claims. The state supreme court may yet weigh in.

What these developments suggest for companies handling internal investigations is that employers should tread carefully when faced with potential whistleblower claims. Whistleblower statutes can vary significantly from state to state, with those like California providing extensive protections to employees reporting issues in a variety of settings and circumstances. A thorough, thoughtfully- designed and well-documented internal investigation is essential before making adverse personnel decisions with respect to any potential whistleblower, regardless of jurisdiction or subject matter. But as Saavedra illustrates, these claims do not give employees carte blanche to take any action they want to support their claims. Employers should be vigilant in understanding and abiding by their obligations with respect to whistleblowers, but should also understand and consider the availability of legal remedies designed to protect their critical interests as well — including, in the right circumstances, reporting questionable whistleblower conduct to law enforcement authorities.