EmploymentQuestion 973 of 1605
An employee reports to a state agency that the contractor is paying workers under the table to evade payroll taxes. The contractor then demotes her. This is best characterized as:
a.Unlawful whistleblower retaliation under Labor Code §1102.5
b.A permissible response to disloyalty
c.An issue only for the tax authorities, with no employee remedy
d.Lawful management discretion
Explanation
Labor Code §1102.5 protects employees who report suspected legal violations to a government agency (or internally) from retaliation. Demoting an employee for reporting payroll-tax evasion is unlawful whistleblower retaliation, exposing the employer to reinstatement, back pay, and civil penalties. It is neither lawful discretion nor a matter solely for tax authorities; the employee has protected-activity remedies.
Law Reference: Labor Code §98.6; §1102.5 whistleblowerPractice all 1605 questions free — no signup required.
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Sen Lin, PrepPass Founder · Verified against California CSLB Contractor License Law & Business Exam · How we review
Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)