Filed 12/12/19

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SIXTH APPELLATE DISTRICT

JEREMIAH MATHEWS,

Plaintiff and Respondent,

v.

HAPPY VALLEY CONFERENCE 

CENTER, INC. et al.,

Defendants and Appellants.

 H043723 & H044098

 (Santa Cruz County

 Super. Ct. No. CV179346)

Plaintiff Jeremiah Mathews worked as a maintenance supervisor and a cook for 

defendant Happy Valley Conference Center, Inc. (Happy Valley), which hosts seminars, 

retreats, and camps on a 30-acre property in the Santa Cruz Mountains. Happy Valley is 

a subordinate affiliate of defendant Community of Christ (the Church). When a younger 

male employee confided in plaintiff that Happy Valley’s female executive director had 

been sending him sexually inappropriate text messages, plaintiff reported the allegation to 

a member of Happy Valley’s board of directors and to the Church’s general counsel. The 

executive director admitted sending the messages, was reprimanded, and was allowed to 

continue supervising plaintiff and the younger male employee. Plaintiff was terminated 

less than a month after reporting the harassment. Plaintiff sued defendants, alleging 

retaliatory termination under several legal theories. The jury returned special verdicts in 

plaintiff’s favor on all causes of action. Defendants were ordered to pay almost $900,000 

in damages (including punitive damages) and almost $1 million in attorney’s fees.

Defendants contest most of the jury’s findings. Relevant to most appellate issues, 

defendants argue the Church cannot be held liable for Happy Valley’s actions because the 
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two are separate entities that do not fall within the single employer doctrine. They further 

argue the trial court’s single employer doctrine jury instruction was prejudicially 

erroneous. 

Regarding liability, defendants argue that Happy Valley is not liable under title 

VII of the Civil Rights Act of 1964 (Title VII; 42 U.S.C. § 2000 et seq.) because Happy 

Valley does not have enough full-time employees to come within that law. Defendants 

also contest their liability under the California Fair Employment and Housing Act

(FEHA; Gov. Code, § 12900 et seq.) because they are exempt religious entities, and 

contend the trial court erred in finding they had waived or were estopped from claiming 

the religious entity exemption. Defendants assert they are not liable under the version of 

the whistleblower statute in effect at the time of the events at issue (rather than the 

amended statute reflected in the parties’ proposed jury instructions). They also argue the 

evidence was insufficient to support a finding that the Church breached an implied or 

actual contract with plaintiff. 

Regarding damages, defendants contend the trial court awarded damages under 

Title VII beyond the maximum value allowed by that statutory scheme; noneconomic and 

punitive damages not recoverable for breach of contract; excessive punitive damages; and 

attorney’s fees not recoverable as a matter of law. 

As we will explain, we find no prejudicial error regarding most of defendants’ 

appellate arguments, but the judgment must be modified to reflect that defendants are 

exempt from FEHA liability. 

I. TRIAL COURT PROCEEDINGS

The following factual summary is based on trial testimony and evidence admitted 

during the jury trial. 

A. DEFENDANTS’ ORGANIZATIONAL STRUCTURES

The Church is a Missouri non-profit corporation with around 250,000 members in 

over 60 countries. The Church is separated geographically into Mission Centers. The 
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Sierra Pacific Mission Center covers, among other areas, the County of Santa Cruz and 

the Happy Valley property. 

Happy Valley is a California non-profit corporation. According to Happy Valley’s 

bylaws, it is an “integral subordinate unit and part of the Community of Christ.” It is 

“accountable to General Church Officers to include the Apostle in charge of the field, the 

Presiding Bishopric and the First Presidency and Sierra Pacific Mission Center officers.” 

Happy Valley is run by a volunteer board of directors (Happy Valley Board). The bylaws 

state the Happy Valley Board “shall regard the Sierra Pacific Mission Center as the body 

to which it is initially accountable for management of the Conference Center.” The 

Happy Valley Board consists of elected members and ex officio members. The elected 

members are “elected by the Conference of the Sierra Pacific Mission Center.” And the 

ex officio members are the Sierra Pacific Mission Center president and the Mission 

Center’s financial officer. Ronald Smith was the Sierra Pacific Mission Center president 

at all relevant times. Happy Valley also has an executive committee made up of four 

members of the Happy Valley Board. Ronald Smith and Happy Valley Board President 

Jerry DeVries were members of the executive committee. 

Happy Valley had three full-time employees: an executive director, a food 

services manager, and a maintenance supervisor. For the time period preceding 

plaintiff’s termination, the executive director was Melinda Gunnerud, the food services

manager was Amanda McKnight, and plaintiff was the maintenance supervisor. Happy 

Valley also employed part-time and seasonal employees, especially during the summer 

months.

B. PLAINTIFF’S HISTORY WITH HAPPY VALLEY AND REPORTS OF HARASSMENT

Plaintiff was hired by Happy Valley as a cook in 2009. He received periodic 

raises based on his performance. His performance reviews were generally positive, but 

plaintiff received lower scores for his communication skills and attitude. At trial plaintiff 

acknowledged he sometimes lost his temper at work, and also acknowledged receiving at 
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least three disciplinary write-ups during his time working for Happy Valley. All were 

related to plaintiff losing his temper with other employees. Plaintiff changed positions 

from part-time cook to full-time maintenance supervisor in late 2010. Both executive 

director Gunnerud and food services supervisor McKnight acknowledged at trial that 

Gunnerud frequently praised plaintiff for his hard work and cooking skills.

Dianne Barnett, a former bookkeeper for Happy Valley, testified that she worked 

there while Gunnerud was the executive director. Barnett stated that several employees 

complained to her about Gunnerud being unfair and treating employees poorly. Barnett 

related that employees would inform Happy Valley Board President Jerry DeVries about 

Gunnerud’s conduct, but that DeVries did not take the concerns seriously. According to 

Barnett, when employees brought their concerns about Gunnerud to DeVries, he would 

report that information back to Gunnerud and then Gunnerud would discipline the 

employees in retaliation.

Food services supervisor McKnight testified that Gunnerud frequently flirted with 

younger male employees and commented on their physical appearance. (We refer to two 

of the former employees by their first names in the interest of their privacy.) McKnight 

testified Gunnerud seemed a “little delusional” about the nature of her relationship with a 

dishwasher named Eli. Gunnerud told McKnight she had gone to Eli’s house to see him

without his permission. McKnight did not think Gunnerud understood that Eli was 

uncomfortable with the interaction. McKnight testified that even after Eli resigned,

Gunnerud continued trying to spend time with him including going to see him at his new 

job. Gunnerud also sent Eli text messages, which we will discuss in greater detail. 

Brett began working at Happy Valley after Eli left. McKnight testified that 

Gunnerud took Brett on shopping errands offsite, which was a task she used to do without 

assistance from others. Brett testified that at first he felt welcomed and comfortable, but 

that he started to feel like he was receiving special treatment from Gunnerud. The 

treatment made him feel “kind of strangely.” Brett testified that Gunnerud began sending 
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him personal text messages after work hours, which eventually focused on “more and 

more suggestive” topics. Brett stated he confided in plaintiff about inappropriate text 

messages received from Gunnerud when he reached a point where he no longer felt 

comfortable at work. Brett went to plaintiff because he looked up to plaintiff and

plaintiff was the person at Happy Valley with whom Brett was most comfortable talking. 

Plaintiff confirmed in his trial testimony that Brett showed him text messages from 

Gunnerud in mid-April 2012. Among the text messages Brett showed plaintiff were the 

following: “Not such a great night. Currently driving around looking for a place to get a 

stiff one after getting in a fight with the hubby”; “I’m glad red didnt give u trouble 

getting in the house....i did tell him to guard my underwear drawer though!” (Errors in 

original.) Gunnerud admitted in her trial testimony that she sent those and other text

messages to Brett.

Brett and plaintiff took the text messages to McKnight. According to McKnight, 

she was uncomfortable reporting the text messages to Gunnerud or DeVries for fear of 

retaliation, so she decided to ask a Happy Valley Board member, Karen Ardito, for help. 

Ardito testified that once she learned about the text messages, she asked her friends in the 

Church for advice and those friends recommended that she contact Karen Minton, the 

Church’s general counsel. Minton testified that plaintiff and Brett reported the messages 

to her, and that they told her they feared retaliation by Gunnerud.

Minton believed the messages constituted sexual harassment, and she asked Sierra 

Pacific Mission Center President (and ex officio Happy Valley Board and executive 

committee member) Smith to investigate them. Minton testified that she looked to Smith 

because she had worked with him before on Church business. The plan was for Smith to 

investigate, confer with Minton, and then provide a recommendation to Happy Valley 

President DeVries. 

Smith testified that he reviewed the text messages Gunnerud sent Brett and 

thought they were “joke[s] in poor taste” rather than sexual harassment. Soon after 
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beginning the investigation, Smith learned from plaintiff about text messages Gunnerud 

had sent to Eli, the former employee. Eli sent Smith an e-mail with copies of the text

messages, which included the following: “Did i ever tell u that the night u stayed at my 

house i hardly slept a wink? I confess that i snuck in and watched you sleeping, naked 

and surrounded by pillows and totally adorable. One of lifes precious moments. Hope i 

get to see u tomorrow. Good night and sleep tight. Love u eli.”; “Did he tell thats only 

after long bouts of exausting, hot nasty ***?! Speaking of which, my boss is coming to 

take me to ‘lunch’ tomorrow ... olitas and football baby! Last time we had a little too 

much to drink but we had a great time! ;) im so bad ...”; “Im off! How about a really 

loooong quikie...or...we could just go to a movie.” (Errors in original.) Gunnerud 

confirmed at trial that she sent those text messages to Eli.

Smith and another Happy Valley Board member interviewed Brett, Eli, and 

Gunnerud. Smith testified that he thought Gunnerud attempted to sugarcoat the severity 

of the texts by arguing that they were all jokes. He testified that Gunnerud reported 

feeling betrayed by the other employees’ decision to disclose her text messages. Smith 

thought Eli seemed cavalier, and appeared to be treating the matter like a game. 

Smith recorded notes during the investigation, which were admitted into evidence

at trial. In those notes he stated his belief that plaintiff was trying to stir the pot and make 

trouble by reporting Gunnerud. He accepted Gunnerud’s statement that she was merely 

trying to make jokes, and he did not think she harbored any “malicious or lascivious”

intent. He thought Eli was “trying to paint it as worse than it really was (for whatever 

reason; collusion with [plaintiff]?).”

Smith ultimately recommended to DeVries that Gunnerud be reprimanded, with 

directions to undergo management training about maintaining appropriate boundaries 

with employees. DeVries followed Smith’s recommendation and reprimanded 

Gunnerud. DeVries testified that he thought the texts were, at most, “borderline” 
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harassment. Gunnerud was allowed to maintain her executive director position with 

supervisory authority over plaintiff and Brett.

About a week after reporting the text messages to Minton, plaintiff informed 

Smith via e-mail that Brett was “terrified” that Gunnerud had found out about the sexual 

harassment report. Plaintiff warned that Gunnerud was vindictive and retaliatory. Smith 

stated in an e-mail to DeVries that Brett denied being terrified about losing his job. 

Plaintiff testified at trial that Brett had indeed expressed being terrified. Plaintiff stated

Brett was not comfortable talking to people affiliated with Happy Valley or the Church 

about the harassment, and suggested that was the reason Brett might not have appeared

terrified to Smith. In a separate e-mail to Minton, plaintiff expressed his dissatisfaction 

with the plan to allow Gunnerud to continue supervising him and Brett. He informed

Minton in that e-mail that he felt his only option was to explore legal action.

The Happy Valley Board met in late April 2012. Gunnerud updated the Board 

about Happy Valley operations and—according to testimony by multiple Board members

at trial—Gunnerud also praised plaintiff’s hard work. In a closed session without 

Gunnerud present, DeVries informed the Board that plaintiff was the person who had 

reported the text messages sent to Eli and Brett. 

Minton, Smith, and DeVries exchanged several e-mails in the days before and 

after the Happy Valley Board meeting regarding both the harassment investigation and 

plaintiff’s claims of retaliation. Smith and DeVries were skeptical of plaintiff’s motives. 

DeVries speculated in an e-mail about what plaintiff might stand to gain from reporting 

Gunnerud. He suggested it might be a way for him to avoid discipline for other 

misconduct, as there had been allegations that plaintiff had used a Happy Valley work 

computer to access pornography. DeVries also mentioned that a few months earlier he 

had talked to Gunnerud about replacing plaintiff because of plaintiff’s anger issues, and 

speculated that plaintiff may have learned about that discussion. DeVries concluded his 

e-mail as follows: “I really do not want to fire him without legal or HR advice, because I 
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don’t want to open the possibility of paying him a dime in any kind of settlement ... He is 

a liability.” Smith responded that he thought DeVries was giving plaintiff too much 

credit for doing anything more than “picking a fight.” Smith speculated plaintiff could be 

motivated by “revenge, could be simple anger (we know he flies off the handle too 

easily), could be hatred for [Gunnerud] or for the world at large.”

Gunnerud met with plaintiff later that month to discuss plaintiff’s work 

assignments. Plaintiff was upset that Gunnerud was still his supervisor. Gunnerud asked 

DeVries to join the meeting. Plaintiff testified that the first thing DeVries said to plaintiff 

when he arrived was “[w]hat’s your problem?” Plaintiff, DeVries, and Gunnerud argued 

about what plaintiff viewed as deficiencies in Happy Valley’s investigation of the 

harassment complaint, and plaintiff acknowledged at trial that during the meeting he 

referred to Gunnerud as a “lying, cheating whore.” Plaintiff asked for a new supervisor, 

and the parties eventually agreed that Happy Valley Board member Bob Thomas would 

take over. Plaintiff testified that Thomas told him at their initial meeting that had 

Thomas already been plaintiff’s supervisor he would have fired plaintiff on the spot.

Plaintiff alleged in an e-mail to DeVries sent the day after Thomas took over as 

plaintiff’s supervisor that Gunnerud was on a “witch hunt” and was trying to convince 

Happy Valley employees to “retro-write” complaints against plaintiff to create evidence 

to support his termination. McKnight testified at trial that Gunnerud had asked her 

around that time to write a complaint about plaintiff for something that had happened in 

the past and McKnight refused to do so. Plaintiff testified at trial that his e-mail was 

referring to Gunnerud’s request to McKnight. DeVries forwarded the “witch hunt” email to Smith, who in turn forwarded it to Minton a few days later and told her: “It’s all 

crap; nothing of this is happening.” Smith acknowledged at trial that he never 

independently investigated whether there was truth to plaintiff’s allegations. Plaintiff

also e-mailed Minton to inform her he was “pursuing state and federal complaints” due to 

what he perceived as an unsatisfactory response to the harassing text message 
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investigation. (Capitalization omitted.) Plaintiff e-mailed the United States Equal 

Employment Opportunity Commission that day, stating he had been “retaliated against in 

relation to another employee[’]s sexual harassment complaints.” (Capitalization 

omitted.) 

Plaintiff met with Thomas five days after notifying Minton of his intention to 

pursue state and federal complaints. Thomas was dissatisfied with the amount of work 

plaintiff had completed the day before. Plaintiff testified that Thomas complained the

cabins were not clean and there was debris in a causeway, and that plaintiff told him

those tasks were not part of his job description as there was a separate cleaning crew

assigned to those tasks. A heated argument ensued and Thomas terminated plaintiff. 

DeVries testified that the stated reasons for plaintiff’s termination were insubordination 

and failure to timely complete assigned tasks. During a portion of his deposition played 

for the jury, Thomas testified that he did not know plaintiff was the person who had 

reported Gunnerud when he chose to terminate plaintiff. But the Happy Valley Board 

meeting minutes indicate Thomas was at the meeting where DeVries described plaintiff’s 

allegations against Gunnerud. And Happy Valley Board member Barnett testified both 

that DeVries mentioned plaintiff by name at the meeting’s closed session and that 

Thomas was in attendance. 

C. ADMINISTRATIVE COMPLAINT, LITIGATION, AND TRIAL

Plaintiff filed a form Charge of Discrimination complaint with the United States 

Equal Employment Opportunity Commission some eight months after his termination, 

alleging he was retaliated against in violation of Title VII and FEHA. Happy Valley and 

the Church filed a joint response, which was signed by Minton as counsel. The 

California Department of Fair Employment and Housing issued a right to sue letter in 

response to plaintiff’s administrative complaint.

Plaintiff’s operative first amended complaint (Complaint) alleged eleven causes of 

action against Happy Valley and the Church: (1) retaliatory termination violating 
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Title VII; (2) retaliatory termination violating FEHA; (3) failing to prevent retaliation 

(Gov. Code, § 12940, subd. (k)); (4) declaratory relief as to the scope of FEHA’s 

religious entity exemption and the interpretation of the Happy Valley employee 

handbook; (5) breach of contract (related to the employee handbook); (6) breach of the 

implied covenant of good faith and fair dealing (also related to the employee handbook);

(7) failure to timely produce employment records (Lab. Code, §§ 1198.5, 432); (8) failure 

to timely produce wage records (Lab. Code, § 226); (9) defamation; (10) retaliation

against a whistleblower (Lab. Code, § 1102.5); and (11) blacklisting (Lab. Code, § 1050). 

(Plaintiff dismissed the defamation and blacklisting causes of action before trial.) 

Plaintiff sought compensatory damages, punitive damages, back pay, front pay, penalties 

for Labor Code violations, and attorney’s fees.

Before the jury trial, the declaratory relief cause of action on the FEHA religious 

entity exemption was tried to the court. After a multiple-week jury trial, the jury returned 

special verdicts in plaintiff’s favor against Happy Valley and the Church on all causes of 

action with less than one day of deliberation. The jury awarded plaintiff $275,000 in 

non-economic damages, $120,550 in economic damages, $1,500 as a penalty for two 

violations of Labor Code sections 226 and 1198.5 (for untimely production of wage and 

employment records), and $1,500 as a penalty for violating Labor Code section 1102.5

(the whistleblower statute). The jury awarded plaintiff $500,000 in punitive damages 

after hearing additional evidence. All damages were imposed against defendants jointly 

and severally. The trial court awarded plaintiff a total of $986,812.50 in attorney’s fees. 

Defendants appealed from the judgment (case No. H043723) and later appealed the postjudgment attorney’s fees order (case No. H044098). (We ordered the appeals to be 

considered together.)

II. DISCUSSION

We address defendants’ contentions in the following order: whether substantial 

evidence supports the jury’s special verdict finding that Happy Valley and the Church 
11

were a single employer; whether the trial court prejudicially erred in instructing the jury

regarding the single employer doctrine; whether the trial court erred in determining that

defendants waived or were estopped from asserting a religious entity exemption to FEHA 

liability; whether the jury’s whistleblower liability finding must be reversed because the 

court’s instruction to the jury was based on the wrong version of the whistleblower 

statute; whether substantial evidence supports the special verdict finding of a breach of an 

actual or implied contract against the Church based on Happy Valley’s employee 

handbook. We then address arguments related to damages. 

A. TITLE VII

Defendants do not contest the jury’s finding that plaintiff was terminated in 

retaliation for reporting sexual harassment, which would violate Title VII. Instead, they 

argue that neither Happy Valley nor the Church can be held liable for retaliatory 

termination because Happy Valley does not meet the 15-employee threshold for Title VII 

liability (42 U.S.C. § 2000e(b)), and the Church is not liable under Title VII despite 

having more than 15 employees because it was not the entity that terminated plaintiff. 

The jury found that Title VII applied because Happy Valley and the Church were so 

interrelated that they constituted a single employer. Defendants argue the jury’s single 

employer finding is unsupported by the evidence. They also contend the trial court 

provided a prejudicially erroneous jury instruction about the single employer doctrine. 

1. The Single Employer Doctrine and the Integrated Enterprise Test

The parties agree that the integrated enterprise test is accurately summarized in 

Laird v. Capital Cities/ABC, Inc. (1998) 68 Cal.App.4th 727 (Laird) (not followed on 

another ground by Reid v. Google (2010) 50 Cal.4th 512, 524). “The federal courts have 

developed a test, derived from federal labor case law, to determine whether two 

corporations should be considered a single employer for title VII purposes. Commonly 

called the ‘integrated enterprise’ test, it has four factors: interrelation of operations, 

common management, centralized control of labor relations, and common ownership or 
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financial control.” (Laird, at p. 737.) The test was “designed to further Congress’s intent 

that title VII be construed liberally, including its definition of the term ‘employer.’ ” 

(Laird, at p. 738.) Common ownership or control alone is never enough to establish 

single employer liability, and courts “often deem centralized control of labor relations the 

most important” factor. (Ibid.) “ ‘The critical question is, “[w]hat entity made the final 

decisions regarding employment matters related to the person claiming 

discrimination?” ’ ” (Ibid.) 

2. Trial Evidence Related to the Single Employer Finding

Plaintiff testified he believed the Church owned Happy Valley. Happy Valley 

Board member Barnett testified that “Happy Valley reports to the mission center.” 

Happy Valley Board member Patricia Carver testified that the procedure for reporting

sexual harassment occurring at Happy Valley involved reporting the harassment to the 

Happy Valley Board, proceeding up the chain to the Sierra Pacific Mission Center, and 

continuing upward through the Church hierarchy. Gunnerud similarly testified that the 

protocol for sexual harassment complaints would be to report the matter to the Happy 

Valley Board, and then to “the person above that, ... who I believe would be Ron Smith, 

and then above that would be the World church.” Those statements are consistent with 

Happy Valley’s bylaws, which refer to Happy Valley as an integral subordinate unit of 

the Church and state that the Happy Valley Board “shall regard the Sierra Pacific Mission 

Center as the body to which it is initially accountable for management of the Conference 

Center.” Defendants acknowledge on appeal that “Happy Valley’s financial statements 

are internally audited by the Church.” And DeVries testified that Happy Valley 

employees can obtain health insurance through the Church’s health insurance system. 

Smith, DeVries, and Minton each testified that the Church exerted no control over 

Happy Valley’s decision to terminate plaintiff. But other testimony and evidence related 

to those individuals suggested a closer relationship between Happy Valley and the 

Church. Smith testified that, as a general matter, the Sierra Pacific Mission Center 
13

president provides oversight to subordinate affiliates like Happy Valley. He responded 

affirmatively when asked if, generally speaking, in his “capacity as the mission center

president, ... [he was] acting essentially in the shoes of the church in terms of [his]

administration of the jurisdictions here within [his] area of California.” And he 

acknowledged he was the main information conduit between Happy Valley and the 

Church. Regarding Minton selecting him as the investigator for the sexual harassment 

complaint against Gunnerud, Smith acknowledged he was likely chosen because as the 

Sierra Pacific Mission Center president he had responsibility for the wellbeing of the 

mission center as a whole. And Smith acknowledged that as the ex officio Happy Valley 

Board member he was the liaison between Happy Valley and the Church. Printouts of 

several e-mail communications between Smith and other individuals were admitted into 

evidence. Those include one to Minton in which Smith referred to plaintiff as a 

“troublemaker” and assured her they would talk to her “before any action is taken.” In 

another e-mail sent five days before plaintiff was terminated, Smith requested a 

conference call with DeVries and Minton because plaintiff was “out of control” and 

“[w]e have to do something soon.”

Minton denied being a decision-maker, but she acknowledged that Smith kept her 

apprised of developments about the sexual harassment investigation. She also agreed that 

she provided input to Smith and DeVries about the investigation. She was asked about

prior inconsistent statements from her deposition: When asked in deposition to define 

what was meant by Happy Valley being a subordinate affiliate of the Church, Minton 

responded: “ ‘The church has -- the church is hierarchical in its structure so ultimately 

the church leadership is responsible for all of the entities affiliated. There [are] multiple 

jurisdictions. They used to be called stakes; currently they’re called mission centers. The 

mission centers do not have separate -- they are not separate entities. Some of those 

entities have other ministries. We are a church. We provide ministry. We’re focused on 

mission. And we provide that mission in multiple ways. Our mission centers are 
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affiliates, but they are the church, so there is no distinction between -- no legal distinction 

between the church and our mission centers or our smaller congregations. They are us, 

we are them. And that would be the same at our campgrounds. And Happy Valley is one 

of our campgrounds.’ ” 

The trial court allowed the jury to submit proposed questions for each witness. 

One jury question asked of Minton was, “Knowing that this could go to court, that 

someone might sue, and that the church might be pulled into the whole affair, why didn’t 

you insist that Happy Valley and the Board take necessary steps to cover all the legal and 

ethical bases?” Minton responded: “I gave my opinion. I told them what I believed. 

But I -- I have no authority over them. I can’t force them to do it because they’re a 

separate corporation, they’re a separate entity.” In response to another question Minton 

stated “I was not legal counsel to Happy Valley” during the sexual harassment 

investigation.

The location of plaintiff’s personnel file following his termination is also relevant 

to defendants’ interrelatedness. McKnight testified that following plaintiff’s termination 

Gunnerud removed plaintiff’s personnel file from the Happy Valley property. Minton 

acknowledged that when first contacted via e-mail by plaintiff’s counsel about the file 

she responded that the Church had “ ‘no record that Mr. Mathews was an employee of the 

Community of Christ and consequently has no personnel files.’ ” Minton confirmed that 

she at some point discovered plaintiff’s personnel file was with the Sierra Pacific Mission 

Center; the file had been given to Patricia Carver’s husband Mike Carver, who was the 

CFO of the Sierra Pacific Mission Center and also a Happy Valley Board member. 

Minton acknowledged that she sent a copy of plaintiff’s personnel file to the EEOC, but

also that she told plaintiff’s counsel two months after the EEOC filing that she was still 

compiling the file. She offered no explanation for that discrepancy. 
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3. Opening and Closing Arguments, and Verdict

Defendants did not discuss the single employer doctrine in either their opening 

statement to the jury or their closing argument. Their opening statement discussed Happy 

Valley and the Church, noting they were “committed to the Christian principles upon 

which they’re founded, the golden rule, redemption, second chances, kindness to one 

another. These are the fundamental principles upon which the church and Happy Valley, 

as an extension, believe in and are committed to.” Their closing argument focused 

largely on attacking plaintiff’s credibility. Defense counsel concluded the closing 

argument as follows: “Mr. Mathews has lied. He’s destroyed evidence. He’s abused 

people. He has manipulated women who were blinded by their own biases and hatred of 

others. People don’t behave the way Mr. Mathews behaved and keep their jobs. People 

don’t get rewarded for the type of conduct that Mr. Mathews has exhibited in this case.

It’s time for Mr. Mathews’ manipulations to be over. It’s time for you to tell Mr. 

Mathews to take responsibility for what he’s done.”

A special verdict form posed the following question: “When Jeremiah Mathews 

was discharged from his employment in May 2012, were Happy Valley Conference 

Center and the Community of Christ sufficiently related so as to be considered a ‘single 

employer’ of Jeremiah Mathews, and therefore jointly responsible for each other’s acts?” 

The jury answered “Yes.” 

4. Substantial Evidence Supports the Single Employer Finding

Defendants argue “the record does not support” the jury’s single employer finding. 

Contrary to defendants’ argument that all their appellate arguments raise issues of law 

and are therefore reviewed de novo, we review a jury’s factual findings for substantial 

evidence. We will reverse a jury’s verdict only if it is unsupported by any substantial 

evidence, meaning to prevail on appeal defendants must show that the evidence was such 

as would justify a directed verdict in their favor. (Sanchez-Corea v. Bank of America 

(1985) 38 Cal.3d 892, 906.) When applying the substantial evidence test, “we resolve 
16

‘all conflicts in the evidence and all legitimate and reasonable inferences that may arise 

therefrom in favor of the jury’s findings and the verdict.’ ” (Murray’s Iron Works, Inc. v. 

Boyce (2008) 158 Cal.App.4th 1279, 1285.) We do not reweigh the evidence or judge 

the credibility of witnesses. (Ibid.) The “power of the appellate court is limited to a 

determination of whether there is any substantial evidence, contradicted or 

uncontradicted, that will support the verdict.” (Zhadan v. Downtown Los Angeles Motor 

Distributors, Inc. (1979) 100 Cal.App.3d 821, 833 (Zhadan).)

As to the four factors—interrelation of operations, common management, 

centralized control of labor relations, and common ownership or financial control—

defendants concede common ownership because in “the parent-subsidiary context, 

common ownership is a given.” Though Happy Valley was somewhat financially 

independent from the Church, defendants acknowledge that Happy Valley’s financial 

statements are audited by the Church, which may indicate some measure of financial 

control or oversight. Regarding common management, Happy Valley’s Board consisted 

of: (1) elected members who, according to Happy Valley’s bylaws, were “elected by the 

Conference of the Sierra Pacific Mission Center”; and (2) ex officio members (like Sierra 

Pacific Mission Center President Ronald Smith) serving by virtue of their management 

positions with the Church’s Sierra Pacific Mission Center. The Happy Valley Board was 

thus closely intertwined with the greater Church organization. Smith held both a high 

position within the Church and a position on Happy Valley’s four-person executive 

committee. Regarding interrelated operations, Happy Valley’s bylaws state that it is an 

“integral subordinate unit and part of” the Church that is “accountable to General Church 

Officers” as well as to the Sierra Pacific Mission Center. Happy Valley employees can

take advantage of the Church’s health insurance. And the jury heard Minton’s deposition 

testimony suggesting interrelated operations: “Our mission centers are affiliates, but they 

are the church, so there is no distinction between -- no legal distinction between the 

church and our mission centers or our smaller congregations. They are us, we are them. 
17

And that would be the same at our campgrounds. And Happy Valley is one of our 

campgrounds.” Defendants argue Minton’s deposition testimony was “legally mistaken 

and therefore of no significance.” But the jury was charged as fact-finder with 

determining the relationship between Happy Valley and the Church, and the jury 

evidently credited Minton’s deposition testimony over her contradictory trial testimony. 

As for centralized control of labor—often considered the most important factor 

(Laird, supra, 68 Cal.App.4th at p. 738)—the jury heard testimony from Happy Valley 

Board member Barnett that Happy Valley reports to the Sierra Pacific Mission Center, as

well as testimony from both Gunnerud and Happy Valley Board member Patricia Carver 

that sexual harassment reports originating at Happy Valley would make their way up the 

chain of command to the Church itself. And specifically related to plaintiff’s 

termination, the evidence showed plaintiff’s personnel file wound up in possession of the 

Church, which would have no independent reason to have the personnel file. Further 

evidence of centralized control of labor comes from the extensive involvement of Smith, 

the Church’s liaison with Happy Valley, in plaintiff’s termination. Smith called plaintiff

a troublemaker in an e-mail to Minton. Without personally investigating plaintiff’s 

complaints about retaliation, Smith assured Minton that plaintiff’s allegations were “all 

crap.” Five days before plaintiff was terminated, Smith told DeVries and Minton that

plaintiff was “out of control” and “[w]e have to do something soon.” Those

communications between the Church’s general counsel, the president of the Church’s 

Sierra Pacific Mission Center, and the president of the Happy Valley Board provide 

substantial evidence to support a reasonable inference that the decision to terminate 

plaintiff was influenced—or even dictated—by individuals acting on behalf of the 

Church. 

Defendants point to evidence showing Happy Valley and the Church should be 

treated as separate entities for purposes of the single employer doctrine, including that the 

Church generally does not oversee Happy Valley daily operations; that Happy Valley has 
18

its own employees who are generally hired, directed, supervised, and fired by Happy 

Valley; and that Happy Valley has its own employee handbook. But that argument 

invites us to reweigh the evidence and ignores our standard of review. We review

whether substantial evidence supports the jury’s single employer finding. That other 

evidence in the record would support a defense verdict is immaterial. (See Zhadan, 

supra, 100 Cal.App.3d at p. 833 [“The appellate court may reverse the decision only if 

there is no evidence to support the verdict.”].)

Defendants contend the Church could not have been involved in plaintiff’s firing 

because Happy Valley Board member Thomas was the person who ultimately fired 

plaintiff. But the final decision to terminate plaintiff did not occur in isolation. The 

evidence supported a finding that, his self-serving deposition testimony notwithstanding, 

Thomas knew that plaintiff was the person who complained about Gunnerud. And given 

the extensive communications between DeVries, Smith, and Minton in which plaintiff 

was characterized as a troublemaker who had to be dealt with, the jury could reasonably 

infer that those views influenced Thomas’s ultimate decision to terminate plaintiff. 

Defendants argue for the first time in their reply brief that even assuming Smith 

and Minton were involved in plaintiff’s firing, they were involved only in their Happy 

Valley subsidiary roles and not in their Church corporate parent roles. (Citing Sonora 

Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523; United States v. Bestfoods

(1998) 524 U.S. 51, 69 [“courts generally presume ‘that the [corporate] directors are 

wearing their “subsidiary hats” and not their “parent hats” when acting for the 

subsidiary’ ”].) Defendants forfeited that argument by failing to raise it until their reply 

brief (Neighbours v. Buzz Oates Enterprises (1990) 217 Cal.App.3d 325, 335, fn. 8), and 

in any event the authorities defendants cite did not apply the “two hats” concept in the 

single employer doctrine context. There was also evidence that Minton wore only a 

Church “hat” for the entire investigation: she testified in response to a jury question, “I 

was not legal counsel to Happy Valley” during the sexual harassment investigation. Nor 
19

does the evidence compel the conclusion that Smith acted solely in his capacity as a 

Happy Valley Board member: Smith acknowledged he was Happy Valley’s liaison to the 

Church, and also agreed with the characterization that “essentially it was your role within 

the church as the mission center president that was the guiding factor in having you be 

the investigator” of the harassing text messages.

5. Instructional Error 

Defendants argue that the trial court erred in instructing the jury about the single 

employer doctrine because the jury instruction did not highlight the centralized control of 

labor relations factor. (Defendants preserved the issue by proposing an alternative 

instruction to the trial court and making there the argument they now make on appeal.) 

The parties agree that any instructional error here is subject to the state law prejudice 

standard, which calls for reversal only if “there is a reasonable probability that in the 

absence of the error, a result more favorable to the appealing party would have been 

reached.” (Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 574.) We are also 

mindful that “[n]o judgment shall be set aside ... on the ground of misdirection of the 

jury ... unless, after an examination of the entire cause, including the evidence, the court 

shall be of the opinion that the error complained of has resulted in a miscarriage of 

justice.” (Cal. Const., art. VI, § 13.) 

a. Factual Background

Each party proposed a jury instruction regarding the single employer doctrine. 

Defendants’ proposal listed the four factors and then continued: “Of these factors, 

‘centralized control of labor relations’ is most important. The central question is what 

entity made the final decisions regarding employment matters related to the person 

claiming retaliation.” The trial court rejected defendants’ requested instruction, 

reasoning that “it’s part of the jury’s province to decide under the facts of this case which 
20

are the most important factors, and I think the plaintiff version accurately states that no 

single factor is conclusive.”

The jury was instructed as follows about the single employer doctrine, using 

plaintiff’s proposed instruction: “Jeremiah Mathews claims he was an employee of both 

Happy Valley Conference Center, Inc. and Community of Christ. Two or more entities 

may be considered a ‘single employer’ if certain factors are found to exist. [¶] In 

determining whether Happy Valley Conference Center and Community of Christ 

constitute a ‘single employer’ for purposes of this action, you should consider the 

following factors: [¶] (1) common ownership; [¶] (2) common management; [¶]

(3) functional integration of operations; and [¶] (4) centralized control of labor relations. 

[¶] No single factor is conclusive and all four factors need not be present. The single 

employer standard places less emphasis on corporate form and assess[es] the economic 

reality of the corporate relationship. ‘Single employer’ status is characterized as an 

absence of an arm’s-length relationship normally found among unintegrated companies. 

The ultimate question is whether there are sufficient facts indicating an interrelationship 

between the two companies such that a reasonable employee would have believed that 

one company was jointly responsible for the acts of the other. [¶] If you find that Happy 

Valley Conference Center and Community of Christ are sufficiently interrelated to 

constitute a ‘single employer’ for purposes of this action, you must treat the conduct of 

one organization as if it were the conduct of both organizations. If you find that Happy 

Valley Conference Center and Community of Christ are not sufficiently related to 

constitute a ‘single employer’ for purposes of this action, you must consider the conduct 

of each organization separately.”

b. The Trial Court Erred, but the Error Was Harmless

California and federal authorities consistently highlight centralized control of 

labor relations as a particularly important factor. (E.g., Laird, supra, 68 Cal.App.4th at 
21

p. 738 [“Although courts consider the four factors together, they often deem centralized 

control of labor relations the most important.”]; Kang v. U. Lim America, Inc.

(9th Cir. 2002) 296 F.3d 810, 815 [“The third factor, centralized control of labor 

relations, is the ‘most critical.’ ”].) Plaintiff acknowledges as much in his brief, where he 

states that courts “consider shared control of labor relations as the primary factor.” Given 

the emphasis on the centralized control of labor relations factor, we agree with defendants 

that the trial court should have highlighted that factor in its single employer instruction. 

Defendants contend the error is “obviously prejudicial” because evidence showing 

that Happy Valley and the Church were not a single employer was “overwhelming.” But 

defendants overstate both the error and the evidence presented to the jury. The 

instruction given correctly identified the four factors and correctly informed the jury that 

no single factor is conclusive. Its flaw was in not emphasizing the centralized control of 

labor factor. The special verdicts—and the speed with which they were returned—

support an inference that the jurors made adverse credibility determinations as to 

defendants’ witnesses. And as we have already summarized, substantial evidence 

supported the centralized control of labor. Multiple witnesses testified that sexual 

harassment complaints related to Happy Valley would be reported to and handled by the 

Church. Both the Church’s general counsel and a high-ranking Church official (Sierra 

Pacific Mission Center President Smith) were extensively involved in discussions with 

Happy Valley Board President DeVries in the weeks leading up to plaintiff’s termination. 

And just days before plaintiff’s termination Smith told the others they had to “do 

something soon” because plaintiff was “out of control.” Defendants have failed to show 

a reasonable probability that a result more favorable to them would have been reached

had the trial court adopted defendants’ version of the single employer doctrine 

instruction. 
22

B. FEHA

FEHA exempts from the definition of “employer” any “religious association or 

corporation not organized for private profit.” (Gov. Code, § 12926, subd. (d); Kelly v. 

Methodist Hospital of So. Cal. (2000) 22 Cal.4th 1108, 1114.) Defendants argue they are

exempt from FEHA liability under the religious entity exemption and that the trial court 

erred by finding they had waived or were estopped from asserting the exemption.

Plaintiff does not dispute that each defendant is a religious non-profit corporation that 

would ordinarily be exempt from FEHA. But in addition to defending the trial court’s 

waiver and estoppel determinations, plaintiff contends that defendants are liable even as 

otherwise exempt religious entities for retaliation under FEHA because the statutory 

scheme prohibits retaliation by “any employer, labor organization, employment agency, 

or person.” (Gov. Code, § 12940, subd. (h).)

1. Factual and Procedural Background

Plaintiff sought a declaration that his “employment with [d]efendants was covered 

by the FEHA” and that defendants could not claim the religious entity exemption. Before 

the jury trial began, the trial court heard testimony from Happy Valley Board President 

DeVries about how the Happy Valley employee handbook was created. He testified that 

Happy Valley purchased software from the California Chamber of Commerce that 

contained standardized employee handbook policies which had been “reviewed by 

attorneys and that for California law.” DeVries worked with the rest of Happy Valley’s 

executive committee to choose policies from the software and compile them into the 

Happy Valley employee handbook. He testified there was no option in the software to 

pick policies written specifically for religious entities. The handbook was sent to the 

Church’s general counsel for review, and Happy Valley never received any feedback. 

As adopted and provided to plaintiff during his employment, the employee 

handbook stated Happy Valley’s company policy “prohibits unlawful discrimination 

based on race, color, creed, gender, religion, marital status, registered domestic partner 
23

status, age, national origin or ancestry, physical or mental disability, medical condition 

including genetic characteristics, sexual orientation, or any other consideration made 

unlawful by federal, state, or local laws.” The handbook continued that Happy Valley is 

“committed to compliance with all applicable laws providing equal employment 

opportunities.” The handbook also prohibited any harassment based on a lengthy list of 

characteristics. It identified harassment as unlawful, and instructed employees to report 

any harassment to a supervisor or other managerial employee. The handbook further 

stated: “You should be aware that the Federal Equal Employment Opportunity 

Commission and the California Department of Fair Employment and Housing investigate 

and prosecute complaints of prohibited harassment in employment. If you think you have 

been harassed or that you have been retaliated against for resisting or complaining, you 

may file a complaint with the appropriate agency.”

Plaintiff filed his retaliation administrative complaint with the EEOC. By signing 

the form complaint, plaintiff agreed with the pre-printed text stating the charge would be 

“filed with both the EEOC and the State or local agency” (i.e., the California Department 

of Fair Employment and Housing). The Department of Fair Employment and Housing 

later notified plaintiff and defendants that it would not be investigating the matter in light 

of the EEOC investigation, and stating “[n]o response to the [Department of Fair 

Employment and Housing] is required” from defendants. (Boldface and underlining 

omitted.) The notice of charge of discrimination that the EEOC sent defendants informed

them that plaintiff had filed a complaint under Title VII. The EEOC notice did not 

reference FEHA. Defendants did not raise the FEHA religious entity exemption during 

the EEOC investigation.

The trial court deferred deciding the declaratory relief issue until it heard more 

evidence during the jury trial. The trial court ultimately decided that the issue of liability 

under FEHA would go to the jury because defendants waived and were estopped from 

raising the religious entity exemption. The trial court based its determination on “the 
24

employee handbook and the fact that the church, while represented by general counsel, 

did not assert that possible defense, that combination shows that they waived that 

exemption.” The court also noted that because DeVries sent the handbook to the Church 

for review, the Church “had every opportunity to assert their claim to be exempt.” The 

trial court cited similar evidence to support estoppel, and concluded there had been 

detrimental reliance by plaintiff because he chose “to pursue these claims and expend all 

the money in the pursuit of these claims, which he could do in reliance on the fact of the 

employee manual and reliance on the fact that the church did not assert the estoppel [sic] 

when the claim was brought administratively.” (We assume the word “exemption” was 

intended instead of “estoppel”.)

2. Defendants Did Not Waive the Exemption

As the foregoing essential facts are undisputed, we review de novo the trial court’s 

decision that defendants waived the religious entity exemption. (Platt Pacific, Inc. v. 

Andelson (1993) 6 Cal.4th 307, 319.) Waiver is “the voluntary relinquishment of a 

known right, which may be effective as a matter of law without any demonstration that 

the other party was caused by the waiver to expose [itself] to any harm.” (City of 

Hollister v. Monterey Ins. Co. (2008) 165 Cal.App.4th 455, 487.) 

Plaintiff argues the trial court correctly found defendants waived the exemption 

based on the following actions: defendants’ failure to raise the exemption during the 

EEOC administrative proceedings; the Happy Valley employee handbook’s prohibition 

on discrimination, harassment, and retaliation as well as its references to “state or local 

law” and to the California Department of Fair Employment and Housing; and defendants’ 

delay in raising the exemption during litigation. 

We consider those bases in order. The EEOC notified defendants it was 

investigating a potential Title VII violation, not a FEHA violation. As such, application 

of a FEHA exemption was immaterial to the EEOC proceedings and failure to raise it in 

that context did not waive the exemption. Regarding the employee handbook, DeVries’s 
25

testimony indicated that Happy Valley chose boilerplate employee handbook content 

from a business association’s software. Plaintiff repeatedly references the handbook’s 

“FEHA and EEOC protections.” But the handbook never explicitly references FEHA. 

The handbook states that Happy Valley prohibits harassment, discrimination, and 

retaliation; that Happy Valley is “committed to compliance with all applicable laws 

providing equal employment opportunities”; and that employees “should be aware that 

the Federal Equal Employment Opportunity Commission and the California Department 

of Fair Employment and Housing investigate and prosecute complaints of prohibited 

harassment in employment.” The handbook makes no promise that defendants will be 

bound by FEHA; the handbook refers to being bound by “applicable” laws. Especially 

considered in the context of its creation, nothing in the handbook amounts to a knowing 

and voluntary waiver of the religious entity exemption. 

As for defendants’ purported delay, plaintiff put the exemption in issue with the 

Complaint’s declaratory relief cause of action and the reference to defendants’ contention 

that “as religious non-profit organizations, [they] were not covered by the FEHA.” 

Defendants answered with a general denial, effectively contesting the request for a 

declaration that they are covered by FEHA. Plaintiff was at least constructively informed 

from the start that defendants were asserting the religious entity exemption. Given our 

conclusion that defendants did not waive the FEHA religious entity exemption, we do not 

reach their arguments that the exemption is not something that can be waived as a matter 

of law.

3. Defendants Were Not Estopped From Asserting the Exemption

We review de novo the trial court’s decision on undisputed facts that defendants 

were estopped from asserting the FEHA religious entity exemption. (Feduniak v. 

California Coastal Com. (2007) 148 Cal.App.4th 1346, 1360 (Feduniak).) “Whenever a 

party has, by his own statement or conduct, intentionally and deliberately led another to 

believe a particular thing true and to act upon such belief, he is not, in any litigation 
26

arising out of such statement or conduct, permitted to contradict it.” (Evid. Code, § 623.) 

The equitable estoppel doctrine is founded on the concepts of equity and fair dealing. It 

has four elements: “ ‘(1) the party to be estopped must be apprised of the facts; (2) he 

must intend that his conduct shall be acted upon, or must so act that the party asserting 

the estoppel has a right to believe it was so intended; (3) the other party must be ignorant 

of the true state of facts; and (4) he must rely upon the conduct to his injury.’ ” (City of 

Goleta v. Superior Court (2006) 40 Cal.4th 270, 279.) Importantly, equitable estoppel is 

“ ‘defensive in nature only, and “operates to prevent one [party] from taking an unfair 

advantage of another.” ’ ” (Moncada v. West Coast Quartz Corp. (2013) 221 

Cal.App.4th 768, 782; accord Honeywell v. Workers’ Comp. Appeals Bd. (2005) 35 

Cal.4th 24, 38 [equitable estoppel “ ‘is applied defensively; it operates to prevent one 

from taking an unfair advantage of another but not to give an unfair advantage to one 

seeking to invoke the doctrine’ ”].)

Defendants argue that the trial court erred in applying estoppel because plaintiff 

invoked it offensively to prevent defendants from relying on an otherwise viable defense 

to FEHA liability. Plaintiff does not address that argument. Given that the weight of 

California authority has limited equitable estoppel to defensive use (e.g., a landowner 

seeking to estop a government agency from enforcing land use restrictions based on prior 

conduct by the agency (Feduniak, supra, 148 Cal.App.4th at p. 1361)), the trial court 

erred in allowing plaintiff to assert it offensively.

Even assuming plaintiff could use equitable estoppel offensively, the record does 

not support estopping defendants from asserting the religious entity exemption. We can 

assume that before the litigation defendants were at least constructively aware of the 

religious entity exemption and that plaintiff did not know the exemption existed. But 

crucial to estoppel—and missing here—is conduct by the party to be estopped that causes 

detrimental reliance by the other party. The employee handbook is ambiguous and makes 

no affirmative representation that FEHA will apply. Defendants’ failure to raise the 
27

FEHA religious entity exemption during the EEOC administrative proceedings was 

reasonable because the EEOC was explicitly not investigating a possible FEHA violation. 

And defendants’ general denial informed plaintiff they were contesting plaintiff’s 

argument that the religious entity exemption did not apply. Plaintiff argues he 

“detrimentally relied on [defendants’] silence about the exemption in pursuing his claims 

and expending his resources in litigation,” but the FEHA exemption was only one of 

several causes of action all relating to common operative facts. There is no indication 

plaintiff would have abandoned the FEHA cause of action had he known earlier that 

defendants would assert the religious entity exemption. 

As we have concluded under California law that the trial court erred in estopping 

defendants from asserting FEHA’s religious entity exemption, we do not reach the 

parties’ arguments related to non-binding federal authorities interpreting the State of 

Washington’s anti-discrimination law. (E.g., Donelson v. Providence Health & ServicesWashington (E.D.Wash. 2011) 823 F.Supp.2d 1179, 1184–1185 [rejecting estoppel based 

on employee handbook; “a pledge not to discriminate is not necessarily inconsistent with 

a later claim of exemption” from state’s anti-discrimination law].)

4. Plaintiff’s Textual Argument is Unpersuasive

Plaintiff argues that even if FEHA’s religious entity exemption would ordinarily 

apply to defendants as “employers,” they are nonetheless subject to the FEHA prohibition 

on retaliation by “any employer, labor organization, employment agency, or person.” 

(Gov. Code, § 12940, subd. (h), italics added.) 

Government Code section 12926 defines terms used in the FEHA statutory 

scheme. Subdivision (d) of that section states: “ ‘Employer’ includes any person 

regularly employing five or more persons, or any person acting as an agent of an 

employer, directly or indirectly, the state or any political or civil subdivision of the state, 

and cities, except as follows: [¶] ‘Employer’ does not include a religious association or 

corporation not organized for private profit.” Each subdivision of Government Code 
28

section 12940 prohibits certain entities or individuals from engaging in certain unlawful 

employment practices. (Unspecified subdivision references are to this section.) For 

example, subdivision (a) prohibits an “employer” from discriminating against employees 

based on race, religious creed, or other characteristics. Subdivision (c) prohibits “any 

person” from discriminating against another person “in the selection, termination, 

training, or other terms or treatment of that person in any apprenticeship training 

program.” And subdivision (h) is a catch-all provision prohibiting retaliation, which 

states it is an unlawful employment practice for “any employer, labor organization, 

employment agency, or person to discharge, expel, or otherwise discriminate against any 

person because the person has opposed any practices forbidden under this part or because 

the person has filed a complaint, testified, or assisted in any proceeding under this part.” 

Plaintiff’s textual argument is based on the word “person” in subdivision (h)’s list 

of entities and individuals that may not retaliate. But the list of entities and individuals in 

subdivision (h) uses the disjunctive “or,” suggesting that each term is a separate category

of entity or individual. Because we have already determined that defendants (as a single 

employer) were plaintiff’s employer, they fall under the “employer” category for 

purposes of subdivision (h). And as employers that are religious entities, they are exempt 

from FEHA liability. Plaintiff points to nothing in the text or legislative history of FEHA 

suggesting a legislative intent to limit the exemption or effectively eliminate it in the 

context of retaliation.

In Jones v. Lodge at Torrey Pines Partnership (2008) 42 Cal.4th 1158 (Jones), the 

Supreme Court discussed the legislative history behind the word “person” in Government 

Code section 12940, subdivision (h). Jones sued his employer and his supervisor under 

FEHA for, among other things, retaliation. After the intermediate appellate court 

determined that an individual could be held personally liable for retaliation, the Supreme 

Court granted review to determine whether “the use of the word ‘person’ in 

subdivision (h) to describe who may not retaliate—compels the conclusion that all 
29

persons who engage in prohibited retaliation are personally liable, not just the employer.” 

(Jones, at pp. 1160, 1162.) In the course of determining that individuals cannot be held 

personally liable (based on reasoning not at issue here), the Jones court looked to the 

legislative history behind adding the word “person” to subdivision (h). The Jones court 

concluded that the Legislature “added the word ‘person’ merely to conform to the fact 

that some other parts of [section 12940] also use the word ‘person.’ ” (Jones, at p. 1173.)

Our conclusion is consistent with Jones. The legislative history discussion in 

Jones demonstrates that the addition of the word “person” to Government Code 

section 12940, subdivision (h) was to ensure that the catch-all retaliation subdivision 

included all entities covered by the preceding subdivisions. Here again, plaintiff points to 

no legislative history indicating the Legislature also intended by that addition to allow an 

employee fired by a religious entity employer to circumvent the religious entity 

exemption by characterizing the employer as a “person” for purposes of a retaliation suit. 

We conclude that defendants are exempt from FEHA. The jury verdict finding 

defendants liable under FEHA cannot stand. 

C. WHISTLEBLOWER INSTRUCTIONS

The parties agree on appeal that the trial court instructed the jury with the wrong 

version of Labor Code section 1102.5 when it used the version in effect at the time of 

trial rather than the version in effect when plaintiff was terminated. (See Diego v. 

Pilgrim United Church of Christ (2014) 231 Cal.App.4th 913, 921, fn. 7.) Defendants 

acknowledge that the trial court’s error was caused by the parties because both proposed 

whistleblower instructions were based on the wrong version of the statute. Though it is 

the responsibility of counsel to propose correct instructions (Metcalf v. County of San 

Joaquin (2008) 42 Cal.4th 1121, 1130–1131), the failure of a trial court “to instruct on 

material issues and controlling legal principles ... may amount to reversible error.” 

(Agarwal v. Johnson (1979) 25 Cal.3d 932, 951, disapproved on other grounds by White 

v. Ultramar, Inc. (1999) 21 Cal.4th 563, 574, fn. 4.)
30

1. Factual Background

Plaintiff e-mailed the EEOC five days before he was terminated. The e-mail read, 

in full: “Hello my name is Jeremiah Mathews and I work for a small company in Santa 

Cruz CA. and feel I have clearly been retaliated against in relation to another 

employee[’]s sexual harassment complaints. We have both complained to CA[’]s Dept. 

of Fair Employment but were hoping to get a fed agency complaint going too. If you 

cannot help us how do I obtain the right to sue cert. Please refer to other agencies (any) 

that can help. My home # is [redacted] my cell is [redacted]. Also you have my e-mail; 

but my address is [redacted]. Please send me any/all info you have I really need help.” 

(Capitalization omitted; otherwise verbatim.) Plaintiff received an automatically 

generated e-mail response from the agency the same day. The following day he received 

another e-mail from the EEOC stating that based on the “information you provided in 

your e-mail, your situation may be covered by the laws we enforce” and instructing 

plaintiff that if he believed his “employer’s or former employer’s actions are retaliatory” 

he could use an EEOC online assessment tool and fill out an online questionnaire. The 

same day plaintiff e-mailed the EEOC he also sent an e-mail to the Church’s general 

counsel Minton informing her that he was “pursuing state and federal complaints” due to 

what he perceived as an unsatisfactory response to the harassing text message 

investigation. (Capitalization omitted.) Plaintiff did not file his official charge of 

discrimination with the EEOC until several months after he was terminated.

On the special verdict form under the heading “Protected Activity,” the jury 

responded in the affirmative to the following question: “Did Jeremiah Mathews report 

sexual harassment and/or retaliation to a state or federal agency before he was 

terminated?” The jury also responded in the affirmative to the following question in the 

Labor Code section 1102.5 section of the special verdict form: “Did Happy Valley 

Conference Center or Community of Christ believe that Jeremiah Mathews had disclosed 

or might have disclosed to an employee with authority to investigate, discover, or correct 
31

legal violations/noncompliance, or that he had disclosed or might have disclosed to a 

government agency that his supervisor had sexually harassed male subordinates or, that 

he had been retaliated against for reporting sexual harassment or engaging in other 

protected activities?”

2. Changes to Labor Code Section 1102.5, Subdivision (b)

At the time plaintiff was terminated, Labor Code section 1102.5, subdivision (b) 

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.” 

(Lab. Code, former § 1102.5, subd. (b); Stats. 2003, ch. 484, § 2, p. 3518.) But the jury 

was instructed based on the version of Labor Code section 1102.5, subdivision (b) in 

effect at the time of trial, which reads: “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.” 

The relevant difference between the two versions relates to the timing of the 

employee’s report to a government agency. Whereas now an employer violates the 

statute if it retaliates against an employee whom the employer merely believes has made 

a report to a government agency, courts interpreting the version in effect in 2012 
32

concluded that liability was triggered for retaliatory actions taken only after the employee 

actually reported the employer. (See Rope v. Auto-Chlor System of Washington, Inc. 

(2013) 220 Cal.App.4th 635, 649, superseded by statute on another ground [finding 

Labor Code former section 1102.5, subdivision (b) did not cover “ ‘anticipatory’ or 

‘preemptive’ retaliation” taken before the employee reported the employer].)

3. The Error Was Harmless

The jury specifically found that “Jeremiah Mathews report[ed] sexual harassment 

and/or retaliation to a state or federal agency before he was terminated.” The incorrect

jury instruction was therefore harmless so long as substantial evidence in the record 

supports the jury’s finding. (Zhadan, supra, 100 Cal.App.3d at p. 833.)

In the e-mail plaintiff sent to the EEOC before he was terminated, he stated that he 

worked for a small company in Santa Cruz and that he believed he had been retaliated 

against in relation to another employee’s sexual harassment complaint. He sought 

assistance in obtaining a right to sue certification. That e-mail is substantial evidence

supporting the jury’s finding that plaintiff reported retaliation to a government agency 

before he was terminated. It briefly summarized the issue; it was sent to a government 

agency; and plaintiff’s e-mail to Minton placed defendants on notice that he was pursuing 

state and federal complaints. 

Defendants argue that the e-mails “did not disclose who was the alleged retaliator 

or what was the alleged retaliation.” But neither version of the statute requires that level 

of specificity. Labor Code former section 1102.5, subdivision (b) prohibited retaliation 

in response to disclosure to the government of “information ... where the employee has 

reasonable cause to believe that the information discloses a violation of state or federal 

statute.” The jury could reasonably conclude that plaintiff’s e-mail met that standard 

because it stated he was being retaliated against in response to another employee’s sexual 

harassment complaint. And given that plaintiff sent the e-mail to an agency that regulates 
33

employers, it is reasonable to infer that he was alleging that his employer was the entity 

retaliating against him. 

Because substantial evidence supports the jury’s finding that plaintiff reported

retaliation to a government agency before he was terminated, the error in the Labor Code

section 1102.5, subdivision (b) instruction was harmless. Defendants’ argument that the 

Church cannot be liable because Happy Valley, rather than the Church, terminated 

plaintiff is without merit in light of the jury’s single employer special verdict finding.

D. BREACH OF CONTRACT

Defendants do not contest the jury’s finding that Happy Valley breached an 

implied-in-fact contract with plaintiff. Defendants argue that insufficient evidence 

supports the breach of contract finding against the Church because “the employee 

handbook is Happy Valley’s handbook, not the Church’s.” Defendants’ argument 

differentiating between Happy Valley and the Church assumes that the single employer 

finding did not apply to the breach of contract cause of action. We requested 

supplemental briefing regarding whether the single employer finding made the Church

jointly liable for breach of contract, and defendants responded that the single employer 

doctrine applies only “in the limited context of title VII, FEHA, and Labor Code 

violations.” Resolving the issue requires reviewing the special verdict form and the jury 

instructions. 

The stipulated special verdict form is 11 pages long. It begins with two questions 

that appear to relate to all causes of action. The first asks whether plaintiff was employed 

by Happy Valley, which the jury answered in the affirmative. The second is the single 

employer question, which the jury also answered in the affirmative: “When Jeremiah 

Mathews was discharged from his employment in May 2012, were Happy Valley 

Conference Center and the Community of Christ sufficiently related so as to be 

considered a ‘single employer’ of Jeremiah Mathews, and therefore jointly responsible 

for each other’s acts?” The single employer question does not limit application of that 
34

finding to any particular causes of action. The jury instruction defining “single 

employer” similarly referenced “determining whether Happy Valley Conference Center 

and Community of Christ constitute a ‘single employer’ for purposes of this action.” 

Following those general questions, the special verdict form asks questions specific

to each cause of action. Under the “Breach of Contract” heading, the jury answered in 

the affirmative the following question: “Did Happy Valley Conference Center or 

Community of Christ promise, by words or conduct, to provide Jeremiah Mathews a 

work environment free of unlawful harassment and to not retaliate against him for filing a 

complaint and to not permit retaliation against him by management employees or 

coworkers?” The jury also answered in the affirmative the question whether “Happy 

Valley Conference Center or Community of Christ breach[ed] the terms of their 

employment relationship with [plaintiff] by retaliating against him[.]” 

Defendants attempt to separate Happy Valley and the Church for breach of 

contract purposes by arguing that the single employer doctrine does not apply to breach 

of contract causes of action. But defendants point to no authority that precludes applying 

the single employer doctrine to a breach of contract. The stipulated special verdict form 

did not limit the single employer finding to specific causes of action, which left the jury 

free to apply that doctrine to all causes of action. The parties at least tacitly agreed to 

apply the single employer doctrine to all causes of action because had the breach of 

contract cause of action not been based on defendants acting as a single employer, the 

parties would have included in the special verdict form separate questions differentiating 

the acts of Happy Valley on one hand and the acts of the Church on the other.

As we have previously discussed, substantial evidence supports the jury’s single 

employer finding. Specific to the Happy Valley employee handbook issue, the evidence 

showed that the Church received a copy to review and provided no feedback. Taken 

together, the jury could reasonably infer that the Church’s lack of changes to the 

handbook was tacit acceptance of its terms. To the extent defendants’ argument can be 
35

construed as challenging the special verdict question as defective, they forfeited the 

argument by failing to raise it in the trial court. (See Little v. Amber Hotel Co. (2011) 

202 Cal.App.4th 280, 299–300 [party forfeits challenge to “ ‘merely ambiguous’ ” 

special verdict form by failing to seek clarification before the jury is discharged].) 

The evidence supports the jury’s special verdict finding that defendants as a single 

employer breached the implied-in-fact contract with plaintiff. (Defendants also contend 

the jury’s breach of the implied covenant of good faith and fair dealing finding is 

superfluous in light of its breach of contract finding, but we do not reach that argument 

because defendants neither request relief as to the breach of implied covenant finding nor 

explain why that finding prejudices them.) 

E. ATTORNEY’S FEES

Defendants’ challenge to the attorney’s fee award is foreclosed by our conclusion 

that substantial evidence supports the jury’s single employer finding. Their attorney’s 

fees argument depends on reversal of both the Title VII and FEHA verdicts, and by 

affirming Title VII liability we also affirm plaintiff’s legal entitlement to attorney’s fees 

(defendants do not challenge as excessive the amount of the fee award). (See 42 U.S.C. 

§ 2000e-5(k) [“In any action or proceeding under this [subchapter] the court, in its 

discretion, may allow the prevailing party, other than the Commission or the United 

States, a reasonable attorney’s fee”].) As defendants challenge only plaintiff’s legal 

entitlement to fees, and plaintiff was entitled to attorney’s fees under Title VII, 

defendants have not demonstrated error in the attorney’s fee award.

F. PUNITIVE DAMAGES UNDER THE WHISTLEBLOWER STATUTE

Defendants’ opening brief stated that the whistleblower statute (Lab. Code, 

§ 1102.5, subd. (b)) does not cap punitive damages. (Citing Weinstein v. HBE Corp.

(C.D.Cal. 2014) 2014 WL 5602510 [nonpub. opn.] (Weinstein).) We requested 

supplemental briefing regarding whether defendants’ whistleblower liability provides an 

adequate basis for all compensatory and punitive damages awarded. Without addressing 
36

their tacit concession from the opening brief, defendants now argue that plaintiff was not 

entitled to punitive damages under the whistleblower statute because that statute limits 

recovery to contract damages. As plaintiff points out, multiple federal cases applying 

California law have affirmed awards of punitive damages for violations of the 

whistleblower statute (see Teutscher v. Woodson (9th Cir. 2016) 835 F.3d 936, 956

(Teutscher)), but it does not appear that any has specifically addressed whether such 

awards are legally available under that statute. Whether the whistleblower statute allows 

for recovery of punitive damages is a question of statutory interpretation over which we 

exercise our independent judgment to ascertain the Legislature’s intent so as to effectuate 

the purpose of the law. (Hunt v. Superior Court (1999) 21 Cal.4th 984, 1000.)

1. Punitive Damages Are Available Under Labor Code Section 1102.5

The general rule regarding punitive damages is stated in Civil Code section 3294, 

subdivision (a): “In an action for the breach of an obligation not arising from contract, 

where it is proven by clear and convincing evidence that the defendant has been guilty of 

oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover 

damages for the sake of example and by way of punishing the defendant.” The 

whistleblower statute does not state what damages are recoverable if it is violated. It has 

one reference to “penalties” in subdivision (f), which provides: “In addition to other 

penalties, an employer that is a corporation or limited liability company is liable for a 

civil penalty not exceeding ten thousand dollars ($10,000) for each violation of this 

section.” (Lab. Code, § 1102.5, subd. (f).) Also relevant is Labor Code section 1105, 

which states that “[n]othing in this chapter [containing Labor Code section 1102.5] shall 

prevent the injured employee from recovering damages from his employer for injury 

suffered through a violation of this chapter.” 

“When a statute recognizes a cause of action for violation of a right, all forms of 

relief granted to civil litigants generally, including appropriate punitive damages, are 

available unless a contrary legislative intent appears.” (Commodore Home Systems, Inc. 
37

v. Superior Court (1982) 32 Cal.3d 211, 215 (Commodore) [determining that punitive 

damages are available in FEHA private actions].) But “where a statute creates a right that 

did not exist at common law and provides a comprehensive and detailed remedial scheme 

for its enforcement, the statutory remedy is exclusive.” (Rojo v. Kliger (1990) 

52 Cal.3d 65, 79 [rejecting employer’s argument that FEHA was the exclusive legal 

theory under which employees could challenge sex discrimination in the workplace].)

Defendants point to nothing in the whistleblower statute or its legislative history 

suggesting any intent to limit the types of damages available to contract damages. Labor 

Code section 1105 states that nothing shall prevent an injured employee from recovering 

damages for a violation of Labor Code section 1102.5. Labor Code section 1102.5, 

subdivision (f) states that the penalty specified therein is to be imposed in addition to 

other penalties. The whistleblower statute is not a complex and detailed remedial scheme 

such that the remedy mentioned in the statute should be deemed to be exclusive. And the 

availability of punitive damages is consistent with federal authorities that have upheld 

punitive damages awards, though we acknowledge none addressed the issue presented 

here. (E.g., Teutscher, supra, 835 F.3d at p. 956; Thomas v. Costco Wholesale Corp.

(C.D.Cal. 2014) 2014 WL 819396 [nonpub. opn.]; Weinstein, supra, 2014 WL 5602510

[nonpub. opn.].) We conclude that punitive damages are recoverable for a violation of 

the whistleblower statute.

In arguing that plaintiff is restricted to contract remedies for defendants’ violation 

of the whistleblower statute, plaintiff relies on dictum from Lockheed Aircraft Corp. v. 

Superior Court (1946) 28 Cal.2d 481 (Lockheed). In that case several individuals sued 

their former employer, alleging they had been wrongfully discharged in violation of 

Labor Code section 1101 (prohibiting employers from “ ‘[c]ontrolling or directing or 

tending to control or direct the political activities or affiliations of employees’ ”). 

(Lockheed, at pp. 483–484.) The former employer petitioned for a writ of prohibition, 

arguing among other things that there was no civil private right of action to enforce Labor 
38

Code section 1101 because Labor Code section 1103 stated that a violation of Labor 

Code section 1101 was a misdemeanor, rendering it an exclusively penal statute. Citing 

Labor Code section 1105, the Supreme Court determined that “upon violation of [Labor 

Code section 1101], an employee has a right of action for damages for breach of his 

employment contract.” (Lockheed, at p. 486.)

The issue in Lockheed was whether a private right of action exists for violations of 

the statute, not the measure of damages for statutory violations. And the decision 

predated Labor Code section 1102.5 as well as the later California Supreme Court 

decisions like Commodore that provide guidance about how to determine the measure of 

damages for statutory violations. Because we conclude that punitive damages are 

available for a violation of Labor Code section 1102.5, we do not reach the parties’ 

arguments about Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167.

2. Punitive Damages Award Was Not Unconstitutionally Excessive 

Because the whistleblower statute does not cap the amount of punitive damages

(Lab. Code, § 1102.5, subd. (b); Civ. Code, § 3294, subd. (a)), a punitive damages award 

will be reversed only if it is grossly excessive violating due process. (BMW of North 

America, Inc. v. Gore (1996) 517 U.S. 559, 568.) Defendants’ argument that the punitive 

damages award was excessive assumes reversal of the single employer finding 

(defendants contend that the $500,000 punitive damages award is disproportionate to 

Happy Valley’s ability to pay given Happy Valley’s relatively low net worth). Because 

defendants were properly treated as a single employer, and the evidence showed 

defendants’ joint net worth was over $179 million, the punitive damages award was not 

unconstitutionally excessive.

G. COMPENSATORY DAMAGES

Defendants challenge the compensatory damages award on several bases. They 

contend that breach of contract liability supports only economic losses and prejudgment 

interest; that Title VII caps damages based on the size of the defendant-employer; and 
39

that damages for a FEHA violation were inappropriate because defendants were exempt 

from FEHA liability. But we need not address those arguments because, as we have

discussed, the whistleblower statute does not limit recovery to contract damages. 

Following the Supreme Court’s guidance in Commodore, plaintiff was entitled as a

whistleblower to “all forms of relief granted to civil litigants generally.” (Commodore, 

supra, 32 Cal.3d at p. 215.) As such, the whistleblower statute violation is itself an 

adequate basis for all compensatory damages awarded by the jury. 

III. DISPOSITION 

The judgment is modified to delete any reference to liability under FEHA. As so 

modified, the judgment and the separate order awarding attorney’s fees are affirmed. 

Plaintiff is entitled to his costs on appeal. 
____________________________________

Grover, J.

WE CONCUR:

____________________________

Greenwood, P. J. 

__________________________________________

Danner, J. 

H043723, H044098 - Mathews v. Happy Valley Conference Center, Inc. et al.
Trial Court: Santa Cruz County Superior Court

Superior Court No. CV179346

Trial Judge: Hon. John M. Gallagher

Counsel for Plaintiff/Respondent 

JEREMIAH MATHEWS 

Elizabeth Mary Peck

 Peck-Law

Devin Cannell Coyle

 Devin Coyle Law

Counsel for Defendants/Appellants

HAPPY VALLEY CONFERENCE 

CENTER, INC. and COMMUNITY 

OF CHRIST

Michon Marie Spinelli

 Ropers, Majeski, Kohn & Bentley

S. Thomas Todd

 Horvitz & Levy, LLP 

H043723, H044098 - Mathews v. Happy Valley Conference Center, Inc. et al.