Category: Retaliation

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Retaliation Whistleblower Law

Expanded Whistleblower Protections: Sarbanes-Oxley extends to employees of privately held companies

On March 4th, the United States Supreme Court handed down the decision of Lawson, et al.  v. FMR LLC, et al., 2014 U.S. LEXIS 1783 (March 4, 2014). Lawson addressed a situation where employees of a privately held company that contracted with a publically held firm claimed to be “whistleblowers” under the protection of the Sarbanes-Oxley anti-retaliation law.

The majority in Lawson constituted a rather motely crew. Justice Ginsburg, a reliable liberal on the bench, delivered the majority opinion. To no surprise, she was joined by Justice Breyer and Kagan. As a bit of a surprise, she was also joined by Chief Justice Roberts and Justice Scalia. Justice Thomas dissented. He was joined by Kennedy and Alito. Justice Sotomayor also filed a dissenting opinion.

The case involved a Plaintiff who alleged “that he was fired in retaliation for raising concerns about inaccuracies in a draft SEC registration statement concerning certain Fidelity funds.” Fidelity is a publically held company. However, it is a publically held company that has absolutely no employees. Zero. The Plaintiffs were essentially part of a management company, which is not publically held, that provides services to Fidelity. According to the Supreme Court, the issue was whether Sarbanes-Oxley:

shield[fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][s] only those employed by the public company itself, or does it shield as well employees of privately held contractors and subcontractors – for example, investment advisors, law firms, accounting enterprises – who perform work for the public company?

The Supreme Court, citing both statutory interpretation and “common sense,” held:

We hold, based on the text of [the statute] the mischief to which Congress was responding, and earlier legislation Congress drew upon, that the provision shelters employees of private contractors and subcontractors, just as it shelters employees of the public companies served by the private contractors and subcontractors.

This makes a whole heck of a lot of sense. A company should not be able to shield itself from whistleblower protection by simply refusing to employ anybody. In other words, it shouldn’t be able to outsource all of their management to a privately held company to avoid Sarbanes-Oxley liability. Moreover, it provides a deterrent to the exact type of illegality that Sarbanes-Oxley attempted to address. Now, lawyers, accountants, consultants, and other contractors who were aware of fraud at a publically held client, can do what they should do. They can blow the whistle on this activity and be assured that the whistleblower protections of Sarbanes-Oxley will protect them in the event they are a victim of retaliation.

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Categories
Retaliation Whistleblower Law

TENNESSEE LAW: Everyone Loses Under Proposed “Whistleblower” Legislation*

You’ll have to search long and hard to find a group of folks who love the great state of Tennessee more than my law partners and I do.  Unfortunately, there is some legislation being proposed that is quite uncharacteristic of the values that make this state so special. Especially for those of you who work in, manage and/or own businesses.

 Under proposed Senate Bill 2126/House Bill 1954, there are two general realities:

–         Employees who “blow the whistle” on illegal conduct within their place of work will be virtually unprotected from retaliation;  and

–         Employers will lose internal control when it comes to handling illegal conduct that may be occurring within its operations.

Under current state law, an employee can blow the whistle on illegal activity in the workplace without fear of retaliation in two ways: (1) report illegal activity and/or (2) refuse to engage in illegal activity. And, if an employer uses the report or refusal as a factor in making the decision to take an adverse action against the employee, then the employee may recover economic and non-economic damages. Makes sense, right?

Well, the proposed bill would change existing law in several detrimental ways:

–         First, it requires employees to prove that the report or refusal was the “sole cause” for the retaliation.  That means that if an employer can point to, not prove, any other reason to discharge the employee, even if it is trivial (e.g. “we had a personality conflict…”), the employee is left unprotected.

–         Second, if employees bring the illegal activity to the attention of management (Which almost always happens. And, sensibly so, I might add)…you guessed it, the employee is not protected.  Instead, they are protected only if they go outside of management such as to a third party.  Think about it, shouldn’t an employee feel secure in bringing this type of information to his boss without fear of losing his job? Further, as an owner or manager, don’t you deserve (or want) to know about the illegal activity in order that it may be stopped expeditiously?   The proposed bill instructs employees to take the matters outside the company.  Over time, of course, employees may learn to go outside the company more frequently.  But, this will burden employers and regulatory agencies much more significantly than internal reporting.

–         Third, this law actually encourages employers to retaliate quickly.  If an employee dares bring a matter to the attention of higher management, but before going to an outside source, higher management is rewarded by firing them immediately.  Is the employee protected? NOPE.

–         Fourth, the economic relief for an employee who is fired for reporting or refusing to engage in illegal activity, is limited.  This, in turn, rewards corporate wrongdoers at the expense of the blameless employee. Surely we don’t want to encourage any corporate misfits to calculate the financial risk of breaking the law only to find that the risked loss is less than the gain…

–         Finally, this law will limit the types of illegal actions which can be the basis of a whistleblower claim. Strange…my parents taught me that wrong was wrong and right was right.

 Some of you (if you’re still reading) may be asking, “okay Jonathan, what’s the silver lining?”  Well, the bill hasn’t passed yet…get on the phone and talk to your representative.

*The information above is taken largely from some materials created by my partners and colleagues who are far more versed in these legislative issues than I. With some commentary thrown in, I wanted to highlight some of the points I find to be particularly alarming. Feel free to contact our office if you would like some more information.

Categories
ADA & ADAA Age Discrimination (ADEA) Bankruptcy Discovery FMLA Overtime/Wage & Hour Retaliation Sex Discrimination Sexual Harassment Title VII Uncategorized Whistleblower Law

17th Annual TBA Labor and Employment Forum

Here’s a great CLE opportunity that will cover a ton of labor and employment topics.  The 17th Annual TBA Labor and Employment Forum is April 12 in Nashville.  I will be speaking about current developments in wage and hour law. 

This is my second year to speak at this event, and it’s an honor to be included among such great employment lawyers from across the state.  This year, the line-up of speakers includes  Judge Clifford Shirley, John Bode, Bob Boston, Stan Graham, and Mark Travis.  Register at http://tinyurl.com/azdyxcl

Categories
Retaliation Whistleblower Law

Silencing the Whistleblower: Using Confidentiality Agreements to Prevent the Reporting of Illegal Activity by Employees

          Increasingly, employers are adopting generic “confidentiality policies” which prevent employees from sharing any internal documents with persons outside of the company.  But what if these internal documents implicate ongoing illegal activity by the employer?  What if the employee, by remaining silent, faces criminal prosecution for remaining silent about illegal activity?

          The rights of employees to “blow the whistle,” or to oppose unlawful activity, may often conflict with an employer’s internal confidentiality policies.  Whether the employee’s right to blow the whistle usurps the employer’s right to strict confidence can be a thorny issue.

          The Sixth Circuit has employed a six-factor test to determine whether an employee may provide confidential information which otherwise violates an employer’s internal confidentiality agreement.  Those six factors include:  (1) how the documents were obtained; (2) to whom they were given; (3) the content of the documents; (4) the reason they were produced; (5) the scope of the confidentiality agreement; and (6) whether the employee could preserve the evidence without violating the confidentiality agreement. Niswander v. Cincinnati Ins. Co., 529 F.3d 714 (6th Cir. 2008).

          The employee in Niswander, an insurance adjuster, produced significant information from claims files to her attorney.  The Sixth Circuit found that her actions in obtaining the documents were appropriate in light of her position, and giving them to an attorney was appropriate as well.  However, the employer ultimately prevailed because much of the content of the information was unrelated to the legal claims she sought to pursue.

          After Niswander, a few courts have criticized the vagueness and weight to be given to the various factors.  For example, the New Jersey Supreme Court, in Quinlan v. Curtiss-Wright Corp., 204 N.J. 239, 248 (N.J. 2010), ruled that an employee may use 1,800 documents which she copied to support her lawsuit for gender pay equality. When the employer fired her for breaching the internal confidentiality agreement by using those documents in litigation, the jury found in her favor in a retaliation case.  Boy, did they ever—a $10,649,117 total verdict, including $4,565,479 in punitive damages.  Perhaps peculiarly, the Quinlan court held that copying and removing the documents was not protected activity, but using them in the deposition was protected activity.  In other words, this “fruit from a poisonous tree” was still good fruit indeed.

          What if the employee needs to report illegal activity to the United States in a Qui Tam (False Claims Act) case?  Is there a difference when the government is involved?  It appears so. The False Claims Act (FCA) makes it illegal to fire a person for providing documents to the government. 31 U.S.C. §3730(h).  Some courts have held that claims to the government under the FCA trump any internal confidentiality agreement. See, e.g., United States v. Cancer Treatment Ctrs. Of Am., 350 F.Supp.2d 765, 773 (N.D. Ill. 2004).  Indeed, under the FCA, and employee is supposed to provide information to the United States in secret because the government “must investigate the alleged fraud without tipping off investigation targets at a sensitive stage.” 31 U.S.FC. §3730(b); U.S. ex. Rel. Yesudian v. Howard Univ., 153 F.3d 731, 743 (D.C. Cir. 1998).

          So, what are the recommendations for an employee who wishes to report ongoing illegal activity to a lawyer?

          First, per Niswander, determine whether note-taking, as opposed to document production, may be sufficient information for counsel;

          Second, if the employee fears the employer will destroy the documents, consider making an additional copy of the documents and storing them in a safe place at the employer’s worksite;

          Third, if production of the documents to counsel is genuinely necessary for case evaluation, produce a narrow, limited sample and make sure those documents are strictly relevant to the claims to be asserted in a lawsuit;

          Fourth, do not share the documents with family members, friends, or other employees. Instead, limit the production to attorneys only, labeling them “attorney client privileged” so as to indicate the closely held nature of the production; and

          Fifth, if the matter is being produced to the government in furtherance of a False Claims Act case (Qui Tam), consider asking the government to seek an Ex Parte Order from a court allowing the documents to be reviewed by an impartial official.  That provides an additional layer of respect for the documents.

Categories
ADA & ADAA Age Discrimination (ADEA) Retaliation Sex Discrimination Title VII Whistleblower Law

What if an employer says he didn’t know about about the protected activity?

When I was a child, I loved the show “Hogan’s Heroes.”  For those of you who were too young to recall the show, it was about some American POWs in a prison camp in Germany.  Remember, it was a comedy.  These POWs were no more imprisoned than you or I.  They had radios, tunnels, and ran missions from their “prison camp.”

How did they do this?  They had a buffoon of a prison guard named Sergeant Schultz. He surely knew of the comedy that was going on behind the walls of the prison.  Whenever he was asked, however, he would respond with one of the classic lines in TV history:  “I hear nothing; I see nothing; I know nothing.”

Employers have a habit of taking on the Sergeant Schultz character when they find themselves defending an employment discrimination claim.  “I didn’t know she had a workers compensation claim when I fired her.”  “I didn’t know that he had just reported his supervisor for race discrimination.”  “I didn’t know she had complained of sexual harassment.” In other words, they claim that the decision maker did not know about the “protected activity.”  They take the witness stand and effectively say, “I hear nothing; I see nothing; I know nothing.”

This defense is problematic  because it requires employees to prove  when a decision maker learned of protected activity, even though the employer has every incentive to hide this crucial information.  Fortunately, some courts have realized that if a decision maker will lie about one thing, they will lie about everything.

It’s well-settled law that an employee can prove that the employer acted with an illegal motive if she can show that the “reason” an employer gives for the termination is a big fat lie.  In other words, if an employer claims that he fired a pregnant lady because was late to work, but the employee can prove that she arrived on time, then the jury can “infer” that the real reason was her pregnancy.  This is called a “pretext.”  Again, that’s a fancy legal word for “big fat lie.”

Employees and their attorneys should use pretext evidence where an employer is claiming he does not know of the protected activity.  “Pretext evidence” can also be used to estabish an employer’s knowledge of protected activity.  If an employee can show that an employer is lying about material matters in case, the jury should be able to infer that he knows about the protected activity and is trying to cover up the discrimination.

 Wise judges have reasoned that if the employee can show that the reason given by the employer for her termination is not true, then the jury can conclude both that the true motivation was illegal andthat the employer knew about the protected activity. See e.g. Cunningham v. Black & Decker, No. 05-1297 T-An.  (W.D. Tenn. 2008); (holding that the jury could conclude that an alleged decision maker knew of the protected activity where his credibility has been impeached on other matters);  see also Allen v. Chicago Transit, 317 F.3d 699‑700 (7th Cir. 2003)(When a witness is impeached on material matters,  his credibility becomes an issue for the jury.  It is well-settled that summary judgment is not appropriate on employment discrimination cases in light of such evidence);  O’Malley, Grenig & Lee, Federal Jury Practice and Instructions § 15.06 (5th ed.2000) (model text of “falsus in uno, falsus in omnibus” as a jury instruction); 10A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2726, at 446 (3d ed. 1998) (“Clearly, if the credibility of the movant’s witnesses is challenged by the opposing party and specific bases for possible impeachment are shown, summary judgment should be denied and the case allowed to proceed to trial”).

 The moral of the story?  Be sure your lies will find you out.

 

 

Categories
ADA & ADAA Age Discrimination (ADEA) Retaliation Whistleblower Law

Allegations of Discrimination and Retaliation at the University of Tennessee: Employment Law Meets College Athletics

There’s a lot more action in the courtroom than on the football field at the University of Tennessee these days. This blog is the first in a series of periodic posts that will explore allegations of illegal employment practices in the U.T. Athletics Department.

Nearly two decades ago, I was an undergraduate at U.T.  As part of a course project, I was on a team of students who did an organizational evaluation of the Women’s Athletics Department.  UT was one of the few universities that separated its men’s’ and women’s’ athletics departments.  I had the opportunity to meet former women’s athletics director Joan Cronan, who was extremely gracious to me and my fellow students.  I also met Debbie Jennings, who struck me as a no-nonsense but deeply committed sports information director. 

At the time, President Joe Johnson was admired and respected by students, faculty, and alumni.  Joan Cronan presided over arguably the most successful women’s athletic program in the country.  And Pat Summitt was . . . well, she was Pat Summitt.

Much has now changed.  The women’s athletic program has merged with the men’s program.  Dave Hart, a new athletic director, is steering the ship.  Pat Summitt has retired under increasingly unclear circumstances.  And Debbie Jennings was forced to resign and has filed a discrimination and retaliation case against the university.

For an overview of the circumstances, you can read this link: http://www.govolsxtra.com/news/2012/oct/03/debby-jennings-suit-amended-to-include-pat/

The strange case of Jennings, Hart, and Pat Summitt is the stuff of law school examinations.  While playing out dramatically in the newspapers, it also reaches across the pantheon of contemporary employment laws.

How strong are Debbie Jennings age and sex discrimination claims?

Can she use statistical evidence, such as the change in the gender make up of employees, as evidence of illegal discrimination? 

Was Pat Summitt protected from termination under the Americans with Disabilities Act?

Was Debbie Jennings protected from termination if she stood up for Summitt?

Can the athletics director’s past actions be used in against him in this case?

These questions involve the intersection of:

–           the Age Discrimination in Employment Act,

–           the Americans with Disabilities Act,

–          the use of statistical evidence in discrimination cases,

–          whistleblower laws,

–          use of “prior inconsistent statements” under evidence law, and

–          use of “other act” evidence under Fed.R.Evid. 404(b).

Law nerds who care nothing about sports are giddy about this case.

Stay tuned.  More posts to follow.

Categories
Retaliation Whistleblower Law

A Lesson in Whistleblower Employment Law from Penn State

Like everyone, I’ve watched the events at Penn State unfold with shock. As an employment lawyer, there was one aspect of this case that was troubling but, unfortunately, not surprising.

Do you recall the portion of the report commissioned by the university that detailed the experience of two janitors in the Penn State athletic department? One of the janitors witnessed an incident of child rape. He was a Korean War veteran. He told his fellow custodian about it. He said that it was most horrible thing he had ever witnessed, worse than the hell of war.

The janitors, however, did not report it. Why?  Because they understood the culture of the place where they worked. They believed they would be fired if they came forward. In his report, Judge Freeh infers they were probably right.

Employment lawyers see this all the time. A victim doesn’t report sexual harassment because she needs her job and fears the consequences. A whistleblower comes forward and finds himself in the unemployment line.

Very little of any value will come of the events in State College, PA.  Hopefully, however, some  lessons will be learned. Here are a few from the prospective of someone who deals with employment lawsuits every day.

1. For victims, don’t be afraid to report abuse, sexual harassment, or employer misconduct.

2.  For workers who know of illegality in the workplace, have the courage to speak out. If you don’t stop it, nobody will. Talk to an employment attorney. There are laws in place to protect you.

3.  For employers, the lesson is clear. Culture matters. You have a choice. You can create a culture of compliance that values the well-being of your employees. Alternatively, you can cultivate a culture that discourages reports of illegal activity.  If you choose this course, however, you may face a jury one day and have to explain how you’re any different from those that called the shots at Penn State.