Pennsylvania Superior Court allows whistleblower claim to circumvent PHRA administrative process

Here's an interesting (albeit unpublished) decision from the Superior Court of Pennsylvania: Harrison v. Health Network Laboratories, LP.

The plaintiff alleged that her employer fired her in retaliation for reporting that her supervisor was creating a hostile work environment for non-Indian employees. If you practice law in Pennsylvania, this probably sounds like a classic Pennsylvania Human Relations Act (PHRA) claim. The PHRA prohibits retaliation for protected activity, like reporting discriminatory harassment.

Here's the thing - the plaintiff filed a claim under the Pennsylvania Whistleblower Law (PWL) instead. The PWL prohibits retaliation for a good faith report of "wrongdoing." She claims her employer fired her for reporting the "wrongdoing" of creating a hostile work environment.

The employer argued that the PHRA pre-empts the PWL. The Superior Court rejected this argument primarily because the PHRA pre-dates the PWL. So, the Court concluded that the employee may proceed with her PWL claim.

Why does this matter? It matters because the PHRA requires that plaintiffs exhaust their administrative remedies before they file a lawsuit in court. Employees generally must go through the administrative process with either the EEOC (if federal discrimination statutes are involved) and/or the PHRC (if state discrimination statutes are involved). This decision appears to allow retaliation plaintiffs to just skip those pesky administrative processes and go straight to court.

One important note: The PWL only protects employees of a "public body" (although, that term has been broadly interpreted to include recipients of public funds as well as government entities).

3d Cir: FCA retaliation requires "but for" causation

Not official use.

Last week, the Third Circuit issued a precedential opinion in DiFiore v. CSL Behring LLC. DiFiore claimed that her employer fired her (technically, constructive discharge) in retaliation for whistleblowing activity. In particular, she internally reported concerns about "the activities of CSL and its employees in marketing drugs for off-label use and including off-label use in sales forecasts."

DiFiore included a claim of retaliation under the False Claims Act (FCA). The Third Circuit concluded that a jury instruction that FCA retaliation required "but for" causation (as opposed to the lower burden of a "mixed motive" instruction) was appropriate.

Did you Know - In Pennsylvania Child Abuse Reporting is Protected Activity

Under a Pennsylvania statute, an employee may bring a lawsuit if (s)he is "discharged from employment or is discriminated against with respect to compensation, hire, tenure, terms, conditions or privileges of employment" as a result of making a good faith report of child abuse. 23 Pa. Stat. and Cons. Stat. Ann. § 6320.

Not official use.

The law covers both mandated reporters and anyone who is "encouraged" to report child abuse. However, "[a]ny person" is encouraged to report child abuse under the statute, so that seems to cover everyone. The Pennsylvania Department of Human Services has established a ChildLine to accept reports of child abuse 24-7.

The statute provides for "appropriate relief, which may include reinstatement of the plaintiff with back pay."

SCOTUS on Whistleblowers and Regulations

Earlier this week, the Supreme Court issued its opinion in DHS v. MacLean.

In 2003 (sometimes these case take a while to unfold!), a federal air marshal received a text that TSA was " cancelling all overnight missions from Las Vegas until early August." Just days earlier, the TSA had briefed the marshal about terrorist plots to hijack passenger flights. So, believing that cancelling the flights was dangerous and illegal, the marshal contacted a reporter and disclosed the cancellation of the missions. The TSA found out and fired him.

The marshal claimed the TSA violated federal statutory whistleblower protections under 5 U. S. C. §2302(b)(8)(A). The government claimed that the firing fell under an exception to the whistleblower protection for disclosures "specifically prohibited by law." The "law" they relied upon was a TSA regulation that prohibited disclosure of "sensitive security information."

Bottom line? The Court held that a regulation did not count as a "law." Therefore, even if the marshal violated the regulation, he did not violate the law. Therefore his activity was protected by the whistleblower statute.

Fun sidenote: Justice Sotomayor (joined by Justice Kennedy) authored a dissent in which she cites Justice Scalia's book, Reading Law: The Interpretation of Legal Texts (co-authored by Bryan Garner). Nice plug, Justice Sotomayor!

SCOTUS Adopts Broad Interpretation of SOx Whistleblower Retaliation Provision

Basic Holding

Yesterday. the Supreme Court issued its opinion in Lawson v. FMR LLC (opinion here). The Court interpreted Sarbanes Oxley's whistleblower retaliation provision:

No [public] company . . . , or any officer, employee, contractor, subcontractor, or agent of such company, may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of [whistleblowing or other protected activity].

18 U.S.C. § 1514A(a) (2006 ed.). Protected activity under SOx includes reporting fraud against shareholders of publicly traded companies. The opinion describes the issue presented as:

This case concerns the definition of the protected class: Does §1514A shield only those employed by the public company itself, or does it shield as well employees of privately held contractors and subcontractors—for example, investment advisers, law firms, accounting enterprises— who perform work for the public company?

Of course, my ears perked up at "law firms." So, what's the bottom line? The Court concluded that the "whistleblower protection extends to employees of contractors and subcontractors."

The Lineup

We got an interesting lineup in the majority opinion. Justice Ginsberg wrote for Justices Roberts, Breyer, Kagan, Scalia, and Thomas. However,. Justices Scalia and Thomas broke off in a concurring opinion by Scalia.

The gist of that opinion was that Ginsberg was spot on with her interpretation of the text of the statute and its context - but, her reliance on congressional intent was misplaced. Anyone who has followed Justice Scalia's career is familiar with this rant (does he just cut and paste these from one case to the next?). In any event, he and Thomas believe that we should look to the original meaning of the text of the law, and that congressional intent is "fiction."

The Dissent

Justice Sotomayor wrote a dissent, joined by Justices Kennedy and Alito (another odd matchup). She opens with a colorful description of how the Court's majority opinion may be applied:

The Court’s interpretation gives §1514A a stunning reach. As interpreted today, the Sarbanes-Oxley Act authorizes a babysitter to bring a federal case against his employer—a parent who happens to work at the local Walmart (a public company)—if the parent stops employing the babysitter after he expresses concern that the parent’s teenage son may have participated in an Internet purchase fraud. And it opens the door to a cause of action against a small business that contracts to clean the local Starbucks (a public company) if an employee is demoted after reporting that another nonpublic company client has mailed the cleaning company a fraudulent invoice.

She concludes by noting that Congress has the power to restrict the reach of SOx to preclude the broad reach of the Court's majority interpretation.

Receipt of UC Benefits Not Enough to Rebut Non-Retaliatory Reason

The Commonwealth Court of Pennsylvania recently decided a claim under the Whistleblower Act in Evans v. Thomas Jefferson University, 81 A.3d 1062 (Pa. Commw. Ct. 2013). In many ways, the case was uninteresting - Plaintiff couldn't establish a causal connection, couldn't establish that she engaged in protected activity, and lost accordingly.

The Court did touch on one interesting issue though:

[Plaintiff] also argues that the decision of the Unemployment Compensation Board of Review that she was entitled to unemployment benefits shows that there are material issues of fact as to whether her discharge was retaliatory. We do not agree. The issue in the unemployment case was whether [her] behavior rose to the level of willful misconduct sufficient to deny her benefits, not whether [Defendant] had a legitimate reason for discharging her. See Webb v. Unemployment Compensation Board of Review, 670 A.2d 1212, 1215 (Pa.Cmwlth.1996). Nothing in the unemployment decision suggests either that [Plaintiff] was discharged for any reason other than the co-worker's complaint or that [Defendant] did not believe that [she] had acted rudely to the co-worker. Indeed, the Unemployment Compensation Board of Review found that “[d]uring the course of her employment, the claimant received warnings about rude behavior to others” and that Evans was discharged for the incident with the co-worker.

Id. at 1071-72 (record citations omitted).

If you're a plaintiff in an employment case, I still think you want that UC decision in your favor (certainly, you still want the benefits!). It shows that the employer has failed to establish that the employee was fired for "willful misconduct." But, that doesn't preclude the employer from showing that it had a legitimate non-retaliatory reason (a lower threshold).

In this case at least, the mere fact that the employee was receiving UC benefits was not enough to rebut the defendant's evidence of a legitimate non-retaliatory reason for her termination. The Commonwealth Court affirmed the trial court's grant of summary judgment in favor of the employer.

Zimmerman Trial Leads to Whistleblower Lawsuit

Apparently, we can never have too much commentary about the George Zimmerman trial. Poor me, I've been stuck on the sidelines because I don't practice criminal law, let alone Florida criminal law. But, against all odds, the criminal trial of a neighborhood watchman who killed a teenager has somehow led to . . . employment law!

The information technology director for Florida state attorney Angela Corey announced that he will be filing a whistleblower lawsuit:

Ben Kruidbos, Corey's former director of information technology, was fired after testifying at a pre-trial hearing on June 6 that prosecutors failed to turn over potentially embarrassing evidence extracted from Martin's cell phone to the defense, as required by evidence-sharing laws. "We will be filing a whistleblower action in (Florida's Fourth Judicial District) Circuit Court," said Kruidbos' attorney Wesley White.

I haven't seen the Complaint yet, but would like to follow this case and provide some updates and analysis.

Of course, George Zimmerman was found not guilty. One of his attorneys, Don West, (in?)famously called the prosecution "disgraceful" after the trial.

Image: George Zimmerman's Florida mug shot, public domain.

Lawffice Links - Snowden: Whistleblower or Criminal

Employment law doesn't usually entail top secret national surveillance programs, accusations of treason, and international media firestorms . . . so the least I can do is bake some Lawffice Links when it does:

• THE ORDER: The top secret order that kicked off the media coverage (fun fact: the judge who signed the order, Roger Vinson, is the same Florida judge who ruled that Obamacare was unconstitutional and struck down the entire law).
• TREASON: Senator Nelson accuses Edward Snowden of treason.
• DEBATE: New York Times Room for Debate:Leak Case, a Whistle-Blower or a Criminal.
• LEGAL RISKS: CNN Video: Legal Risks for NSA Leaker.
• WHISTLEBLOWER PROTECTION: Loopholes Exclude Intelligence Contractors Like Snowden from Whistleblower Protections.

Guest Post: Rutgers, Whistleblowers, and Extortion

By Stephanie Sautter
Ms. Sautter is a 2L at Catholic University and Lead Articles Editor of the Catholic University Law Review

Just about everyone has seen the video of recently fired Rutgers University basketball coach Mike Rice abusing his players, both physically and verbally. The video, which ESPN aired last week, showed clips of Rice throwing basketballs at his players, kicking them, and shoving them. Less than 24 hours after it aired, Rice had been fired. Eric Murdock, the former Director of Player Development, compiled the video footage. Murdock gained public sympathy when he said that he tried to take steps to end the abuse, but was fired for doing so on July 2, under the false pretense that his contract was not being renewed.

The Whistleblowing Claim

Given the allegations, it was not too surprising when Murdock filed a wrongful termination suit in state court on April 5 (complaint can be seen here). He names several defendants, including Rutgers University, the current and former presidents of the university, Mike Rice, and former Athletic Director Timothy Penetti.

Murdock is alleging that his employment with Rutgers was terminated in direct response to his complaints about Rice’s offensive behavior. Essentially, he is saying that the employment decision was a result of illegal retaliation. Murdock is suing under New Jersey’s Conscientious Employee Protection Act, which created a cause of action for retaliatory discharge. Terminating an employee in response to the filing of an internal complaint is actionable retaliatory discharge under the Act. Therefore, Murdock’s complaints about Rice are protected, and Rutgers may be held liable if its actions were taken in response to the complaints. The issue may come down to whether Murdock can establish that he filed a complaint before the decision about his contract was made. He says this is the case, but has not yet provided evidence (failing to provide evidence seems to be a consistent problem for Murdock – Rutgers says he also made allegations about NCAA violations, including paying players, but did not provide any supporting evidence).

Rutgers has stated that Murdock’s contract was simply not renewed, which Murdock claims is not true. Rather, Murdock claims that his contract was actually renewed (although there is no evidence of this) and Rutgers’ contract renewal explanation is merely pretext. So far, Rutgers has not offered much justification for their decision other than a dispute Murdock had with Rice regarding missing 35 minutes of basketball camp – but that reason seems pretty flimsy. Odds are, Rutgers has compiled a laundry list of Murdock’s misconduct that they will say influenced their employment decision, but the court may determine that it was actually retaliation.

Extortion Investigation

Soon after filing his suit, however, information surfaced that was far less sympathetic to Murdock: he may have tried to extort Rutgers out of almost one million dollars. This week, the media obtained a 2-page letter, dated December 27, 2012, from Murdock’s attorney, Barry A. Kozyra to Rutgers University’s attorney, John K. Bennett (entire letter can be seen here). The letter requested a $950,000 “settlement” of Murdock’s (not yet filed) wrongful termination claim. Murdock’s salary with Rutgers was $70,000 - less than a 1/10 of the “settlement offer.” I’m admittedly not well versed in the art of extortion, but I’m guessing “don’t send a signed and dated extortion letter” is pretty high on the list of things not to do if you want to get away with it. Unfortunately for Murdock, though, his “settlement offer” was signed and dated, which might explain why F.B.I. Special Agent James Tareco visited the Rutgers campus. Murdock’s lawyer called the extortion claim “nonsense,” and said that the letter was a standard request to settle before filing suit.

What’s more, Murdock compiled the 30-minute video by painstakingly editing hundreds of hours of video footage, which he obtained pursuant to New Jersey’s freedom of information statute. Obviously this video is horrible no matter what, but the way in which Murdock went about creating it, along with his leaking it to ESPN rather than just filing his wrongful termination suit, does make it look a bit like extortion.

The Impact of an Extortion Attempt on his Whistleblowing Claim

Although settlement offers are not usually admissible in trial, evidence of an FBI investigation may be. An extortion attempt does not necessarily change the legality of Rutgers’ employment decision, but may still be helpful to Rutgers in determining damages or a settlement amount. If Murdock was taking steps in preparation of an extortion attempt while he was still employed, Rutgers could use evidence of the misconduct to severely limit the relief available to Murdock. The “after-acquired evidence” doctrine allows relief to be limited to back-pay based on evidence obtained after the retaliatory action, if the evidence would have been a legitimate basis for terminating the employee had the employer known about it at the time.

This means that Rutgers could benefit by obtaining evidence that Murdock was taping practices or discussions with or of Rutgers officials that he then used to extort Rutgers. Murdock certainly would have been fired for any known preparation of an attempt to extort Rutgers.

Note from Phil Miles: First, I'd like to thank Ms. Sautter for contributing this post. I would like to offer a few counterpoints in defense of Mr. Murdock. It is not unusual for an ex-employee to make a settlement demand prior to filing suit and as someone who does a lot of defense work, ridiculously high settlement demands are likewise not that unusual. The media "leak" does cause a little concern though. I also wanted to note that he has only filed a complaint so the lack of evidence at this stage is not a problem - although it may be down the road. I'd love to get some feedback on the line between settlement demands and extortion - so drop a comment!

Image: Rutgers logo used in commentary on matter of public interest. Not official use.

Whistleblower-Palooza

It seems like whistleblower protection is a hot topic lately (well, along with that whole part of the health care law is unconstitutional thing). There are two topics of note in the whistleblower arena.

First, the Senate passed the Whistleblower Protection Enhancement Act. The Washington Post had some coverage, noting that:

The Senate has passed enhanced protections for government employees and contractors who report cases of waste, fraud and abuse.

Perhaps the most shocking part of the article is the statistic that the existing Whistleblower Protection Act has led to a "3-210 record against whistleblowers for decisions on the merits since October 1994." (Hat Tip: HR Hero via Twitter).

Additionally, the Wall Street Journal covered the challenges in ramping up the new Dodd-Frank whitleblower protections program:

The Dodd-Frank law dangles a pile of money in front of whistleblowers who tip off the Securities and Exchange Commission and Commodity Futures Trading Commission to financial fraud. But collecting the bounty could be a challenge.

The article draws comparisons to the delays in the IRS's implementation of its own compensation for information program. (Hat Tip: Paul Secunda via Twitter).

Whistleblowing appears to be getting more protection every day, so it would be wise to keep up with the latest developments.

Posted by Philip Miles, an attorney with McQuaide Blasko in State College, Pennsylvania in the firm's civil litigation and labor and employment law practice groups.