Tag: retaliation

Sixth Circuit Clarifies When Statute of Limitations Commences in False Claims Act Whistleblower Retaliation Cases

On January 10, 2022, the Sixth Circuit held in El-Khalil v. Oakwood Healthcare, Inc., 2022 WL 92565 (6th Cir. Jan 10, 2022) that the statute of limitations period for a False Claims Act whistleblower retaliation case commences when the whistleblower is first informed of the retaliatory adverse employment action.

El-Khalil’s False Claims Act Whistleblower Retaliation Claim

While working as a podiatrist at Oakwood Healthcare, El-Khalil saw  employees submit fraudulent Medicare claims, which he reported to the federal government. In 2015, Oakwood’s Medical Executive Committee (MEC) rejected El-Khalil’s application to renew his staff privileges.  After commencing a series of administrative appeals, El-Khalil found himself before Oakwood’s Joint Conference Committee (JCC) on September 22, 2016. The JCC, which had the authority to issue a final, non-appealable decision, voted to affirm the denial of El-Khalil’s staff privileges.  On September 27, 2016, the JCC sent El-Khalil written notice of its decision.

Three years later, on September 27, 2019, El-Khalil sued Oakwood for retaliation under the False Claims Act whistleblower retaliation law.  Oakwood moved for summary dismissal on the basis that the claim was not timely filed in that the JCC’s decision became final when it voted on September 22, 2016 and therefore the filing on September 27, 2019 was outside of the 3-year statute of limitations. The district court granted Oakwood’s motion and El-Khalil appealed.

Sixth Circuit Denies Relief

In affirming the district court, the Sixth Circuit held that the text of the FCA anti-retaliation provision (providing that an action “may not be brought more than 3 years after the date when the retaliation occurred”) is unequivocal that the limitations period commences when the retaliation actually happened. It adopts “the standard rule” that the limitations period begins when the plaintiff “can file suit and obtain relief,” not when the plaintiff discovers the retaliation. The retaliation occurred on September 22 when the JCC voted to affirm the denial of El-Khalil’s staff privileges, and the JCC’s September 27 letter merely memorialized an already final decision.

In addition, the Sixth Circuit held that the False Claims Act’s whistleblower protection provision does not contain a notice provision. As soon as Oakwood “discriminated against” El-Khalil “because of” his FCA-protected conduct, he had a ripe “cause of action triggering the limitations period.” The court noted that if an FCA retaliation plaintiff could show that the employer concealed from the whistleblower the decision to take an adverse action, the whistleblower might be able to avail themself of equitable tolling to halt the ticking of the limitations clock.

Implications for Whistleblowers

Some whistleblower retaliation claims have a short statute of limitations and therefore it is critical to promptly determine when the statute of limitations starts to run.  For most whistleblower retaliation claims that are adjudicated at the U.S. Department of Labor, the clock for filing a complaint begins to tick when the complainant receives unequivocal notice of the adverse action.  Udofot v. NASA/Goddard Space Center, ARB No. 10-027, ALJ No. 2009-CAA-7 (ARB Dec. 20, 2011).  If a notice of termination is ambiguous, the statute of limitations may start to run upon the effective date of the termination as opposed to the notice date.  Certain circumstances may justify equitable modification, such as where:

  1. the employer actively misleads or conceals information such that the employee is prevented from making out a prima facie case;
  2. some extraordinary event prevents the employee from filing on time;
  3. the employee timely files the complaint, but with the wrong agency or forum; or
  4. the employer’s own acts or omissions induce the employee to reasonably forego filing within the limitations period.

See Turin v. AmTrust Financial Svcs., Inc., ARB No. 11-062, ALJ No. 2010-SOX-018 (ARB March 29, 2013).

When assessing the statute of limitations for whistleblower retaliation claims, it is also critical to calculate the deadline to timely file a claim for each discrete adverse action or each act of retaliation.  However, in an action alleging a hostile work environment, retaliatory acts outside the statute of limitations period are actionable where there is an ongoing hostile work environment and at least one of the acts occurred within the statute of limitations period.  And when filing a retaliation claim, the whistleblower should consider pleading untimely acts of retaliation because such facts are relevant background evidence in support of a timely claim.

Article By Jason Zuckerman of Zuckerman Law

For more whistleblower and business crimes legal news, click here to visit the National Law Review.

© 2022 Zuckerman Law

Virginia Employees Protected From Retaliation for Raising Concerns About COVID-19 Workplace Safety Issues

On June 29, 2020, the Virginia Safety and Health Codes Board moved forward with an emergency workplace standard to curb the spread of COVID-19. These standards would apply to all Virginia employers and places of employment under the jurisdiction of the Virginia Occupational Health and Safety Administration.

Pursuant to 16 VAC 25-220, Emergency Temporary Standard, employers would be required to:

  • Mandate physical distancing on the job, i.e., “keeping space between yourself and other persons while conducting work-related activities inside and outside of the physical establishment by staying at least 6 feet from other persons. Physical separation of an employee from other employees or persons by a permanent, solid floor to ceiling wall constitutes physical distancing from an employee or other person stationed on the other side of the wall.”
  • Clean and disinfect all common spaces, including bathrooms, frequently touched surfaces, and doors at the end of each shift, and where feasible, disinfect shared tools, equipment, and vehicles prior to transfer from one employee to another.
  • Provide personal protective equipment to employees and ensure its proper use in accordance with VOSH laws, standards, and regulations applicable to personal protective equipment, including respiratory protection equipment when engineering, work practice, and administrative controls are not feasible or do not provide sufficient protection.
  • Assess the workplace for hazards and job tasks that could potentially expose employees to SARS-CoV-2/COVID-19 and ensure compliance with the applicable standards for “very high,” “high,” “medium,” or “lower” risk levels of exposure.
  • Inform employees of methods of self-monitoring and encourage employees to self-monitor for signs and symptoms of COVID-19 if they suspect possible exposure or are experiencing signs of forthcoming illness.
  • Notify their own employees who were at a worksite with an employee who subsequently tested positive for active COVID-19, other employers whose employees were also present, and the building/facility owner of the affected site within 24 hours of discovery of possible exposure.
  • Develop and implement policies and procedures for employees to report positive results from antibody testing, and while an employee who has tested positive for SARS-CoV-2 antibodies may return to work, employers are not required to allow an employee who has received such a test to return.

In addition, the emergency workplace standard prohibits employers from:

  • Discriminating against or discharging an employee because that employee voluntarily provides and wears their own personal protective equipment, if such equipment is not provided by the employer, as long as that equipment does not create an increased hazard for the employee or other employees.
  • Discriminating against or discharging an employee who has raised a reasonable concern about SARS-CoV-2/COVID-19 infection control to the employer, the employer’s agent, other employees, or a government agency, or to the public through print, online, social, or any other media.

These workplace safety standards are set to go into effect on July 15, 2020, and employers could be fined up to $13,000 for failing to comply.

The United States Department of Labor Occupational Safety and Health Administration (OSHA) has issued guidance to employers to protect workers but has not adopted a binding rule. OSHA provided guidance to employers on preventing worker exposure to SARS-CoV-2/COVID-19 in March 2020, and in June 2020 it released guidance on returning to work. The guidance on returning to work states that employers should continue to be flexible and allow employees to work remotely when possible, use alternative business operations such as curbside pickup to serve customers if feasible, implement strategies for basic hygiene and disinfection at work, encourage social distancing, apply procedures for identification and isolation of sick employees, and provide employee training on the various phases of reopening and necessary precautions. Further, employers should not retaliate against employees for adhering to OSHA’s safety guidelines or raising workplace health and safety concerns. Though these guidelines are not binding, employers are bound by the General Duty Clause of the Occupational Safety and Health Act of 1970, which requires that they provide a safe workplace free from serious hazards.

Virginia’s recently-enacted whistleblower protection law, which became effective July 1, 2020, will protect workers that disclose violations of the emergency workplace standard. In particular, the new Virginia whistleblower protection law provides a private right of action for an employee who suffers retaliation for “in good faith report[ing] a violation of any federal or state law or regulation to a supervisor or to any governmental body or law-enforcement official.” Va. Code § 40.1-27.3(A)(1).

The statute proscribes a broad range of retaliatory acts, including discharging, disciplining, threatening, discriminating against, or penalizing an employee or taking other retaliatory action regarding an employee’s compensation, terms, conditions, location, or privileges of employment because of the employee’s protected conduct. Id. at § 40.1-27.3(A).

A prevailing whistleblower under Virginia’s whistleblower protection law can obtain various remedies, including:

  • An injunction to restrain a continuing violation;
  • Reinstatement to the same or an equivalent position held before the employer took the retaliatory action; and/or
  • Compensation for lost wages, benefits, and other remuneration, together with interest, as well as reasonable attorneys’ fees and costs. at § 40.1-27.3(C).

© 2020 Zuckerman Law

For more anti-retaliation legislation, see the National Law Review Labor & Employment law section.

Chicago City Council Introduces COVID-19 Anti-Retaliation Ordinance, Reflecting Growing Trend

On April 22, 2020, Chicago Mayor Lori Lightfoot, with the backing of several Aldermen, introduced the COVID-19 Anti-Retaliation Ordinance (the “Ordinance”), which, if enacted, would prohibit Chicago employers from retaliating against employees for obeying a public health order requiring an employee to remain at home as a consequence of COVID-19.  This reflects a growing trend among states and local governments in enacting protections against retaliation amid the COVID-19 pandemic.

The Ordinance would prohibit employers from demoting or terminating a “Covered Employee”[1] for obeying an order issued by the Mayor, the Governor of Illinois or the Chicago Department of Public Health requiring the Covered Employee to:

(1) Stay at home to minimize the transmission of COVID-19;

(2) Remain at home while experiencing COVID-19 symptoms or sick with COVID-19;

(3) Obey a quarantine order issued to the Covered Employee;

(4) Obey an isolation order issued to the Covered Employee; or

(5) Obey an order issued by the Commissioner of Health regarding the duties of hospitals and other congregate facilities.

An employer would also be prohibited from retaliating against a Covered Employee for obeying an order issued by the employees’ treating healthcare provider relating to subsections (2), (3) and (4) above.

Finally, the anti-retaliation protections would extend to Covered Employees who are caring for an individual who is subject to subsections (1)-(3) above, and would apply even if workers have exhausted any earned sick-leave time available pursuant to Chicago’s Paid Sick Leave Ordinance.

Affirmative Defense

The Ordinance would allow an employer to assert an affirmative defense if it relied upon a reasonable interpretation of the public health order at-issue and, upon learning of the violation of the Ordinance, cured the violation within 30 days.

Penalties/Damages

The Ordinance has teeth:  violations can lead to fines of up to $1,000 per offense per day, and Covered Employees who have been retaliated against may pursue the following recovery in a civil action: (i) reinstatement; (ii) damages equal to three times the full amount of wages that would have been owed had the retaliatory action not taken place; (iii) actual damages caused directly by the retaliatory action; and (iv) costs and reasonable attorneys’ fees.

Next Steps

The Ordinance has been referred to the Chicago Committee on Workforce Development for further deliberation.

A Growing Trend

The protections the Ordinance would afford to employees are consistent with a growing trend among state and local governments in response to the COVID-19 crisis.  Similar protections have been established through emergency orders or rules in New Jersey, Michigan and Washington which prohibit employers from disciplining or terminating employees for requesting or taking time off after contracting or, in some circumstances, being exposed to COVID-19.  Other states, such as New York and California, have issued guidance applying existing federal, state, and local anti-discrimination and anti-retaliation laws to prohibit employers from discriminating against or refusing to provide reasonable accommodations for employees who contract or are otherwise impacted by the virus. As state legislative and executive responses continue to rapidly evolve, employers should ensure that they are familiar with the latest guidance in each state where their employees are located.

[1] “Covered Employee” generally means any employee who, in any particular two-week period, performs at least two hours of work for an employer while physically present within the geographic boundaries of the City of Chicago.  Chicago, Ill., Mun. Code § 1-24-010.

© 2020 Proskauer Rose LLP.
For more on COVID-19 related employment ordinances, see the National Law Review Coronavirus News section.

New Jersey and New York Further Strengthen Wage and Hour Laws to Protect Employees: Part 1 – NJ Developments

On August 6, 2019, New Jersey substantially amended its wage and hour laws in several critical respects by, among other provisions, expanding the statute of limitations, increasing damages and criminal penalties, strengthening anti-retaliation provisions and, overall, making it easier and more lucrative for employees to prevail on wage and hour claims. The new “Wage Theft” Law is effective immediately, except for one provision identified below. Here is a summary of the key provisions:

    • The Statute of Limitations Expands from 2 to 6 years – The amendment triples the amount of time available to file claims for unpaid minimum wage and overtime payments, thereby tripling the potential damages available to employees. New Jersey now joins New York in implementing a 6-year statute of limitations for such claims. In contrast, the statute of limitations under federal law remains at 2 years or 3 years, depending on whether a willful violation was committed.

    • Liquidated Damages – The amendment provides that, in addition to having to pay earned, unpaid wages, employers also will be liable for liquidated damages of up to 200% of the wages owed. Previously, liquidated damages were not available under New Jersey law. A limited “good faith” defense will be available to first-time violators under certain circumstances.

    • Anti-Retaliation – The amendment expands the anti-retaliation provisions by making it a disorderly persons offense to take retaliatory action by discharging or otherwise discriminating against an employee for making a complaint, instituting an action, or informing other employees about their rights concerning wages and hours of work.There is a rebuttable presumption of retaliation for adverse actions taken within 90 days of an employee filing a complaint with the Department of Labor or a court action. Liquidated damages are available for claims of retaliation.

    • Fines and Penalties – It is now a disorderly persons offense for an employer to (i) knowingly fail to pay wages, compensation or benefits when due, (ii) take retaliatory action, or (iii) fail to pay agreed-upon wages within 30 days of the date when payment is due. An employer who commits any such offense must pay wages due plus 200% of that amount in liquidated damages, reasonable costs and attorneys’ fees, a fine of $500 for a first offense (which increases for subsequent offenses) and, under certain circumstances, an additional penalty of 20% of wages due and/or imprisonment. The amendment provides for a broad definition of “employer” to include officers of a corporation and “any agents having the management of that corporation.”

    • Creation of a New Crime – The amendment creates a new crime of “pattern of wage nonpayment” for a person convicted of violating certain provisions of the Criminal Justice Code and/or wage and hour laws on two or more occasions. Though this is classified as a “3rd – degree” crime, there is no presumption of nonimprisonment. This provision will become effective three months from the August 6 enactment date.

    • Joint and Successor Liabilities – The amendment expands the circumstances under which organizations may now be held liable as joint or successor employers.

    • Failure to Maintain Records – The amendment provides that employers who fail to produce required records are subject to a rebuttable presumption that allegations by the employee concerning the time period the employee was employed and the wages that are due are true.

    • Employer Notice Requirement – The amendment imposes a new written notice obligation on employers. NJ employers will be required to distribute both to current employees and new hires a form the NJ Department of Labor and Workforce Development will publish.

Take Aways

Wage and hour compliance has long been a vulnerable area for employers, and New Jersey employers must now contend with wage and hour protections that are among the strongest in the nation. It is more imperative than ever for New Jersey employers to (i) properly classify workers, where warranted, as employees rather than as independent contractors, (ii) properly classify employees as exempt or non-exempt from overtime requirements, (iii) timely pay employees all wages, compensation and benefits due, including overtime, and (iv) maintain required wage and hour records for at least 6 years.

 

© Copyright 2019 Sills Cummis & Gross P.C.
For more wage-hour laws, see the National Law Review Labor & Employment law page.

Supreme Court Limits Scope of Dodd-Frank Whistleblower Protections

On February 21, the US Supreme Court decided Digital Realty Trust, Inc. v. Somers (583 U.S. ____ (2018)), which resolved a circuit split related to whether the anti-retaliation provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 124 Stat. 1376 (Dodd-Frank) extend to individuals who have not reported a securities law violation to the Securities and Exchange Commission and, therefore, falls outside of Dodd-Frank’s definition of a “whistleblower.”

Paul Somers alleged that Digital Realty Trust, Inc. (Digital Realty) terminated his employment shortly after reporting suspected securities-law violations to the company’s senior management. Somers filed a case in the US District Court for the Northern District of California (District Court) alleging that his termination amounted to whistleblower retaliation under Dodd-Frank. Digital Realty moved to dismiss the claim on the grounds that Somers did not qualify as a “whistleblower” for purposes of Dodd-Frank because (1) the statute defines a “whistleblower” as someone “who provides . . . information relating to a violation of the securities laws to the [SEC];” and (2) Somers failed to report the allegations to the SEC prior to his termination. The District Court denied Digital Realty’s motion and the Ninth Circuit affirmed on the grounds that Dodd-Frank’s whistleblower protections should be read to protect employees regardless of whether they provide information to the SEC.

Reversing the District Court and the Ninth Circuit, Justice Ruth Bader Ginsburg, writing for the Court, explained that Dodd-Frank’s whistleblower retaliation provisions do not extend to an individual who has not reported alleged securities law violations to the SEC. Citing Dodd-Frank’s definition of a “whistleblower,” the Court determined that the statute explicitly required an individual to report such violations to the SEC in order to receive whistleblower protections. The Court found this interpretation of the whistleblower definition to be corroborated by Dodd-Frank’s intended purpose of motivating individuals to report securities law violations directly to the SEC.

The text of the decision is available here.

©2018 Katten Muchin Rosenman LLP
Read more Litigation news on the National Law Review Litigation page.

Massachusetts Commission Against Discrimination: Job Transfer Not Retaliation

Massachusetts Commission Against DiscriminationOn December 30, 2016, a Hearing Officer with the Massachusetts Commission Against Discrimination (MCAD) dismissed the Complainant’s retaliation case, finding that the Complainant had failed to establish a causal connection between his earlier discrimination complaint and a later adverse action. Most interesting was the Hearing Officer’s determination that the Complainant had failed to establish a prima facie case of retaliation as a result of his transfer from one facility to another.  There was no evidence that his transfer “caused Complainant to suffer any tangible economic loss or a change in any other job related benefits.” MCAD v. Mass. Dept. of Corrections, 11-BEM-02854, 2016 WL 7733656 (MCAD).

Underlying Discrimination Claim

Complainant Rigaubert Aime (“Aime”) had been a correction officer with the Massachusetts Department of Correction (“DOC”) for over twenty years. In March 2011, he filed a race discrimination claim with the MCAD and soon thereafter filed internal complaints of unfair treatment by his supervisors. While his internal complaints were all dismissed, the Hearing Officer cited established law in holding that Aime only needed to prove that he — reasonably and in good faith — believed that the DOC had discriminated against him — not that it actually had done so — in order to proceed with his retaliation complaint.

Adverse Action Demonstrated but Retaliation not Proven

 In the ensuing months, Aime claimed he was subjected to disciplinary treatment of several types, including a two-day suspension for performance reasons, which the Hearing Officer concluded were “adverse employment actions” giving rise to retaliation claims.  However, in each instance the Hearing Officer concluded that the DOC’s disciplinary actions were justified for legitimate, non-retaliatory reasons.

Job Transfer Did Not Involve A Material Change

In late July 2011, the DOC informed Aime that he was being transferred from a Pre-Release Center in Roslindale, MA to the Lemuel Shattuck Hospital Correctional Unit in Boston. The DOC Superintendent in Roslindale, the evidence showed, had requested that Aime be reassigned within a few weeks of the filing of Aime’s MCAD discrimination complaint back in March 2011 because of Aime’s repeated conflicts with his supervisors. Aime claimed that transfers in the past had often been viewed as negative or punitive and although his transfer did not involve any material change in his shift, days off, or any other terms or conditions of his employment, including his commuting time, he asserted that his transfer was in retaliation for filing his earlier MCAD complaint. The Hearing Officer did not agree, concluding that the transfer did not “materially disadvantage” him in tangible working conditions. Aime’s subjective feelings of mistreatment, without objective evidence of loss, could not sustain his claim. The Hearing Officer went on to find that, even if the transfer was to constitute an actionable adverse employment action, Aime failed to prove that the reason given for the transfer was a pretext for retaliation.

Take-aways

  1. Just because an employee has filed a claim of discrimination does not immunize the employee from disciplinary action, including discharge.

  2. Just because the employee’s discrimination complaint has been dismissed does not immunize the employer from a retaliation claim.

  3. If the employee’s discrimination claim was asserted in bad faith, it cannot support a retaliation claim. But “bad faith” is difficult to prove.

  4. The temporal proximity between the discrimination complaint and further disciplinary action is a factor in evaluating whether retaliation has occurred, but it is not dispositive.

  5. Employers should not avoid disciplining an employee who has recently filed a discrimination claim. Discipline should be issued as uniformly as possible where the circumstances support it.

  6. A persistent employee may claim retaliation, repeatedly, no matter how justified the employer’s actions may seem. This is no reason to give in.

  7. All disciplinary action should be reviewed to make sure it is well-supported. This is particularly true if a retaliation claim is likely.

  8. Job transfers to a lesser position can support a claim of retaliation. In addition, a longer commuting distance may constitute an adverse employment action.

  9. This case nonetheless illustrates that not every change relating to a job assignment is an adverse employment action. The employee has the burden of proving the adverse employment action and that it was retaliatory.

ARTICLE BY Barry J. Waters of Murtha Cullina

© Copyright 2017 Murtha Cullina

ACA Notice Requirements, Big Data Analytics, OSHA Retaliation Final Rule: Employment Law This Week – October 24, 2016 [VIDEO]

ACA Notice RequirementACA Section 1557 Notice Requirements Take Effect

Our top story: The Section 1557 ACA Notice Requirements have taken effect. Section 1557 prohibits providers and insurers from denying health care for discriminatory reasons, including on the basis of gender identity or pregnancy. Beginning last week, covered entities are required to notify the public of their compliance by posting nondiscrimination notices and taglines in multiple languages.

Final Rule on ACA Issued by OSHA

The Occupational Safety and Health Administration (OSHA) has issued a final rule for handling retaliation under the Affordable Care Act (ACA). The ACA prohibits employers from retaliating against employees for receiving Marketplace financial assistance when purchasing health insurance through an Exchange. The ACA also protects employees from retaliation for raising concerns regarding conduct that they believe violates the consumer protections and health insurance reforms in the ACA. OSHA’s new final rule establishes procedures and timelines for handling these complaints. The ACA’s whistleblower provision provides for a private right of action in a U.S. district court if agencies like OSHA do not issue a final decision within certain time limits.

EEOC Discusses Concerns Over Big Data Analytics

The Equal Employment Opportunity Commission (EEOC) is fact-finding on “big data.” The EEOC recently held a meeting at which it heard testimony on big data trends and technologies, the benefits and risks of big data analytics, current and potential uses of big data in employment, and how the use of big data may implicate equal employment opportunity laws. Commissioner Charlotte A. Burrows suggested that big data analytics may include errors in the data sets or flawed assumptions causing discriminatory effects. Employers should implement safeguards, such as ensuring that the variables correspond to the representative population and informing candidates when big data analytics will be used in hiring.

Seventh Circuit Vacates Panel Ruling on Sexual Orientation

The U.S. Court of Appeals for the Seventh Circuit may consider ruling that Title VII of the Civil Rights Act of 1964 (Title VII) protects sexual orientation. On its face, Title VII prohibits discrimination only on the basis of race, color, religion, sex, or national origin, and courts have been unwilling to go further. In this case, the Seventh Circuit has granted a college professor’s petition for an en banc rehearing and vacated a panel ruling that sexual orientation isn’t covered. Also, an advertising executive who is suing his former agency has asked the Second Circuit to reverse its own precedent holding that Title VII does not cover sexual orientation discrimination. We’re likely to see more precedent-shifting cases like these as courts grapple with changing attitudes towards sexual orientation discrimination.

Tip of the Week

October is Global Diversity Awareness Month, and we’re celebrating by focusing on diversity in our tips this month. Kenneth G. Standard, General Counsel Emeritus and Chair Emeritus of the Diversity & Professional Development Committee, shares some best practices for creating an inclusive environment.

ARTICLE BY George Carroll Whipple, III of Epstein Becker & Green, P.C.

©2016 Epstein Becker & Green, P.C. All rights reserved.

Expanding Retaliation: Fourth Circuit Rejects "Manager Rule" in Title VII Cases

After helping an employee report a complaint of harassment, a manager expresses concern over the company’s handling of the situation and tells the employee the complaint is being mishandled. After the complaining employee files (and then settles) a Title VII against the company, the manager is fired for failing to take a “pro-employer” stance and act in the company’s “best interests.” Does the manager have a Title VII retaliation claim? That is the exact question recently decided by the United States Court of Appeal for the Fourth Circuit in DeMasters v. Carilion Clinic.

According to the complaint, which the court accepted as true for purposes of its review, J. Neil DeMasters began working as an employee assistance program consultant for Carilion in 2006. Two years later, DeMasters was consulted by an employee who complained that his supervisor was sexually harassing him. DeMasters relayed the substance of the complaint to human resources, which investigated the allegations and fired the supervisor. The employee was told the supervisor would never be back in the workplace, but a few days later the employee’s department manager allowed the supervisor to return to collect belongings. The employee complained to DeMasters that he felt uncomfortable at work and that he was facing increasing hostility from the supervisor’s allies and friends.

Upon learning this, DeMasters contacted HR to express his concern with how the situation was being handled, and HR confirmed it was aware the employee was being harassed by co-workers. DeMasters offered to coach the HR department on better ways to handle harassment complaints. HR declined, stating it would handle the situation. However, the employee reported to DeMasters that the harassment continued to get worse on a daily basis. DeMasters then opined to the employee that the complaints were being mishandled by HR. With that, DeMasters stopped having contact with the complaining employee.

Two years later, however, the employee filed a Title VII claim, which was settled. A few weeks after the settlement, DeMasters was called into a meeting with corporate counsel, the vice president of HR, and his own department director. DeMasters was told that by not taking the “pro-employer side,” he had put the company at risk of substantial liability. Two days later, DeMasters was fired for, among other reasons explained to him in writing, failing to act in the company’s best interests and failing to protect the company.

DeMasters filed a Title VII retaliation claim, which was dismissed by the federal district court for two reasons. First, the district court found that when DeMasters’ actions were examined individually, each action failed to constitute “protected activity” under Title VII. Second, even if he had engaged in protected activity, the “manager rule” prevented him from bringing a Title VII retaliation claim because he was acting within the scope of his job duties when reporting the complaints of the employee and discussing the matter with the company.

On appeal, the Fourth Circuit roundly rejected both aspects of the district court’s reasoning. The appellate court found the district court’s individualized assessment of DeMasters’ actions to be “myopic.” The correct approach, the appellate court counseled, was to examine the totality of the circumstances in a “holistic approach.” As the court put it, just as a play cannot be understood on the basis of some of its scenes, so a discrimination claim cannot be understood without looking at the overall scenario. With this in mind, the Fourth Circuit had no difficulty finding DeMasters engaged in protected activity by complaining to the company that he felt the complaining employee was still being subjected to unlawful conduct.

The court then turned to the “manager rule,” which finds its origin in the Fair Labor Standards Act (“FLSA”) and requires an employee to “step outside” his role of representing the company in order to engage in protected activity. Under this theory, DeMasters’ job duties required him to counsel the employee and relay complaints to HR, and therefore his actions were not protected activities.

The Fourth Circuit again roundly rejected the application of the “manager rule” to the Title VII context. The court first found that whatever statutory support the “manager rule” had in the FLSA context did not exist in the Title VII context because the statutory language of Title VII differs from the FLSA in important considerations.

The court then found that two separate Title VII concepts counseled against the “manager rule.” First, under Fourth Circuit case law, an employer can escape Title VII liability if an employee’s conduct at work is sufficiently insubordinate, disruptive, or nonproductive. If the “manager rule” requires an employee to step outside his job duties in order to engage in protected activities, then it would put an employee in the dilemma of needing to step outside their job duties to have Title VII’s protections but then risk those same protections because stepping outside job duties could be seen as sufficiently insubordinate. Second, because Title VII offers employers the affirmative defense in certain harassment claims that complaining employees failed to follow the company’s internal reporting procedures, implementing a “manager rule” that could discourage employees responsible for helping other employees, such as DeMasters, from reporting concerns of discrimination. Thus, the “manager rule” would prevent Title VII’s overall goal of preventing and eliminating discrimination and harassment in the workplace.

The Fourth Circuit became just the second appellate court to look at and decide the “manager rule” question in the Title VII context in a published opinion. The Sixth Circuit similarly decided that it did not apply, but the Tenth and Eleventh Circuits have non-precedential opinions adopting the “manager rule” in the Title VII context. Continued split among the federal courts on this issue increases the likelihood the Supreme Court may one day decide the issue.

For employers, the case serves as another reminder that concerns and complaints expressed by managers in harassment claims should be taken seriously and that great care needs to be taken to ensure employees are not retaliated against. Courts and the EEOC have been taking an increasingly expanded view of what constitutes protected activity and retaliation, and employers not mindful of these developments ignore them at their peril.

Article By Matthew J. Feery of Gonzalez Saggio & Harlan LLP
Gonzalez Saggio & Harlan LLP | Copyright (c) 2015

Expanding Retaliation: Fourth Circuit Rejects “Manager Rule” in Title VII Cases

After helping an employee report a complaint of harassment, a manager expresses concern over the company’s handling of the situation and tells the employee the complaint is being mishandled. After the complaining employee files (and then settles) a Title VII against the company, the manager is fired for failing to take a “pro-employer” stance and act in the company’s “best interests.” Does the manager have a Title VII retaliation claim? That is the exact question recently decided by the United States Court of Appeal for the Fourth Circuit in DeMasters v. Carilion Clinic.

According to the complaint, which the court accepted as true for purposes of its review, J. Neil DeMasters began working as an employee assistance program consultant for Carilion in 2006. Two years later, DeMasters was consulted by an employee who complained that his supervisor was sexually harassing him. DeMasters relayed the substance of the complaint to human resources, which investigated the allegations and fired the supervisor. The employee was told the supervisor would never be back in the workplace, but a few days later the employee’s department manager allowed the supervisor to return to collect belongings. The employee complained to DeMasters that he felt uncomfortable at work and that he was facing increasing hostility from the supervisor’s allies and friends.

Upon learning this, DeMasters contacted HR to express his concern with how the situation was being handled, and HR confirmed it was aware the employee was being harassed by co-workers. DeMasters offered to coach the HR department on better ways to handle harassment complaints. HR declined, stating it would handle the situation. However, the employee reported to DeMasters that the harassment continued to get worse on a daily basis. DeMasters then opined to the employee that the complaints were being mishandled by HR. With that, DeMasters stopped having contact with the complaining employee.

Two years later, however, the employee filed a Title VII claim, which was settled. A few weeks after the settlement, DeMasters was called into a meeting with corporate counsel, the vice president of HR, and his own department director. DeMasters was told that by not taking the “pro-employer side,” he had put the company at risk of substantial liability. Two days later, DeMasters was fired for, among other reasons explained to him in writing, failing to act in the company’s best interests and failing to protect the company.

DeMasters filed a Title VII retaliation claim, which was dismissed by the federal district court for two reasons. First, the district court found that when DeMasters’ actions were examined individually, each action failed to constitute “protected activity” under Title VII. Second, even if he had engaged in protected activity, the “manager rule” prevented him from bringing a Title VII retaliation claim because he was acting within the scope of his job duties when reporting the complaints of the employee and discussing the matter with the company.

On appeal, the Fourth Circuit roundly rejected both aspects of the district court’s reasoning. The appellate court found the district court’s individualized assessment of DeMasters’ actions to be “myopic.” The correct approach, the appellate court counseled, was to examine the totality of the circumstances in a “holistic approach.” As the court put it, just as a play cannot be understood on the basis of some of its scenes, so a discrimination claim cannot be understood without looking at the overall scenario. With this in mind, the Fourth Circuit had no difficulty finding DeMasters engaged in protected activity by complaining to the company that he felt the complaining employee was still being subjected to unlawful conduct.

The court then turned to the “manager rule,” which finds its origin in the Fair Labor Standards Act (“FLSA”) and requires an employee to “step outside” his role of representing the company in order to engage in protected activity. Under this theory, DeMasters’ job duties required him to counsel the employee and relay complaints to HR, and therefore his actions were not protected activities.

The Fourth Circuit again roundly rejected the application of the “manager rule” to the Title VII context. The court first found that whatever statutory support the “manager rule” had in the FLSA context did not exist in the Title VII context because the statutory language of Title VII differs from the FLSA in important considerations.

The court then found that two separate Title VII concepts counseled against the “manager rule.” First, under Fourth Circuit case law, an employer can escape Title VII liability if an employee’s conduct at work is sufficiently insubordinate, disruptive, or nonproductive. If the “manager rule” requires an employee to step outside his job duties in order to engage in protected activities, then it would put an employee in the dilemma of needing to step outside their job duties to have Title VII’s protections but then risk those same protections because stepping outside job duties could be seen as sufficiently insubordinate. Second, because Title VII offers employers the affirmative defense in certain harassment claims that complaining employees failed to follow the company’s internal reporting procedures, implementing a “manager rule” that could discourage employees responsible for helping other employees, such as DeMasters, from reporting concerns of discrimination. Thus, the “manager rule” would prevent Title VII’s overall goal of preventing and eliminating discrimination and harassment in the workplace.

The Fourth Circuit became just the second appellate court to look at and decide the “manager rule” question in the Title VII context in a published opinion. The Sixth Circuit similarly decided that it did not apply, but the Tenth and Eleventh Circuits have non-precedential opinions adopting the “manager rule” in the Title VII context. Continued split among the federal courts on this issue increases the likelihood the Supreme Court may one day decide the issue.

For employers, the case serves as another reminder that concerns and complaints expressed by managers in harassment claims should be taken seriously and that great care needs to be taken to ensure employees are not retaliated against. Courts and the EEOC have been taking an increasingly expanded view of what constitutes protected activity and retaliation, and employers not mindful of these developments ignore them at their peril.

Article By Matthew J. Feery of Gonzalez Saggio & Harlan LLP
Gonzalez Saggio & Harlan LLP | Copyright (c) 2015

Jury Awards $1.6M to Sarbanes-Oxley Whistleblower

A New York federal jury awarded $1.6M in compensatory damages to a whistleblower in a Sarbanes-Oxley whistleblower retaliation lawsuit. The verdict is consistent with a recent trend of large jury verdicts in whistleblower retaliation claims, including a six million dollar verdict in the Zulfer SOX case. According to the verdict form, the full amount of the verdict awarded to whistleblower Julio Perez was for compensatory damages. Under the whistleblower provision of SOX, there is no cap on compensatory damages.

While employed at Progenics Pharmaceuticals as a Senior Manager of Pharmaceutical Chemistry, Perez worked with representatives of Progenics and Wyeth to develop Relistor, a drug that treats post-operative bowel dysfunction and opioid-induced constipation. In May 2008, Progenics and Wyeth issued a press release stating that the second phase of trials “showed positive activity” and that the two companies were “pleased by the preliminary findings of this oral formulation” of Relistor. Within two months of the issuance of the press release, Wyeth executives sent a memo to Progenics senior executives informing them that the second phase of clinical trials failed to show sufficient clinical activity to warrant a third phase of trials. The Wyeth memo specifically stated: “Do not pursue immediate initiation of Phase 3 studies with either available oral tablets or capsule formulations.”

Perez saw the confidential Wyeth memo and on August 4, 2008, he sent a memo to Progenics’ Senior Vice-President and General Counsel in which he alleged that Progenics was “committing fraud against shareholders since representations made to the public were not consistent with the actual results of the relevant clinical trial, and [Plaintiff] think[s] this is illegal.” The next day, Progenics’ General Counsel questioned Perez about the confidential Wyeth memo. Progenics then terminated Perez’s employment, claiming he had refused to reveal how he had obtained the Wyeth memorandum.

Perez brought suit under SOX, alleging that Progenics terminated his employment because of his August 4, 2008 Memorandum, and denying that he refused to answer questions about his access to the Wyeth memo. Progenics again claimed that it terminated Perez’s employment because he failed to explain how he got the memo. The memo’s intended recipients denied giving Perez a copy of the memo. During the litigation, Perez argued that the memo was distributed widely within Wyeth and that he had not “misappropriated” it.

Following an investigation, OSHA did not substantiate Perez’s SOX complaint. Perez removed his SOX complaint to federal court in November 2010. On July 25, 2013, Judge Kenneth Karas issued an order denying Progenics’ motion for summary judgment. The case was hard-fought, with more than 120 docket entries concerning pre-trial matters. Perez was represented by counsel when he filed his SOX claim in federal court, but proceeded pro seshortly before Progenics moved for summary judgment through trial.

Recent Sarbanes-Oxley Whistleblower Jury Verdicts

On March 5, 2014, a California jury awarded $6 million to Catherine Zulfer in her SOX whistleblower retaliation against Playboy, Inc. (“Playboy”).  Zulfer, a former accounting executive, alleged that Playboy had terminated her in retaliation for raising concerns about executive bonuses to Playboy’s Chief Financial Officer and Chief Compliance Officer.  Zulfer v. Playboy Enterprises Inc., JVR No. 1405010041, 2014 WL 1891246 (C.D.Cal. 2014).  She contended that she had been instructed by Playboy’s CFO to set aside $1 million for executive bonuses that had not been approved by the Board of Directors.  Id.  Zulfer refused to carry out this instruction, warning Playboy’s General Counsel that the bonuses were contrary to Playboy’s internal controls over financial reporting.  Id.  After Zulfer’s disclosure, the CFO retaliated by ostracizing Zulfer, excluding her from meetings, forcing her to take on additional duties, and eventually terminating her employment.  Id.  After a short trial, a jury awarded Zulfer $6 million in compensatory damages and also ruled that Zulfer was entitled to punitive damages.  Id.  Zulfer and Playboy reached a settlement before a determination of punitive damages.  The $6 million compensatory damages award is the highest award to date in a SOX anti-retaliation case.  Id.

The Ninth Circuit recently affirmed a SOX jury verdict awarding $2.2 million in damages, plus $2.4 million in attorneys’ fees, to two former in-house counsel.  Van Asdale v. Int’l Game Tech., 549 F. App’x 611, 614 (9th Cir. 2013).  The plaintiffs, both former in-house counsel at International Game Technology, alleged that they had been terminated in retaliation for disclosing shareholder fraud related to International’s merger with rival game company Anchor Gaming.  Id.  Specifically, plaintiffs alleged that Anchor had withheld important information about its value, causing International to commit shareholder fraud by paying above market value to acquire Anchor.  Van Asdale v. Int’l Game Tech., 577 F.3d 989, 992 (9th Cir. 2009).  When the plaintiffs discovered the issue, they brought their concerns about the potential fraud to their boss, who had served as Anchor’s general counsel prior to the merger. Id. at 993.  International terminated both plaintiffs shortly thereafter. Id. 

In addition, a former financial planner at Bancorp Investments, Inc. who alleged that he was terminated for disclosing trade unsuitability obtained a $250,000 jury verdict in the Eastern District of Kentucky in late 2013.   Rhinehimer v. Bancorp Investment, Inc., 2013 WL 9235343 (E.D.Ky. Dec. 27, 2013), aff’d 2015 WL 3404658 (6th Cir. 2014).

Zulfer, Van Asdale, and Rhinehimer highlight the importance of the removal or “kick out” provision in SOX that authorizes SOX whistleblowers to remove their claims from the Department of Labor to federal court for de novo review 180 days after filing the complaint with OSHA.

ARTICLE BY Jason Zuckerman of Zuckerman Law

© 2014 Zuckerman Law