Not Every Whistleblower Is a “Whistleblower” under New Jersey’s CEPA

A recent decision issued by the Chief Judge of the United States District Court for the District of New Jersey is a reminder that not every employee who “blows the whistle” is a “whistleblower” protected under the New Jersey Conscientious Employee Protection Act (CEPA), and that the New Jersey Supreme Court’s gatekeeping instructions to trial courts in Dzwonar v. McDevitt (2003) are alive and well.

  1. NJ Supreme Court’s Gatekeeping Instructions to Trial Courts

New Jersey’s whistleblower statute encourages employees to report illegal workplace activities and protects them from retaliation for engaging in such conduct. CEPA is a broad, remedial statute, providing an array of significant remedies to an aggrieved party. Importantly, however, not every employee who complains, objects to, or files a grievance about something that occurred in or is related to the workplace is a protected “whistleblower” under CEPA.

In Dzwonar v. McDevitt, 177 N.J. 451 (2003), the New Jersey Supreme Court provided the analytical framework for trial courts to use to separate the proverbial wheat from the chaff in most CEPA cases. To establish a prima facie CEPA claim, the employee must establish (1) that he or she objected to or refused to participate in an activity, policy or practice that the employee believed violated either a law, rule, or regulation, or was fraudulent or criminal or violated a public policy; (2) a “whistle-blowing” activity as described in N.J.S.A. § 34:19-3c; (3) an adverse employment action; and (4) a causal connection between the whistle-blowing activity and the adverse employment action.

There are occasions when a plaintiff cites one or more laws or broad or generalized legislative, ethical or code-of-conduct statements to challenge management decisions. Some might be protected under CEPA, and some might not. Trial courts are required to closely scrutinize the complained-of conduct to determine whether it truly falls within CEPA’s scope and protection. To that end, the Court in Dzwonar instructed trial courts to identify a law, rule or regulation promulgated pursuant to a law, or a clear mandate of public policy, that the plaintiff believed was violated by the employer’s conduct. This threshold analysis allows the trial court to determine whether, as a matter of law, the plaintiff engaged in protected whistle-blowing activity.

  1. Breach of Contract or Fraud in Performance Allegations Did Not Support a Whistle-blowing Claim under CEPA

On October 26, 2021, Chief Judge Freda L. Wolfson, U.S.D.J., dismissed a CEPA claim brought by a former employee of a pharmaceutical company. In Rotella v. Smithers PDS, LLC, the plaintiff alleged that his coworker had engaged in “double dipping” or “double billing” and therefore committed fraud by servicing more than one of his employer’s clients in violation of the employer’s contract with its clients (which the employee believed prohibited his coworker from working for more than one client at a time). The plaintiff complained about this purported fraud to the company’s President, and four months later he was fired. His employer claimed it terminated the plaintiff for poor job performance and on Human Resource’s recommendation that he be terminated.

Applying Dzwonar’s and its progeny’s instructions to trial courts to, as a threshold matter, “first find and enunciate the specific terms of a statute or regulation, or the clear expression of public policy, which would be violated if the facts as alleged are true,” Judge Wolfson found that the employee’s whistleblower complaint was primarily predicated on a “breach of contract” theory, which, without more, does not constitute “an objectively reasonable belief that a CEPA violation occurred.” Judge Wolfson then cited several examples where New Jersey courts have dismissed CEPA claims based on a plaintiff’s allegation of activity that may have breached a contract or company policy, but did not rise to the “force of law” as required by CEPA.

Judge Wolfson then explained that a CEPA claim can sound in “fraud in the inducement” of a contract, but not in “fraud in the performance” of a contract. In analyzing the basis of the plaintiff’s fraud claim, Judge Wolfson found that the employee presented “vague and conclusory” complaints and did not articulate a fraud in the inducement claim with sufficient particularity. Because the plaintiff had failed to establish the first element of a prima facie CEPA claim, the court dismissed his Complaint on a motion for summary judgment.

Takeaways

Some plaintiffs alleging a claim under CEPA rely on the often cited tenet in New Jersey’s jurisprudence that CEPA is not intended to “make lawyers out of conscientious employees” in the hopes that if they cite a legal theory or law, even if that legal theory or law is not closely related to the complained-of conduct, then a trial court will allow the case to proceed to a jury. Indeed, Judge Wolfson cited this principle in Rotella noting, “the New Jersey Supreme Court does not ‘expect whistleblowers to be lawyers on the spot.’” This is true. Employees are neither expected nor required under CEPA to be correct in their belief that a law was violated or that the law was in fact violated. But the counterweight to that principle is that trial courts must ensure that there is a close relationship, what Dwzonar described as a “substantial nexus,” between the complained-of conduct and the identified law. If that substantial nexus does not exist between the types of laws that can form the basis of a CEPA claim and the complained-of conduct, then the plaintiff cannot establish a prima facie claim under CEPA, and the trial court must dismiss the case.