Whistleblower Archives - Page 4 of 4

Blowing The Wrong Whistle – Close Scrutiny Of Code Of Ethics Dooms Nurse’s Lawsuit Under New Jersey’s Whistleblower Statute

New Jersey’s Conscientious Employee Protection Act (CEPA) is remedial legislation designed to protect employees who “blow the whistle” on illegal or unethical activity committed by their employers or co-workers. To be sure, CEPA is a powerful anti-retaliation statute, providing an array of significant remedies to an aggrieved party. However, as the saying goes, with great power comes great responsibility. A recent decision by the Appellate Division, Hitesman v. Bridgeway, Inc. (decided March 22, 2013), highlights the important gatekeeping functions of trial courts in CEPA cases. Click here for a copy of Hitesman. http://www.judiciary.state.nj.us/opinions/a0140-11.pdf.

Not every employee who “blows a whistle” is a “whistleblower” subject to the protections of CEPA. An employee who lacks an objectively reasonable belief that his or her employer’s conduct violated a law or public policy or constituted improper quality of patient care cannot, as a matter of law, sustain a viable claim under CEPA. The Supreme Court in Dzwonar v. McDevitt, 177 N.J. 451 (2003) provided the legal framework for trial courts to use to separate the proverbial wheat from the chaff in most CEPA cases. First, the trial court must 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. Next, the court must determine whether there is a “substantial nexus between the complained-of conduct and [the] law or public policy identified by the court or the plaintiff.” If the trial court so finds, the jury then must determine whether the plaintiff “actually held a belief and, if so, whether that belief was objectively reasonable.”

In Hitesman, the plaintiff, a nurse who worked at a long-term nursing home facility, disclosed to government regulators “practices of Defendant that he reasonably believed constituted improper quality of patient care and violations of his professional code of ethics.” He sued under CEPA after he was fired for admittedly violating the defendant’s confidentiality policy (improper disclosure of patient information). The trial court allowed the plaintiff’s CEPA claim to proceed to a jury trial, and the jury found in the plaintiff’s favor on liability. However, on appeal the Appellate Division reversed the jury’s verdict.

Applying the analytical framework in Dzwonar for determining whether the plaintiff has established a prima facie case under CEPA, the court in Hitesman found that the plaintiff had failed to proffer facts that would support an objectively reasonable belief that a violation of law or clear mandate of public policy by his employer had occurred. The Appellate Division concluded that the plaintiff’s reliance on the American Nursing Association’s Code of Ethics (“Code”), his employer’s Employee Handbook and a Statement of Residents’ Rights, was misplaced because none of these documents constituted a source of law or public policy closely related to the conduct about which the plaintiff claimed he had blown the whistle. While the section of the Code relied upon by the plaintiff provided guidance as to whether he had acted in compliance with the Code in expressing his concerns, nothing in the Code established any standards regarding patient care. As a result, the court held that the plaintiff’s belief that his employer had acted in violation of the Code was not objectively reasonable as a matter of law.

The court in Hitesman also concluded that “generalized statements” in the employer’s Employee Handbook about a commitment to “the best quality of health care” and requirements that its employees comply with all applicable statutes, regulations and ethical standards were “far too vague” to provide a “high degree of public certitude in respect of acceptable versus unacceptable conduct.” Thus, an employee’s reliance on generalized statements that the employer and its employees will comply with the law will not support a CEPA claim.

All too often, plaintiffs in CEPA cases cite a litany of broad and generalized legislative, ethical rule or code of conduct statements to challenge management decisions. Do not let a plaintiff get away with the “throw everything at the wall to see what sticks” approach in CEPA cases. Hitesman and Dzwonar require trial courts to engage in a rigorous analysis to determine whether the plaintiff had, as a matter of law, an objectively reasonable belief that the complained-of conduct violated a law or public policy. Because CEPA does not shield a complainer who simply disagrees with an employer’s course of lawful conduct, close scrutiny of the complained-of conduct by the trial court is essential. As the court in Hitesman explained, it is “not enough for an employee to rest upon a sincerely held – and perhaps even correct – belief that the employer has failed to follow the most appropriate course of action, even when patient safety is involved.” Instead, the employee must have an objectively reasonable belief that a violation of relevant legal authority occurred.

New Year, New Laws for California Employers – Added Whistle-blower Protections, With Whom Will the EDD Share Employer Reports and Contracts with Commission Employees

Continuing with our series “New Year, New Laws for California Employers,” we take a look at newly added whistle-blower protections, with whom the EDD will share employer reports and contracts with commission employees. Prepared by Mark Terman, partner in the Los Angeles office, this series looks at some of the significant new regulations becoming law in 2013 affecting private employers doing business in California.

Added Whistle-blower Protections

The California False Claims Act prohibits submission to the government of a false claim for money, property or services, and authorizes actions for treble damages and penalties. An example could be charging a government entity for goods or services that were not provided.

Employees, as “relators,” can inform the government or law enforcement, participate in these actions after satisfying certain requirements and share in the recovery. Employers cannot prevent employees from disclosing information to the government or law enforcement agency, or from acting in furtherance of a false claims action. There are similar statutes under federal law.

AB 2492 provides that contractors and agents can also be whistle-blowers under Cal-FCA. The new law also makes clear that retaliation for trying to prevent a false claim is prohibited, and that relief in a whistleblower or “Qui Tam” action can include reinstatement, double back-pay, interest on the back pay, special damages, punitive damages and attorneys’ fees.

With Whom Will the EDD Share Employer Reports?

Existing law requires employers to provide employee wage information, new employee information and new independent contractor information to the Employment Development Department for use in the administration of tax and unemployment insurance.

We are entering an era of enhanced information sharing designed to make government agencies more effective in enforcing tax and other laws, including billions of dollars that state agencies believe are lost in tax revenue due to improper classification of independent contractors. AB 1794 now permits the EDD to share employer and employee information with the Joint Enforcement Strike Force on the Underground Economy for the purposes of auditing, investigating and prosecuting violations of tax and cash-pay reporting laws and other agencies.

The strike force includes the EDD; Department of Industrial Relations, Division of Labor Standards Enforcement and Division of Occupational Safety and Health; Contractors’ State License Board; Department of Insurance, State Compensation Insurance Fund; and Department of Justice (see www.edd.ca.gov/payroll_taxes). Information sharing is also permitted with the California Department of Health Care Services, the California Health Benefit Exchange, the Managed Risk Medical Insurance Board, county departments and agencies, the Agricultural Labor Relations Board, the Franchise Tax Board and the State Board of Equalization.

Contracts with Commission Employees

Enacted in 2011, Labor Code Sec. 2751 becomes effective Jan. 1, 2013. It requires an employer, when entering into a contract of employment calling for commissions as a method of payment, to create a contract that must be in writing and that describes the method of computation and payment of commissions. The employer must give a signed copy of the contract to the employee and obtain a signed receipt for the contract from the employee. If the contract expires and the parties nevertheless continue to work under the terms of the expired contract, the contract terms are presumed to remain in full force and effect until the contract is superseded or employment is terminated by either party.

“Commissions” generally mean the same as in Labor Code Sec. 204.1: “Compensation paid to any person for services rendered in the sale of such employer’s property or services and based proportionately upon the amount or value thereof.”

Commissions do not include: short-term productivity bonuses (such as are paid to retail clerks) and bonus and profit-sharing plans— unless there has been an offer by the employer to pay a fixed percentage of sales or profits as compensation for work to be performed. AB 2675 adds that temporary, variable incentive payments that increase commissions but do not decrease payment are not covered.

Links to the other posts from this series are below.

New Year, New Laws for California Employers – Employer Access to Social Media

New Year, New Laws for California Employers – Religious Dress and Grooming Protected and Breastfeeding Further Protected

The Birth of Dodd-Frank Whistleblower Actions

In what many are calling the first Dodd-Frank retaliation suit to survive a Rule 12(b)(6) motion to dismiss, the United States District Court for the District of Connecticut issued a ruling permitting a terminated Human Resources manager’s retaliation claim to proceed. In Kramer v. Trans-Lux Corp. (to read the full opinion click here), the plaintiff’s Dodd-Frank retaliation claim is based on his termination allegedly caused by his written complaints – one to the company’s CEO, another to the Board’s audit committee and, finally, a complaint to the SEC – that the company was violating its pension plan.

Much of the argument in the case hinged on whether Kramer’s method of reporting to the SEC – sending a letter to the SEC via regular mail – was sufficient to trigger Dodd-Frank’s anti-retaliation provisions. Specifically, the defendant employer insisted that a “whistleblower” under Dodd-Frank’s statutory definitions must report violations to the SEC through the Commission’s website or by mailing or faxing a Form TCR (Tip, Complaint or Referral). The court rejected this construction, finding that such an interpretation would defeat a key goal of the Dodd-Frank Act to “improve the accountability and transparency of the financial system” and create “new incentives and protections for whistleblowers.” Like two other federal courts in Maryland and New York, the federal court in Connecticut specifically noted that the term “whistleblower” should be given broader construction in the retaliation provision of the statute than in other portions.

This decision opens the door for more whistleblower lawsuits under Dodd-Frank – an option that is appealing to many potential plaintiffs. Notably, a Dodd-Frank retaliation claim offers different remedies than a Sarbanes-Oxley claim. Further, Dodd-Frank offers a significantly longer statute of limitations. Yet another bonus: Dodd-Frank claims can be brought directly in federal court whereas Sarbanes-Oxley claims must be brought through a U.S. Department of Labor administrative process.

For more background on Dodd-Frank retaliation claims click here to read “Dodd-Frank: Picking Up Where SOX Fell Short”, authored by Lynne Anne Anderson and Meredith R. Murphy in the New Jersey Labor and Employment Law Quarterly, Vol. 33, No. 4 – May 2012.