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A Hidden Danger: Employee Whistleblower Complaints

by Armando V. Riccio, Esq.

A vast array of employee conduct and communications are protected by state and federal laws, including the New Jersey Conscientious Employee Protection Act (“CEPA”). To establish a claim, an employee must prove: (1) that s/he engaged in a protected activity; (2) that s/he was subjected to an adverse employment action, and; (3) a link between the two. As members of management, we must be able to identify activity which can trigger protection, distinguish protected conduct from unprotected conduct, and avoid the pitfalls inherent in certain administrative processes. Each of these issues is briefly addressed below.

The New Jersey Conscientious Employee Protection Act (“CEPA”)

New Jersey employers are subject to the expansive provisions of CEPA, a statute with remedies as broad as the categories of protected conduct. A violation can result in injunctive relief, reinstatement of the employee, as well as an award of compensatory damages, (e.g., lost wages, benefits and other remuneration), punitive damages, the costs of filing the lawsuit and attorney’s fees. Moreover, an employee is not required to complain internally in emergency situations where there is a reasonable fear of physical harm or where the employee is reasonably certain the practice is already known to one or more supervisors.

CEPA prohibits an employer from retaliating (e.g., an adverse employment action) against an employee because s/he engaged in any of the following:

a. Discloses, or threatens to disclose to a supervisor or to a public body an activity, policy or practice of the employer or another employer, with whom there is a business relationship, that the employee reasonably believes is in violation of a law, or a rule or regulation promulgated pursuant to law, or, in the case of an employee who is a licensed or certified health care professional, reasonably believes constitutes improper quality of patient care;

b. Provides information to, or testifies before, any public body conducting an investigation, hearing or inquiry into any violation of law, or a rule or regulation promulgated pursuant to law by the employer or another employer, with whom there is a business relationship, or, in the case of an employee who is a licensed or certified health care professional, provides information to, or testifies before, any public body conducting an investigation, hearing or inquiry into the quality of patient care; or

c. Objects to, or refuses to participate in any activity, policy or practice which the employee reasonably believes : (1) is in violation of a law, or a rule or regulation promulgated pursuant to law or, if the employee is a licensed or certified health care professional, constitutes improper quality of patient care; (2) is fraudulent or criminal; or (3) is incompatible with a clear mandate of public policy concerning the public health, safety or welfare or protection of the environment.

The broad language of CEPA is liberally construed by our courts to afford expansive protection to employee-whistleblowers. The statute protects a complaining employee who has a reasonable basis for objecting to misconduct of an employer or a co-worker.

The scope of subsections (a) and (c) are counter-balanced by the “reasonable belief” requirement. This limits whistleblower protection to complaints regarding matters beyond minor infractions or trivial issues. It is an area which employers must carefully explore and properly document. The employee only needs a “reasonable belief,” s/he does not need to be correct. Thus, employers must exercise caution in reaching conclusions about the severity of an infraction or issue because failure to take corrective action may be misconstrued by a court or a jury as the employer’s approval and adoption of the complained of conduct as its own, which in turn, exposes the employer to liability.

On the other hand, the New Jersey Supreme Court has made clear that an employer can “fire an employee, even a whistleblower, who is unreasonable in expressing his or her complaints. For example, a state employee who repeatedly called the Governor at the Governor’s residence late at night to report violations of law at a state agency could justly be said to be insubordinate if requested not to do so.” Thus, an employer need not tolerate insubordinate conduct related to unreasonable complaints. Indeed, an employer retains the authority to dismiss an employee for complaints that are not supported by an objectively reasonable basis. These limitations provide employers with an avenue to defuse potential whistleblower liability problems. For example, where the employee’s belief is incorrect, an employer can provide information and/or data to the employee establishing such, including information from and access to a neutral, objective source and/or third party.

In addition to the “reasonable belief” requirement, subsection (c)(3) also requires the employee to prove the existence of a public harm: a detriment to the public health, safety or welfare. An employee’s reporting of a violation, or possible violation, of OSHA or the regulations established under OSHA will usually meet this requirement. However, a harm suffered solely by the employer does not meet this criteria and hence, subsection (c)(3) would not protect the employee-whistleblower. Notably, this limitation only applies to claims under subsection (c)(3), as CEPA’s overall application is not limited to employee complaints which implicate a public interest or harm and consequently, a broader public harm does not need to be established by a whistleblower under the other subsections.

Subsection (b) is interpreted as broadly as the other provisions. It applies to information or testimony provided by an employee about co-worker misconduct even though the misconduct did not involve a “violation . . . by the employer or another employer.” Our Courts have concluded that it would be anomalous to protect an employee that objects to such conduct, yet not afford protection to that same employee if s/he testified before a public body investigating the conduct.

When confronted with a whistleblower complaint, employers should not require rigid compliance with chain of command directives. An employer can not terminate an employee for insubordination because s/he failed to follow the chain of command in reporting complaints about perceived unethical or illegal conduct. CEPA protects employees who report such conduct to any individual defined by the statute as a supervisor: any individual who has the authority to direct and control the work performance of the affected employee, to take corrective action or who is designated by the employer on the workplace notice required by CEPA. Thus, an employer can not limit the definition of supervisor under CEPA by requiring employees to submit such complaints to their immediate supervisors. Equally important, employers must remain cognizant that the chain of command defense, if applicable, would most likely be resolved by a jury.

Generally, employers do not provide management or supervisory personnel with training regarding the recognition, investigation or resolution of CEPA complaints. Additionally, many organizations have not implemented a complaint process which addresses whistleblower issues or measures to prevent retaliation. All employees with supervisory responsibilities must learn to treat any such complaints seriously and to investigate such promptly. Management must be informed that in many instances the employee only needs to possess a “reasonable belief” to be protected, even if his or her belief is wrong. Employees should be provided with a means to raise retaliation complaints that assures expeditious notice to upper management and prompt effective remedial action. Patience, caution, appropriate documentation and solid guidance from legal counsel are the keys to avoiding liability headaches under CEPA.

Adverse Employment Action

Our courts have found the following types of conduct to be retaliatory:

• conduct which alters the employee’s compensation, terms or conditions of employment, deprives the employee of employment opportunities or adversely affects their employment status.

• transferring an employee to a job the employer knows the employee can not perform.

• an undesirable scheduling change, even if no financial harm is suffered by the employee.

• written, as distinguished from oral, reprimands permanently included within the employee’s personnel file.

• a performance appraisal score lower than ever previously received by the employee which adversely effected compensation.

Whether retaliation has occurred is determined based upon what a reasonable person in the employee’s position would reasonably understand.

Be Alert to the Administrative Trap

Unfortunately, employers can become too comfortable in administrative settings where the threat of litigation is not readily apparent. Employers must remain mindful when responding to inquiries from federal or state agencies that an employee may later use such statements and submissions in a subsequent lawsuit under CEPA. Another common trap is the use of employer statements or submissions to the Division of Unemployment Compensation made in response to a former employee’s application for benefits. Efforts to preclude the use of unemployment records in a subsequent lawsuit are met with mixed results. For these reasons, as well as others, it is important to employ legal counsel to review such submissions and statements well before an actual lawsuit is filed in court. Generally, the costs associated with legal guidance in administrative proceedings are significantly less than the costs incurred to successfully defend a CEPA lawsuit.

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