Tag: Whistleblower

LABORER’S NEW JERSEY WHISTLEBLOWER CLAIM NOT PREEMPTED BY FEDERAL LAW AND BELONGS IN STATE COURTS

Last week, the Supreme Court of New Jersey held that the state court had jurisdiction over a worker’s whistleblower lawsuit, rejecting the defendant’s argument that that National Labor Relations Board had jurisdiction.  In this case, Plaintiff Salvatore Puglia worked as a laborer for Elk Pipeline, Inc.   In 2010, he worked on a public sewer reconstruction project for the city of Camden which was subject to the New Jersey Prevailing Wage Act.

He and another worker noticed that their wage rate was significantly decreased, causing Puglia to complain to the project manager and the Company’s president.  Although the Company restored the prevailing wage rate and paid back pay to affected employees, Puglia stated that he was not paid the full amount owed to him.  He was laid off in December 2010 because, according to the Company, less onsite laborers were needed on the project since it was “winding down.”

Puglia filed a complaint in state court alleging violations of the Prevailing Wage Act and the New Jersey whistleblower law called the Conscientious Employee Protection Act (CEPA).  The Prevailing Wage Act claim was settled, and pursuant to the remaining CEPA claim, plaintiff alleged that he was terminated due to his complaints regarding the Company’s failure to pay him proper wages.

Elk Pipeline argued that the CEPA claim was preempted by federal laws, namely the National Labor Relations Act and the Labor Management Relations Act, because there was a Collective Bargaining Agreement (CBA) in place and Puglia’s claims were founded on rights created in the CBA.  The trial court agreed with the Company. Puglia appealed and the Appellate decision affirmed the trial court’s decision.  The Appellate Division held that the CBA was related to the CEPA claim because the work was winding down, “causing Elk to trim labor based upon seniority, a defined term of art under the CBA,” which could not be reviewed without interpretation of the CBA.   Puglia again appealed to the New Jersey Supreme Court.

The Supreme Court reversed the lower court’s decision in favor of Puglia.  In sum, a unanimous court held that whether Puglia performed a whistle blowing activity when he complained about his pay under the Prevailing Wage Act and whether he was fired because of his complaint are factual questions that are unrelated to the interpretations of the CBA and employee rights contained therein.  The court explained that CEPA created independent rights and his “CEPA cause of action is unaffected by whether the CBA was violated.”

The court also added that the Puglia could have sought relief based on provisions in the CBA, such as those relating to wages or seniority, but the court reasoned that the CBA-based claims would not make a CEPA claim depend on the CBA.  The court stated, “[Puglia] is asking our court to enforce his rights under CEPA, independent and apart from his bargained-for employment conditions.  That, our courts can do.”

NEW JERSEY BASED ENVIRONMENTAL TESTING FIRM TO PAY $2 MILLION IN FALSE CLAIMS ACT SETTLEMENT

In a press release issued yesterday, New Jersey Acting Attorney General John J. Hoffman announced that Accutest Laboratories, an environmental testing firm based in Middlesex County, will pay the State $2 million to resolve allegations that it submitted false claims to the State and its agencies for payment. The State and its agencies contracted with Accutest to perform environmental tests and in 2013, a former-Accutest employee filed a whistleblower lawsuit claiming that the firm violated state and federal False Claims Acts by not following Environment Protection Agency requirements in the extraction and testing of certain semi-volatile organic compounds and that some laboratory technicians did not adhere to the Standard Operating Procedures or proper protocols.

This settlement is the largest non-Medicaid-related False Claims Act settlement entered into by the State since New Jersey’s False Claims Act took effect in March 2008.

NEW JERSEY SUPREME COURT EXPANDS EMPLOYER LIABILITY IN “WATCHDOG” EMPLOYEE WHISTLEBLOWER CASE

Earlier this month, the New Jersey Supreme Court ruled in Lippman v. Ethicon that workers whose job entails monitoring whether their employers are complying with certain rules, regulations and standards, sometimes called “watchdog” employees, are entitled to whistleblower protection under the Conscientious Employee Protection Act  (“CEPA”).  CEPA is a comprehensive state law that protects employees from retaliation for reporting illegal activities or other activities that otherwise threaten the public’s safety, health or welfare or the environment.

In Lippman, Chief Medical Officer, Dr. Joel Lippman, brought suit against his former employer, Ethicon, a subsidiary of Johnson and Johnson, for retaliation for firing him for allegedly making complaints about certain drugs and medical devices and supporting recalls of dangerous products.  The Company argued that since raising these issues were part of Dr. Lippman’s “ordinary job responsibilities,” he could not show that he engaged in a “whistleblowing activity,” and therefore, he should not be protected under CEPA.    The trial court previously ruled in favor of Ethicon.  The Appellate Division reversed but ruled that watchdog employees, like Lippman, must exhaust all internal complaint processes before they can make a CEPA claim.  The New Jersey Supreme Court unanimously held that the plain language of the statute did not require an extra exhaustion requirement, and stated that watchdog employees are vulnerable to retaliation and state law “does not limit protection based on job title or function.”

This Firm will continue to monitor the developments in this case.

SEC ANNOUNCES FIRST ENFORCEMENT ACTION AGAINST COMPANY IN WHISTLEBLOWER PROTECTION CASE

Whistleblowers are given protection under Section 240.21F-17 of the Dodd-Frank Act. The rule states, in part, “No person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violations, including enforcing, or threatening to enforce, a confidentiality agreement…with respect to such communications.” This rule was promulgated to prevent companies from stifling whistleblowers.

Although the Securities and Exchange Commission has been signaling its intention to crack down on violators of the rule, it did so for the first time earlier this month. The SEC imposed a $130,000 penalty to Houston-based global technology and engineering firm, KBR, Inc., for using improperly restrictive language in its confidentiality agreements.

Specifically, KBR was found to have violated the rule by requiring witnesses to sign confidentiality agreements with language that threatened to discipline or fire them for speaking to outside parties without prior approval from its legal department during a securities fraud investigation. The SEC did not find any instances in which KBR specifically prevented employees from communicating with the SEC; however, it found that the language contained in the confidentiality agreements had a potential chilling effect on whistleblowing. KBR has since amended the language in its confidentiality agreement.

This case serves as a reminder to employers to avoid including language that an employee may interpret as impeding his or her right to talk to the SEC or another government entity in agreements including confidentiality agreements, employment agreements and separation agreements as well as employment manuals.

THIRD CIRCUIT HOLDS THAT EX-TD AMERITRADE EMPLOYEE REQUIRED TO ARBITRATE WHISTLEBLOWER CLAIMS

Earlier this week, the Third Circuit Court of Appeals ruled that former TD Ameritrade employee, Boris Khazin, must arbitrate his whistleblower claims instead of suing in court. Khazin, who worked in the firm’s compliance group, sued TD Ameritrade for retaliating against him as a whistleblower when he complained about alleged securities law violations.

The issue before the court was whether Dodd-Frank’s ban on mandatory, pre-dispute arbitration agreements could be applied retroactively. Dodd-Frank was passed by Congress in 2010 in the wake of the financial crisis. In Khazin’s case, he signed an agreement in 2006, which stated that he was required to arbitrate employment-related claims through FINRA. The lower court compelled arbitration between TD Ameritrade, and Khazin subsequently appealed to the Third Circuit.

The Third Circuit refused to expand Dodd-Frank’s whistleblower protections beyond its technical reading, and thus, affirmed the lower court’s decision.

This issue was a matter of first impression in the U.S Court of Appeals for the Third Circuit. Other circuits have been split on this question.

U.S. SUPREME COURT RULES THAT WHISTLEBLOWERS IN THE PUBLIC SECTOR ARE PROTECTED FROM RETALIATION FOR COURT TESTIMONY

The U.S. Supreme Court ruled last week that public employees are protected from retaliation when they testify in court against their superiors regarding misconduct at the workplace.  The court unanimously decided that that the First Amendment protects those who tell the truth and reveal corruption.  Justice Sonya Sotomayor wrote that public employees should not have to choose between “the obligation to testify truthfully and the desire to avoid retaliation and keep their jobs.”

This decision clarified a previous ruling in Lane v. Franks, in which Lane, an Alabama community college official, testified against a state legislator for collecting money from the college but performing no work.  After he gave his testimony, he was fired.  He sued several college officials claiming that he was terminated for telling the truth, thereby violating the First Amendment.  The lower court dismissed his claims on grounds that the First Amendment does not protect public employees for exposing internal wrongdoing.  Similarly, in a 2006 case, Garcetti v. Ceballos, the court held that the First Amendment does not protect internal whistleblowers who speak about matters involving their official duties. 

In last week’s decision, however, the court held that testifying in court is protected as it is not part of an employee’s ordinary job duties, and public employees who testify in a corruption probe have an “independent obligation” to tell the truth, which is different then speaking about a workplace dispute.