EMPLOYEE DISCIPLINE AND DISCHARGE First Run Broadcast: … · 2012. 4. 4. · Best practices to...

EMPLOYEE DISCIPLINE AND DISCHARGE

First Run Broadcast: April 10, 2012

1:00 p.m. E.T./12:00 p.m. C.T./11:00 a.m. M.T./10:00 a.m. P.T. (60 minutes)

Disciplining and discharging employees are among the most time difficult and time consuming

tasks for your clients. They’re also fraught with potential liability as departing employees claim

wrongful discharge, discrimination, or retaliation. Getting the interrelated processes of discipline

and discharge right – from carefully documenting disciplinary issues to delivering the message

that the employee is being released – is essential to maintaining workforce morale and

controlling the risk of litigation and liability. This program will cover the substantive legal

context of employee discipline and discharge, detail the essential steps of documenting employee

misconduct and discipline, conducting workplace investigations, and provide practical guidance

on limiting employer liability.

Legal framework of employee discharge – substantive law and process

Contractual protections v. gradations of employment-at-will

Legitimate grounds for discharge v. protected classes and criteria

Workplace investigations, including privacy issues

Essential documentation to diminish risk of litigation

Wrongful discharge torts and other common sources of litigation

Best practices to avoid liability

Speaker:

David Goldstein is a partner in the Minneapolis office of Littler Mendelson, P.C., where

he counsels employers with regard to all aspects of the employment relationship, including wage

and hour issues, affirmative action programs, and sex, age and race discrimination. Mr.

Goldstein also has an active litigation practice representing clients from large multinationals to

startups in proceedings before state and federal courts, the EEOC and state and local agencies.

He is a graduate of Haverford College, where he received his B.A., and Harvard University Law

School, where he received his J.D.

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Employee Discipline and Discharge:

Policies and Procedures to Limit Liability Teleseminar

April 10, 2012

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DEALING WITH THE PROBLEMEMPLOYEE

David J. Goldstein

Littler Mendelson P.C.1300 IDS Center80 South 8th St.

MINNEAPOLIS, MN 55402

dgoldstein(litt1er. corn

(612) 313-7611

Littler 70

April 2011

WHAT IS A PROBLEM EMPLOYEE

A. The Poor Performer

B. The Disruptive Employee

1. Absenteeism

2. Horseplay

3. Harassment

4. Erratic behavior

a. Use of drugs or alcohol

b. Mental disabilities

5. Threatening or violent behavior

C. Chronic Complainers

D. Employees Preparing to Compete

II. DIFFICULT DECISIONS

A. Protected Class Problem Employees

B. Simultaneously Dealing with Multiple Employees Who Present Problems

C. Retaliation

1. Title VII

2. Sarbanes-Oxley

3. State laws

4. Workers’ Compensation

D. The Federal False Claims Act

E. Concerted Protected Activity

III. DEALING WITH PROBLEM EMPLOYEES

A. Appropriate Policies and Procedures

1. reserve the at-will relationship

1

2. Document expectations

a. Accurate position descriptions

b. Appropriate policies regarding behavior

i. Harassment policy

ii. Workplace Violence Policy

iii. Drug and alcohol policies

iv. Internet and telephone use policies

v. Confidentiality and non-competition agreements

3. Communicate

No employee should ever be surprised by a decision to terminate his or heremployment for performance related reasons.

a. Periodic performance appraisal process

b. Discipline process

4. Offer Assistance

a. Open door policies

b. Formal complaint procedures

c. Employee Assistance Programs

B. Documentation

Importance

a. Discipline is more likely to be effective when carefullydocumented.

b. Documentation reduces the possibility of later disputes over whatwas said

c. With good documentation, the employer is less likely to be suedand, if sued, more likely to prevail

2. In practice

a. Forms and guidelines

2

b. Training

c. Record retention

C. Supervision

D. Treat everyone with Respect

1. Consider extenuating circumstances

2. Deliver the message at an appropriate time and place

3. Deliver the message in an appropriate manner

4. Limit communication about the decision

5. Don’t play games with the employee’s final paycheck

E. Reap the Rewards of Past Good Works

F. Consider Offering Severance in Return for a Release of Claims

IV. DETERMINING WHEN TO DISCHARGE A PROBLEM EMPLOYEE

A. The Basic Analysis

1. Evaluate Risk

a. Protected class status

b. Retaliation!whistleblower issues

c. Other issues

d. Identify any contractual obligations

i. Employment agreements

ii. Collective bargaining agreements

iii. Unilateral contracts

iv. Promissory estoppel

e. Consider how similar situations were handled in the past

f. Consider how the Company may want to handle similar situationsin the future

2. Evaluate ability to explain and defend the decision

3

a. Objective versus subjective issues

b. Documentation

c. Witnesses

d. Does the decision seem fair

3. Assess the cost to the business of continuing to employ the individual

4. Consider whether postponing the decision will increase or decrease therisk

B. Ensuring the Integrity of the Analysis

1. An objective party (e.g. the Director of Human Resources) shouldparticipate in the decision making.

2. The decision should take into account any similar decisions from the past

V. SPECIAL PROBLEMS

A. RETALIATION

B. EMPLOYEES WITH DISABILITIES

C. THE EMPLOYEE WHO SUES AND STAYS

4

TERMINATION CHECKLIST

D Confirm the reason for the termination

D Take action to protect company property and data

o For example, change computer passwords, deactivate access cards

D The termination meeting

o Prepare comments in advance

o Conduct the meeting at an appropriate time and place

o Have two representatives of management at the meeting

o Allow the employee to make any statements he or she wishes

o Don’t get involved in a debate or negotiating session

o Take accurate, detailed notes

o Show compassion and sensitivity. If possible, avoid having to escort the employee outof the workplace. Make arrangements for the employee to pick up his or her property

o If the employee has a company car which must be immediately surrendered, makesure that the employee will be able to get home

o Discuss company’s policy regarding references

D Be prepared to promptly provide a final paycheck

o Is employee entitled to any unused vacation, sick leave, or bonus

o Have any deductions been taken from the final paycheck without authorization

D Arrange for COBRA notice to be given

I] Confirm that all company property has been returned

D Remind the employee of any continuing obligations arising under confidentiality or noncompetition agreements

D Dealing with the threatening employee

o Assess the risk

o Consider precautions

5

• Notice to other employees

• Utilize security personnel

• Restraining orders

D Consider offering severance and a release

6

LittlerEmp!oyrnent & Labor Law Solubons Woddwdo

David J. GoldsteinShareholder

1300 IDS Center

80 South 8th Street

Minneapolis, MN 55402

main: (612) 630-1000

direct: (612) 313-7611

fax: (612) 630-9626

dgoldsteinlittler.com

Practice Areas

Complex Litigation and Jury Trials

Affirmative Action/OFCCP Compliance

Higher Education

Executive Compensation

Overview

David J. Goldstein works with in-house counsel, business leadership, and HR to proactively identify and implement

creative solutions for effectively utilizing human resources, complying with legal and regulatory requirements, avoiding

liability, and resolving internal and external disputes. Areas in which he provides advice include wage and hour law,

employee selection procedures, test validation, protection of intellectual property, and enforcement of non-compete

agreements.

David also tries cases before judges, juries, and arbitrators and has substantial experience representing employers in

class action litigation. In addition to trying two class action lawsuits to judgment, he has represented clients in other class

or collective actions brought under the Fair Labor Standards Act, Title VII, the Age Discrimination in Employment Act, the

Worker Adjustment and Retraining Notification Act, and state laws. He also frequently works with mediation and other

dispute-resolution techniques in order to efficiently resolve disputes.

David devotes a significant portion of his practice to assisting employers with the preparation and approval of affirmative

action plans and to representing government contractors in connection with Office of Federal Contract Compliance

Programs (OFCCP), state, and local compliance reviews.

With clients in a wide range of industries, he has represented employers involved in:

• Construction

• Media

• Technology

• Manufacturing

• Higher education

I

I

David J. Goldstein Littler

Professional sports organizations

Before joining Littler Mendelson, David was a partner at another firm, where he practiced in the Labor and Employment

Law Group for 22 years.

Professional and Community Affiliations

• Member, Board of Directors, Minnesota Twins Community Fund

• Member, Board of Directors, Twin Cities Rise!

• Member and Co-Chair, Minnesota Affirmative Action Compliance Council (an OFCCP recognized Industry Liaison

Group)

• Member, National Association of College and University Attorneys

Education

J.D., Harvard Law School, 1986

B.A., Haverford College, 1983, With Honors in Economics, Phi Beta Kappa

Bar Admissions

Minnesota

Courts

U.S. Supreme Court

U.S. Court of Appeals, 7th Circuit

U.S. Court of Appeals, 8th Circuit

Minnesota Supreme Court

U.S. District Court, District of Minnesota

U.S. District Court, Central District of Illinois

U.S. District Court, Eastern District of Wisconsin

U.S. District Court, Western District of Wisconsin

U.S. District Court, Western District of Tennessee

Court of Central Jurisdiction, Non-Removable Mille Lacs Band of Chippewa Indians

Publications

“You Screen, I Screen, EEOC Screams when we Screen: Avoiding EEOC Scrutiny of Pre-Employment Screening

Practices,” Spring 2012 Newsletter, CUPA-HR, Minnesota Chapter, Spring 2012

“OFCCP Looks to Overhaul Audit Procedures Through Revisions to Scheduling Letter and Itemized Listing,” May 12,

2011

“Minnesota Supreme Court Ruling is a Reminder to Think Twice Before Taking Deductions from Wages,” September 15,

2010

“DCL Issues Final Rule on Notification by Federal Contractors of Employee Labor Law Rights,” June 3, 2010

2


“Companies Seeking Stimulus Funds Should Expect a More Aggressive OFCCP,” July 21, 2009

“Affirmative Action, Its Future in the Balance,” Hennepin Lawyer, 1997

Press

“Littler Strengthens Employment Law Practice with Addition of David J. Goldstein and Holly M. Robbins to the Firm’s

Minneapolis Office,” March 20, 2009

Events & Speaking Engagements

“Government Contractor Update: OFCCP Continues to Pursue Major Changes in Regulations and Enforcement,” Upper

Midwest Employment Law Institute, 2011

“The Employment Compliance Costs of Doing Business with the Federal Government,” Milwaukee, WI, November 5,

2010

“The Employment Compliance Costs of Doing Business with the Federal Government,” Minneapolis, MN, October 14,

2010

“The Employment Compliance Costs of Doing Business with the Federal Government,” Des Moines, IA, October 13, 2010

“Executive Order 13496: Employee Rights Poster in Government Contractor Workplaces,” June 22, 2010

“Executive Order 13496: Employee Rights Poster in Government Contractor Workplaces,” June 10, 2010

“Ten Best Practices to Ensure OFCCP Compliance Under the New Administration,” Pittsburgh, PA, May 19, 2010

“A Littler OFCCP Webinar Series,” March 2, 2010

“EEO Tune-Up for Federal Contractors: Preparing for Increased Enforcement,” Upper Midwest Employment Law Institute,

2010

“Prevailing Wage Law in Minnesota,” Lorman, 2010

“Legal Update On The OFCCP Regs: Recruiters - Will Your Company Be a Target in 2011,” Minnesota Technical

Recruiters Network, 2010

“What’s New for Federal Contractors under the Obama Administration?,” Corporate Counsel Luncheon, Hennepin County

Bar Association, 2009

“WARNing WILL ROBINSON! Hidden Hazards for the Unwary Under WARN,” Upper Midwest Employment Law Institute,

2009

“Affirmative Action 101,” Upper Midwest Employment Law Institute, 2008

3


“Affirmative Action: Developments for Employment and Business Practitioners,” Bar Association / Web Credenza

Teleseminar Series, 2005

“A Practical Guide to the Developing Law: ADA and FMLA,” Faegre & Benson, 2004

‘Conceal and Carry,” Minnesota CLE, 2003

“Statistical evidence: When, How and Why to Use It,” Minnesota Continuing Legal Education, 2001

“HR Challenges in the Electronic Age,” Faegre & Benson, 2001

“Alternative Dispute Resolution of ADA Claims,” Minnesota Institute of Legal Education, 1998

“Developing and Trying Complex Employment Cases: A Defense Perspective,” Labor and Employment Law Institute,

1997

“Testimony before the Minnesota Advisory Committee,” U.S. Commission on Civil Rights, 1987

Blog Posts

“Despite Congressional Action OFCCP Signals Intent to Continue Litigating TRICARE,” Healthcare Employment Counsel,

March 14, 2012

“Hospital’s Post-Offer Medical Questions May Violate ADA, Title VII, and Employee Privacy Rights,” Healthcare

Employment Counsel, December 12, 2011

“Another District Court Dismisses FLSA, ERISA and RICO Claims in Hospital Class Action,” Healthcare Employment

Counsel, September 21, 2011

“OFCCP Proposes Changes to Compliance Review Documents,” Employment Law Update, May 12, 2011

4

DEALING WITH THE PROBLEM EMPLOYEEDAVID J. GOLDSTEIN

Littler Mendelson P.C.

Minneapolis, MN

APPENDIX

An Excerpt From:

Retaliation & Whistleblowing: A Guidefor Human Resources Professionals &Counsel, Fourth Edition with CD-ROM

WRITTEN BY GREGORY C. KEATING, ESQ. ANDTHE ATTORNEYS OF LITTLER’S WHISTLEBLOWING

AND RETALIATION PRACTICE GROUP

Littler

COPYRIGHT © 2011 LITTLER MENDELSON, P.C. ALL RIGHTS RESERVED. All material containedwithin this publication is protected by copyright law and may not be reproduced without theexpress written consent of Littler Mendelson. Published by LexisNexis. 8-1

CHAPTER 8

BREAKING NEW GROUND:HOT TOPICS IN WHISTLEBLOWER

& RETALIATION CASES

§ 8.1

I. INTRODUCTION

As noted throughout this book, the area of retaliation and whistleblowing is replete withexamples of divergent opinions and splits in the courts with regard to establishing a primafacie case. This Chapter focuses on certain topics that present particularly vexing issues foremployers and currently divide the courts and commentators.

The first hot topic involves the growing trend of third-party retaliation claims. By way ofexample, an individual and his mother work at the same company. His mother hadcomplained of sexual harassment at some point in the past. The individual now sues forretaliation alleging that because of his mother’s actions, the employer subjected him to someadverse employment action. The literal language of Title VII does not provide standing forsuch a third party to assert a claim for retaliation. However, the U.S. Supreme Court recentlyissued an opinion extending Title Vii’s retaliation protections to third parties. The scope ofthose protections remains unsettled, however, as the Court declined to identify whichrelationships will “count” for purposes of a third-party retaliation claim.

The second hot topic involves a tension between the right of employers to access the judicialprocess and the perception that such activity constitutes retaliation. This topic implicatesadded elements, including rights guaranteed by the U.S. Constitution and rights associatedwith the litigation privilege.

The third hot topic involves the rising tide of retaliatory harassment claims. These claimsencompass claims of employees who allege that harassment they experienced in theworkplace is as a result of their exercise of protected activity. For example, an employeecomplains of unlawful discrimination and is subsequently ridiculed and subjected todemeaning comments by her coworkers.

COPYRIGHT © 2011 LIErLER MENDELSON, P.C. ALL RIGHTS RESERVED. All material containedwithin this publication is protected by copyright law and may not be reproduced without theexpress written consent of Littler Mendelson. Published by LexisNexis. 8-1

§ 8.2 CHAPTER 8—HOT TOPICS IN WHISTLEBLOWER & RETALIATION CASES

The fourth hot topic involves an employer’s implementation of a mandatory arbitrationagreement as a condition of employment. The question that arises is whether an employee’srefusal to execute and be bound by such an agreement can be viewed as “protected activity”and whether an employer’s subsequent denial of employment constitutes retaliation underTitle VII.

The fifth hot topic involves retaliatory acts outside of employment. This topic examines thecourts’ expansive holding that incidents outside the employment context can constitute anadverse action.

The sixth hot topic relates to the fact that even an employer’s good faith efforts to avoidtaking an adverse action based on retaliatory motives may serve as evidence that theemployee’s protected activity influenced the employer’s decision.

The seventh hot topic, “Unreasonable Opposition,” addresses whether a plaintiffs conductconstitutes protected activity when it is disruptive or violative of workplace rules, when itinvolves the production of confidential information belonging to the employer or even if theopposition takes the form of physical violence.

The final hot topic pertains to whistleblower and retaliation claims brought by attorneysserving as in-house counsel to companies. This topic presents a particularly challengingconflict between the attorney’s possible rights as an employee and his or her ethicalobligations to the client.

The purpose of this Chapter is to identify topics that are particularly ripe for determinationand in conflict around the country, as well as to provide practice points as a means to avoidtraps for the unwary employer.

Any analysis of claims addressed in these hot topics requires an understanding of thereasoning and holding from the 2006 U.S. Supreme Court decision in Burlington Northern &Santa Fe Railway Co. v. White decision.’ In that case, the Court held that Title Vii’sdiscrimination and retaliation provisions have different statutory language and differentpurposes and, accordingly, the antiretaliation provisions, unlike the substantive provisions,are not limited to discriminatory actions that solely affect the terms and conditions ofemployment. This necessarily means that a plaintiff claiming retaliation under Title VII needonly show that a reasonable employee would have found the alleged retaliatory actions“materially adverse” in that they “well might have dissuaded a reasonable worker frommaking or supporting a charge of discrimination.”2Therefore, the reasoning of many earliercases narrowly construing Title Vii’s antiretaliation provisions and rejecting claims in thesehot topic areas as not cognizable under Title VII appears suspect.

1 548 U.S. 53 (2006).21d at 64-68.

8-2 RETALIATION AND WHISTLEBLOWING—FOURTH EDITION

A. THIRD-PARTY RETALIATION CLAIMS UNDER TITLE VII § 8.2.1

§ 8.2

II. THIRD-PARTY RETALIATION CLAIMS

§ 8.2.1

A. THIRD-PARTY RETALIATION CLAIMS UNDER TITLE VII

Title VII states:

It shall be unlawful... for an employer to discriminate against any of hisemployees or applicants. . . because he has opposed any practice made anunlawful employment practice by this subchapter, or because he has made acharge, testified, assisted, or participated in any manner in an investigation,proceeding, or hearing under this subchapter.3

Although this language seemingly restricts actionable retaliation claims under Title VII tothose brought by individuals who personally engaged in protected activity, the U.S. SupremeCourt recently opened the door to third-party Title VII retaliation claims by employees whodid not engage in protected activity.4 In Thompson v. North American Stainless, L.P., theCourt unanimously held that Title Vil’s antiretaliation provision provides a cause of action toany individual with an interest “arguably sought to be protected by [Title VII] With thisdecision, the Court has settled a longstanding split in the authority regarding protections forthird parties,6 but the Thompson opinion also creates new ambiguity surrounding thecategories of third parties against whom retaliation will form the basis of a viable Title VIIclaim.

In Thompson, both the plaintiff and his fiancée were employees of the defendant company.7In September 2002, plaintiff’s fiancée filed a charge with the Equal Employment OpportunityCommission (EEOC), alleging that her supervisors discriminated against her on the basis ofher gender.8 The EEOC notified the company of the fiancée’s charge on February 13, 2003.Approximately three weeks later, the company terminated the plaintiffs employment.9Although the company argued that it terminated the plaintiff for legitimate,

42 U.S.C. § 2000e-3(a) (2003) (emphasis added). Other federal statutes have similar provisions. See,e.g., 29 U.S.C. § 2601 (2003) (FMLA antiretaliation provision); 29 U.S.C. § 215(a)(3) (2003) (FLSAantiretaliation provision); 42 U.S.C. § 12203(a) (2003) (ADA antiretaliation provision). See alsoChapter 3.“Thompson v. North Am. Stainless, L.P., 131 S. Ct. 863 (2011).51d. at 866.6 Prior to the U.S. Supreme Court’s decision in Thompson, those courts that had considered the issuewere divided mainly into two opposing camps. One camp, including the Fifth, Sixth and EighthCircuits, held that the plain language of Title VII and other antidiscrimination statutes limited aretaliation claim to the person who opposed an unlawful practice or participates in a protected activity.The other camp, including the Fourth, Seventh, Eleventh and D.C. Circuits, took a more expansiveview and held that a third-party retaliation claim should survive based on the broad, remedial purposeof Title VII. In addition, a small number of lower courts tried to fmd some middle ground by allowinga retaliation claim to proceed if the employee could demonstrate some level or perception ofinvolvement in the third party’s protected conduct. (For further discussion, see Chapter 2, §2.1.1(c).)‘ Thompson, 131 S. Ct. at 867.8 Id9 Id

COPYRIGHT © 2011 LIErLER MENDELSON, P.C. ALL RIGHTS RESERVED. 8-3

§ 8.2.1 CHAPTER 8—HOT TOPICS WHISTLEBLOWER & RETALIATION CASES

performance-based reasons, the plaintiff alleged in his lawsuit that the company terminatedhim in retaliation for his fiancée’s EEOC charge.’°

The U.S. Court of Appeals for the Sixth Circuit, affirming the lower court’s decision, ruledthat “under its plain language,” Title VII “does not authorize a retaliation claim by a plaintiffwho did not himself engage in protected activity.” On January 24, 2011, the U.S. Supremecourt reversed the Sixth Circuit’s decision.

Delivering the opinion of a unanimous court, Justice Scalia identified two issues: “First, did[the company] ‘s firing of [plaintiff] constitute unlawful retaliation? And, second, if it did,does Title VII grant [plaintiff] a cause of action?”2in answering the first question, the Courtrelied on the “adverse action” standard announced in its Burlington Northern opinion for theproposition that Title Vii’s antiretaliation provision is broader than the statute’santidiscrimination provision.’3 In Burlington Northern, the Supreme Court held thatTitle Vii’s antiretaliation provision prohibits an employer action that “well might havedissuaded a reasonable worker from making or supporting a discrimination charge.”4Applying that standard to the facts in Thompson, the Court concluded that a reasonableworker may well be dissuaded from engaging in protected activity, if she believed that herfiancé would be fired in retaliation.’5

Although the Court explicitly allowed third-party retaliation claims under Title VII, it did notspecify which third parties might be sufficiently associated with the plaintiff to makeretaliation against that person an actionable claim.’6 Despite declining to “identify a fixedclass of relationships for which third-party reprisals are unlawful,”17 the Court did providesome guidance on this critical question. Specifically, the Court explained: “We expect thatfiring a close family member will almost always meet the Burlington standard, and inflictinga milder reprisal on a mere acquaintance will almost never do so, but beyond that we arereluctant to generalize.”8

The Court also addressed the question of who can state a claim for third-party retaliation.Title VII provides that a “civil action may be brought... by the person claiming to beaggrieved.”9Rejecting the company’ argument that the provision should be read to limitclaims only to those who were the subject of unlawful retaliation, the Court instead adopted a“zone of interests” standard for determining who is “aggrieved” for purposes of Title VIIretaliation claims.20 Specifically, the Court explained that, under Title VII, any plaintiff withan interest “arguably sought to be protected by [Title VII]” may be “aggrieved” and state aclaim of retaliation under the statute.2’ In the case before the Court, it held that the plaintifffell within the “zone of interests” because: (1) he was an employee of the company, and thepurpose of Title VII is to protect employees from their employers’ unlawful conduct; and

‘°Id.

“Thompson v. North Am. Stainless, L.P., 567 F.3d 804 (6th Cir. 2009).12 Thompson, 131 S. Ct. at 868.‘3

14d. at 866 (citing Burlington Northern, 548 U.S. at 68 (2006)).at 868.

‘6Id17Id.‘ Thompson, 131 S. Ct. at 868‘ 42 U.S.C. § 2000e-5(f)(1).20 Thompson, 131 S. Ct. at 870.21


B. THIRD-PARTY RETALIATION CLAIMS UNDER OTHER STATUTES § 8.2.2

(2) accepting the plaintiffs allegations as true, his termination was effectively an act throughwhich the company punished the fiancée for filing her charge of discrimination.22Therefore,the plaintiff was a “person aggrieved” and could pursue a Title VII retaliation claim.

Employers are well-advised to train their managers and supervisors that retaliation may bebroad in scope, including retaliation against an employee who is in some manner associatedwith the employee who engaged in protected activity. Also employers should review theirretaliation policies to ensure that the language can be construed broadly enough to prohibitretaliation against third parties.

§ 8.2.2

B. THIRD-PARTY RETALIATION CLAIMS UNDER STATUTES

OTHER THAN TITLE VIIAlthough Thompson involved a third-party retaliation claim under Title VII only, courts willlikely extend its reasoning to claims brought under the Americans with Disabilities Act(ADA) and the Age Discrimination in Employment Act (ADEA), which containantiretaliation provisions similar to the one in Title VII. Indeed, the ADA contains anadditional antiretaliation provision, that the U.S. Court of Appeals for the Third Circuit found(in a case prior to Thompson) created protections for third parties.

In Fogleman v. Mercy Hospital, Inc. ,23 the Third Circuit was unwilling to allow third-party

retaliation claims brought under the ADEA, the Pennsylvania Human Relations Act, and thefirst antiretaliation provision of the ADA on the basis that the plain language would not allowsuch claims. However, the court reversed summary judgment for the employer based on thebroader language in the second provision of the ADA.24 The second antiretaliation provisionof the ADA states:

It shall be unlawful to coerce, intimidate, threaten, or interfere with anyindividual in the exercise or enjoyment of, or... on account of his or herhaving aided or encouraged any other individual in the exercise or enjoymentof, any right granted or protected by this chapter.25

The Third Circuit compared this language to language found in the National Labor RelationsAct (NLRA) and noted that its own precedent, plus that from other circuits, recognized acause of action for close relatives of employees that engaged in protected activity under theNLRA.26 Ultimately, the court held that the ADA’s second antiretaliation provision did not“limit a cause of action to the particular employee that engaged in protected activity,” thusopening a door for third-party retaliation claims under the broader language of the ADA.27 In

23 283 F.3d 561 (3d Cir. 2002).

241d. at 570-71.25 42 U.S.C. § 12203(b) (2003).26Fogleman 283 F.3d at 570.27 Id. See also Wychock v. Coordinated Health Sys., 2003 U.S. Dist. LEXIS 3376 (E.D. Pa. Mar. 5,2003) (court recognizes that ADA provides for third-party retaliation claims, however, refused toextend to employee because her relationship was not sufficiently close with the individual whoengaged in protected activity).

COPYRIGHT © 2011 LITrLER MENDELSON, P.C. ALL RIGHTS RESERVED. 8-5

§ 8.3 CHAPTER 8— HOT TOPICS IN WHISTLEBLOWER & RETALIATION CASES

light of this additional and broader language in the ADA it is likely that courts will recognizethird-party retaliation claims under that statute.

Because of differences between Title Vii’s antiretaliation provision and that found in theFamily and Medical Leave Act (FMLA), it remains an open question whether third-partyFMLA claims are actionable. To date, only the U.S. Court of Appeals for the Fifth Circuit hasaddressed third-party FMLA retaliation claims. In Elsensohn v. St. Tammany Parish Sherff’sOffice,28 the Fifth Circuit held that the plaintiff could not state a claim under the FMLA forsupporting, but not testif’ing in, his wife’s FMLA case. In Elsensohn, the court noted that theFMLA antiretaliation protections are narrower and more circumscribed than those under TitleVII and other antidiscrimination statutes. Specifically, section 2615(b) of the FMLA makes itunlawful for an employer “to discharge or in any other manner discriminate against [an]individual” because that person:

1. has filed any charge, or has instituted or caused to be instituted anyproceeding, under or related to this [subchapter];

2. has given, or is about to give, any information in connection with anyinquiry or proceeding relating to any right provided under this[subchapter]; or

3. has testified, or is about to testifj, in any inquiry or proceeding relatingto any right provided under this [subchapter] 29

It is possible that a court construing the FMLA’s more specific antiretaliation provisionwould find that the statutory language does not permit retaliation claims by third parties whohave not themselves engaged in any of the enumerated protected activities.

§ 8.3

III. USE OF JUDICIAL PROCESS CLAIMS

Courts have struggled with when and under what circumstances an employer’s resort to thejudicial process constitutes unlawful retaliation. in many circumstances, employers facedwith claims of discrimination that they perceive to be meritless seek to go on the offensiveand assert claims against the former employee. By way of example, in a case involving TacoBell, the employee sued under the FMLA and Taco Bell included counterclaims in its answeralleging conversion and unjust enrichment due to the employee’s having received and keptexcess mileage reimbursements to which he was not entitled.3°The employee sought leave toamend his complaint and allege retaliation against the employer.3’The court held that TacoBell’s actions in asserting the counterclaims could form the basis of a retaliation suit.32 Asdiscussed in greater detail below, not all courts embrace the notion that access to the judicialprocess can form the basis for a retaliation claim. Nonetheless, employers should know thelaw in the jurisdiction that they operate in and should at least think carefully before suing an

28 530 F.3d 368 (5th Cir. 2008).2929 U.S.C. § 26 15(b).30Rosania v. Taco Bell ofAm., Inc., 303 F. Supp. 2d 878, 880 (N.D. Ohio 2004).311d.

321d. at 889.


A. JURISDICTIONS WHERE COUNTERCLAIMS NEVER CONSTITUTE RETALIATION § 8.3.1

employee or former employee who has filed a charge or a complaint alleging discriminationor harassment.

Moreover, the U.S. Supreme Court’s holding in Burlington Northern that a nonemploymentrelated action can constitute an adverse employment action if that action could dissuade areasonable employee from making or supporting a charge of discrimination underscores thatan employer must strongly consider the potential for a retaliation claim when filing acounterclaim or pursuing legal action against a current or former employee.33

§ 8.3.1

A. JURISDICTIONS WHERE COUNTERCLAIMS NEVER

CONSTITUTE RETALIATION

Some courts have drawn a firm line in the sand and hold that an employer’s action inasserting claims or counterclaims can never constitute retaliation. The principal reason thatthese courts refuse to entertain counterclaims as the basis for retaliation is that they do notconstitute an adverse employment action.34 However, the Supreme Court’s holding inBurlington Northern arguably negates this analysis.

Nonetheless, the U.S. Court of Appeals for the Fifth Circuit is the only Court of Appeals thathas, to date and prior to Burlington Northern, addressed the issue of counterclaims as a basisfor retaliation and has squarely rejected the notion.35 In Hernandez v. Crawford BuildingMaterial Co. ,36 the employee filed a complaint alleging age discrimination. The employersubsequently learned from a third party that the plaintiff had stolen company property whileemployed at Crawford and asserted a counterclaim for theft.37 The case went to trial and thejury exonerated the employer for the underlying act of discrimination but found against theemployer and awarded $75,000 in damages for retaliation in filing a counterclaim.38 Onappeal, the court reversed, holding that the claim “should not have gone to the jury in the firstplace” because a counterclaim could not “support a finding of retaliatory employmentaction.”39 The court reasoned that under no circumstance in the Fifth Circuit could acounterclaim constitute an “adverse employment action” because the Fifth Circuit analyzes

33See, e.g., Spiegel v. Schulmann, 2006 U.S. Dist. LEXIS 86531 (E.D.N.Y. Nov. 30, 2006) (citingBurlington Northern, the court acknowledges that frivolous employer lawsuits can give rise to aretaliation claim).34Hernandez v. Crawford Bldg. Material Co., 321 F.3d 528, 532-33 (5th Cir. 2003), cert. denied,540 U.S. 817 (2003) (per curiam); Neuffer v. York Corrugated Container Corp., 2004 U.S. Dist.LEXIS 7299 (N.D. Ill. Apr. 28, 2004); Earl v. Elecfro-Coatings ofIowa, Inc., 2002 U.S. Dist. LEXIS20937, at **6..8 (N.D. Iowa Oct. 29, 2002); EEOC v. K & JMgmt., Inc., 2000 U.S. Dist. LEXIS 8012,at **8..12 (N.D. Ill. June 7, 2000).

Hernandez, 321 F.3d at 532, 533; see also Scrivner v. Socorro Indep. Sch. Dist., 169 F.3d 969, 972(5th Cir. 1999) (“it is not obvious that counterclaims or lawsuits filed against a Title VII plaintiff oughtto be cognizable as retaliatory conduct under Title VII. After all, companies and citizens have aconstitutional right to file lawsuits. .

.

36Hernandez, 321 F.3d at 529.37Id.

at 530.391d. at 533.


§ 8.3.2 CHAPTER 8—HOT ToPIcs IN WHISTLEBLOWER & RETALIATION CASES

that element “in a stricter sense than some other circuits,” only allowing an “ultimateemployment decision” by an employer to form the basis for liability as retaliation.40

After the U.S. Supreme Court decided Burlington Northern, the U.S. District Court for theNorthern District of Illinois held that an employer’s filing of a counterclaim did not amount toretaliation.4’ In Beltran v. Breniword North Healthcare Center, terminated nursing carefacility employees filed suit against their former employer seeking unpaid wages under theFair Labor Standards Act and the state wage payment laws. The employer filed acounterclaim against the employee claiming that the employees had breached their fiduciaryduties where the employees were not entitled to unpaid overtime because they had beensleeping on the job. The district court found for the employer stating that “filing acounterclaim will not chill plaintiffs from exercising and enforcing their statutory rightsbecause by the time the employer files its counterclaim, plaintiffs have afready made theircharges and initiated a lawsuit.... Because counterclaims are supposed to be brought inresponse to a complaint, there is nothing suspicious about the timing of [the employer’s]counterclaim.”42Other courts in have held likewise.43

§ 8.3.2

B. JURISDICTIONS WHERE LITIGATION IN RESPONSE TO

DISCRIMINATION CLAIM MAY CONSTITUTE RETALIATION

Other courts have recognized that an employer who initiates a separate action in response toan EEOC charge does commit unlawful retaliation.44 In Urquiola v. Linen Supermarket,45for

401d. at 531. Following Hernandez, the Texas Court of Appeals held that “a former employer’scounterclaim cannot form the basis for a retaliation claim as a matter of law. . . .“ Stewart v. SanminaTexas, L.P., 156 S.W.3d 198, 209 (Tex. App.—Dallas 2005).‘ See Beltran v. BrentwoodN. Healthcare Cfr., L.L.C., 426 F. Supp. 2d 827 (N.D. Ill. 2006).

421d at 834.

43Neuffer v. York Corrugated Container Corp., 2004 U.S. Dist. LEXIS 7299 (N.D. Ill. Apr. 28, 2004)(dismissing retaliation claim premised on employer’s counterclaim); EEOC v. K & J Mgmt., Inc.,2000 U.S. Dist. LEXIS 8012 (N.D. Ill June 7, 2000) (same); see also Banks v. CBOCS West, Inc., 2005U.S. Dist. LEXIS 9503 (N.D. Ill. May 9, 2005) (granting summary judgment because counterclaim wasnot adverse action); Harmar v. United Airlines, Inc., 1996 U.S. Dist. LEXIS 5346 (N.D. Ill. Apr. 23,1996) (granting motion to dismiss retaliation claim because filing affirmative defenses did not providebasis for viable retaliation claim); Glass v. IDS Fin. Servs., Inc., 778 F. Supp. 1029, 1061 n.53(D. Minn. 1991) (“The court notes.. . that the antiretaliation provisions of the ADEA and Title VII aredesigned principally to deal with retaliatory conduct that occurs outside the judicial system, forexample: demotion, termination, poor evaluations, and loss of normal work assignment. Antiretaliationprovisions prevent employers from intimidating plaintiffs thereby discouraging plaintiffs from seekinglegal remedies. Once a lawsuit has been filed, courts have tools to deal with counterclaims that aretruly retaliatory or made in bad faith.”) (internal citations omitted).

44Spiegel v. Schulmann, 2006 U.S. Dist. LEXIS 86531 (E.D.N.Y. Nov. 30, 2006); EEOC v.Seelye- Wright of S. Haven, Inc., 2006 U.S. Dist. LEXIS 73529 (W.D. Mich. Oct. 10, 2006); Walsh v.Irvin Stern’s Costumes, 2006 U.S. Dist. LEXIS 57398 (E.D. Pa. Aug. 15, 2006); Neuffer, 2004 U.S.Dist. LEXIS 7299, at *2; Ishkhanian v. Forrester Clinic S.C., 2003 U.S. Dist. LEXIS 11041 (N.D. Ill.June 25, 2003); Cozzi v. Pepsi-Cola Gen. Bottlers, Inc., 1997 U.S. Dist. LEXIS 7979, at *3 (N.D. Ill.May 30, 1997); Urquiola v. Linen Supermarket, Inc., 1995 U.S. Dist. LEXIS 9902, at *1 (M.D. Fla.Mar. 23, 1995); EEOC v. Levi Strauss & Co., 515 F. Supp. 640, 641 (N.D. Ill. 1981); EEOC v.Virginia Carolina Veneer Corp., 495 F. Supp. 775, 777 (W.D. Va. 1980).“ Urquiola, 1995 U.S. Dist. LEXIS 9902, at *3


B. JURISDICTIONS WHERE LITIGATION MAY CoNsTrrum RETALIATION § 8.3.2

example, the employee filed an EEOC charge alleging sexual harassment and the employerresponded by filing a separate action in court for defamation. The court held that while “anemployer is not precluded from filing a defamation suit to vindicate his reputation if the suitis brought in good faith,” filing an action in the immediate wake of an EEOC charge creates astrong inference that the separate action was retaliatory.46Other courts have noted that filing aseparate action chills the rights of employees by forcing them to incur the expense of hiringcounsel (often not retained at the EEOC level) and creating fear of monetary judgmentagainst them.47

On the other hand, the Massachusetts Supreme Judicial Court held that initiation of a lawsuitagainst a former employee who has lodged a charge of discrimination is not actionableretaliation where the lawsuit has a legitimate basis in law and fact.48 In Sahli v. Bull RNInformation Systems, Inc. ,“ the plaintiff worked for eight years in the human resourcesdepartment at Bull HN Information Systems. With a layoff looming, plaintiff unsuccessfullybid for a vacant position in the human resources department.5°She was not selected andinstead took a severance package, which included a release of all claims against heremployer.5’Months later, she learned to her dismay that the company had filled the vacantposition she applied for with a younger woman.52 She sued, claiming discrimination and theemployer promptly filed a civil action seeking a declaratory judgment that the discriminationcharge was barred by the terms of the release she had executed.53 The plaintiff amended herdiscrimination complaint to allege retaliation by the employer for filing a separate civil actionseeking declaratory relief.54 In rejecting the employee’s claim that filing a separate civilaction could form the basis of a retaliation claim, the court sought to balance the rightsagainst retaliation guaranteed by the discrimination statute against the constitutional right toseek judicial resolution of disputes under the First Amendment of the U.S. Constitution.55Thecourt ultimately concluded that provided an employer’s action has a “legitimate basis in fact,”the right guaranteed by the U.S. Constitution trumped the right guaranteed by thediscrimination statute against retaliation.56

Similarly, in Timmerman v. US. Bank, NA.,57 the U.S. Court of Appeals for the Tenth Circuitheld that even assuming, arguendo, that the plaintiff had established a prima facie case of

47Harmar v. UnitedAirlines, 1996 U.S. Dist. LEXIS 5346, at *3 (N.D. Iii. Apr. 17, 1996).48 Sahli v. Bull HN Info. Sys., Inc., 774 N.E.2d 1085 (Mass. 2002); see also Hill v. Lazarou Enters.,Inc., 2011 U.S. Dist. LEXIS 37849 (S.D. Fla. Mar. 17, 2011) (requiring plaintiff, whose retaliationclaim was based upon employer’s counterclaim, to show that the counterclaim was filed for aretaliatory motive and lacked reasonable basis in fact or law).

49Sahli, 774 N.E.2d at 1087.501d.

5’Id.52

r Sahli, 774 N.E.2d at 1088.Icl.

Id. at 1089-90.561d. at 1091-92. In reaching its holding, the court looked to U.S. Supreme Court authority decidedunder the NLRA in which a union challenged an employers filing of a separate lawsuit as retaliatoryand the employer successfully argued that it had a right to file the action under the U.S. Constitution.BE&K Constr. Co. v. NLRB, 536 U.S. 516 (2002).483 F.3d 1106 (10th Cir. 2007).


§ 8.3.2 CHAPTER 8— HOT ToPIcs IN WHISTLEBLOWER & RETALIATION CASES

retaliation based on the employer’s filing several counterclaims in response to her complaintof discrimination, the employer had come forward with a legitimate, nondiscriminatoryreason for filing its counterclaims, and plaintiff had failed to demonstrate that the employer’sreason was pretextual.58 In that case, the employer explained that it decided to bring itscounterclaims against the plaintiff only after she admitted, during deposition testimony, thatshe partially funded an internal U.S. Bank “party fund” account using coin counting andnotary fees, that she knew the money did not belong to her personally, and that she withdrewa portion of the money from the “party fund” after she was fired and deposited it in her ownaccount at another bank.59 The court concluded that “the potential diversion and withdrawalof U.S. Bank’s funds is a legitimate, nondiscriminatory reason for the employer to filecounterclaims against that employee in an attempt to retrieve what was alleged (and hereadmitted) to have been taken.6°Thus, when the plaintiff failed to show that the employer’sreason for filing its counterclaims was merely pretext for a retaliatory adverse employmentaction, the court affirmed the summary judgment granted in favor of the employer.6’

While instituting a separate action may form the basis for a retaliation action, many courtshold that an employer does not commit retaliation when it counterclaims in an action broughtby an employee. In EEOC v. K & J Management, Inc. ,62 for example, a district court inIllinois rejected the plaintiff’s assertion that filing a counterclaim could form the basis of aretaliation claim. Specifically, the court noted:

[F]iling a counterclaim is unlikely to chill plaintiffs’ exercise of their rightsto challenge discrimination under Title VII. The purpose of. . . Title VII is toprohibit retaliation against an employee who has made a charge with theEEOC. When employers file a counterclaim, however, plaintiffs have alreadymade their charges with the EEOC and initiated a lawsuit against theiremployer before any counterclaim is even brought. The filing of a

581d at 1123.

59d.

611d. at 1124; see also Mohamed v. SanojI-Aventis Pharms., 2009 U.S. Dist. LEXIS 119871, at* *73..74 (S.D.N.Y. Dec. 18, 2009) (“even if Plaintiff has established a prima facie case of retaliation,Plaintiff cannot show that the Company’s proffered reason for asserting the counterclaims—that it hada reasonable good-faith belief that the claims were valid—is actually a pretext for retaliation.”); GreerBurger v. Temesi, 879 N.E.2d 174, 178 (Ohio 2007) (reversing an Administrative Law Judge’s rulingthat an employer’s counterclaim against its employee was retaliation, and holding that “an employer isnot barred from filing a well-grounded, objectively based action against an employee who has engagedin a protected activity.”). But see Darveau v. Detecon, Inc., 515 F.3d 334, 343 (4th Cir. 2008) (fmdingallegation that plaintiffs employer filed a lawsuit against him alleging fraud with a retaliatory motiveand without a reasonable basis in fact or law an actionable adverse employment action under the FairLabor Standards Act); Pinkett v. Apex Commc ‘ns. Corp., 2009 U.S. Dist. LEXIS 34053 (E.D. Va.Apr. 21, 2009) (fmding retaliation claims actionable where employer filed, in the bankruptcy court,objections to discharge with malice and without a sufficient factual basis); Munroe v. Partsbase, Inc.,2009 U.S. Dist. LEXIS 15801, at **22..23 (S.D. Fla. Feb. 17, 2009) (“Bad faith or groundlesscounterclaims and other legal proceedings against employees who assert statutory rights are actionableretaliation precisely because of their ‘in terrorem effect.”); Torres v. Gristede ‘s Operating Corp.,628 F. Supp. 2d 447, 473 (S.D.N.Y. 2008) (citing Bill Johnson’s Rests., Inc. V. NL.R.B., 461 U.S. 731,740 (1983)) (acknowledging that “by suing an employee who files charges ... an employer can placeits employees on notice that anyone who engages in such conduct is subjecting himself to thepossibility of a burdensome lawsuit”).622000 U.S. Dist. LEXIS 8012, at *10 (N.D. III. June 7,2000).


C. JURISDICTIONS WHERE COUNTERCLAIMS ALONE CAN BE RETALIATION § 8.3.3

counterclaim in an action already commenced by an employee will not chillthat employee’s legal enforcement of Title VII rights.63

Similarly, the U.S. Court of Appeals for the Seventh Circuit noted in one of the earlier casesaddressing the issue of use of the judicial process as grounds for a retaliation claim thatalthough “some actions taken in the course of litigation could conceivably constituteretaliation. . . it will be the rare case in which conduct occurring within the scope of litigationconstitutes retaliation

After the Supreme Court’s decision in Burlington Northern, courts have continued to hold thatan employer’s instituting a lawsuit after an employee files a charge may constitute retaliation.65For example, in EEOC v. Seelye-Wright of South Haven, Inc., the U.S. District Court for theWestern District of Michigan held that an employer retaliated against a former employee whohad filed a discrimination charge with the Michigan Department of Civil Rights when it filed adefamation suit against the employee. The court, citing Burlington Northern, reasoned that eventhough the employer’s lawsuit occurred outside of the employment setting, it was sufficient toconstitute an adverse action that amounted to retaliation.66Further, the court noted that the closetemporal proximity between the employee’s filing and the employer’s lawsuit established acausal connection that the employer’s suit for defamation was as a result of the employeeengaging in protected activity.67

Further, the potential for a retaliation claim is not limited to situations where an employeefiles a claim of discrimination. It may also arise where an employee files anotheremployment-related claim, such as a workers’ compensation claim.68

§ 8.3.3

C. JURISDICTIONS WHERE COUNTERCLAIMS ALONE CAN

CONSTITUTE RETALIATION

A growing number of courts have held that either initiating a separate action in response to anEEOC charge or asserting a counterclaim in response to a court proceeding can constitute

63Id at **10..1 1; see also Gross v. Akin, 599 F. Supp. 2d 23, 27 (D.D.C. 2009) (holding that filing of acounterclaim against an employee was not a qualifying adverse action for a retaliation claim based onthe fmding that “filing a counterclaim will not chill plaintiffs from exercising and enforcing theirstatutory rights because by the time the employer files its counterclaim, plaintiffs have already madetheir charges and initiated a lawsuit”) (citing EEOC v. K&J Mgmt. Inc., 2000 U.S. Dist. LEXIS 8012(N.D. Ill. June 7, 2000)).64 Steffes v. Stepan Co., 144 F.3d 1070, 1075 (7th Cir. 1998); see also Green Leaf Nursery v.El. Du Pont de Nemours & Co., 341 F.3d 1292 (11th Cir. 2003), cert. denied, 541 U.S. 1037 (2004).65 EEOC v. Seelye- Wright ofS. Haven, Inc., 2006 U.S. Dist. LEXIS 73529 (W.D. Mich. Oct. 10,2006); Frazier v. USAirways, Inc. (In re US Airways, Inc.), 2006 Bankr. LEXIS 1095, at *13 (Bankr.E.D. Va. Mar. 27, 2006) (“this court holds that the bringing or instigating of court proceedings may, inappropriate circumstances, give rise to a cause of action under the anti-retaliation provisions of TitleVII, the ADEA, and the ADA”).

665eelye..Wright 2006 U.S. Dist. LEXIS 73529, at *4

68 Thompson v. City ofNew York, 2006 U.S. Dist. LEXIS 59472 (S.D.N.Y. Aug. 10, 2006) (resistingplaintiffs workers’ compensation claim materially adverse under retaliation law).


§ 8.3.4 CHAPTER 8.—HOT ToPICS IN WHISTLEBLOWER & RETALIATION CASES

unlawful retaliation.69 In so doing, these courts have expressly rejected a common argumentposited by defendant employers—that the filing of a counterclaim is not an adverseemployment action.7°In Harper v. Realmark Corp. ,71 for example, the court expressly noted agrowing trend among courts in the Seventh Circuit that recognizes that an “employmentimpairment” is not necessary for a retaliation action.

Former employees have also successfully asserted retaliation claims for counterclaimsalleging unfair com?etition as a result of their having formed a new business that competeswith the employer.7 In Kreinik v. Showbran Photo, Inc., a former employee sued defendantemployer to enforce his rights under the terms of two employment benefit plans.73 After theemployer asserted counterclaims for trademark infringement, unfair competition, and breachof contract, the employee moved to amend the complaint to add claims of unlawful retaliationunder ERISA.74 The court allowed the employee to amend his complaint to include a claimfor retaliation because the employee alleged facts sufficient to infer that the employer’scounterclaims constituted an adverse action that challenged the employee’s ability competefairly and exhibit good faith in business relationships.

§ 8.3.4

D. OTHER JUDICIAL ACTIONS THAT CAN CONSTITUTE

RETALIATION

Courts have also held that initiating or threatening to initiate other types of judicial actions

against an employee may constitute retaliation. In Walsh v. Irvin Stern ‘s Costumes,75 theplaintiff alleged that her former employer retaliated against her when it accused her of theftand threatened to seek criminal charges against her if she did not withdraw an EEOC charge.Before the decision in Burlington Northern, plaintiff’s retaliation claim was dismissed, sinceshe did not show “any tangible adverse employment consequences” of the criminalaccusations.76On reconsideration, however, the court reinstated the retaliation claim.77 The

69Rosania v. Taco Bell ofAm., Inc., 303 F. Supp. 2d 878 (N.D. Ohio 2004); Harper v. Realmark Corp.,2004 U.S. Dist. LEXIS 15673 (S.D. md. July 29, 2004); Gill v. Rinker Materials Corp., 2003 U.S.Dist. LEXIS 2986 (E.D. Tenn. Feb. 24, 2003); Hernandez v. Data Sys. Int’l, Inc., 266 F. Supp. 2d1285, 1306 (D. Kan. 2003); Ishkhanian v. Forrester Clinic S.C., 2003 U.S. Dist. LEXIS 11041(N.D. Ill. June 30, 2003); Gliatta v. Tectum Inc., 211 F. Supp. 2d 992 (S.D. Ohio 2002); Ward v.Wal-Mart Stores, Inc., 140 F. Supp. 2d 1220, 1231 (D.N.M. 2001); EEOC v. Outback Steakhouse, Inc.75 F. Supp. 2d 756 (N.D. Ohio 1999); Greer-Burger v. Temesi, 2006 Ohio 3690 (Ohio Ct. App. 2006)(Ohio court of appeals finding that employer’s suit to recoup attorney fees and punitive damages afteremployee lost her sexual harassment jury trial constituted retaliation); see also Judith A. Moldover,When the Empire Strikes Back: Employer Retaliation, Reaction and Counterclaims, N.Y. LAW J.(May 16, 2007).

v. Realmark Corp., 2004 U.S. Dist. LEXIS 15673, at *8 (S.D. md. July 29, 2004); Kreinikv.Showbran Photo, Inc., 2003 U.S. Dist. LEXIS 18276, at **19..20 (S.D.N.Y. Oct. 10, 2003).71 Harper, 2004 U.S. Dist. LEXIS 15673, at *8.

72See e.g., Kreinikv. Showbran Photo, Inc., 2003 U.S. Dist. LEXIS 18276 (S.D.N.Y. Oct. 14, 2003).73

Id.; see also 29 U.S.C. § 1140.

2006 U.S. Dist. LEXIS 57398 (E.D. Pa. Aug. 15, 2006).

761d at *4

771d. at *5

8-12 RETALIATION AND WHISTLEBLOWING—FOURTH EDITIoN

D. OTHER JUDICIAL ACTIONS THAT CAN CONSTITUTE RETALIATION § 8.3.4

court reasoned that a reasonable person would be dissuaded from pressing a discriminationcomplaint in the face of possible criminal action, making it materially adverse.78

Similarly, in another post-Burlington Northern case, Williams v. WD. Sports, NM, Inc.the court found that plaintiff adduced sufficient evidence to warrant trial because theemployer’s opposition to her unemployment benefits claim would have dissuaded areasonable person from availing herself of Title VII remedies, and was sufficient to satisfy thematerially adverse action requirement. The court noted that the closeness in time between theemployee filing her discrimination charge and the employer’s opposition to her claim forunemployment benefits established the necessary causal connection.8°In response to theemployee’s prima facie case, the employer presented seemingly inconsistent andcontradictory explanations for its opposition, which supported a finding that the statedreasons for its actions were pretext.81

Even in the face of employee violence, an employer must consider whether filing criminalcharges against an employee who has recently filed a discrimination charge or complaint willconstitute actionable retaliation.82 For example, in Malone v. City ofNew York,83 subsequentto filing an EEOC complaint, the plaintiff was charged with assaulting a supervisor at a cityadministrative board hearing. Plaintiff alleged that the charge was false, and was trumped upin retaliation for filing the EEOC complaint.84The court found that “the charges [were] notsufficiently concrete to establish an adverse employment action under the anti-discriminationprovision of Title Vu.”85 However, a false assault charge could dissuade a reasonable personfrom filing an EEOC charge. Therefore, the assault charge was materially adverse to supporta retaliation claim.86

On the other hand, at least one court has held that initiating or threatening to initiate criminalcharges against an employee does not constitute retaliation. In Ibrahim Abuoumar v. LakeshoreChrysler,87 the plaintiff sought to amend a discrimination complaint to include a retaliationclaim based on the employer’s decision to press criminal charges against the plaintiff two yearsafter his employment was terminated. The court found that the employer’s decision did notconstitute an ultimate employment decision even though it might have affected the employee’sfuture employability.88Thus, the court concluded, the amended complaint did not state a claimfor retaliation upon which relief could be granted because the employer’s instigation of criminalcharges against plaintiffwas not an adverse employment action.89

78 Id. at *979497 F.3d 1079 (10th Cir. 2007).

at 1090-91.see also Hughes v. Miller, 909 N.E.2d 642 (Ohio Ct. App. 2009) (defamation suit filed by

employee accused of sexual harassment against his accuser constituted adverse action and was per seretaliation.).

e.g., Malone v. City ofNew York, 2006 U.S. Dist. LEXIS 61866 (E.D.N.Y. Aug. 30, 2006).

841d at *24.85 Id. at *25

872006 U.S. Dist. LEXIS 29511 (E.D. La. May 15, 2006).88 Id. at **89

891d

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§ 8.3.5 CHAPTER 8—HOT TOPICS IN WHISTLEBLOWER & RETALIATION CASES

§ 8.3.5

E. JUDICIAL ACTIONS UNDER THE SARBANES-OXLEY ACT

Courts considering whistleblower retaliation claims under the Sarbanes-Oxley Act (SOX)have found that an employer’s resort to judicial process is not retaliatory because, unlikeunder Burlington Northern, the adverse action under SOX must be employment related. Forinstance, in Farnham v. International Manufacturing Solutions,9°the U.S. Department ofLabor Administrative Review Board (ARB or “Board”) agreed with the Administrative LawJudge (AU) that the respondent’s filing of a civil suit against the complainant allegingtortious interference with the respondents’ loan transactions, slander, and intentionalinfliction of emotional distress, was not proved to be adverse employment action under theSOX. In its decision, the Board stated that SOX defines adverse action as “discharging,demoting, suspending, threatening, harassing, or in any other manner discriminating againstan employee in the terms and conditions of his or her employment. [The complainant] hasfailed to establish how [the] filing [of the] civil suit against [him] . . . injured him in any wayin relation to ‘the terms and condition of his employment.”9’

Likewise, in Vodicka v. DOBI Medical International, Inc. ,92 the complainant, who had been amember of the respondent’s board of directors, filed a SOX whistleblower complaint allegingviolation of that law by the respondent when it filed a lawsuit seeking injunctive relief in thestate of New York against the complainant on the ground that he had allegedly violated hisconfidentiality agreement with the respondent. The AU observed that section 806(a) of theAct prohibits retaliation against an employee in regard to the terms and conditions ofemployment, and that the implementing regulations at Code of Federal Regulations title 29,section 1980.102 similarly provide that a company may not discriminate against anyemployee with respect to the employee’s compensation, terms, conditions, or privileges ofemployment.93 The AU concluded: “Here the lawsuit sought to enforce the confidentialityagreement by compelling Complainant to return confidential documents to Respondent andrequiring him not to disseminate confidential information to other persons. Complainant hasprovided no explanation as to how this lawsuit could affect his ability to obtain futureemployment or the terms or conditions of such employment, and I can think of none.”94 TheAU, therefore, granted summary decision in favor of the employer.95

§ 8.3.6

F. CONCLUSION

Employers considering use of the judicial process should proceed with caution beforeinstituting a separate cause of action (although the argument that the U.S. Constitutionguarantees the right to resort to the judicial process is available). More importantly,employers, particularly those who operate nationally, must first ascertain the law in theirjurisdiction on an issue that has divided the courts: what constitutes an adverse action? If an

90ARB Case No. 07-095, 2006-SOX-1 11 (Feb. 6, 2009).‘ Id.92 2005-SOX-1 11 (Dep’t of Labor Dec. 23, 2005).

93Id.

id. at 12.Id.


IV. RETALIATORY HARASSMENT § 8.4

employer is operating in a liberal or moderate jurisdiction, asserting a counterclaim orbringing a separate action when faced with allegations of discrimination could result in a newcharge of retaliation.

§ 8.4

IV. RETALIATORY HARASSMENT

As the law of retaliation has continued to evolve, claims of retaliatory harassment by anemployee’s coworkers have emerged. Even prior to Burlington Northern, courts were justbeginning to embrace the concept that workplace harassment by other coworkers andsupervisors could constitute an adverse action sufficient to support a retaliation claim.96

The U.S. Court of Appeals for the First Circuit held as such in Noviello v. City ofBoston.97 InNoviello, a female parking enforcement officer complained of her supervisor’s assault uponher where he unhooked her brassiere, ripped it from her body, hung it on the vehicle’s outsidemirror and bellowed a crude sexual remark to a fellow employee on the street.98 After shefiled an internal complaint, other coworkers began to subject the female officer to consistentinsults.99 The female officer subsequently filed suit in state court alleging violations ofTitle VII. The suit was removed to federal court. The District Court of Massachusetts foundthat, although the employee had been subject to a series of distasteful and unpleasant acts bycoworkers because she had filed a complaint, the employee’s retaliation claim failed becausenone of the individual incidents constituted an adverse employment action that bore directlyupon the terms and conditions of her employment.’00

The U.S. Court of Appeals for the First Circuit reversed the district court’s decision.Following the EEOC’s reasoning that Title VIl’s antiretaliation provision prohibits anemployer from discriminating against any employee “because [the employee] has made acharge, testified, assisted or participated in any manner in an investigation, proceeding, orhearing under [Title VII],” the court held that Title VII should be extended to coverharassment by coworkers as it is likely to deter the complaining party from engaging inprotected activity.10’ The court stated that “[r]eading Title VII to provide a remedy forretaliatory harassment that expresses itself in the form of a hostile work environment thusfurthers the goal of ensuring access to the statute’s remedial mechanisms.”°2

The U.S. Court of Appeals for the Third Circuit likewise held that retaliatory harassment bycoworkers could constitute an adverse action sufficient to support a retaliation claim in thecase of Jensen v. Potter In Jensen, a postal employee alleged sex discrimination andretaliation against her employer based on her filing of an internal complaint of sexualharassment and her coworkers’ subsequent insults and other actions criticizing her complaintto management. The Middle District Court of Pennsylvania granted summary judgment in

96See e.g., Jensen v. Potter, 435 F.3d 444 (3d Cir. 2006); Noviello v. City of Boston, 398 F.3d 76(1st Cir. 2005).

398 F.3d 76 (1st Cir. 2005)

981d at 83.99Id.

at 83-84.1011d at 90.

COPYRIGHT © 2011 LIrrLER MENDELSON, P.C. ALL RIGHTS RESERVED. 8-15

§ 8.4 CHAPTER 8— HOT TOPICS IN WHISTLEBLOWER & RETALIATION CASES

favor of the employer on both claims. in reversing the district court’s decision, the ThirdCircuit held that a claim for retaliatory harassment under Title Vii’s antiretaliation provisionmust be predicated upon a hostile work environment under the statute’s antidiscriminationprovisions. Therefore, in order to demonstrate a cognizable claim of retaliatory harassment,the employee was required to show retaliatory harassment that was severe or pervasiveenough to create a hostile work environment)03Despite intermingling the two separatecauses of action under the statute, the Third Circuit found that the employee had establishedher claim of retaliatory harassment.

However, after the U.S. Supreme Court’s ruling in Burlington Northern, the Third Circuitrevisited its decision in Jensen and recognized that a claim of retaliatory harassment mayexist even without a showing of a hostile work environment.’04 In Moore v. City ofPhiladelphia, the Third Circuit recognized that Burlington Northern broadened the scope ofretaliation to include any actions that might dissuade a reasonable employee from making orsupporting a charge of discrimination, and, therefore, claims of retaliatory harassment neednot depend upon an underlying showing of a hostile work environment.’05Other courts havesubsequently followed the Third Circuit’s reasoning in Moore.’°6

In Hawkins v. Anheuser-Busch, Inc., the plaintiff’s coworker set fire to the plaintiff’s car andthreatened her life after she made a complaint of sexual harassment against him.’°7 The U.S.Court of Appeals for the Sixth Circuit determined that an employer should be liable for acoworker’s retaliatory acts if: (1) the coworker’s retaliatory conduct is sufficiently severe soas to dissuade a reasonable worker from making or supporting a charge of discrimination;

103 Id. See also Richardson v. New York State Dep’t of Corr. Sen’s., 180 F.3d 426 (2d Cir. 1999). Inthat case, the plaintiff, a fonner prison employee, suffered a racially hostile work environment andretaliation after complaining to supervisors about discrimination and filing an EEOC charge. Id. at444-46. The employer knew of the harassment and did little to mitigate it, telling plaintiff it might bedifficult to “change [her coworkers’] attitudes.” Id. at 435. The court imputed this harassment to theemployer since “unchecked retaliatory coworker harassment, if sufficiently severe, may constituteadverse employment action.” Id. at 446.104 See, e.g., Moore v. City of Philadelphia, 461 F.3d 331 (3d Cir. 2006); see also Irene Gamer, TheRetaliatory Harassment Claim: Expanding Employer Liability in Title VII Lawsuits, 3 SET0N HALLCIR. REv. 269 (2006).105 Moore, 461 F.3d at 341. Although the Third Circuit recognized that the employee could assert aclaim of retaliatory harassment without also showing that the harassment created a hostile workenvironment, the court found that the employees failed to establish that their coworkers’ harassment,including being called “rats” and “snitches” after reporting the alleged abuses by their coworkers totheir supervisor, was linked to a retaliatory animus on the part of supervisor. Id. at 342.106 See, e.g., Hare v. Potter, 220 Fed. Appx. 120, 127 (3d Cir. 2007) (fmding that genuine issues ofmaterial fact as to whether actions an employee’s superiors, particularly poor treatment by hermanager, were motivated out of retaliatory animus for her filing a charge with the EEOC precludedsummary judgment against the employee on her Title VII retaliatory harassment claim); Prise v.Alderwoods Group, Inc., 2009 U.S. Dist. LEXIS 86445 (W.D. Pa. Sept. 21, 2009) (finding thatplaintiffs lack of awareness of the details of coworker’s conduct, such as heightened scrutiny andsurveillance of plaintiff, was fatal to her constructive discharge claim, but a reasonable jury couldconclude that such coworker conduct is “materially adverse” despite plaintiffs lack of knowledge ofthe conduct at the time); Yatzus v. Appoquinimink Sch. Dist., 458 F. Supp. 2d. 235, 243 (D. Del. 2006)(denying employer’s motion for sununary judgment on employee’s retaliatory harassment claimalleging that her supervisors became antagonistic and hostile toward her because she reported conductthat ultimately led to another employee’s termination).107 517 F.3d 321 (6th Cir. 2008), reh ‘g denied, 2008 U.S. App. LEXIS 15501 (6th Cir. July 14, 2008).


IV. RETALIATORY HARASSMENT § 8.4

(2) supervisors or members of management have actual or constructive knowledge of thecoworker’s retaliatory behavior; and (3) supervisors or members of management havecondoned, tolerated, or encouraged the acts of retaliation, or have responded to the plaintiff’scomplaints so inadequately that the response manifests indifference or unreasonablenessunder the circumstances.108 Applying this standard, the court dismissed the defendant’smotion for summary judgment on the grounds that a reasonable jury could find theemployer’s failure to investigate the retaliatory acts to be both indifferent and unreasonable.

Courts have also recognized circumstances under which an employer may be liable forretaliatory harassment perpetrated by a supervisor. The Sixth Circuit clarified its positionregarding an employer’s liability for a supervisor’s retaliatory harassment in Morris v.Oldham County Fiscal Court.’°9 In Morris, the plaintiff complained about her supervisor’scomments regarding sexual favors and subsequently received heightened criticism and “thecold shoulder” from her supervisor.”0This harassment included following the plaintiff homefrom work, throwing nails onto her driveway, calling the plaintiff repeatedly, and visiting theplaintiff’s office, against company orders.” In a case of first impression, the court held thatan employer may be liable for the retaliatory harassment perpetrated by a supervisor.”2Citingthe Supreme Court’s decision in Burlington Industries, Inc. v. the court reasonedthat that “severe or pervasive supervisor harassment that is engaged in because an individual‘has opposed any practice made an unlawful employment practice by’ Title VII also canconstitute discrimination” under Title Vu.”4 Therefore, an employee can state a claim forretaliation by alleging severe or pervasive retaliatory harassment by a supervisor that amountsto discriminatory changes in the terms and conditions of employment.”5

The U.S. Court of Appeals for the Tenth Circuit has also, at least implicitly, acknowledgedthat an employee can state a claim for retaliatory harassment by a supervisor. In Gorny v.Salazar, the court upheld summary judgment for the employer, not based upon a conclusionthat harassment could not form the basis of a retaliation claim, but because the plaintiff failedto demonstrate that any of the alleged acts of harassment were motivated by retaliatoryanimus.116 On the other hand, the Third Circuit has held that the acts of a former supervisor,who no longer had authority over the plaintiff, would not be imputed to the employer. InMoore v. City ofPhiladelphia, a police captain stated he would make plaintiff’s life “a livingnightmare” if he filed an EEOC complaint.”7Plaintiff subsequently transferred to a differentdistrict, no longer under that captain.”8The court ruled that, since the captain no longer had a

1O8j at 347.109 201 F.3d 784, 792 (6th Cir. 2000).‘101d. at 787.“ Id.

“2 See Id. at 791.113 524 U.S. 742 (1998).“4Morris, 201 F.3d at 792.115 See id.116 413 Fed. Appx. 103, 112-13 (10th Cir. 2011) (unpublished) (explaining that a “retaliatory hostilework environment claim is analytically similar” to a claim of hostile work environment on the basis ofrace or gender insofar as a plaintiff must “demonstrate that the alleged harassment stemmed fromretaliatory animus”).117 Moore 461 F.3d at 341.“81d



role in supervising plaintiff or making decisions regarding his employment, his statementscould not be considered evidence of causation.”9

It is important to note that, as in a sexual harassment case, the employer may raise anaffirmative defense by demonstrating that the employer exercised reasonable care to preventor remedy any harassment or the plaintiff unreasonably failed to take advantage ofpreventative or corrective opportunities provided by the employer.’20

§ 8.5

V. REFUSAL TO SUBMIT TO MANDATORY

ARBITRATION

EEOC v. Luce, Forward, Hamilton & Scripps’2’presents the first and only case addressingwhether denying an individual employment, as a result of his refusal to sign and be bound byan employer’s mandatory arbitration agreement as a condition of employment, constitutesretaliation under Title VII. In Luce, a legal secretary was given an employment letter thatincluded a provision subjecting all claims arising from or related to his employment tomandatory arbitration.’22The employee refused to sign the arbitration agreement because hebelieved “it was unfair” and he wanted to preserve his “civil liberties, including the right to ajury trial and redress of grievances through the government process.”123 After the employee’srefusal, the employer withdrew the job offer. The employee filed an EEOC charge allegingthat the employer retaliated against him by terminating his employment.’24 The EEOCcommenced suit seeking damages and a permanent injunction preventing the employer fromengaging in retaliation and requiring arbitration agreements as a condition of employment.

The district court granted the EEOC’s request for injunctive relief but did not grant relief onthe retaliation claim.’25 The employer appealed the injunction and the EEOC appealed thecourt’s ruling denying the retaliation claim. The U.S. Court of Appeals for the Ninth Circuitreversed the district court’s grant of injunctive relief holding that pursuant to Circuit CityStores, Inc. v. Adams,’26 the employer could condition employment on the acceptance of a

‘191d. at 350.‘20See Morris, 201 F.3d at 792 (citing Ellerth, 524 U.S. at 765); see also Butler v. Potter,345 F. Supp. 2d 844 (E.D. Tenn. 2004) (fmding supervisor’s conduct was sufficiently severe andpervasive to qua1if’ as retaliatory harassment); but see Lakeside-Scott v. Multnomah County, 556 F.3d797 (9th Cir. 2009) (fmding that where the employer could show that the decision to terminate theplaintiff was independent, legitimate, and not influenced by the employee’s supervisor’s retaliatorymotives, the supervisor could not be liable for causing the termination).121 F.3d 742 (9th Cir. 2003).‘221d123 Id. at 745.124 The employee also filed a state court action alleging wrongful termination, which was dismissed bythe state trial court and affirmed by the California Court of Appeals and California Supreme Court.125 See EEOC v. Luce, Forward, Hamilton & Scripps, L.L.P., 122 F. Supp. 2d 1080 (C.D. Cal. 2000).The court did not grant the retaliation claim because it considered the claim to be part of the claim formonetary relief for wrongful termination. The court ruled that the claim must be denied based uponresjudicata pursuant to state court’s dismissal of the employee’s wrongful termination claim.126 279 F.3d 889 (9th Cir. 2002), cert denied, 535 U.S. 1112 (2002).


V. REFUSAL TO SUBMIT TO MANDATORY ARBITRATION § 8.5

mandatory arbitration agreement.127 However, the Ninth Circuit remanded the denial of theretaliation claim back to the district court. in reaching this decision the court noted:

At least on the surface, it would appear that, if an employer can compel itsemployees to submit all claims arising out of their employment to arbitration,no retaliation would be involved in an employer’s exercise of such right,because an employee opposing such a practice would not be engaged in anyprotected activity.’28

The court went on to hold that the EEOC presented a “novel theory” why Circuit City Stores,Inc. v. Adams did not preclude a fmding that the employer retaliated against the employeebased upon his opposition to the agreement.’29

Ultimately, the district court never issued an opinion on whether the employee’s refusal of anemployer’s mandatory arbitration agreement constitutes “protected activity” because theEEOC and the employer reached a settlement where the employer agreed to informemployees that they retained their rights to file an EEOC charge, notwithstanding themandatory arbitration agreement.

For now, Luce has firmly confirmed an employer’s right to establish a mandatory arbitrationagreement as a condition of employment. However, one commentator has argued that the lackof full and final adjudication in Luce and an employee’s refusal of a mandatory arbitrationagreement present a viable additional claim under Title Vii’s antiretaliation framework.’3°

Subsequent to Luce, in Boss v. Salomon Smith Barney Inc. ,‘‘ the U.S. District Court for theSouthern District of New York stayed the plaintiff’s whistleblower action pending arbitration,consistent with the plaintiff’s employment agreement.’32 The court held that the mandatoryarbitration requirement in the agreement controlled the plaintiff’s whistleblower retaliationclaim, and found that compelling arbitration would not conflict with the SOX purpose.’33Similarly, in Guyden v. Aetna Inc. ,‘“ the U.S. Court of Appeals for the Second Circuit foundSOX’s strong protections for whistleblowers to be consistent with mandatory arbitration.’35

127 EEOC v. Luce, Forward, Hamilton & Scripps, 345 F.3d. 742, 746 (9th Cir. 2003).128 Id. at 754.129 Circuit City Stores, Inc., 279 F.3d 889.‘305ee e.g., Kiren Dosanjh Zuckerm, Retrieving What Was Luce: Why Courts Should RecognizeEmployees’ Refusal of an Employer’s Mandatoiy Arbitration Agreement as “Protected Activity”Under Title Vii’s Antiretaliation Provision, 22 LAB. LAW. 233 (Fall 2006) (arguing that because theissue of whether refusal of a mandatory arbitration agreement constitutes “protected activity” was leftundecided due to the EEOC’s settlement, there exists an on-going potential cause of action underTitle Vii’s antiretaliation provisions).131 263 F. Supp. 2d 684 (S.D.N.Y. 2003).

at 685.

544 F.3d 376 (2d Cir. 2008).

135d. see also Caley v. Gulfstream Aerospace Corp., 333 F. Supp. 2d 1367, 1378 (N.D. Ga. 2004)(“Title VII does not prohibit employers from requiring mandatory arbitration of employment disputesas a condition of employment”) (citing Wee/cs v. Harden Mfg. Corp., 291 F.3d 1307, 1310 (11th Cir.2002); EEOC v. Luce, Forward, Hamilton & Scripps, 345 F.3d. 742, 749 (9th Cir. 2003); Cole v.Burns Int’l Sec. Servs., 105 F.3d 1465, 1485 (D.C. Cir. 1997)).



§ 8.6

VI. RETALIATORY ACTS OUTSIDE THE EMPLOYMENT

CONTEXT

Several courts have followed the expansive holding of the U.S. Supreme Court’s decision inBurlington Northern & Santa Fe Railway Co. v. White that incidents outside the employmentcontext can constitute an adverse action.’36 For instance, in Wharton v. Gorman-Rupp Co.,137the plaintiff, an unsuccessful applicant, sent the defendant a complaint letter alleging age biasand sexual harassment. Three weeks later, the plaintiff was accosted in a parking lot by thedefendant’s vice president of human resources who presented himself with a hostile tone andmanner and used an expletive to describe the plaintiff.’38 The U.S. Court of Appeals for theSixth Circuit held that these actions were materially adverse because they would dissuade areasonable employee from filing a charge of discrimination.’39 In Hawkins v. AnheuserBusch, Inc. 140 the Sixth Circuit similarly found that a coworker’s conduct in setting fire to theplaintiff’s car and threatening her life constituted a materially adverse action, for which theemployer was potentially liable, because it failed to properly investigate the incident.

In Kovacevich v. Vanderbilt University,’4’the plaintiff accused her graduate supervisor ofsubjecting her to sexual harassment while she was a graduate student and graduate studentassistant. After that case settled, plaintiff claimed in a subsequent retaliation suit that thegraduate supervisor sought to ruin her professional reputation and career by making variouscomments and allegations to a publisher and to attendees at a professional conference outsideof Vanderbilt University.’42Relying on Burlington Northern, the court held that the plaintiffcould “litigate alleged retaliatory conduct that does not relate to employment or whichoccurred outside the Vanderbilt graduate student assistant workplace.”43

Defamation by an employer may also constitute retaliation. In Persichitte v. University ofNorthern Colorado,’44 defendants allegedly disseminated false or misleading informationabout the plaintiff to the news media, alleging that she misappropriated state funds. Plaintiffwas also approached by a television news team regarding these allegations.’45 The courtfound that such actions could dissuade a reasonable worker from making a charge ofdiscrimination, and thus denied dismissal of the retaliation claim.’46

548 U.S. 53, 66-67 (2006).‘‘ 309 Fed. Appx. 990 (6th Cir. 2009).138 Id“91d.‘° 517 F.3d 321, 347-48 (6th Cir. 2008), reh’g denied, 2008 U.S. App. LEXIS 15501 (6th Cir. July 14,2008).‘‘ Kovacevich v. Vanderbilt Univ., 2010 U.S. Dist. LEXIS 36054, at **38..39 (M.D. Tenn. Apr. 12,2010).‘421d. at *46.‘‘ Id at *47144 2006 U.S. Dist. LEXIS 69939 (D. Cob. Sep. 27, 2006), motion for summaryjudgment granted andcomplaint dismissed on other grounds, Persichitte v. Board of Trs. of Univ. of N. Cob., 2007 U.S.Dist. LEXIS 5835 (D. Cob. Jan. 25, 2007).

Id. at *3

‘46Id. at *17.

8-20 RETALIATION AND WHISTLEBLOWING—FOURTU EDITION

VII. GOOD INTENTIONS MAY BE EVIDENCE OF PRETEXr § 8.7

In Malone v. City of New York,’47 subsequent to filing an EEOC complaint, plaintiff wascharged with assaulting a supervisor at a city administrative board. Plaintiff alleged that thecharge was false, and was trumped up in retaliation for filing the EEOC complaint.’48 Thejudge found that “the charges [were] not sufficiently concrete to establish an adverseemployment action under the antidiscrimination provision of Title Vu.”49 However, a falseassault charge could dissuade a reasonable person from filing an EEOC charge.’5°Therefore,the assault charge was materially adverse to support a retaliation clajm.15’

§ 8.7

VII. GOOD INTENTIONS MAY BE EVIDENCE OF

PRETEXT

An employer’s good faith efforts to avoid taking an adverse action based on retaliatorymotives may, in fact, serve as evidence that the employee’s protected activity influenced theemployer’s decision. In Hamilton v. General Electric Co. 152 the plaintiff had a history ofdisciplinary problems and was given a last chance agreement and placed on a 30-daysuspension. During his suspension the plaintiff filed an EEOC charge.’ Thereafter, he wassubjected to increased scrutiny and terminated three months after filing the charge.’54 TheSixth Circuit stated that “[t]he combination of this increased scrutiny with the temporalproximity of his termination occurring less than three months after his EEOC filing issufficient to establish the causal nexus needed to establish a prima facie case.”55 Theemployer argued that it could have terminated the plaintiff shortly after he filed the chargebased on his disciplinary problems, but it did not and that this favorable treatment dissolvedany inference of discriminatory motive.’56 The court rejected this argument and stated that“an employer’s intervening ‘favorable treatment’ does not insulate that employer fromliability for retaliatory termination.”57 The dissent argued that the heightened scrutiny wasjustified stating that “surely an employer may more closely observe an employee who isreturning from sanction” and concluding that the majority’s holding merely encouragedsanctioned employees to file discrimination charges.’58

“ 2006 U.S. Dist. LEXIS 61866 (E.D.N.Y. Aug. 30,2006).148d. at *24.

‘491d. at *25.

‘501d

‘511d.152 556 F.3d 428 (6th Cir. 2009).

Id.

‘54Id.155 Id. at 435-36.

‘561d.

‘571d. at 436.158 Id. at 440; but see Loftin v. United Parcel Serv., 2009 U.S. Dist. LEXIS 3087 (E.D. Ark. Jan. 15,2009) (company’s acknowledgement of plaintiff’s health condition and medical treatment for FMLApurposes established absence of retaliatory motive).


§ 8.8 CHAPTER 8—HOT ToPIcs IN WHISTLEBLOWER & RETALIATION CASES

In Owens v. Comcast Corp.,159 a news broadcaster who had participated in a racediscrimination class action lawsuit against her former employer was denied an anchorposition by the former employer’s parent company. The parent company argued that it did nothire the plaintiff because she was not well-known in the target market and performed poorlyduring auditions.’6°The plaintiff presented evidence that she discussed the prior lawsuitduring her interview and members of the hiring team subsequently sought advice fromsuperiors and executives at the subsidiary about hiring plaintiff.’6’Although the hiring teamwas eventually advised that the prior litigation should not be a factor in the selection processand “the conversations are evidence that they were trying to avoid a retaliation claim,” thecourt nonetheless concluded that the conversations could be evidence of an improper motiveand pretext.’62

§ 8.8

VIII. UNREASONABLE OPPOSITION

Protected activity, for purposes of a retaliation claim includes opposition to unlawfulpractices. One important question in analyzing oppositional activity is whether theemployee’s opposition will constitute protected activity if it is, in some manner,“unreasonable” or disrupts the workplace.’63 When an employee engages in oppositionalactivity, courts balance the remedial purpose of the statute against the ability of employers toeffectively control the workplace.’64

In Robbins v. Jefferson County School District, for example, the U.S. Court of Appeals forthe Tenth Circuit found that the plaintiffs activities were not reasonable and did notconstitute protected opposition.’65 The court noted that the plaintiff lodged frequent,voluminous, and sometimes specious complaints and engaged in antagonistic behaviortowards her superiors.’66 Specifically, the plaintiff accused her superiors of slander, maliciousintent, and untruthfulness; called one a puppet; accused school board members of trying to“cover up” for inappropriate supervisor actions; and complained that the superintendent’sresponse to her grievances contained false statements and “dripped with hostility and bias.”67The court held that, as a matter of law, “[b]alancing the purpose of Title VII against thebarrage of inflammatory memoranda [the plaintiff] wrote, often bypassing her immediatesupervisors... [plaintiffs] activities were not reasonable and did not constitute protectedopposition.”68

2004 U.S. Dist. LEXIS 23498, at *7 (E.D. Pa. Nov. 18, 2004).

1601d at *13161 Id. at *15

‘621d.163 See, e.g., Cruz v. Coach Stores, Inc., 202 F.3d 560, 566 (2d Cir. 2000); Robbins v. Jefferson CountySch. Dist., 186 F.3d 1253, 1260 (10th Cir. 1999); Kiel v. Select Artficials, 169 F.3d 1131, 1136(8th Cir. 1999); Folkerson v. Circus Circus Enters., Inc., 107 F.3d 754, 755 (9th Cir. 1997).164 See Kubicko v. Ogden Logistics Servs., 181 F.3d 544, 551(4th Cir. 1999); Rollins v. Florida Dep ‘t

ofLaw Enforcement, 868 F.2d 397, 401 (11th Cir. 1989).165 Robbins, 186 F.3d at 1260.

1661d at 1259.

‘671d.168 Id. at 1260.


A. THEFT OF CONFIDENTIAL INFORMATION AS PROTECTED AcTIvITY § 8.8.1

In Hertz v. Luzenac America, Inc., the Tenth Circuit distinguished a single emotional outburstfrom the pattern of behavior at issue in Robbins.’69 In that case, the court upheld the lowercourt’s decision not to have an unreasonable opposition jury instruction, where the plaintiffyelled loudly through a door in response to what he perceived to be a disparaging commentabout his religion.’70 In explaining the distinction between the two cases, the court noted:“[am emotional response to a racial or religious epithet is a most natural human reaction. Itwould be ironic, if not absurd, to hold that one loses the protection of an antidiscriminationstatute if one gets visibly (or audibly) upset about discriminatory conduct.”7’

The U.S. Court of Appeals for the Eighth Circuit has also rejected a plaintiff’s retaliationclaim where he engaged in unreasonable opposition.’72 The plaintiff in that case, a hearingimpaired individual, repeatedly requested a telecommunications device (TDD) to use thephone, but the employer denied his requests since the TDD was not necessary to perform hisduties.173 The plaintiff responded by yelling, “You’re selfish, you’re selfish,” and slamming adesk drawer.’74 He was subsequently terminated.’ The court concluded that this outburst didnot constitute protected conduct since “the ADA confers no right to be rude.”176

Other forms of unreasonable opposition include:

• violent picketing;

• efforts to hamper a company’s business pursuits;

• neglect of work duties;

• disrupting the work place by engaging in violence, failing to get along with coworkers,or disobeying company rules.’77

§ 8.8.1

A. THEFT OF CONFIDENTIAL INFORMATION AS PROTECTED

ACTIVITY

The U.S. Court of Appeals for the Sixth Circuit recently concluded that collecting andproducing the employer’s confidential information is “unreasonable opposition” that will notsupport a retaliation claim. 178 In Niswander v. Cincinnati Insurance Co., the plaintiff gave her

169 370 F.3d 1014, 1022 (10th Cit. 2004).

l71

‘72Kiel, 169 F.3d 1131.‘731d at 1134.

176 See id. at 1136; see also Matima v. Celli 228 F.3d 68, 80 (2d Cit. 2000) (“[D]isruptive orunreasonable protests against discrimination are not protected activity under Title VII and thereforecannot support a retaliation claim.”).177 See, e.g, Green v. Burton Rubber Processing, Inc., MA., 30 Fed. Appx. 466, 470-71(6th Cit.2002); Matima, 228 F.3d at 76; Kiel v. Select ArtfIcials, 169 F.3d 1131, 1135 (8th Cit. 1999);Douglas v. Dyn McDermott Petroleum Operations Co., 144 F.3d 364, 369 (5th Cit. 1998);Hochstadt v. Worcester Found., 545 F.2d 222, 233 (1st Cit. 1976).178 See Niswander v. Cincinnati Ins. Co., 529 F.3d 714, 714 (6th Cit. 2008); see also Argyropoulos v.City of Alton, 539 F.3d 724, 734 (7th Cit. 2008) (fmding that eavesdropping by tape-recording a

COPYRIGHT © 2011 LITTLER MENDELSON, P.C. ALL RIGHTS RESERVED. 8-23

§ 8.8.1 CHAPTER 8— HOT ToPICS IN WHISTLEBLOWER & RETALIATION CASES

attorneys several confidential documents that she had access to through her position at thecompany.’79 The documents were unrelated to her Equal Pay Act claim and only served thepurpose of prompting her recollection of events she considered to be retaliatory.180

Although it found a “paucity of case law addressing the production of confidentialinformation in the context of a retaliation claim,” the court in Niswander canvassed theexisting case law and concluded that a “balancing test” must be applied to determine if thedelivery of confidential documents constitutes reasonable oppositiofl•S The court’s balancingtest included the following factors:

1. how the documents were obtained;

2. to whom the documents were produced;

3. the content of the documents, both in terms of the need to keep the informationconfidential and its relevance to the employee’s claim of unlawful conduct;

4. why the documents were produced, including whether the production was in directresponse to a discovery request;

5. the scope of the employer’s privacy policy; and

6. the ability of the employee to preserve the evidence in a manner that does not violatethe employer’s privacy policy.’82

Applying this test, the court found that the plaintiffs conduct was not protected opposition,reasoning that protecting such activity would “provide employees with near-immunity fortheir actions in connection with antidiscrimination lawsuits.” 83

The Sixth Circuit similarly held in Armstrong v. Whirlpool Corp., that employees who foundand retained a supervisor’s notebook containing confidential information about the defendantcompany’s employees, including the plaintiffs, had not engaged in protected activity.’84Interestingly, the two plaintiffs at issue in Armstrong were already litigants in a racediscrimination case against the company when they discovered the notebook and argued thatthey withheld the notebook because it “contained evidence that ‘[company] had increasedsurveillance of them and other employees for participating in [the] lawsuit.”85 The SixthCircuit rejected the notion that the plaintiffs’ conduct constituted protected particlpationunder Title VII, explaining that “concealing confidential company documents, threatening anemployer with those documents, and refusing to fully disclose those documents to an attorneyor return them to the company are not parts of the discovery process.”86 Applying thebalancing test used in Niswander, the court also held that the plaintiffs’ conduct was not

meeting with employee’s supervisor was not protected because Title VII “does not grant the aggrievedemployee a license to engage in dubious self-help tactics or workplace espionage in order to gatherevidence of discrimination”).‘79Niswander, 539 F.3d at 714.‘801d

‘811d at722.at 726.

‘831d184 363 Fed. Appx. 317, 330-32 (6th Cir. 2010).‘851d at 331.


B. PHYSICAL SELF-DEFENSE AS A PROTECTED AcTIvrrY § 8.8.2

protected opposition because the plaintiffs behaved unreasonably in refusing to return thenotebook to the company and withholding it even from their own attorneys.’87

In Vaughn v. Epworth Villa, unlike in Niswander and Armstrong, the U.S. Court of Appealsfor the Tenth Circuit relied upon a broad interpretation of the statutory phrase “participated inany manner,” disagreeing with the district court’s interpretation of the statutory language asimposing a duty to engage in only “honest and loyal conduct in advancing a claim unless theemployee proves that it is necessary to resort to other means.”188 Under its more liberalinterpretation of the statutory language, the Tenth Circuit found both: (1) that the plaintiffsproduction of unredacted medical records to the EEOC, in violation of company policy andHIPAA, was protected participatory activity; and (2) that the production of confidentialmedical records also provided the company with a legitimate, nondiscriminatory reason toterminate the plaintiff.’89

§ 8.8.2

B. PHYSICAL SELF-DEFENSE AS A PROTECTED ACTIVITY

One interesting aspect of reasonable opposition as protected activity involves a plaintiffs useof physical self-defense in response to workplace harassment)9°In a Second Circuit case, theplaintiff slapped a coworker who made sexually charged comments to her.’9’ The SecondCircuit held that the slap, even if in response to Title Vu-barred harassment, was notprotected activity because the plaintiff had other options available for recourse against hercoworker.’92 Similarly, in Folkerson v. Circus Circuit Enterprises, Inc., a plaintiff mimestruck a patron who attempted to embrace her during a performance.’93 In that case, theemployer casino had taken steps to protect the employee from such encounters, and therefore,the U.S. Court of Appeals for the Ninth Circuit found that the plaintiffs physical resistancewas not protected opposition to an unlawful employment practice.’94

at 332-33.188 F.3d 1147, 1152 (10th Cir. 2008).‘891d.190 See, e.g., Cruz v. Coach Stores, Inc., 202 F.3d 560, 566 (2d Cir. 2000); Folkerson v. Circus CircusEnters., Inc., 107 F.3d 754, 755 (9th Cir. 1997); Van Horn v. Specialized Support Sen’s., Inc., 241 F.Supp. 2d 994, 1012 (S.D. Iowa 2003).‘‘ Cruz, 202 F.3d at 564.

192Id. at 566.

Folkerson, 107 F.3d at 755.

‘941d.



Both Folkerson and Cruz are distinguished from Van Horn v. Specialized Support Services, inwhich the plaintiff slapped a developmentally disabled man in her care in response to hispinching her breast.’95 In Van Horn, the plaintiff had made several complaints to heremployer regarding the man’s inappropriate behavior and touching, but the emiloyer did notrespond, even at the plaintiffs direct request for a self-defense instruction.’9 Under thosecircumstances, the court found that slapping the man was reasonable, protected activity inopposition to an unlawful employment practice.’97

§ 8.9

IX. WHISTLEBLOWING & RETALIATION CLAIMS

BROUGHT BY IN-HOUSE COUNSEL

When a company’s own in-house attorney blows the whistle or brings a claim for retaliatorydischarge, difficult issues arise regarding the tension between attorneys’ ethical obligations totheir clients and the rights of in-house counsel as employees. On the one hand, attorneys havean ethical obligation to maintain client confidentiality and not disclose privilegedinformation. Furthermore, these ethical obligations help foster legal compliance byencouraging companies to seek and rely upon the counsel of their legal advisors. On the otherhand, attorneys also have ethical obligations to disclose ongoing criminal or fraudulentconduct, and they may also have rights as employees to blow the whistle on ongoing illegalconduct and to be protected from retaliation for doing so. Added to this complex interplaybetween statutory protection and ethical obligation is the divergent interpretations of thosestatutes and rules of professional responsibility by various courts, federal agencies, and statebar associations.

§ 8.9.1

A. IN-HOUSE COUNSEL AS WHISTLEBLOWER UNDER THEDODD-FRANK ACT

On May 25, 2011, the Securities and Exchange Commission (SEC) adopted final rules andregulations’98 to implement the whistleblower provisions of section 922of the Dodd-FrankWall Street Reform and Consumer Protection Act (“Dodd-Frank Act”).’99 These rules setforth detailed definitions about who and what information may qualif’ for a monetary awardfrom the SEC. In drafting and adopting these regulations, the SEC grappled with the extent towhich an in-house attorney should be permitted to collect a monetary award for reporting theillegal conduct of his or her client/employer to the SEC, ultimately placing strict limitationsupon would-be attorney whistleblowers. Although the regulations aim to preventopportunistic attorneys from collecting thousands or even millions of dollars in exchange forinformation entrusted to them by their clients, the regulations also allow attorneys who make

Van Horn, 241 F. Supp. 2d at 1000-1001.19614 at 1012.l97

198 See Implementation of the Whistleblower Provisions ofSection 21F of the Securities Exchange Actof 1934, available at http://www.sec.gov/news/press/201 1/2011-1 16.htm; see also 17 C.F.R. § 240.21.199 The Dodd-Frank Act, Pub. Law No. 111-203 § 922, 18 U.S.C. § 1514A.


A. IN-HousE COUNSEL AS WHISTLEBLOWER UNDER DODD-FRANK § 8.9.1(b)

disclosures deemed permissible under various rules of professional conduct to participate inthe “bounty award program.”

For further discussion of the bounty award program, see Chapter 5.

§ 8.9.1(a)

Privileged Communications Excludedfrom the Dodd-Frank Act’sMonetary Incentive ProgramUnder the SEC’s 2011 regulations, information obtained through an attorney-client privilegedcommunication20°may not qualify as “independent knowledge” or “independent analysis” bya whistleblower,201 meaning that a report of such information will not result in a monetaryaward. Also, under the rules, an attorney cannot collect an a monetary award from the SECfor the disclosure of information obtained in connection with the representation of a client.202

In precluding attorneys from collecting monetary awards for whistleblower tips based onprivileged information, the SEC acknowledged the critical role attorneys play in preventing orstopping illegal conduct and emphasized the SEC’s belief “that overall compliance withfederal securities laws is better promoted by generally excluding information that is shared inconfidence with attorneys.”203 The SEC further expressed its intention to send “a clear,important signal to attorneys, clients and others that there will be no prospect of financialbenefit for submitting information in violation of an attorney’s ethical obligations.”204

§ 8.9.1(b)

Exceptionfor Attorney Disclosures that Are “OtherwisePermitted”

The rule excluding tips based on privileged information from the bounty program does,however, contain an important exception for attorney disclosures that are “otherwisepermitted,” by, for example, rules of professional responsibility or the regulations governingattorneys practicing before the SEC (described more fully below).205 This exceptionintroduces significant variability in terms of which attorney disclosures may qualify for amonetary award because the state rules of professional conduct regarding such disclosures

200 The SEC regulations implementing the Dodd-Frank Act also extend the rules applicable to attorneysto non-attorneys who receive information in a confidential attorney-client communication. Thus, if anattorney in possession of the information would be precluded from receiving an award based on his orher submission of the information to the SEC, a non-attorney who acquired the information through aconfidential attorney-client communication would also be disqualified.201 17 C.F.R. § 240.21F-4(b)(4)(i).202 17 C.F.R. § 240.21F-4(b)(4)(ii). The regulations also contain exceptions for: (1) “[am employeewhose principal duties involve compliance or internal audit responsibilities, or.. . employed by orotherwise associated with a firm retained to perform compliance or internal audit functions for anentity” (17 C.F.R. § 240.21F-4(b)(4)(iii)(B)); and (2) an individual “[e]mployed by or otherwiseassociated with a firm retained to conduct an inquiry or investigation into possible violations of law”(17 C.F.R. § 240.21F-4(b)(4)(iii)(C)).203 Implementation of the Whistleblower Provisions of Section 21F of the Securities Exchange Act of1934, available at http://www.sec.gov/news/press/20 11/2011-11 6.htm.

at 61.205 17 C.F.R. § 240.21F-4(b)(4)(i).


§ 8.9.1(b) CHAPTER 8—HOT TOPICS IN WHISTLEBLOWER & RETALIATION CASES

differ markedly. That said, the most common and universally accepted basis for a permissibledisclosure of privileged information is the “crime-fraud exception,” to the rules governing anattorney’s obligation to maintain client confidences. Under the crime-fraud exception, an

attorney is permitted to make disclosures reasonably deemed necessary to prevent an ongoingcrime or fraud.206 In-house attorneys in particular are also permitted under many states’ rulesof professional conduct to reveal confidential information, to the extent the lawyer reasonablybelieves necessary, after the attorney has reported violations internally and the organizationhas failed to act.207

Permissible attorney disclosures of confidential information also include those allowed underthe SEC’s rules governing attorneys who practice before it on behalf of securities issuers. TheSEC’s rules of professional conduct were implemented in 2003 pursuant to a directivecontained in section 307 of the Sarbanes-Oxley Act.208 According to the SEC’s summary ofthese rules, the SEC’s purpose in adopting them is “to protect investors and increase theirconfidence in public companies by ensuring that attorneys who work for those companiesrespond appropriately to evidence of material misconduct.”209

Like state-based rules of professional conduct, the SEC ‘ s regulations governing attorneyconduct allow disclosures of confidential information under certain circumstances. Unlike thestate rules of professional conduct, however, the SEC’s regulations set forth a detailedinternal reporting protocol for attorneys who become aware of a material securities-relatedviolation.210

Specifically, an attorney governed by the SEC’s rules of conduct who becomes aware of sucha violation, “shall” report to the company’s chief legal officer or the equivalent thereof.21’The chief legal officer must then conduct an inquiry and encourage the company to adopt anappropriate response, unless he or she finds no evidence of a material violation.212 If thelawyer making the initial report does not reasonably believe that the chief legal officer orcompany CEO has responded to the lawyer’ s report appropriately, the lawyer must thenreport the violation to: (1) the audit committee; (2) a committee of the board of directorscomprised of individuals who are not employed by the company; or (3) the company’s boardof directors.213 The in-house attorney can also proceed directly to any of those three groups atthe outset if he or she reasonably believes it would be futile to report the violation to the chieflegal officer and CEO.214

In addition to these mandatory internal reporting requirements, the SEC’s regulations permitoutside disclosure of a material violation under certain circumstances. Namely, an attorneycan reveal to the SEC, without his or her client’s consent, “confidential information related tothe representation to the extent the attorney reasonably believes necessary” to prevent the

206 See e.g., ABA MODEL RULES OF PROF’L CONDUCT R. 1.6.207 See e.g., ABA MODEL RULES OF PROF’L CONDUCT R. 1.13.208 15 U.S.C. § 7245.209 See Final Rule: Implementation of Standards of Professional Conduct for Attorneys, Summary(17 C.F.R. Pt. 205), available athttp://www.sec.gov/rules/final!33-8185.htm.210 See 17 C.F.R. § 205.3(b).211 17 C.F.R. § 205.3(b)(2).212k

213 17 C.F.R. § 205.3(b)(3).214 17 C.F.R. § 205.3(b)(4).

8-28 RITALIATION AND WHISTLEBLOWING—FOURTH EDITION

B. IN-HOUSE COUNSEL AS QuI TAM RELATOR § 8.9.2

issuer from: (1) committing a material violation; (2) committing or suborning perjury; or(3) engaging in other acts likely to perpetrate a fraud upon the SEC.215 An attorney subject tothese rules may also make a report to the SEC in order to “rectify the consequences of amaterial violation by the issuer that caused, or may cause, substantial injury to the financialinterest or property of the issuer or investors in the furtherance of which the attorney’sservices were used.”216

§ 8.9.2

B. IN-HOUSE COUNSEL AS Qul TAM RELATOR

In-house attorneys face a steeper uphill battle when it comes to serving as a relator in a quitam suit against an employer under the False Claims Act (FCA). Although no provision of theFCA specifically precludes attorneys from acting as relators in qui tam suits, one courtrecently held that an in-house attorney was barred by the rules of professional responsibilityfrom representing the U.S. government as a relator in a qui tam action adverse to his formerclient.217 The court held that the former in-house counsel was “representing another person,the United States, in a matter substantially related and materially adverse to his formerrepresentation of [his employer] without his client’s consent” and was therefore violating therules of professional responsibility.218Notably, the court rejected the plaintiffs argument thathis disclosure of client confidences in pursuit of the litigation was permissible under thecrime-fraud exception to rules preventing disclosure of privileged infonnation.219 The courtfound the crime-fraud exception to be limited to occasions in which the disclosure isnecessary to prevent a client from committing a future crime or engaging in an ongoingcriminal scheme.22°

In United States, ex rel. John Doe v. X Corp., the court did not go so far as to prohibit anin-house attorney, as a matter of principle, from bringing a qui tam suit against his formeremployer.22’Nonetheless, as a practical matter, the plaintiff in that case was precluded fromserving as a relator because the court found that he could not ethically disclose theconfidential information that supported his claim.222

In X Corp., the court had previously enjoined the plaintiff from disclosing confidentialdocuments and information he obtained as in-house counsel.223 The court granted theinjunction barring disclosure of the confidential materials after it determined that a reasonableattorney in the same circumstances “would not conclude that the disputed information anddocuments clearly established an ongoing fraud by the former employer.”224 This requiredshowing, the court found “balances the vital need to preserve the integrity of the

215 17 C.F.R. §205.3(d)(2).2l6

217 United States ex rel. Fair Lab. Practices Assocs. v. Quest Diagnostics Inc., 2011 U.S. Dist. LEXIS37014 (S.D.N.Y Apr. 5,2011).

219d. at **34..36

220Id at **35_36221 862 F. Supp. 1502 (E.D. Va. 1994).222Id

223Id at 1503 (citingXCorp. v. John Doe, 816 F. Supp. 1086 (E.D. Va. 1993) ( “XCorp. II”)).

224Id at 1504.


§ 8.9.2 CHAPTER 8—HOT ToPIcs IN WHISTLEBLOWER & RETALIATION CASES

attorney-client relationship against the need for disclosure in those rare circumstances wherethe relationship is abused.”225 After the plaintiff was ordered to return confidential documentsto the employer, the government and the employer entered into a settlement agreement.226Arguing that he served as a relator, the plaintiff sought a 25% portion of the settlementamount plus reasonable attorneys’ fees.227 The defendant X Corp. argued that the plaintiffcould not properly serve as a relator because of his status as the company’s former attorneyand, should not be permitted to share in the settlement.228 The court rejected the defendant’scontention as having no statutory basis in the FCA and reasoned that an attorney could serveas a relator if the basis of his or her claim was a disclosure commensurate with an attorney’sethical obligations.229 Because the plaintiff in this case had previously failed to show that theconfidential information he disclosed “clearly established an ongoing fraud,” and wastherefore enjoined from disclosing any of the confidential information that supported hisallegations of wrongdoing, the court found that he could not, as a practical matter, satisfy therequirements for being a relator.

Courts handling FCA qui tam claims by in-house attorneys have also held that conductconsistent with a plaintiff’s regular job does not place the employer on notice of a potentialFCA suit and, therefore, is not protected activity under that statute.23°As the U.S. Court ofAppeals for the D.C. Circuit explained in one such case, “notice stemming from theperformance of one’s normal job responsibilities is typically inadequate . . . but when anemployee acts outside his normal job responsibilities or alerts a party outside the usual chainof command, such action may suffice to notify the employer that the employee is engaged inprotected activity.”23’ By way of example, one court found that the plaintiff providedsufficient evidence that he engaged in acts in furtherance of FCA litigation when he tolddefendants that he was concerned about the possibility of fraud and would cooperate in anygovernment investigation, sought involvement of defendants’ legal counsel, characterizeddefendants’ conduct as illegal, and sought advice of an outside attorney.232 Whereas, inMaturi v. McLaughlin Research Corp., the U.S. Court of Appeals for the First Circuit heldthat an employee whose job duties included oversight of government billing had not put hisemployer on reasonable notice of a possible FCA suit, and therefore had not engaged in

225 Id226XCorp., 862 F. Supp. at 1505.227jd228 Id at 1506.2291d at 1507.230 See Maturi v. McLaughlin Research Corp., 413 F.3d 166 (1st Cir. 2005) (communications wereconsistent with duties of employment rather than reasonable notice to employer that FCA litigation wasa realistic possibility); United States ex rel. Scott v. Metropolitan Health Corp., 375 F. Supp. 2d. 626(W.D. Mich. 2005) (employee’s FCA retaliation claim failed on summary judgment because herwarnings to employer were consistent with her job duties and did not give sufficient notice that sheintended to pursue an FCA action); United States ex reL Bartlett v. Tyrone Hosp., Inc., 234 F.R.D. 113,129 (W.D. Pa. 2006) (“investigatory actions of non-compliance pursuant to one’s duty as an employeedo not constitute protected conduct... . When such investigations are part of the employee’s duties,such duties do not suffice to establish protected conduct and further notice that the investigation is forpurposes of an FCA claim is required of the employee.”); X Corp. II, 816 F. Supp. at 1096 (“noretaliatory discharge is established if [in-house attorney’s] discharge simply resulted from an adversereaction to persistence in urging compliance”).231 United States ex rel. Brown v. Aramark Corp., 591 F. Supp. 2d 68, 77 (D.D.C. 2008).

232DeCalonne v. G.I. Consultants, Inc., 197 F. Supp. 2d 1126 (N.D. md. 2002).


C. RETALIATION CLAIMS BY IN-HOUSE COUNSEL § 8.9.3

protected activity, when he wrote a letter regarding a billing issue without characterizing thematter as fraudulent.233

§ 8.9.3

C. RETALIATION CLAIMS BY IN-HOUSE COUNSEL

Because an in-house attorney’s employer is also his client, a retaliation lawsuit by that lawyerpresents a serious conflict of interest, particularly with regard to the disclosure of clientconfidences and privileged information. Some courts presented with such claims have heldthat in-house lawyers cannot bring claims of retaliatory discharge, while other courts haveallowed such claims only to the extent that they can be litigated without disclosingconfidential and privileged information. Still other courts allow in-house attorneys to pursuetheir retaliation claims even when doing so will necessarily require the disclosure ofconfidential and/or privileged information. Thus, the extent to which an in-house attorneymay be able to sue his or her employer for retaliation and disclose the client’s confidentialinformation in the course of that lawsuit depends largely upon the rules of professionalconduct applicable to the attorney and the court’s interpretation of those rules.

An early Indiana state court decision is often cited for the strictest view regarding retaliatorydischarge claims by in-house attorneys. In that case, Balla v. Gambro, Inc. the courtcompletely disallowed a retaliatory discharge claim brought by an in-house attorney who wasallegedly terminated after vowing to do whatever was necessary to stop the sale of faultymedical equipment and then refusing to destroy documents requested in a lawsuit against thecompany.234 In support of its decision, the court explained that the prospect of such suitswould have an undesirable chilling effect on attorney-client communications, makingemployers hesitant to seek advice from attorneys regarding potentially questionable corporateconduct.235 Further, the court reasoned that the public policy at stake was already protected bythe rules of professional conduct obligating the attorney to report ongoing fraud and otherviolations.236

Other courts have allowed in-house counsel to bring claims of retaliatory discharge, but onlyif those claims do not require the attorney to divulge confidential information.237 One suchcourt explained that “there is no reason inherent in the nature of an attorney’s role as in-housecounsel to a corporation that in itself precludes the maintenance of a retaliatory dischargeclaim, provided it can be established without breaching the attorney-client privilege or undulyendangering the values lying at the heart of the professional relationship.”28

233 413 F.3d 166, 173 (1st Cir. 2005).234 Balla v. Gambro, Inc., 584 N.E.2d 104, 110, 112 (Iii. 1991) (concluding that “in-house counselgenerally are not entitled to bring a cause of action for retaliatory discharge against theiremployer/client”).235

2361d at 110—11.237 See, e.g., Kachmar v. SunGard Data Sys., Inc., 109 F.3d 173 (3d Cir. 1997) (recognizing a limitedclaim for retaliatory discharge under Title VII); GTE Prods. Corp. v. Stewart, 653 N.E.2d 161 (Mass.1995) (allowing an attorney’s retaliatory discharge claim if it can be proved without violating theattorney-client privilege and confidentiality).238 General Dynamics Corp. v. Superior Court, 876 P.2d 487, 490 (Cal. 1994).


§ 8.9.3 CHAPTER 8— HOT ToPICS IN WHISTLEBLOWER & RETALIATION CASES

Still other courts have allowed in-house attorneys to bring retaliatory discharge claimswithout any limitation, even when the claim requires disclosure of privileged information.One such court reasoned that: a lawyer “does not forfeit his rights simply because to provethem he must utilize confidential information. Nor does the client gain a right to cheat thelawyer by imparting confidences to him.”239

In Willy v. Administrative Review Board,24°the U.S. Court of Appeals for the Fifth Circuitheld that an attorney in a retaliation suit could bring a claim of wrongful termination and, inprosecuting that claim, could admit into evidence a privileged report that he prepared whileemployed as in-house counsel. Similarly, in Van Asdale v. International Game Technology,the U.S. Court of Appeals for the Ninth Circuit held that two in-house attorneys could state aclaim of retaliatory discharge under SOX.24’The court rejected the defendant’s argument thatthe state’s rules of professional conduct barred the suit and that the suit should be dismissedbecause it would require the disclosure of attorney-client privileged information.242 Instead ofdismissing the suit on the basis of disclosure of confidential information, the courtrecommended equitable measures “to minimize the possibility of harmful disclosure.”243

In Jordan v. Spring Nextel Corp., a Department of Labor Administrative Review Board(ARB) similarly allowed an attorney to state claims of retaliation under SOX, despite the factthat bringing the claim entailed disclosure of privileged and confidential information.244 TheARB reasoned that the mandatory disclosure requirements for counsel set forth in Code ofFederal Regulations title 17, section 205.3 and the whistleblower protections under SOXshould be read together to provide a remedy for attorneys alleging that they have beenretaliated against for making a required disclosure.245 The ARB also noted that the SECregulation regarding attorney disclosure of material violations was modeled on the AmericanBar Association’s (ABA) Model Rule 1.6, which “allows an in-house attorney to useprivileged information to establish a retaliatory discharge claim against the attorney’semployer.”246

Indeed, the ABA’s Model Rule 1.6 does contain an exception to the attorney’s obligation tomaintain client confidentiality, allowing such disclosures in order to “establish a claim ordefense on behalf of the lawyer in a controversy between the lawyer and the client.”247Furthermore, the ABA issued a Formal Ethics Opinion248 finding that a wrongful terminationclaim is a “claim” within the meaning of Rule 1.6. The ABA has further explained that, underthe Model Rules, an attorney “may reveal information to the extent necessary to establish her

239 Burkhart v. Semitool, Inc., 5 P.3d 1031, 1041 (Mont. 2000); see also Crews v. Buckman Labs. Int’l,Inc., 78 S.W.3d 852, 862 (Tenn. 2002) (holding that “a lawyer may generally bring a claim forretaliatory discharge when the lawyer is discharged for abiding by the ethics rules as established by thisCourt”); Nesseirotte v. Allegheny Energy, Inc., 2008 U.S. Dist. LEXIS 55730 (W.D. Pa. July 22, 2008).240 423 F.3d 483 (5th Cir. 2005).241 F.3d 989 (9th Cir. 2009).

at 995-96.243 Id. at 995.244 2006-SOX-41 (AU Mar. 14, 2006).2451d at 14-15.2461d. at 15.

ABA MODEL RULES OF PROF’L CONDUCT R. 1 .6(b)(5).248 ABA Comm. on Ethics and Prof 1 Responsibility, Formal Op. 01-424 (2001).


D. PRIVILEGED DOCUMENTS & SOX CLAIMS BY IN-HOUSE COUNSEL § 8.9.4

claim against her employer. . . . [but] must take reasonable affirmative steps... to avoidunnecessary disclosure and limit the information revealed.”249

This trend in the ABA’s Ethics Opinion and Model Rule may portend a growing acceptanceof disclosures by in-house attorneys pursuing claims of retaliation against their employers. Injurisdictions that have adopted a similar rule allowing disclosure of client secrets “to establisha claim or defense” against the former client, courts have shown a greater willingness toallow retaliation claims by in-house attorneys to go forward, even where such claims entailsome disclosure of privileged and/or confidential information.250

§ 8.9.4

D. PRIVILEGED DOCUMENTS & SOX CLAIMS BY IN-HOUSE

COUNSEL

Particularly difficult issues may also arise in cases involving in-house attorneys as SOXcomplainants. SOX whistleblower claims frequently involve confidential and sensitiveinformation (e.g., trade secrets, undisclosed financial information, social security numbers,salary data, performance reviews), including communications protected by the attorney-clientprivilege. DOL records pertaining to SOX claims are subject to disclosure pursuant to FOIArequests.25’Although information contained in a SOX case file will generally not be disclosedto the public during the pendency of an OSHA investigation or appeal,252 once OSHA hascompleted its investigation and the case is “closed,” the DOL is required to disclose anyinformation, upon request, in its possession that does not fall within FOIA’s nine exemptionsor three law-enforcement-related exclusions.253

OSHA takes the position that attorney-claimants can file attorney-client privilegedinformation and attorney work product “to the extent necessary to prove their claims.”254 Anemployee who refuses to produce documents on the basis that they are privileged runs therisks that OSFIA will afford a negative inference about their contents.255 That said, OSFIAwill take special steps to secure privileged documents from unauthorized access in casesinvolving attorney-complainants and, to the extent allowable, will withhold such informationfrom public disclosure in response to FOIA requests.256 In cases involving attorney-

250 See, e.g., Hoffman v. Baltimore Police Dep ‘t, 379 F. Supp. 2d 778, 782 (D. Md. 2005); Burkhart,5 P.3d at 1041 (concluding that “in-house counsel may maintain an action for employment relatedclaims against an employer-client, and that such claims are within the contemplation of Rule 1.6 of theMontana Rules of Professional Conduct, which permits an attorney to reveal confidentialattorney-client information to establish a claim in a controversy between the lawyer and the client”).251 Jordan v. Sprint Nextel Corp., ARB Case No. 06-105 (June 19, 2008); Koeck v. General Elec.Consumer & Indus., ARE Case No. 08-068 (Aug. 28, 2008).252 See U.S. Department of Labor, OSHA Whistleblower Investigations Manual, at 1-22 (Sept. 20,2011), available at http://www.whistleblowers.gov/.253 Id.; see also Jordan, ARB Case No. 06-105, 12; Koeck, ARE Case No. 08-068, 3.254 See U.S. Department of Labor, OSHA Whistleblower Investigations Manual, at 1-21 (Sept. 20,2011), available at http://www.whistleblowers.gov.255 Id256 Id


§ 8.9.4 CHAPTER 8— HOT TOPICS IN WHISTLEBLOWER & RETALIATION CASES

complainants, employers can request written assurance from OSHA that evidence will receivespecial treatment and be held in confidence to the extent permissible under FOIA.257

Although an employer can make a claim of privilege that protects the entire file in a caseinvolving an attorney, it may not do so in cases where the complainant is not an attorney forthe employer. In that situation, the employer must request the special treatment on a perdocument basis.258

For a further discussion of protecting confidential information in SOX proceedings, seediscussion in § 4.4.6.

258


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