Effective January 26, 2022, New York will greatly expand whistleblower protections provided to employees and independent contractors, creating new compliance challenges and avenues of liability for employers. Senate Bill S4394A (the “Amendment”), recently signed into law by Governor Hochul on October 28, 2021, amends New York’s whistleblower protection law (codified at Section 740 of New York’s Labor Law) in four principal ways: ·       Expanding the definition of protected activity under the law; ·       Expanding the scope of individuals entitled to whistleblower protection; ·       Expanding the definition of adverse actions under the law; and ·       Watering down the requirement that whistleblowers notify their employer of the challenged conduct prior to reporting it to law enforcement or other government bodies. Most importantly, the amendment expands the scope of protected activity under the whistleblower law.  Previously, a whistleblower was protected only when disclosing employer conduct that violated a law, rule, or regulation and created a substantial and specific danger to public health or safety or constituted health care fraud.  Now, whistleblowers will also have protection when reporting employer conduct that the whistleblower reasonably believes violates a law, rule, or regulation or is a substantial and specific damage to public health or safety.  What constitutes “reasonable belief” will likely be determined by future case law, but will likely include both objective and subjective analyses as is the case under other whistleblower protection laws (similar to Section 806 of the Sarbanes-Oxley Act). The law also expands the universe of individuals who may be entitled to whistleblower protection.  Previously, New York’s whistleblower law protected only employees.  The new amendment clarifies that the whistleblower law also protects former employees and expands protection to independent contractors.  Further, the amendment  broadens the definition of  “retaliatory action” under the law to include (1) actions or threats to a former employee’s current or future employment; and (2) threats to contact U.S. immigration authorities on an employee or an employee’s family member. Finally, the new amendment allows employees or independent contractors to, in some cases, obtain protection without reporting the alleged illegality or threat to health and safety to the employer.  Whereas previously employees were required to report violations of law to the employer to obtain protection, now they merely need to make “a good faith effort” to do so.  In addition, employer notification is excused entirely if: (1) there is an imminent and serious danger to public health and safety, (2) the employee reasonably believes that reporting would result in the destruction of evidence or concealment of the conduct, (3) the conduct could reasonably be expected to endanger the health of a minor, (4) the employee reasonably believes that reporting would result in physical harm to the employee or another person, or (5) the employee reasonably believes their supervisor is aware of the conduct and will not correct it. Employers should be aware that the amendment imposes a posting requirement for employers. Employers must post a notice of employee rights in a well-lit place that is “customarily frequented by employees and applicants.”  The New York Department of Labor will likely publish a model notice prior to the effective date of January 26, 2022. The new whistleblower protection under New York state law joins the ever-proliferating layers of employee whistleblower protections under state and federal law.  Employers who receive complaints about illegality or health and safety issues will need to carefully document both the receipt of the complaint itself and the employer’s response.  Employers would be well-advised to consult counsel before taking an adverse employment action following a whistleblower’s report. If you have questions regarding these upcoming changes to New York law, contact your Polsinelli attorney.

On March 31, 2021, in United States ex rel. Felten v. William Beaumont Hospital, the Sixth Circuit Court of Appeals held that an employer’s allegedly retaliatory conduct directed at an employee after the employee’s termination can give rise to a False Claims Act (FCA) retaliation claim.  In doing so, the Sixth Circuit embraced a minority position among courts nationwide and created a split with the Tenth Circuit, which held in 2018 that only retaliation against someone who is a current employee at the time can support an FCA claim. The facts of Felten are relatively straightforward.  Mr. Felten believed that his employer, a hospital, was violating the FCA and an analogous Michigan statute by paying kickbacks to physicians and physicians’ groups in exchange for referrals of Medicare, Medicaid, and TRICARE patients.  Mr. Felten filed a qui tam action against his employer, and also asserted that his employer retaliated against him by threatening and marginalizing him for insisting on compliance with the law. After the federal and state governments intervened and settled the qui tam claim, Mr. Felten amended his complaint to add new claims that he was terminated from his employment and, after termination, had been unable to obtain a comparable position because his now-former employer disparaged him to nearly 40 institutions in retaliation for his reports of unlawful conduct.  The district court granted the hospital’s motion to dismiss Mr. Felten’s claims based on the alleged post-termination disparagement, finding that the FCA’s anti-retaliation provision only applied to retaliatory conduct occurring during the employment relationship, and not to disparagement of an employee occurring after his employment has ended. The Sixth Circuit reversed this ruling, finding that an “employee,” for purposes of the FCA, includes both current and former employees of a government contractor.  The court noted that the Tenth Circuit held otherwise in its 2018 Potts v. Center for Excellence in Higher Education, Inc., 908 F.3d 610 (10th Cir. 2018) decision, but departed from its sister circuit’s reasoning.  Instead, the Sixth Circuit relied heavily on the Supreme Court’s decision in Robinson v. Shell Oil Co., 519 U.S. 337 (1997), holding that under Title VII former employees may bring retaliation claims for actions occurring after the termination of their employment.  The court explained that some of the retaliatory actions prohibited by the FCA – such as, threatening, harassing, and discriminating – can refer to actions against former employees, and that some “terms and conditions of employment” persist after an employee’s termination.  The court also explained that a contrary result would incentivize employers to rush to fire employees who the employees believe may engage in FCA protected activity, undermining FCA’s purpose. Because of the circuit split the Sixth Circuit’s decision created, this may be a decision to watch for future developments.  Regardless of what may happen next, the Felten decision is a useful reminder that when an employee engages in potentially protected activity, whether under the FCA, other whistleblower statutes, or anti-discrimination laws, employers must act with care in personnel actions involving that employee.  In some cases, employers may win the battle but lose the war, showing that the “concerns” the employee reported were non-issues, but facing retaliation liability because of how managers or others treated the employee after he or she made the reports.  Felten emphasizes that this care must continue even after the employee departs the organization.

Missouri Governor Mike Parsons recently signed Senate Bill 591, which impacts Missouri employers by significantly restricting the availability of punitive damages.  Beginning August 28, 2020, plaintiffs in Missouri will face a higher pleading requirement and standard of proof for claims of punitive damages. Key Changes To recover punitive damages, plaintiffs must now prove “by clear and convincing evidence that the defendant intentionally harmed the plaintiff without just cause or acted with a deliberate and flagrant disregard for the safety of others.”  This change represents a departure from the previous burden which required only a showing of “complete indifference to or conscious disregard for the safety of others.” In addition to raising the punitive damages standard, plaintiffs will now face a more onerous pleading standard related to punitive claims.  Claims for punitive damages are no longer permitted in initial pleadings.  To assert a claim for punitive damages, a party must seek leave of the court no later than 120 days before the final pre-trial conference or trial date.  Only if the court then determines that the trier of fact could reasonably conclude standards for awarding punitive damages are met, can a party file a pleading seeking punitive damages.  Likewise, discovery of an employer’s assets is only allowed if the court grants plaintiff leave to seek punitive damages. S.B. 591 also contains specific provisions that limit employer exposure where a plaintiff seeks punitive damages against an employer because of an employee or agent’s actions.  Punitive damages are now only recoverable for an employee’s conduct if (1) the principal or a managerial agent of the principal authorized the doing and the manner of the act; (2) the agent was unfit and the principal or a managerial agent of the principal was reckless in employing or retaining him or her; (3) the agent was employed in a managerial capacity or was acting in the scope of employment; or (4) the principal or a managerial agent of the principal ratified or approved the act. Employer Takeaways Missouri’s new limitations on punitive damages will greatly impact if, when, and how claims for punitive damages in employment cases filed under Missouri law are pursued.  Plaintiffs now face a standard that makes them work to not only prove, but even to seek punitive damages.  And these changes come shortly after the new damage caps now in place under the Missouri Human Rights Act.  If you have questions about S.B. 591’s new limitations on punitive damages in Missouri, contact your Polsinelli attorney.

As the COVID-19 pandemic continues, health care workers on the front-lines continue to risk their own health to provide care for patients suffering from or who may have been exposed to COVID-19.  With growing worries regarding the availability of Personal Protective Equipment (PPE) (e.g., N95 masks, face shields, medical gowns and gloves), health care workers across the country are increasingly speaking out. In doing so, though, some health care employers have run into additional problems from an employment law perspective.  Workers are alleging they have been ordered by their employers not to speak out about insufficient PPE—or even more serious, they have been terminated for speaking to the media about the problem.  With these concerns looming and more medical professionals speaking out, hospitals, doctors’ offices, and the like must take care to not violate workers’ rights or take actions that could be construed as retaliatory against those employees.  Health care workers who are terminated or disciplined for raising concerns about inadequate PPE or COVID-19 exposure may have viable wrongful discharge claims under applicable state laws.  The majority of states have explicitly recognized some version of a common-law claim for wrongful discharge in violation of public policy, created to protect workers from termination based on public policy designed to ensure the health, safety, or welfare of the public.  In fact, some states such as California, Illinois, Massachusetts, Michigan, New York, Texas, Washington, and Wisconsin have statutory provisions specifically prohibiting retaliation against health care workers who take certain steps to report health, safety, and/or patient care concerns. Employers of health care professionals should take the following steps to help reduce or eliminate risk. Reviewing the applicable social media and media policies to ensure they include, among others, simple and clear provisions on: a. Patient privacy and posting of patient images; b. Mutual respect; c.  Using disclaimers such as “The views expressed on this [blog, website, post] are my own and do not reflect the view of my employer”; d.  Professionalism; e.  Not allowing social media activity to interfere with work commitments; f. Encouraging workers to talk with the media through public relations offices; g. Not speaking or posting on behalf of the institution, unless pre-approved. Enforcing social media and other applicable policies consistently and in line with past precedent. Not enforcing policies more harshly against those who speak out regarding COVID-19. Focusing on the violation of the policy, not the content of the employee’s speech, when disciplining an employee for violating social media or media policies. Avoiding negative comments about filing administrative complaints (e.g., OSHA) reporting health and safety concerns. Not discouraging such administrative complaints related to COVID-19 concerns. On the federal level, various laws may also give rise to a potential whistleblower complaint arising from PPE-related comments including, for example, OSHA’s whistleblower provisions.  In addition, government-related health care institutions face additional potential liability due to “free speech” concerns.  Employers should also keep in mind that Section 7 rights under the National Labor Relations Act apply equally to union and non-union employees.  Section 7 prohibits employers from interfering with, restraining, or coercing employees exercising their rights to engage in concerted activity for mutual benefit and to discuss working conditions, including through social media policies.  Health care entities should keep these additional considerations in mind when addressing employee conduct. If you have any questions or need assistance related to employment decisions pertaining to your health care workers, contact your Polsinelli attorney.

Public company directors, who are under constant threat of claims, received welcome news earlier this month.  On December 9, 2019, the U.S. District Court for the Southern District of New York ruled that corporate directors cannot be sued for whistleblower retaliation under the Sarbanes-Oxley Act (SOX).  The SDNY decision splits with a 2015 opinion from a California federal district court permitting SOX claims against corporate directors to go forward. The SDNY case involved a number of “yieldco” subsidiaries formed by SunEdison to facilitate investment in renewable energy projects.  The plaintiff and alleged whistleblower was the CEO of two of these subsidiaries.  The CEO claimed that he started questioning SunEdison’s public statements about the subsidiaries’ finances and SunEdison’s liquidity and that, in response, the subsidiaries terminated his employment.  He also accused two SunEdison directors – the Board’s Executive Chairman and Governance Committee chair – of orchestrating his termination.  The CEO’s claim was consolidated with related shareholder litigation concerning the representations about SunEdison’s finances. The court relied on the plain language of the SOX whistleblower retaliation statute, 18 U.S.C. § 1514A, to dismiss the former CEO’s claims against the directors.  SOX provides a retaliation claim against a “company” with publicly-traded securities, a “nationally recognized statistical rating organization,” “or any officer, employee, contractor, subcontractor, or agent of such company or nationally recognized statistical rating organization.”  Directors are not listed in the statute.  Given that SOX specifically regulates the conduct of corporate directors in other respects, the court refused to read the broad term “agent” to encompass corporate directors.  The court also noted that individual directors are not ordinarily regarded as agents of the corporation for which they serve. The New York decision splits with a 2015 decision from the Northern District of California in Wadler v. Bio-Rad Laboratories, Inc.  There, the court found that SOX’s use of the term “agent” was ambiguous and construed it to include directors.  Although the Ninth Circuit ruled on appeal on various issues in the Wadler case earlier this year, it did not address the director liability issue.  No federal appellate court has yet ruled on this issue, leaving the question split between the New York and California federal district courts. Since the SOX was enacted in 2002, plaintiffs and their counsel have been testing the scope of whistleblower claim, including the individuals and entities – such as directors – that can be held liable.  .  Director liability is worth closely watching with D&O insurance rates reportedly on the rise due to an uptick in shareholder litigation.  Polsinelli will continue to monitor this and other emerging SOX and Dodd-Frank whistleblower issues.

On September 11, 2019, the Department of Labor announced that whistleblower retaliation complaints under the Taxpayer First Act (TFA) will be handled by the Occupational Safety and Health Administration (OSHA). TFA was created as part of a broader IRS reform bill that passed on July 1, 2018.   It provides a retaliation claim for employees who are terminated or otherwise disciplined because they provided information or assisted in an investigation regarding underpayments of tax or violations of the internal revenue or other federal tax fraud laws.  Generally speaking, the procedures for a TFA whistleblower retaliation claim follow those in place for whistleblower claims under the Sarbanes-Oxley Act, which are also administered by OSHA. Employees who prevail under this cause of action are entitled to “all relief necessary to make the employee whole” and compensatory damages, including reinstatement, 200% of the amount of back pay and 100% of all lost benefits, with interest, and special damages including litigation costs, expert witness fees, and reasonable attorney fees.  Employers cannot require employees to arbitrate TFA retaliation claims through pre-dispute arbitration agreements. The TFA adds to the increasing list of statutes, such as the False Claims Act and the Sarbanes-Oxley Act, which provide whistleblower protections to employees who reasonably believe that their employer has violated federal law and report such beliefs.  When an employee blows the whistle regarding alleged wrongdoing, now including tax underpayment or fraud, employers should consult outside counsel to help navigate through the investigation and subsequent interactions with the employee and avoid or better prepare for potential whistleblower litigation.

On May 8, 2019, the U.S. Seventh Circuit Court of Appeals reaffirmed its test to determine whether a worker qualifies as an “employee” as defined by and subject to Title VII protections. In this case, the plaintiff was a physician who maintained practice privileges at defendant Hospital.  Most of her revenue came from the work she performed at the Hospital, and the Hospital subjected her to peer-review proceedings.  Nevertheless, the Court ruled that she was not an “employee” of the Hospital for purposes of Title VII, but was instead an independent contractor. In its decision, the Court reaffirmed that the following factors are relevant to determining an individual’s employment status under the statute: the extent of the employer’s control and supervision over the worker, including directions on scheduling and performance of work; the kind of occupation and nature of skill required, including whether skills are obtained in the workplace; responsibility for the costs of operation, such as equipment, supplies, fees, licenses, workplace, and maintenance of operations; method and form of payment and benefits; and length of job commitment and/or expectations. The Court emphasized that the most important factor is the employer’s right to control the worker’s conduct and performance. While acknowledging that a physician who enjoys hospital staff privileges could share an indirect employer-employee relationship with a hospital sufficient to invoke Title VII protection, the Court ultimately held that subjecting the plaintiff to peer review did not meet the necessary control threshold to create an employee-employer relationship with the Hospital. The Seventh Circuit’s decision comes as welcome news for employers, as the employee/independent contractor distinction is currently in flux.  Employers with questions regarding the proper classification of its workers would do well to consult with competent counsel.

On June 3, 2019, the U.S. Supreme Court in Fort Bend County, Texas v. Davis unanimously held that Title VII’s charge-filing requirement is mandatory for claimants, but not jurisdictional.  Stated plainly, employees can still file and proceed with Title VII lawsuits without first filing a charge of discrimination, absent a timely-asserted exhaustion defense by employers. In Davis, the claimant filed a charge of discrimination with the Equal Employment Opportunity Commission (“EEOC”) alleging sexual harassment and retaliation for internally reporting the harassment.  The claimant was later terminated for reasons she believed to be based on her religion.  Although the claimant amended her intake questionnaire with the EEOC to add religion-based claims, she never amended her EEOC Charge of discrimination.  After receiving a right to sue notice, the claimant filed a lawsuit asserting the claims of harassment and retaliation as stated in her charge, and also included discrimination based on religion.  The case proceeded on the merits on all of claimant’s claims and summary judgment was entered in the employer’s favor on all claims.  The U.S. Fifth Circuit Court of Appeals reversed on the claimant’s religious discrimination claim.  On remand, the district court granted the employer’s motion to dismiss, wherein the employer asserted for the first time that the claimant failed to assert religious discrimination claims in her EEOC charge and, therefore, the court lacked jurisdiction over those claims.  The Fifth Circuit reversed, holding that a failure to exhaust administrative remedies under Title VII is not a jurisdictional bar to sue, but rather is an affirmative defense, which is subject to waiver.  The court further held that the employer waived the affirmative defense by not asserting it in its answer or moving on it earlier in the case. The U.S. Supreme Court agreed with the Fifth Circuit and held that Title VII’s charge-filing instruction is not jurisdictional, but rather a mandatory, nonjurisdictional claim-processing rule that must be “timely raised to come into play.” This case should remind all employers to timely assert all applicable or potentially applicable affirmative defenses.  Employers are encouraged to have thoughtful discussions with their counsel to review waivable defenses that should be asserted as early as possible in litigation.

On April 24, 2019, the Federal Court that reinstated the EEO-1 pay data reporting requirement accepted the EEOC’s recommendation that employers must submit the EEO-1 form for 2018, including pay data, by Monday, September 30, 2018.  Employers with at least 100 employees and federal contractors and first-tier subcontractors with at least 50 employees must file the EEO-1 survey annually with the Equal Employment Opportunity Commission (“EEOC”). The EEOC has expanded the survey to require the disclosure of a wide range of employee pay data, in addition to employee demographics.  The pay data reporting requirement mandates disclosure of the total number of full- and part-time employees by demographic category in each of 12 pay bands for each EEO-1 job category, as well as the aggregate hours worked by all of the employees in each pay band. Employers subject to the EEO-1 reporting requirement for 2018 presently have two deadlines to meet: May 31, 2019: Deadline to submit Component 1 (demographics) data through the EEOC online portal; and September 30, 2019: Deadline to submit Component 2 (pay) data through the EEOC online portal. It is unclear at this time whether the EEOC will remove or alter the existing May 31 deadline.  Adding to the burden, and potential future confusion, the Court ordered the EEOC to collect either 2017 or 2019 pay data at a future time.   The EEOC has yet to choose.  Employers subject to EEO-1 reporting requirements should retain all 2017 employee pay data, pending further guidance from the EEOC. Employers that have not taken preparatory steps to comply with the enhanced EEO-1 reporting requirements should do so now.  In addition, employers with questions regarding their EEO-1 obligations would do well to consult with able counsel.

On December 1, 2018, the amendments to Rule 23 of the Federal Rules of Civil Procedure (“Rule 23”), which governs class actions, went into effect.  The amendments codify certain procedures the courts have been requiring or permitting over the last 15 years in class actions.  Below are five important takeaways from the Rule 23 amendments: Before directing notice to a certified or not-yet-certified class, the parties’ submissions must demonstrate that the court will likely: (1) be able to approve the settlement after a final hearing; and (2) be able to certify the class for purposes of judgment on the proposal. The amendments establish a standard set of factors to assess the fairness, reasonableness, and adequacy of a proposed settlement.  These enumerated factors are not designed to displace the various analyses used in each circuit, but instead are intended to bring focus to the most germane factors. The notice sent to members of a class certified for purposes of settlement should be the same as notice sent to members of a class that is certified by the Court in a litigated context. Email is now an expressly approved method for delivering notice to members of the class.  However, no single delivery method of notice is preferred, leaving it to the court’s discretion to select the appropriate means (or combination of means) most likely to be effective in a particular case.  As such, the parties may wish to advocate for their preferred method of service when seeking approval of notice. Objections (and appeals) now can be withdrawn without court approval, unless a payment or other consideration is “associated with” the withdrawal.  The purpose of this amendment is to tackle objections and threats of appeal advanced for personal gain, as opposed to those advanced to assist the settlement-review process. Moreover, notes to the amendments emphasize that notices be in “plain, easily understood language,” and that the “means, format, and content” of a notice appropriate for one group may not be appropriate for another.  Parties should be prepared to address concerns over classes with members whose first language may not be English, or who may have other impediments to comprehending (or even seeing) typical notices.

On March 1, 2019, in a long-awaited and unsurprising 3-1 decision, the National Labor Relations Board (“Board”) ruled lobbying expenses are not chargeable to employees who work in a union setting and choose not to join or remain a member of the union under the National Labor Relations Act (“NLRA”).  See Kent Hospital, 367 NLRB No. 94 (2019).  In addition, the Board further held unions must verify to such employees – known as Beck objectors – that financial information disclosed to them has been independently audited. The case arose in 2009, when several employees of Kent Hospital resigned their memberships with the union and objected to paying union dues for activities unrelated to collective bargaining, contract administration, or grievance adjustment.  By letter, the union provided the resigning employees with their new reduced fee amounts, as well as several charts outlining the major categories of expenses spent by the union both internationally and at Kent Hospital locally.  The letter further stated that the categories of expenses disclosed therein were verified by a certified public accountant.  However, the union did not provide the objectors with the actual verification letter from the auditor because it believed it was not required to do so.  Critical to the Board, the union continued to deduct dues from the Beck objectors for lobbying expenses.  Thereafter, the Board’s Acting General Counsel filed unfair labor charges against the union, alleging the union violated Section 8(b)(1)(A) of the NLRA by 1) failing to provide the objectors with evidence “beyond a mere assertion” the financial data the union disclosed was based on an independent audit; and 2) charging the Beck objectors dues it used to fund its lobbying efforts.  The Administrative Law Judge dismissed the Acting General Counsel’s charge relating to the audit verification and partially sided with the union relating to its decision to charge the Beck objectors for lobbying expenses. The case was appealed to the Board.  On appeal, the Board first held “private-sector unions subject to the ‘basic considerations of fairness’ inherent in the statutory duty of fair representation are required to provide Beck objectors verification that the financial information disclosed to them has been independently verified by an auditor.”  The Board reasoned, since financial information provided to Beck objectors must be independently verified, unions “must take the modest additional step of supplying verification that the provided financial information has been independently verified.” The Board then discussed whether a union’s lobbying efforts were chargeable to Beck objectors, and concluded they were not.  When making its ruling, the Board explained unions may not spend funds collected from Beck objectors on activities “not germane” to its duties relating to collective bargaining, contract administration, or grievance processing.  The Board acknowledged, in certain circumstances, a union’s lobbying efforts may touch on workers’ terms and conditions or “incidentally affect” collective bargaining.  Even so, the Board held, lobbying efforts are not part and parcel of a union’s duty to bargain collectively, and, thus, Beck objectors cannot be compelled to pay for political lobbying: “Lobbying activity is not a representational function simply because the proposed legislation involves a matter that may also be the subject of collective bargaining.” Stay tuned to Polsinelli at Work for further updates regarding this case.

In 2016, the Occupational Safety and Health Administration (“OSHA”) published a rule (the “2016 Rule”) – found in  29 C.F.R. § 1904.35(b)(1)(iv) – related to post-incident drug testing and workplace safety incentive programs that left many employers confused. Fortunately, on October 11, 2018, OSHA published a memorandum designed to clarify the 2016 Rule and how it may be enforced (the “2018 Memo”). OSHA’s 2018 Memo can be found here. Post-Incident Drug Testing The 2016 Rule prohibited employers from retaliating against employees for reporting work-related injuries or illnesses. Subsequently, OSHA interpreted the 2016 Rule to prohibit employers “from using drug testing (or the threat of drug testing) as a form of adverse action against employees who report injuries or illnesses,” thus limiting employers to drug testing when there was a “reasonable possibility” that drugs or alcohol contributed to the accident or injury. See Supplementary Information to 2016 Rule, which can be found here. The 2018 Memo clarifies that an employer-mandated post-incident drug test would only violate the law “if the employer took the action to penalize an employee for reporting a work-related injury or illness rather than for the legitimate purpose of promoting workplace safety and health.” In addition, most instances of workplace drug testing are permissible under the law, including random drug testing, drug testing unrelated to the reporting of a work-related injury or illness, and drug testing to evaluate the root cause of a workplace incident. Safety Incentive Programs On the topic of safety incentive programs, the 2016 Rule warned that such programs “might be well-intentioned efforts by employers to encourage their workers to use safe practices,” but “if the programs are not structured carefully, they have the potential to discourage reporting.” See Supplementary Information to 2016 Rule. The 2018 Memo explains that incentive programs that reward employees who report near-misses or hazards, or programs that reward employees with prizes or bonuses at the end of an injury-free month, are lawful so long as they are not implemented in a manner that discourages reporting. To assure proper reporting, OSHA recommends that employers take steps to “create a workplace culture that emphasizes safety” by, for example, implementing: Incentive programs that reward employees for identifying unsafe conditions in the workplace. Training programs reinforcing reporting rights and responsibilities and the non-retaliation policy. A mechanism for accurately evaluating employees’ willingness to report injuries and illnesses. OHSA’s clarifications in the 2018 Memo are helpful to employers as they work to establish and implement policies aimed at maintaining and encouraging a safe working environment. Employers with questions regarding the 2018 Memo would do well to consult with competent counsel.

On November 15, 2018, the United States Fourth Circuit Court of Appeals affirmed the decision of the Middle District of North Carolina in the case of Netter v. Barnes, et al, upholding dismissal of Netter’s case because her removal of other employees’ personnel files from the workplace is not “protected activity” and is a legitimate non-discriminatory reason for her termination.[1] A longtime employee of the Sheriff’s Department, Catherine Netter believed she was being discriminated against on account of her race and religion and removed several coworkers’ personnel files without permission, presumably “fishing” to determine whether said employees were being treated more favorably than her. Then, Netter copied the files and shared them with the Equal Employment Opportunity Commission (“EEOC”) when attempting to support her charge of discrimination. Eventually, Netter sued her employer for discrimination when she was passed over for a promotion. Netter (through her attorney) subsequently produced the files to the Sheriff in discovery. When deposed, Netter conceded that she had obtained the files as described above. In response, the Sheriff’s Department terminated her employment, citing, in addition to violations of internal policy, Netter’s violation of N.C. Gen. Stat. § 153A–98, which imposes criminal penalties for reviewing or disseminating information in county personnel files without authorization. Netter amended her lawsuit to include a retaliation claim under Title VII’s “participation clause,” which protects “participat[ion] in any manner in an investigation, proceeding, or hearing…” 42 USC § 20000e-3(a). Netter argued that her theft of personnel files fell under the participation clause, and even conceded that her actions violated the law. The Sheriff argued that any disclosure of information in violation of an employer confidentiality policy would fall outside of the scope of the participation clause, even if the employee had permission to access the information and disclosed it only to the EEOC in connection with a Title VII claim. The Court took a middle path, holding that the participation clause “does not protect a violation of a valid state law that poses no conflict with Title VII.” The Court did leave some breadcrumbs regarding the types of laws that could conceivably conflict with Title VII. Specifically, the Court noted in dicta the importance of personnel files to show evidence of disparate treatment. One can imagine that courts might take a closer look at a state law that, for instance, placed limits on the ability of the EEOC (or a corresponding state agency) to seek the information contained in personnel files. In any case, employers should ensure that access to personnel files and other confidential information is strictly monitored. [1] http://hr.cch.com/ELD/NetterBarnes111518.pdf

On Tuesday November 6, 2018, the U.S. Supreme Court unanimously ruled that the Age Discrimination in Employment Act (“ADEA”) applies to state and local government employers with fewer than 20 employees.  The Supreme Court’s decision, in Mount Lemmon Fire District v. Guido, affirmed the U.S. Ninth Circuit Court of Appeal’s ruling and resolved a Circuit Court split regarding the ADEA’s coverage of public employers. Due to budgetary shortfalls, the Mount Lemmon Fire District, a political subdivision in Arizona, terminated its two oldest full-time firefighters, John Guido and Dennis Rankin, who sued alleging discrimination under the ADEA. Mount Lemmon sought dismissal of the case on the grounds that it was not an employer as defined and  covered by the ADEA. Upon enactment in 1967, the ADEA covered only private sector employers.  However, in 1974, Congress amended the ADEA to redefine an employer as “a person engaged in an industry affecting commerce who has twenty or more employees…[t]he term also means (1) any agent of such a person, and (2) a State or political subdivision of a State…”  (emphasis added). The statutory language proved pivotal in the case, as the Supreme Court held the phrase “also means” created an entirely new, separate category of employer covered under the ADEA. The Supreme Court reasoned that because Congress did not apply the numerosity requirement of private sector employers to the political subdivisions, small state and local government subdivisions need not have 20 or more employees to fall within the ADEA’s scope. While Mount Lemmon warned that this interpretation would too broadly extend the ADEA’s scope, potentially causing increased litigation and legal costs and threatening necessary public services, the Supreme Court ultimately disagreed. Justice Ruth Bader Ginsburg, who authored the opinion, acknowledged that this interpretation would give the ADEA “a broader reach than Title VII. But this disparity is a consequence of the different language Congress chose to employ.”  The Court was further unconcerned with the risk of emergency service shrinkages, noting that the Equal Employment Opportunity Commission has followed this same interpretation for 30 years without problematic public services cuts.  The Court concluded that the ADEA’s definition of employer left “scant room for doubt” that state and local governments are employers under the ADEA, regardless of their number of employees. With its broader reach, state and local employers should be mindful of the ADEA’s coverage and requirements. The Polsinelli Labor and Employment attorneys are here to address and assist with any ADEA questions or cases.

In Digital Realty Trust, Inc. v. Somers, No. 16-1276 (U.S. Feb. 21, 2018), the U.S. Supreme Court determined that the anti-retaliation provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) is limited to individuals who report a violation of the securities laws to the Securities and Exchange Commission (“SEC”) under § 78u-6(h). The plaintiff alleged that defendant terminated him shortly after he reported suspected securities law violations to senior management, in violation of Dodd-Frank’s anti-retaliation provision.  Although plaintiff could have alerted the SEC prior to his termination, he did not do so. In the district court, the defendant moved to dismiss the claims, arguing that plaintiff did not qualify as a “whistleblower” under Dodd-Frank because he did not report any alleged violations to the SEC. The trial court deferred to the SEC’s Rule 21F-2, which provides that Dodd-Frank’s retaliation procedures could apply in situations where information was not provided to the SEC, so long as the individual provided information shielded by one of the anti-retaliation provision’s three clauses. A divided panel of the Ninth Circuit affirmed. The Supreme Court observed that its charge was to determine the meaning of “whistleblower” within the context of Dodd-Frank’s anti-retaliation provision. With that task in mind, the Court explained the statute defines a “whistleblower” as “any individual who provides information relating to a violation of the securities laws to the Commission.” The statute further instructs that the definition applies throughout the anti-retaliation provision. The definition clearly identifies who is eligible for protection under Dodd-Frank (an individual who provides information “to the Commission”), and the three clauses of the anti-retaliation provision clearly delineate what conduct is shielded from employment discrimination. The Supreme Court held that both requirements must be met to invoke Dodd-Frank. The Court buttressed its conclusion in two other respects. First, it observed that a separate whistleblower protection in Dodd-Frank did not require that information be conveyed to a governmental agency. The Court reasoned that the inclusion of the reporting requirement in § 78u-6(h), but not in other parts of Dodd-Frank, was an intended difference in meaning.  Second, it noted that the core objective of the whistleblower program is to motivate individuals with knowledge of securities law violations “to tell the SEC.” Therefore, the Court concluded that both the text and purpose of the statute make clear that an individual does not qualify as a whistleblower under § 78u-6(h) unless he provides information to the SEC. Somers signals a rejection of an expansive view of Dodd-Frank’s anti-retaliation provisions.  While employers may benefit from this narrower definition, the Court’s ruling may ultimately lead to limited opportunities for internal corporate resolution, as whistleblowers may be incentivized to report concerns to the SEC rather than internally. RETALIATION AND WHISTLEBLOWER DEFENSEFEBRUARY 26, 2018

This week, the United States Supreme Court heard oral argument in Digital Realty Trust, Inc. v. Somers to consider whether the Dodd-Frank Act (“Dodd-Frank”) protects internal whistleblowers and, more broadly, regulatory agencies’ power to interpret federal statutes. The Court’s decision could impact an employer’s ability to terminate employees who report concerns of malfeasance internally, and give agencies the power to circumvent Congress’ legislative authority. In Digital Realty, the employer terminated an employee after he internally reported alleged corporate malfeasance. The employee then filed suit, claiming that his termination violated Dodd-Frank’s anti-retaliation provision. Dodd-Frank prohibits retaliation against a “whistleblower” – defined as any individual who provides information relating to a violation of securities laws to the Securities and Exchange Commission (“SEC”), in a manner established, by rule or regulation, by the SEC. In 2011, the SEC interpreted Dodd-Frank’s “whistleblower” definition to include those who make internal reports.  The SEC’s interpretationis impactful – since 2012, 83% of whistleblowers who have received judgments first reported internally to their company and then later to the SEC. The employer in Digital Realty moved to dismiss the employee’s Dodd-Frank retaliation claim, arguing that Dodd-Frank only protects those who provide information to the SEC and not those who internally report violations. The district court denied the employer’s motion and the Ninth Circuit affirmed. If the Supreme Court agrees with the Ninth Circuit, employers may be subjected to further litigation when terminating employees who have internally reported concerns related to Dodd-Frank. Moreover, regulatory agencies could perceive they have greater leeway to interpret legislation. As political affiliations within agencies change, so too could the agencies’ interpretations of statutes. Under such a scenario, employers would need to pay close attention to agency interpretations to minimize legal exposure. Conversely, the Court could strictly interpret Dodd-Frank and limit agencies’ powers, giving strength and certainty to express legislative enactments. Regardless, employers should be mindful of the Court’sDigital Realty decision because it will impact whistleblower litigation and may provide a preview to this Court’s treatment of future employment law cases. Keep watching the Polsinelli at Work blog for more updates regarding this matter.

Mediation of employment matters is on the rise. When faced with an employment case, your company may be ordered to mediation or the court rules may require it. It is also common to receive a letter from the Equal Employment Opportunity Commission (EEOC) or state agency advising the company that by choosing to mediate, the company will not be required to go to the time and expense of a charge investigation or submit a position statement. Below are four issues to know before considering whether mediation is right for your case. 1. Cost EEOC mediations are typically no-cost, so long as the parties use an EEOC mediator. The same is true with respect to state agencies. If, however, the parties choose to use a private mediator, then they will be required to pay for the mediator’s time, which the parties then must agree at the outset as to the split of payment by the parties. If the case is settled, mediation costs may be shifted to one party as part of any settlement. 2. Formalities   Mediation is sometimes confused with arbitration. Mediation is usually – even if it is not EEOC or state-sponsored mediation – non-binding. By contrast, an arbitration proceeding is usually a binding proceeding on the merits of the claims and similar to a “mini-trial.” At an arbitration, there will be a person, or a panel of persons, acting in a capacity similar to a judge, who hears and evaluates the evidence and then renders a decision the claims. In mediation, the mediator listens to the parties discuss their positions in an informal setting, but does not render a decision on the claims. Instead, the mediator serves in the role of a facilitator, pointing out the strengths and weaknesses of both sides’ cases and attempting to reach an agreed upon resolution of the claims. 3. Mediation Framework The ground rules for the mediation will typically be available, in writing, for review before the mediation. This document will include privacy considerations for the mediation. A mediator will often ask the parties to submit a mediation position statement in advance of the actual session to become familiar with the issues. An opening session, with all parties present, may be part of a mediation. At this time, the parties, generally through counsel, summarize the strengths of their cases. Thereafter, the mediator will move forward with the primary focus of the mediation, which is private sessions with each side, often called caucuses. During these private sessions, the mediator will generally work with each side to help them understand the strengths and weaknesses of their positions. Mediators use a variety of techniques in these sessions to help the parties understand the risks of continued litigation and to reach an agreed resolution. 4. Requirement of Settlement? There is no requirement that a case settle at mediation, but many times cases settle or reach a point where settlement negotiations can be more readily pursued later. Even if the case is not resolved, mediation can sometimes provide the parties with input that helps them look at the case differently, such that with some additional evidence, the case will be resolved shortly thereafter. Should your company be presented with an offer of mediation, contact your employment lawyer to discuss your options. In certain circumstances, a well-timed mediation could save you time and resources.

As discussed in our September 12, 2016 Labor & Employment blog post, the U.S. Securities and Exchange Commission (SEC) continues to incentive employees to “blow the whistle” on their employers for alleged securities violations. What happens when the complaint of alleged securities impropriety is made only to the employer, rather than the SEC? Is the employee’s complaint protected? If you do not know the answer, you are not alone. Dozens of district courts and several appellate courts across the country have come to opposite conclusions when faced with the question of whether employees may seek the protections of the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) when making purely internal complaints to their employer. The Dodd-Frank Act, which was enacted in 2010, contains anti-retaliation provisions for employee whistleblowers. The anti-retaliation provision of the Dodd–Frank Act provides that an employer may not adversely affect the terms and conditions of a whistleblower’s employment “because of any lawful act done by the whistleblower . . . in providing information to the Commission in accordance with this section . . . .” 15 U.S.C. § 78u–6(h)(1)(A) (emphasis added). The term “whistleblower” is defined as “any individual who provides . . . information relating to a violation of the securities laws to the Commission, in a manner established, by rule or regulation, by the Commission.” 15 U.S.C. § 78u–6(a)(6) (emphasis added). Nevertheless, the SEC has taken the position that the Dodd-Frank Act protects even internal complaints, not just those made to the SEC. Federal courts are split on this issue, however. The Fifth Circuit, in Asadi v. G.E. Energy (USA), L.L.C., 720 F.3d 620 (5th Cir. 2013), disagreed with the SEC’s position and found that employees must make a complaint to the SEC. The Second Circuit, in Berman v. Neo@Ogilvy LLC, 801 F.3d 145 (2d Cir. 2015), held in a 2-1 decision that the Dodd-Frank Act protects a whistleblower who internally reports violations of the securities laws without reporting the violations directly to the SEC.  The Second Circuit found sufficient ambiguity in the statute to warrant deference to the SEC, as the agency in charge of regulating securities. To add further confusion, some federal district courts have issued opinions splitting on this issue. It does not appear that this conflict among federal courts will be resolved soon, as the defendants in the Berman case elected not to pursue Supreme Court review. For now, employers would be wise to assume that an internal complaint of alleged securities impropriety is protected. Moreover, because it may be difficult to discern between normal business concerns and protected activity, employers should address the anti-retaliation provisions of the Dodd-Frank Act (and other anti-retaliation statutes) proactively. Employers should review the seven elements of an effective whistleblower protection and anti-retaliation system provided in Polsinelli’s September 12, 2016 Labor & Employment blog post, as they are critical to a company’s efforts to comply with the Dodd-Frank Act, regardless of whether internal complaints are protected.

Some very loud whistles have been blowing across corporate America since 2011 – whistles valued at $107 million, in fact. The United States Securities and Exchange Commission announced on August 30, 2016, that since its whistleblower program began in 2011, they have awarded more than $107 million total to 33 individuals who voluntarily provided the SEC with original and useful information that led to a successful enforcement action. Whistleblower awards can range from 10 percent to 30 percent of the money collected when the SEC’s monetary sanctions in a matter exceed $1 million.     The SEC encourages employees to report suspected wrongdoing, because they, according to Acting Chief Jane Norberg, “are in unique positions behind-the-scenes to unravel complex or deeply buried wrongdoing.” And, last year alone, employees responded by providing nearly 4,000 tips to the agency. With this kind of incentive from the SEC and other government agencies, as well as a growing number of successes in whistleblower lawsuits, it is more important than ever for companies to get advice on a regular basis from a multi-faceted team, including corporate, employment, and white collar crime attorneys. Moreover, companies must be strategic and proactive in their approach to implementing an effective whistleblower protection and anti-retaliation system.     Key elements of an effective whistleblower protection and anti-retaliation system include: Clear and visible leadership commitment and accountability. This is truly the most important piece of the puzzle. Without sincere support from the top, no internal whistleblower program can succeed. The creation of a true “speak-up” organizational culture focused on prevention, including encouraging employees to raise all suspicions and issues quickly and insuring the fair resolution of such issues. Independent, protected resolution systems for employees and third-parties who believe they are experiencing retaliation as a result of raising concerns.   Specific training to educate all employees about their rights and available protections (including both internal and external programs). Specific training for managers who may receive complaints or information from employees, requiring the manager to be considerate of the employee making the report, to be diligent, and, most importantly, to act on the information with no corporate tolerance of the “just telling me as a friend, not as a manager” excuse. Internal monitoring and measurement of corporate compliance efforts and the effectiveness of the speak-up and non-retaliation culture, without contributing to the suppression of employee reporting. Independent auditing to determine if the whistleblower protection and anti-retaliation system is actually working.

OSHA’s recently announced rulemaking changes have major implications for employers.  Effective January 1, 2017, certain employers will be required to electronically submit injury and illness data to OSHA, which will then be posted to the OSHA website. Currently, employers are expected to log the data on OSHA Injury and Illness forms, which remain with the employer until OSHA requests that the logs be produced in the course of an inspection or investigation. Another major change is OSHA’s heightened emphasis on injury reporting and anti-retaliation protections. There are four things that you need to know about these changes. 1. Employers Must Establish Procedures To Report Work-Related Injuries And Illness And Inform Employees Of The Right To Use These Procedures Without Fear Of Retaliation. Under the new rule, an employer must specifically inform employees (i) of the procedure to promptly and accurately report work-related injuries and illnesses; (ii) that employees have the right to report work-related injuries and illnesses; and (iii) that employers are prohibited from discharging or in any manner discriminating against employees for reporting work-related injuries or illnesses. 2. Employers Must Carefully Review Their Drug Testing and Safety Incentive Programs to Determine if the Programs Interfere with Reporting Injuries and Illnesses. Many employers have implemented mandatory post-incident drug testing programs. OSHA will take a close look at these programs to ensure that the testing requirement is reasonable and is not implemented for the purpose of dissuading an employee from reporting an injury or illness.  OSHA appears to sanction drug-testing when an employee’s drug use is likely to have contributed to the accident and the drug test can accurately identify impairment from drug use. However, an automatic rule for drug testing in all work-related accidents, regardless of whether it appears that drug use contributed to the accident, will most likely not be approved by OSHA unless the program is implemented to comply with the requirements of a state or federal law or regulation. Along the same lines, safety incentive programs which provide monetary rewards to employees for “accident free” months could give rise to a record keeping violation if OSHA determines that the program discourages the reporting of workplace injuries without improving workplace safety. 3. OSHA Can Now Issue Citations And Penalties For Retaliation Claims, Even Where There Is No Complaint From An Employee. Currently, OSHA can investigate a complaint of retaliation under Section 11(c) of the OSHAct upon receipt of a complaint from an employee. The new rule gives OSHA a new regulatory enforcement mechanism which allows OSHA to cite an employer for retaliation if evidence is found during a routine OSHA inspection or OSHA investigation arising out of an injury or accident. As a result, the new rules will allow OSHA to assess statutory penalties for retaliatory conduct – which could be as high as $121,710.00 if a willful violation is found – in addition to the effected employee filing a complaint under Section 11(c). 4. Employers Must Take Action Now. Although the new requirements concerning anti-retaliation protection become effective on August 10, 2016, OSHA recently announced that it would not enforce the new rules until November 1, 2016. In the meantime, employers are well-advised to conduct a self-audit of their reporting procedures, drug testing and safety incentive programs to ensure compliance with the expanded obligations imposed under the new rule.

On January 21, 2016, the EEOC issued for public comment its proposed enforcement guidance on retaliation, which has not changed since 1998.  Upon a close look, the EEOC is doing much more than “updating” its guidance based upon recent court opinions.  The guidance takes an interpretive and liberal view, consistent with the EEOC’s efforts to expand protections for employees, well beyond case law precedent. Here are five things the proposed guidance does that employers should be prepared to address: 1.  Expands the definition of “participation” protected activity.  According to the EEOC’s proposed guidance, internal complaints and participating in internal investigations will be treated as protected “opposition” to unlawful activity and protected “participation” in an EEO proceeding.  The Supreme Court in Crawford v. Metro. Gov’t of Nashville and Davidson Cnty., Tenn. declined to answer whether such activity is protected under the “participation” clause.  And, despite listing courts that have rejected this interpretation, the EEOC plans to apply it.  To be protected under the “opposition” clause, an employee must have a reasonable good-faith belief that the conduct complained about is unlawful.  By contrast, the “participation” clause does not have such a requirement.  By interpreting internal complaints and investigations to constitute “participation,” the EEOC has essentially removed this important distinction. 2.  Instructs that employer-side employees are protected.  The proposed guidance maintains that employees who give information in support of employers (i.e., do not oppose unlawful conduct) are protected by the participation and opposition clauses.  Employers should be on guard because it is counterintuitive to reasons an employee might seek protection from retaliation. 3.  Lowers the bar for harassment complaints.  The EEOC’s guidance seeks to lower the bar for when harassment complaints constitute protected activity.  Now, “reporting even a single incident” of alleged harassment is protected if the employee reasonably believes that a hostile work environment may occur in the future—i.e., a complaint does not have to rise to the level of “severe or pervasive.”  It may behoove employers to investigate such complaints as well, as the EEOC’s guidance explains that failure to investigate can constitute a materially adverse action. 4.   Rejects the “manager rule.”The proposed guidance rejects what has been adopted by some courts as the “manager rule.”  This concept requires that managers who are responsible for investigating EEO violations or enforcing EEO policies step outside of their management role to engage in protected activity.  The EEOC’s interpretation requires employers to be more alert when handling personnel issues for managers in such roles. 5.  Promotes agency comingling. The EEOC’s proposed guidance encourages cooperation with other enforcement agencies, such as the Wage and Hour Division of the DOL, the OFCCP, and the NLRB.  Employers should be prepared to handle inquiries from other agencies if charge allegations develop beyond EEO matters, and narrowly respond to charges and requests for information. Although the EEOC’s guidance is not binding law, it instructs the EEOC’s personnel when processing and investigating charges, including making cause determinations and pursuing litigation.  If this guidance is officially adopted, employers should review their retaliation policies, procedures, and training and balance this new guidance with well-established legal precedent.