Category Archives: Whistleblower

Whistleblower

The Tax Man Giveth to the Whistleblowers

whistleblower

The Government Accountability Office recently reported that the IRS has made more than 500 awards totaling over $315 million to whistleblowers reporting tax cheats in claims paid since 2011.  And that’s not all — the IRS has 30,152 open claims, which could lead to the award of millions more to whistleblowers.

The IRS’s whistleblower law is designed to give an incentive to people to expose those who commit tax fraud or otherwise fail to pay their required federal taxes.

Michael Homans is a Labor & Employment attorney and founding partner of HomansPeck LLC. For more employment law updates, including news and links to important information pertaining to legal developments that may affect your business, subscribe to Michael’s blog, or follow him on Twitter @EmployLawUpdate.

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Whistleblower

Protecting the Top Dog – Judge Blocks CEO Deposition

pyramidA federal judge in Philadelphia recently quashed a plaintiff’s efforts to depose the Chief Executive Officer of Johnson & Johnson in a whistle-blower case, holding that any likely benefit of the deposition was outweighed by the burden it would put on the company.

The decision in U.S. ex rel. Galmines v. Novartis Pharmaceuticals Corp. provides helpful guidelines for corporations seeking to protect their CEOs, board members, presidents and chief officers from discovery in employment lawsuits, especially when lower-level managers possess the same knowledge.

In Galmines, Judge Gene E.K. Pratter noted that any relevant information known by J&J Chairman and CEO (and former Novartis CEO) Alex Gorsky could be obtained more easily from lower-level managers, and cited to Rule 26(b)(2)(C) of the Federal Rules of Civil Procedure, which provides that discovery may be limited when “the burden or expense of the proposed discovery outweighs its likely benefit.”  Pratter also relied on the “apex doctrine,” an analytical framework used by courts to determine whether to permit the depositions of individuals at the “apex” of their corporations.  The doctrine recognizes that “depositions of high-level officers severely burden those officers and the entities they represent, and that adversaries might use this severe burden to their unfair advantage,” Pratter wrote.

Michael Homans is a Labor & Employment attorney and founding partner of HomansPeck LLC. For more employment law updates, including news and links to important information pertaining to legal developments that may affect your business, subscribe to Michael’s blog, or follow him on Twitter @EmployLawUpdate.

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Conscientious Employee Protection Act, Fair Labor Standards Act (FSLA), Whistleblower, Whistleblower Complaints

Whistle-blowers and Watchdogs – Beware of the Bite

Three courts recently confirmed that employers need to beware of retaliation claims by human resources professionals and other compliance employees who identify and report unlawful practices as part of their jobs.

In July, the New Jersey Supreme Court in Lippmann v. Johnson & Johnson, Inc. rejected lower court decisions that had limited the applicability of the state’s main whistleblower law, the Conscientious Employee Protection Act (CEPA), when the whistle-blowing at issue was part of the employee’s job duties.  The Supreme Court found no statutory basis for that court-developed limitation and held that CEPA therefore applies with equal force to protect “watchdog employees” like compliance and human resources officers who object to unlawful conduct while performing their normal job duties. 

Similarly, on August 24, in Kavanaugh v. C.D.S. Office Systems, Inc., a federal court in Illinois refused to dismiss a retaliation claim by a human resources director who was fired shortly after she reported to her boss, the CFO, concerns that the company was not paying its IT engineers overtime, in violation of the Fair Labor Standards Act.  And on August 10, the U.S. Circuit Court of Appeals for the Fourth Circuit reversed a ruling in DeMasters v. Carilion Clinic that a “manager rule” prevented retaliation claims by an EAP counselor whose job responsibilities included reporting discrimination and harassment claims.

It remains true that some laws, including the First Amendment, limit the protections against retaliation for employees who are engaging in the protected conduct as part of their job duties.  But these three recent cases make clear that many anti-retaliation laws do not have such limits.  Managers are well-advised to check the applicable legal standards under state and federal law before taking an adverse action against an employee who has reported – internally or externally – a suspected violation of the law, even if the report was part of his or her job and even if the report had nothing to do with the reasons for termination.

Michael Homans is a Labor & Employment attorney and founding partner of HomansPeck LLC. For more employment law updates, including news and links to important information pertaining to legal developments that may affect your business, subscribe to Michael’s blog, or follow him on Twitter @EmployLawUpdate.

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Affordable Care Act, Conscientious Employee Protection Act, Dodd-Frank Wall Street Reform and Consumer Protection Act, Securities and Exchange Commission (SEC), Whistleblower, Whistleblower Complaints

Hear that? More whistles are blowing

That seems to be the message from Congress and the courts in the past year, as the number and variety of workplace whistleblower claims keep expanding.

First, the whistleblower provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, seem to be finally gaining traction, as the “Office of the Whistleblower” of the Securities and Exchange Commission (SEC) announced that it received 3,238 whistleblower complaints and tips in fiscal year 2013 (the most ever), and obtained judgments and sanctions exceeding $1,000,000 in 118 different matters (the most ever).  In addition, the SEC issued four monetary awards to whistleblowers under Dodd-Frank in 2013, including a whopping $14 million award (the largest ever under Dodd-Frank) to a whistleblower whose information led to the recovery of investor funds.  Given that Dodd-Frank provides that whistleblowers will be awarded 10-30 percent of the monetary sanctions collected, we can presume that the sanctions collected were between $47 million and $140 million.  Nice tip for investors.

Second, the beloved Affordable Care Act (ACA), which is taking full effect this year, includes protections for employees who are retaliated against for engaging in protected activities, including: (1) receiving a health insurance marketplace subsidy or health plan cost-sharing reduction; (2) reporting, reasonably and in good faith, a violation of the ACA to the employer, the federal government or the state attorney general; (3) participating in a proceeding concerning an ACA violation; or (4) objecting to or refusing to participate in activity reasonably believed to violate the ACA.  Claims must be filed with OSHA.  Expect to see many of these cases soon.

Third, a New Jersey court has rejected a recent line of cases that had held that, if the alleged protected conduct fell within the plaintiff’s job duties and responsibilities, the employee could not bring a claim under the state’s Conscientious Employee Protection Act (CEPA).  In Lippman v. Ethicon, Inc., the Appellate Division of the New Jersey Superior Court rejected the reasoning reflected in the earlier cases as contrary to the “broad remedial purposes” of CEPA, and held that “watchdog employees” are “the most vulnerable to retaliation because they are uniquely positioned to know where the problem areas are and to speak out when corporate profits are put ahead of consumer safety.”  A “watchdog employee” bringing such a claim, however, must either (a) first pursue and exhaust all internal means of securing compliance, or (b) refuse to participate in the objectionable conduct.

The take-home for employers from these developments:

  • Learn about these new laws and ensure that your company’s policies and practices comply;
  • As needed, adopt a compliance policy and code of conduct, and train your managers and employees, preferably with visible support from C-level officers;
  • Set up an anonymous hotline or ombudsman for reporting suspected compliance issues; and
  • React promptly and effectively to any complaint, and ensure that no retaliation occurs.

Michael Homans is a Labor & Employment attorney and founding partner of HomansPeck LLC. For more employment law updates, including news and links to important information pertaining to legal developments that may affect your business, subscribe to Michael’s blog, or follow him on Twitter @EmployLawUpdate.

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