Court of Appeals Clarifies the Scope of Protected Conduct Under Maryland Health Care Worker Whistleblower Protection Act, Provides Insight into Maryland Public Policy

By R. Scott Oswald, Managing Principal at The Employment Law Group®

On May 13, 2010, the Court of Appeals of Maryland held in Lark v. Montgomery Hospice, Inc.,¹ that an employee does not need to make an external disclosure in order to be protected under the Maryland Health Care Worker Whistleblower Protection Act, Md. Code, Health Occ. §§ 1-501 to -506 (the “Act”). In its discussion of the Act, the court cites numerous cases from other jurisdictions favoring the protection of whistleblowers making only an internal disclosure, and in gratis dictum indicates that an employee need not make an external disclosure in order to be protected under the Maryland common law tort of wrongful discharge.²

Susan Lark was as a nurse at Montgomery Hospice Inc. (Montgomery).³Starting in 2004, Lark noticed what she thought were abnormalities and potential violations of generally accepted professional standards of nursing practice. A few years later, Lark learned that her co-workers were distributing narcotics in an unsafe and potentially illegal manner. Some of the practices which Lark alleges include the distribution of narcotics to non-patients, providing adult doses to children, improper documentation of the distribution of narcotics, distribution of narcotics to patients without a physician’s order, and failure to use safety precautions with a patient that had a high risk of hemorrhage.

From September 2006 to April 2007, Lark complained to management about the alleged violations in an attempt to comply with her legal and ethical responsibilities. Some of her complaints were in the form of emails to her supervisor and the Vice-President of Clinical Services. On April 14, 2007 Lark met with her supervisor, the Vice-President of Clinical Services, and the Vice-President of Medical Services. During the meeting, Lark was given a memo alleging that she engaged in “practices [that] are frequently outside the acceptable and safe standards of nursing practice” and she was terminated.⁴

Lark filed a complaint alleging inter alia that her discharge was in violation of public policy and the Maryland Health Care Worker Whistleblower Protection Act, Md. Code, Health Occ. §§ 1-501 to -506. Lark’s suit appears to be the first reported action ever brought under the 8 year old Act which prohibits employers retaliating against an employee because the employee:

(1) Discloses or threatens to disclose to a supervisor or board an activity, policy, or practice of the employer that is in violation of a law, rule, or regulation; (2) Provides information to or testifies before any public body conducting an investigation, hearing, or inquiry into any violation of a law, rule, or regulation by the employer; or (3) Objects to or refuses to participate in any activity, policy, or practice in violation of a law, rule, or regulation.

Md. Code, Health Occ. § 1-502.

Section 503 of the Act narrows the scope of protected conduct and provides that an employee is only protected if:

(1) The employee has a reasonable, good faith belief that the employer has, or still is, engaged in an activity, policy, or practice that is in violation of a law, rule, or regulation; (2) The employer’s activity, policy, or practice that is the subject of the employee’s disclosure poses a substantial and specific danger to the public health or safety; and (3) Before reporting to the board: (i) The employee has reported the activity, policy, or practice to a supervisor or administrator of the employer in writing and afforded the employer a reasonable opportunity to correct the activity, policy, or practice; or (ii) If the employer has a corporate compliance plan specifying who to notify of an alleged violation of a rule, law, or regulation, the employee has followed the plan.

Md. Code, Health Occ. § 1-503.

Montgomery filed a motion to dismiss, arguing that Lark’s claims should be dismissed because “(1) the wrongdoing she complains of was committed by her fellow employees and not [Appellee]; and (2) she never reported any perceived wrongdoing to the appropriate external board or other authority as required for the Act to apply.”⁵ The trial court, treating Montgomery’s motion to dismiss as a motion for summary judgment, granted the motion on all counts. Lark appealed only her claim under the Act and the Court of Appeals issued a writ of certiorari on its own initiative.

Public Policy Favors Protection of Employees Who Make Internal Disclosures

Montgomery argued that Lark is not protected under the Act because she “never reported any perceived wrongdoing to the appropriate external board or other authority as required for the Act to apply.”⁶ According to Montgomery, section 503(3) of the Act “necessarily implies that reporting to the board is a mandatory prerequisite to coverage under the Act,” and any other reading would cause “this particular clause [to be] stripped of all meaning and . . . rendered surplusage.”⁷ Montgomery made a similar argument regarding Lark’s wrongful discharge claim, claiming that because the state law underlying Lark’s public policy argument require disclosure of suspected violations to the Board of Nursing, such external disclosures are “a necessary prerequisite for any claim of wrongful discharge under Maryland law.”⁸⁹

While these arguments may have presented the best chance of success in the instant case, they were by no means in the best interest of Montgomery or other employers in the state of Maryland. Had Montgomery prevailed, employees would no longer have any incentive use internal channels when reporting illegal, unethical, or dangerous behavior. Instead, employees would be forced into making potentially costly and embarrassing external disclosures. Such encouragement would undermine compliance and internal reporting programs, and consequently drive up costs for employers and increase the likelihood of litigation.

The court rejected, correctly, Montgomery’s position. First addressing Montgomery’s statutory interpretation argument, the court observed that the Act is a remedial statute and should be “construed liberally in favor of claimants to suppress the evil and advance the remedy.”¹⁰ The court then concluded:

§ 1-503(3) was not enacted to protect an employer against a legitimate Whistleblower action asserted by a former employee who was fired before he or she made an external report, provided that the former employee actually ‘reported the activity, policy, or practice [that poses a substantial and specific danger to the public health or safety] to a supervisor or administrator of the employer in writing[.]’ . . . Because the Act expressly protects an employee who ‘threatens to disclose’ as well as an employee who actually discloses, we reject the argument that a report to the Board of Nursing was an essential condition precedent to the action asserted in the case at bar.¹¹

The court next turned its attention to the issue of whether public policy supports the protection of employees who make only an internal disclosure under the Act. Here the court in gratis dictum addresses not only whether an internal disclosure is sufficient to trigger protection under the Act but also whether an internal disclosure alone is sufficient to trigger protection under the common law claim of wrongful discharge in violation of public policy.

¹²The court then recites eleven cases from nine states and the District of Columbia, in support of this proposition.¹³ Of the eleven cases, all but two were based on common law wrongful discharge in violation of public policy. The court also emphasized a quote from Sullivan v. Mass. Mut. Life Ins. Co.,¹⁴ a wrongful discharge and breach of contract case:

A rule that would permit the employer to fire a whistleblower with impunity before the employee contacted the authorities would encourage employers promptly to discharge employees who bring complaints to their attention, and would give employees with complaints an incentive to bypass management and go directly to the authorities.¹⁵

While only dictum, the court’s lengthy discussion of common law wrongful discharge signals an unmistakable departure from the external reporting requirement first articulated in Wholey v. Sears Roebuck¹⁶ and an expansion of protected conduct. In the wake of Lark, prudent employers should consider internal disclosures to be protected activities under both the Act and Maryland common law.