Whistleblower Law Blog

Sixth Circuit Rules that Job Applicants not Covered by Whistleblower Statutes

February 18, 2015

The U.S. Court of Appeals for the Sixth Circuit recently ruled that federal statutes do not protect a job applicant from retaliation by a prospective employer based on whistleblowing at a previous employer. The decision puts the Court at odds with long-standing agency interpretation of the Energy Reorganization Act (ERA) by the Department of Labor (DOL), as well as assumptions underlying decisions in several other federal circuit Courts of Appeals. Gary Vander Boegh worked for the Department of Energy (DOE) for many years as landfill manager at the Paducha Gaseous Diffusion Plant (PDGP) under WESKEM, LLC, a subcontractor to Bechtel Jacobs Company (BJC). While working for WESKEM, Vander Boegh engaged in a range of protected whistleblowing, including reporting environmental violations. In 2005, DOE awarded the PGDP contract to Paducah Remediation Services, LLC (PRS). EnergySolutions subcontracted with PRS to provide waste management services. Vander Boegh applied to EnergySolutions to remain the landfill manager, but EnergySolutions hired another candidate. Vander Boegh filed a complaint against BJC, PRS, and EnergySolutions with DOL, alleging retaliation for prior protected conduct in violation of six federal statutes.

After the Sixth Circuit remanded a previous appeal by Vander Boegh, the district court again granted summary judgment to the one remaining defendant, EnergySolutions, holding that Vander Boegh lacked standing because he was an applicant and not an employee of EnergySolutions. On appeal, the Sixth Circuit affirmed, finding that Vander Boegh lacked standing under the ERA and the False Claims Act (FCA), and that the court thus did not have subject matter jurisdiction over Vander Boegh’s claims under four other federal environmental statutes: The Safe Drinking Water Act (SDWA), 42 U.S.C. § 300j-9(i); the Clean Water Act (CWA), 33 U.S.C. § 1367; the Toxic Substances Control Act (TSCA), 15 U.S.C. § 2622; and the Solid Waste Disposal Act (SWDA), 42 U.S.C. § 6971.

In its opinion filed on November 18, 2014, the Sixth Circuit noted that the Third Circuit had “assumed, without deciding, that applicants are employees under the ERA,” but declined to follow the Third Circuit’s reasoning. Vander Boegh argued that the term “employee” is ambiguous and the Court should thus apply Chevron deference to DOL’s interpretation of the term in the ERA and adopt the agency’s long-standing interpretation. But the Court reasoned that since the term “employer,” but not “employee,” was defined in the statute, it should be guided by the dictionary definition of “employee.” With that reasoning, the Court endorsed the following definitions of “employee” under the ERA: “[s]omeone who works in the service of another person (the employer) under an express or implied contract of hire, under which the employer has the right to control the details of work performance,” and “[a] person working for another person or a business firm for pay.”

The Court concluded that, by these definitions, Vander Boegh was not an employee because he never worked for EnergySolutions. It added that Congress had included, in its ERA definition of employer, “applicants” for Nuclear Regulatory Commission licenses, indicating that had it intended to include applicants within the definition of “employee,” it would have. The Court added that courts should “presume Congress intended a term to have its settled, common-law definition” absent a contrary indication in the statute.

But the Court did not address two other viable theories of statutory interpretation. The first is that Congress simply failed to define the term “employee” in the ERA, thus creating a statute with ambiguous language. The accepted doctrine of Chevron deference to agency interpretation in such instances would carry no weight if Congress intended Courts to defer to dictionary or common law definitions when faced with unintended ambiguity. The second possibility – that Congress knowingly left the term undefined, expecting the agency to use its discretion in defining it – even more strongly supports Chevron deference.

The Court also failed to engage DOL’s reasoning for including applicants within the definition of “employees.” In Samodurov v. General Physics Corporation, the DOL Office of Administrative Appeals stated, “It is well established that the ERA covers applicants for employment.” The DOL reasoned that “[a] broad interpretation of ‘employee’ is necessary to give full effect to the purpose of the employee protection provision, which is to encourage reporting of safety deficiencies in the nuclear industry.” In Vander Boegh, the Sixth Circuit did not address either the DOL’s long-standing and settled interpretation of employee under the ERA, or DOL’s reasoning based on the congressional intent underlying the statue.

Finally, in addition to the Third Circuit opinion cited but not followed by the Court, other circuits have assumed that applicants are protected under the anti-retaliation provision of the ERA. The Fifth Circuit applied a three-part test to decide whether job applicants were protected under the ERA in Williams v. Administrative Review Board. In Hasan v. Department of Labor, the Tenth Circuit upheld the dismissal of an applicant’s claim under the whistleblower provision of the ERA, but not because the plaintiff was an applicant. Like the Fifth Circuit in Williams, the Tenth Circuit laid out the elements the applicant needed to show to sustain a claim under the act. At least three other circuits have thus deferred to DOL’s determination that applicants are within the definition of employee under the ERA.

For these reasons, the Sixth Circuit’s limited reading of “employee” under the ERA (and, by extension, other federal whistleblowing statutes) to exclude applicants is unlikely to be followed by other circuits.

Eighth Circuit Holds Planned RIF Does Not Bar Reinstatement of Fired Whistleblower

February 05, 2015

On December 17, 2014, the Court of Appeals for the Eighth Circuit affirmed a lower court ruling ordering Bayer Corporation to reinstate a former pharmaceuticals sales representative, Mike Townsend, wrongfully terminated by Bayer in violation of the anti-retaliation provisions of the False Claims Act (FCA), 31 U.S.C. § 3730(h). Bayer had opposed the court-ordered relief, arguing that reinstating Townsend constituted an abuse of discretion by the lower court because Bayer had planned to eliminate Townsend’s position in a reorganization and the FCA did not permit reinstatement in those circumstances.

In April 2009, Townsend disclosed to his manager that a Bayer customer, Dr. Kelly Shrum, was committing Medicare fraud by buying a cheaper Canadian version of a contraceptive device and submitting reimbursement claims for the more expensive FDA-approved contraceptive. Townsend eventually reported Shrum to the Arkansas attorney general.

On May 5, 2010, Bayer fired Townsend, claiming he couldn’t do his job because his credit card had been deactivated. At trial, Bayer argued that the deactivated card prevented Townsend from entertaining physicians. The jury rejected Bayer’s stated reason for terminating Townsend as pretextual and found Bayer fired Townsend in retaliation for reporting Shrum’s Medicare fraud.

Judge James M. Moody of the District Court for the Eastern District of Arkansas ordered Bayer to reinstate Townsend. The Eighth Circuit affirmed reinstatement as an appropriate remedy for the retaliatory firing, given that Townsend had no performance issues, enjoyed working at Bayer, and there was no evidence that Townsend’s coworkers would harass him upon his return. The Court rejected Bayer’s planned reduction in force as an affirmative defense to bar Townsend’s reinstatement. The Court held that Bayer did not have to reinstate Townsend to the exact same position, but, at a minimum, had to put him in a position with “the same seniority status” he would have had but for Bayer’s unlawful conduct.

Companies Settle FCA Case for $4 Million for Failure to Pay Workers Prevailing Wage

February 03, 2015

Arbon Equipment Corporation and its holding company, Rite-Hite Holding Company, agreed to pay $4 million to settle a suit alleging they violated the federal and California False Claims Act by failing to pay employees prevailing wages on certain government-funded projects. A former employee, Mark Brooks, filed the qui tam suit in the U.S. District Court for the Southern District of California. Brooks and other employees installed and serviced loading dock equipment at facilities owned by the federal or California state government. Arbon and Rite-Hite, as part of the settlement, also agreed to change their compensation practices and policies.

The Service Contract Act and the Davis-Bacon Act require contractors and subcontractors working on certain government-funded projects to pay employees specified hourly wages that are higher than minimum wage and often higher than wages paid for similar work on private projects. Courts recognize that false certifications regarding the mandated payments can form the basis for qui tam actions.

Because of Brooks’ decision to blow the whistle, he will receive an award of $1,164,000. Additionally, Arbon and Rite-Hite Holding have agreed to pay approximately $1,500 to each current and former employee who was not paid the required wages.

Department of Labor Administrative Review Board Upholds Compensatory Damages Award Based on Unrebutted Psychiatrist Testimony

January 29, 2015

On November 3, 2014, the U.S. Department of Labor Administrative Review Board ruled that a pilot was entitled to compensatory damages for retaliation by Continental Airlines for his protected refusal to fly a plane without an inspection.

The 2014 ARB decision upheld the determination made by an administrative law judge on remand from a previous ARB decision. On January 31, 2012, the ARB had affirmed the earlier ALJ decision, which found that Continental Airlines retaliated against Roger Luder. However, in its 2012 decision, the ARB held that the ALJ had improperly granted both back and front pay to Luder and remanded the case to determine the proper amount of damages.

Luder’s claims date back to 2007, when he and a co-pilot were scheduled to fly a Continental flight from Miami to Houston. Before departure, Luder’s co-pilot informed him that the plane had experienced turbulence during the previous flight that had gone unreported. Federal regulations require that planes be inspected after experiencing turbulence. Accordingly, Luder insisted that the plane be inspected prior to taking off and wrote a log entry regarding the turbulence.

As a result, Continental temporarily suspended Luder and issued him a “termination warning” letter citing “unprofessional behavior.” Luder eventually claimed to suffer from an array of ailments arising from the retaliation, and claimed those ailments caused him to fail a flight simulator test and be disqualified from flying.

Luder brought the suit under the whistleblower protection provision of the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century, also known as AIR 21, and its implementing regulations, 29 C.F.R. Part 1979 (2013). The ARB has authority to issue final agency decisions under AIR 21. The November 3, 2014 decision on damages was ARB Case No. 13-009.

The 2012 ARB decision had determined that Luder’s actions constituted protected activity under AIR 21 and that Continental’s suspension of Luder constituted an adverse action. The ALJ had awarded Luder compensatory damages for posttraumatic stress disorder, anxiety, and depression resulting from Continental’s retaliation for his refusal to fly an uninspected and potentially damaged plane. The ALJ relied on testimony by Luder and a psychiatrist, Dr. Shaulov. The ARB remanded to the ALJ for determination, under a preponderance of the evidence standard, that the retaliation caused the harm.

The ALJ entered a Recommended Decision and Order on Remand, determining that Luder proved that the retaliation caused his psychiatric condition that prevented him from returning to work. The ALJ found “ample support for causation . . . when the entire record, including the credible testimony of Dr. Shaulov, Dr. Jorgenson, and Luder, is considered.”

A dissenting opinion in the ARB’s recent 2014 decision argued that a judge should still examine undisputed expert testimony under Federal Rule of Evidence 702 for “sufficient facts or data that properly applied reliable principles and methods,” but stopped short of advocating a Daubert hearing.

The Employment Law Group® law firm has an extensive nationwide whistleblower practice representing employees who have been victims of retaliation, including employees in the airline industry.

Whistleblowers Get $435 Million in FCA Awards in 2014 — Taxpayers Get Nearly $6 Billion

January 16, 2015

The U.S. Department of Justice announced that taxpayers recovered nearly $6 billion from False Claims Act (FCA) cases in fiscal year 2014.

More than half the total came via lawsuits filed by individuals. Under the FCA’s qui tam provision, whistleblowers who uncover fraud may sue on behalf of the government — and get up to 30% of recovered funds as a reward.

In FY 2014, the Government paid out $435 million in such awards. It was the second consecutive year in which more than 700 qui tam suits were filed, and the first time FCA recoveries exceeded $5 billion.

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Federal District Court Refuses To Dismiss Case Based on the Public Disclosure Bar When the Government Has Opposed Dismissal On that Basis

January 16, 2015

In United States ex rel. Karin Berntsen v. Prime Healthcare Services, Inc. et al., the U.S. District Court for the Central District of California denied Prime Healthcare’s motion to dismiss, ruling that a False Claims Act qui tam action cannot be dismissed under the “public disclosure bar” if the Government has opposed dismissal on that basis.

The False Claims Act prevents a private party from bring a qui tam action where the alleged fraud is already publicly known (this is often referred to as the public disclosure bar).  In this case, Karin Berntsen, the relator, alleged that she was the original source of the information underlying her qui tam complaint and that she made these disclosures to the government before filing her lawsuit.  But Prime Healthcare and the other defendants moved to dismiss, in part, because they claimed that Berntsen was not the original source.  In support of their motion, they identified a number of publicly-available reports and articles regarding their allegedly fraudulent practices.

The relator argued that because the Government opposed the dismissal of the complaint on the basis of the public disclosure bar, the district court was barred from dismissing the complaint on that basis.  The court agreed with the relator.  The court also acknowledged a lack of legal authority on the issue and reviewed Congress’s intent in creating the public disclosure bar: to strike a balance between encouraging private persons to root out fraud and stifling parasitic lawsuits.  Since the Government, through its opposition to the dismissal, had indicated that it supported the relator’s qui tam action, the court found that it would be “illogical” for it to conclude that the relator’s action was parasitic, and thus allowed the relator’s qui tam action to proceed.

DOJ Report Recommends New Protection for FBI Whistleblowers; and DOJ Implements Recommendations

January 13, 2015

The Department of Justice recently released recommendations from a report by the Attorney General that reviewed protections for FBI whistleblowers. The DOJ has already begun implementing the recommendations and will implement additional changes over time. Specifically, the report proposes the following changes:

– Provide voluntary alternative dispute resolution in FBI whistleblower cases
– Award compensatory damages for retaliation
– Expand the list of persons to whom a protected disclosure may be made
– Report findings of wrongdoing to the appropriate authority
– Provide authority to sanction violators of protective orders
– Expedite the OARM process through the use of acknowledgement and show cause orders
– Equalize access to witnesses
– Expand resources for OARM to reduce the time needed to adjudicate FBI whistleblower cases
– Publish decisions with appropriate redactions
– Publish annual reports to be submitted to the President

Senators Grassley and Wyden, who initially inquired about the Attorney General’s report in August 2014, have generally endorsed the new FBI whistleblower protection recommendations and are optimistic that the recommendations will provide better protection for whistleblowers. The recommendations and changes reflect a need to pay special attention to whistleblowers who have access to classified information and to ensure that they are protected under the law.

Whistleblower Receives $1.2 Million in $6 Million Settlement of Qui Tam Action Against Caremark For Failing to Reimburse Medicaid for Drug Costs Covered by Both Medicaid and a Private Health Plan

January 13, 2015

The Department of Justice announced that Caremark, a pharmacy benefit management (PMB) company, will pay $6 million to settle allegations that it violated the False Claims Act; and the former Caremark employee who blew the whistle on the violations will receive $1.2 million from the settlement. Caremark allegedly knowingly failed to reimburse Medicaid for the cost of drugs for beneficiaries who were covered by both Medicaid and a private health plan. These patients are referred to as “dual eligible” and their private insurer or PMB must assume the cost of the prescription drugs rather than submit claims to Medicaid.

If Medicaid pays for the drugs when a private insurer or PMB should have assumed the cost, the private insurer or PMB must reimburse Medicaid. Caremark caused Medicaid to pay the drug costs when Caremark should have paid.

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Canadian Court Holds Employee Has No Duty to Accept Lower Position If Constructively Dismissed Via Demotion

January 13, 2015

In Farwell v. Citair, Inc., the Canadian Superior Court of Justice affirmed a trial court ruling that Citair had wrongfully dismissed Kenneth Farwell. The Court held that Farwell did not have an obligation to accept an alternative position offered to him by Citair. The alternative job was below Farwell’s most recent position; and though it had the same salary and working conditions as Farwell’s most recent position, it involved a likely reduction in bonus.

The Court found that an employee cannot be obligated to mitigate by working in an atmosphere of hostility, embarrassment, or humiliation. And since accepting a position lower than his previous position would humiliate Farwell, he did not have a duty to accept it.

Federal District Court in New York Holds that Retaliation under FRSA is Governed by AIR 21’s Burden-shifting Framework

January 13, 2015

The U.S. District Court for the Northern District of New York recently denied summary judgment in a suit filed by Robin Young against his former employer, CSX Transportation. Young alleged that CSX violated the Federal Rail Safety Act’s anti-retaliation provisions when it fired him after it was informed that he had filed a complaint with the Occupational Safety and Health Administration (OSHA). Young’s complaint to OSHA alleged that CSX told him to “refrain from providing extensive testimony about related safety issues” during a formal hearing with the Federal Railroad Administration; and then fired him because he refused to comply with this order.

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