Whistleblower Law Blog

New Food Safety Law Protects Whistleblowers

February 14, 2011

The Huffington Post reported on the “little-noticed” whistleblower provision of the Food Safety Modernization Act, which prohibits employers from retaliating against food industry workers who report food safety violations.  The Department of Labor or federal courts may reinstate fired employees, award back pay with interest, and award attorneys’ fees and other litigation costs.  Click here to read our recent post discussing these new whistleblower protections.

District Court Decision Broadly Construes Sarbanes-Oxley Protected Conduct

February 14, 2011

Judge Christopher F. Droney of the United States District Court for the District of Connecticut held that Sarbanes-Oxley (SOX) whistleblower Mary Barker need only have “reasonably believed” her employer’s violations of securities law were material to plead a SOX whistleblower claim.  Barker alleges that UBS retaliated against her following her reporting to compliance officers that UBS failed to report millions in assets to its shareholders.  Although UBS’s omission is arguably immaterial, the court ruled that the omission did not have to be material for Barker to be protected under the Sarbanes-Oxley Act:

As Barker is not a lawyer, nor does she appear to have any specialized knowledge of federal securities law, it seems objectively reasonable that she would imagine unreported assets valued subsequently at over $80 million substantial enough to trigger federal scrutiny.

And regarding Barker’s whistleblower retaliation claim, the court further stated:

. . . while certain employees at UBS did encourage Barker in her investigation, her complaint asserts valid reasons why she could still believe an intentional misrepresentation was occurring.  A reasonable person could find that Barker’s supervisors were attempting to cover up the incorrect reporting, based on the initial lack of response by [a supervisor], coupled with [another supervisor’s] instructions to Barker that she was not to speak of the exchange seat discrepancy, as well as the fact that a meeting was held about how to “spin” the accounting error. That Barker felt obligated to approach [the head of UBS’s Legal Compliance Division] for advice about the disclosure indicates that she believed her supervisors were unlawfully encouraging her to conceal important information that had legal significance for shareholders.

To be protected by SOX, whistleblowers do not have to be certain that the fraud or misrepresentations they report are material; they only have to reasonably believe it to be material.  To learn more about the Sarbanes-Oxley Act and reporting shareholder fraud, click here.

Domino’s Truck Driver Reinstated under STAA

February 08, 2011

In Williams v. Domino’s Pizza, the Department of Labor Administrative Review Board (ARB) affirmed an order requesting Domino’s to reinstate and pay damages to Lavan Williams.  The ARB further held that Williams was engaging in a statutorily protected activity under the Surface Transportation Assistance Act (STAA) when he reported to corporate that coworkers attempted to pressure him into working during his rest periods even though Williams refused to name those coworkers.

On October 26, 2007, Williams was involved in a minor accident.  He submitted an accident report and attempted to notify several Domino’s employees.  He could not find the phone number to the accident hotline.  Domino’s procedures require that drivers notify their team leader and contact the Domino’s accident hotline no later than two hours after an accident occurs.  On October 30, 2007, Williams called one of his supervisors to talk about the accident.  His supervisor commented that if Williams had been able to call the compliance hotline, he should have been able to contact the accident hotline.  His supervisor suspended him without pay pending an investigation, and later terminated him.

The ARB rejected Domino’s assertion that Williams was not protected under STAA because he refused to name the coworkers who unlawfully pressured him.  The ARB instead found that Williams’s complaint about being pressured was a contributing factor in his supervisor’s decision to fire him, and affirmed his reinstatement as a truck driver.  The ARB also affirmed the ALJ’s decision to admit into evidence the transcript of an unemployment hearing:

In this matter, the prior statements that Williams sought to introduce as evidence were statements by Domino’s’ agents concerning matters within the scope of the agency, made during the existence of the relationship and were therefore, admissions by a party-opponent and not hearsay.

It is unsafe and illegal for companies to pressure truck drivers into working during their rest periods.  To learn more about reporting illegal employer practices, click here.

Fiscal Times Quotes TELG Attorney About Dodd-Frank Whistleblower Provisions

February 08, 2011

In an article in the Fiscal Times discussing the SEC’s proposed rules implementing the Dodd-Frank Act’s whistleblower provisions, Jason Zuckerman, an attorney at The Employment Law Group® law firm, asserted that all whistleblowers should be permitted to report fraud directly to the SEC:

A key point of contention is whether the whistleblower should be required to report internally [to the employer] first. The SEC proposal would give the employee the choice of going directly to the government, and would protect the tipster’s “place in line” for the bonus by using the date of any internal reporting in determining whether the information qualified for a payout.

Whistleblowers almost always attempt to report internally and face retaliation while their concerns are squashed, said Jason Zuckerman, a principal at The Employment Law Group®, which represents corporate whistleblowers.

“While some companies have established robust compliance programs, there are also corporate compliance programs that are just window dressing, especially in organizations where senior management is condoning or orchestrating fraud to increase profits,” Zuckerman said.  “When a corporation has an opportunity to deal with an issue before the issue is provided to the SEC, that can be an opportunity for the corporation to destroy evidence and to influence what the key witnesses are likely to say to the SEC.”

The Dodd-Frank Act, enacted last year, requires the SEC to reward whistleblowers up to 30% of the funds recovered in return for information leading to a recovery larger than $1 million.  For more information about the Dodd-Frank Act or reporting fraud to the SEC, click here.

Former Portneuf Mechanic Awarded $485,000 after Being Fired for Reporting Unsafe Helicopters

February 04, 2011

Department of Labor Administrative Law Judge William Dorsey ruled in favor of helicopter mechanic Mark Van who was fired by Portneuf Medical Center (an Idaho hospital) for repeatedly raising concerns about violations of FAA safety standards in their helicopter air ambulance program.  The court noted that Van’s dedication to safety is primarily rooted in an experience in 2001 where Van and his son rescued a pilot from the flaming wreckage of a downed helicopter, saving the pilot’s life. 

The events that led to his termination began in February 2005 when he found that ice had not been removed from one of the helicopters.  This led him to question whether all pilots were taking adequate, routine precautions to ensure that helicopters would not fly with ice, snow, or frost on its control surfaces.  He then reported the ongoing problem with cold weather operations to his superiors at Portneuf.  Shortly thereafter Van was harassed by a pilot who flew an air ambulance with ice on its rotor blades.  Van’s complaints went nowhere, so he took the matter to Portneuf’s Human Resources department, which also resulted in no corrective action.

On April 19, 2005, shortly after Van had completed an exhaustive inspection regimen on a helicopter, and worked on modifying the helicopter so that pilots could use night vision goggles, he was fired.  Seemingly at odds with Portneuf’s decision to terminate Van was that he received a positive performance evaluation and merit salary increase just days before his firing. 

The Judge concluded, “Raising air safety issues kindled the rupture that led to Van‘s termination.”  By firing Van, Portneuf had violated § 519 of the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (AIR-21), which prohibits employers from firing, demoting, suspending, or otherwise retaliating against a whistleblower who reports safety violations regarding aircraft.

Accordingly, Judge Dorsey ordered the following:

1. Portneuf Medical Center must pay to Mark Van:

• Lost compensation (including back pay and fringe benefits) in the amount of $287,438.31;
• Compensatory damages for his emotional distress in the amount of $100,000;
• Front pay in the amount of $98,576 since reinstatement was not practical;
• Interest on these amounts compounded quarterly; and
• Costs and expenses, including attorney‘s fees and expert witness fees.

2. Portneuf Medical Center must expunge from Van‘s personnel file all negative or derogatory information that pertains to the firing.

3. Portneuf Medical Center must deliver a copy of this decision and order directly to Life Flight pilots, medical flight staff, mechanics, and dispatchers within 7 days.  Portneuf also must prominently post copies of this decision at every location where it posts other notices to employees that relate to employment law (e.g., wage and hour, civil rights in employment, age discrimination, and family medical leave).  It must be posted for no fewer than 60 days; Portneuf must take all reasonable steps to ensure that no copy of the decision is altered or defaced.

For more information on AIR-21 or reporting unsafe aircraft, click here.

Managed Care Provider CareSource Settles Health Care Fraud Whistleblower Lawsuit for $26 Million

February 02, 2011

According to a recent Department of Justice Press Release, Ohio-based CareSource, CareSource Management Group Co., and CareSource USA Holding Co. will pay the United States and Ohio $26 million to resolve allegations that they fraudulently billed Medicaid for assessments and case management that they did not actually provide to patients.  Two former employees, Laura Rupert and Robin Herzog, initiated the lawsuit by bring a qui tam action under the False Claims Act, alleging CareSource knowingly failed to provide required screening, assessment, and case management to adults and children with special needs.  CareSource allegedly received millions in Medicaid funds for work they did not perform.

Assistant Attorney General Tony West stated, “Cash-strapped Medicaid programs, such as Ohio’s, can ill afford conduct such as this, designed to improve this company’s bottom line at the expense of a program benefitting the poor and disabled.”  The federal False Claims Act and many similar state False Claims Acts reward whistleblowers who report fraud committed by companies against the government.  The federal False Claims Act also protects whistleblowers from reprisal by the company.  To learn more about the False Claims Act or to report fraud, click here.

Xe Services (Blackwater) Procedural Challenge to Whistleblower Lawsuit Fails

January 19, 2011

Judge T. S. Ellis, III denied Xe Services LLC’s motion to dismiss a whistleblower lawsuit, alleging the company defrauded the government by overcharging for its security services.  Xe Services, formerly known as Blackwater, came to notoriety for its controversial government contracts to supply private security in Iraq and Afghanistan.  Former employees Melan and Brad Davis, brought the allegations of fraud under the False Claims Act (FCA), seeking a reward of up to 30% of the funds recovered by the government.  Xe Services challenged the lawsuit under the theory that the amended FCA complaint must be sealed.  The court disagreed, holding that ordinarily FCA complaints – including amended complaints – must be sealed, but when the amended complaint is not substantially different from the original complaint and merely provides additional details, its unsealed filing does not “deprive the government of the opportunity to investigate [the] allegations and to decide whether to intervene.”  For more information about the False Claims Act or to report fraud, click here.

Federal Judge Interprets SOX to Protect Whistleblowers Who Report Fraud Committed by Clients and Business Partners

January 19, 2011

Judge Robert Sweet of the United States District Court for the Southern District of New York stated in the case of Sharkey v. J.P. Morgan Chase that the Sarbanes-Oxley Act (SOX) protects whistleblowers who report fraudulent activity by their employer or by third parties such as clients and business partners:

The legislative history concerning the sox whistleblower provision indicated that Sarbanes-Oxley was enacted to counteract a corporate culture that “discourages employees from reporting fraudulent behavior not only to the proper authorities such as the FBI and the SEC, but even internally. This ‘corporate code of silence’ not only hampers investigations, but also creates a climate where ongoing wrongdoing can occur with virtual impunity. The consequences of this corporate code of silence for investors in publicly traded companies, in particular, and for the stock market, in general, are serious and adverse, and they must be remedied.” S. Rep. No. 107 146, at *5.

SOX precludes an employer from retaliating against any employee who provides information or otherwise assists in an investigation regarding conduct which the employee reasonably believes constitutes a violation of “section 1341 [Frauds and Swindles], 1343 [Fraud by Wire, Radio or Television], 1344 [Bank Fraud], or 1348 [Securities and Commodities Fraud], any rule or regulation of the [SEC], or any provision of Federal law relating to fraud against shareholders.” 18 U.S.C. 1514A(a) (1) . The statute by its terms does not require that the fraudulent conduct or violation of federal securities law be committed directly by the employer that takes the retaliatory action.

Under the Judge’s interpretation of SOX, companies are prohibited from either requiring employees to ignore the illegal activity of clients and business partners or punishing those employees with the integrity to report illegal activity.  For more information about the Sarbanes-Oxley Act or reporting illegal activity, click here.

IRS Broadens Opportunities for Whistleblower Rewards

January 19, 2011

The Internal Revenue Service (IRS) recently issued new rules that now permit whistleblowers to be rewarded for reporting a company’s illegal tax scheme that leads to ill-gotten tax refunds or credits.  Under the IRS’s whistleblower program, whistleblowers can be rewarded up to 30% of the funds recouped in return for reporting tax fraud.

Dept. of Labor ARB Affirms Broad Scope of Adverse Employment Actions Under AIR 21 in Whistleblower Case Against American Airlines

January 13, 2011

The U.S. Department of Labor Administrative Review Board (ARB) held in the case of Williams v. American Airlines that a written warning or counseling session conducted by an employer is presumptively an adverse employment action against an employee where:

1. it is considered discipline by policy or practice,
2. it is routinely used as the first step in a progressive discipline policy, or
3. it implicitly or expressly references potential discipline.

The ARB further clarified the broad definition for adverse employment actions under the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (AIR 21):

To settle any lingering confusion in AIR 21 cases, we now clarify that the term “adverse actions” refers to unfavorable employment actions that are more than trivial, either as a single event or in combination with other deliberate employer actions alleged. . . . While we agree that it is consistent with the whistleblower statutes to exclude from coverage isolated trivial employment actions that ordinarily cause [trifling] harm or none at all to reasonable employees, an employer should never be permitted to deliberately single out an employee for unfavorable employment action as retaliation for protected whistleblower activity.  The AIR 21 whistleblower statute prohibits the act of deliberate retaliation without any expressed limitation to those actions that might dissuade the reasonable employee.  Ultimately, we believe our ruling implements the strong protection expressly called for by Congress.

The complainant is Brian Williams, a licensed aviation maintenance technician at John F. Kennedy Airport (JFK), who alleges that American Airlines, Inc. violated the whistleblower protection provisions of AIR 21 when his supervisor disciplined him for ordering the re-inspection of an aircraft’s brakes.  During the first inspection of the aircraft, Williams and another mechanic, Joe Urso, determined that the aircraft’s brakes needed to be changed.  Because the brake change took longer than usual, Williams and Urso believed another inspection was required.  Their immediate supervisor disagreed and reported the incident to Williams’s direct supervisor who then determined that Williams had a job performance issue and scheduled a counseling session with Williams.  The counseling session resulted in Williams having negative remarks entered into his personnel record.

AIR 21 provides that “[n]o carrier or contractor or subcontractor of an air carrier may discharge an employee or otherwise discriminate against an employee with respect to compensation, terms, conditions, or privileges of employment” because the employee has engaged in certain protected activities, including providing information to the employer or the Federal government about a violation, or alleged violation of any Federal law relating to air carrier safety.  Department of Labor regulations define “discrimination” under AIR 21 to include efforts by the employer “to intimidate, threaten, restrain, coerce, blacklist, discharge or in any other manner discriminate against any employee” because the employee engaged in protected activity.  As a matter of law, AIR 21 includes reprimands (verbal or written), as well as counseling sessions that are coupled with references to potential discipline.

Notably, the ARB also rejected the Sixth Circuit’s holding in Melton v. Yellow Transp. Inc. by stating:

We believe it is irrelevant whether the employer’s personnel policies allow its employees to appeal or formally challenge a written warning.  A great number of workers are “at will” employees who have no right to appeal a suspension or termination, much less a written warning.  Personnel policies are often drafted solely by the employer and hinge on the employer’s unilateral assessment as to the extent of appellate procedures it can address given limited resources.

For more information about AIR 21 or to seek assistance with reporting violations.