Department of Labor Whistleblower Update

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In recently released decisions, the DOL Administrative Review Board took further action in two whistleblower actions of interest to employers.

No Answer on Whether Stealing Confidential Data Is Protected – But a Silver Lining Appears

In Vannoy v. Celanese Corp., ARB Case No. 09-118, ALJ Case No. 2008-SOX-064 (Sept. 28, 2011), the Administrative Review Board (“ARB”) vacated the Administrative Law Judge’s (“ALJ’s”) grant of summary judgment to Celanese Corp., which had held that the complainant’s unauthorized theft and disclosure of confidential employee records to the Internal Revenue Service did not constitute SOX-protected activity based on crucial legal and factual disputes.  The Board remanded the case to the ALJ for a hearing on whether the information that complainant procured from the company was the kind of “original information” that Congress intended to be protected under either the IRS or SEC whistleblower programs, and whether the manner of complainant’s transfer of the information to the SEC and IRS was protected activity within the scope of the Sarbanes-Oxley Act.  Upon remand, the ALJ encouraged and facilitated a negotiated settlement calling for withdrawal of the ALJ’s summary judgment decision and expunction from the public record.

Under DOL procedural regulations governing the conduct of whistleblower cases, settlement agreements reached prior to issuance of a final order are not valid without ARB approval.  Upon initial review of the agreement, the ARB approved it but held that only the ALJ had the authority to withdraw his prior decision. The Board granted the parties’ joint motion for reconsideration requesting remand to the ALJ who had indicated a willingness to withdraw his decision for purposes of settlement.    

The Vannoy case highlights an interesting settlement option for an employer that prevails before an ALJ in a whistleblower case but would prefer not to have the specifics of the case become part of the public record or otherwise endure the uncertain and lengthy appeal process.  In such circumstances, Vannoy teaches that it is possible to negotiate for expunction, provided that the ALJ consents to withdraw his or her decision upon approval of the settlement agreement by the ARB.

After-Acquired Evidence Rule Applies in Whistleblower Cases – But the Clear and Convincing Evidence Standard Applies and Requires Prompt Action on An Employer’s Part

In Clemmons v. Ameristar Airways, Inc., ARB No. 08-067, ALJ No. 2004-AIR-011 (ARB Apr. 27, 2012), the ARB opened the door for employers to use the after-acquired evidence doctrine to limit a complainant’s award of back pay in claims of retaliation under the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (“AIR 21”). Click Here. Now, in affirming the ALJ’s determination on remand that the after-acquired evidence doctrine was not applicable under the facts of the case, the ARB has signaled that limiting a back pay award will not be an easy task for employers.  Clemmons v. Ameristar Airways, Inc., ARB Case No. 12-105, ALJ Case No. 2004-AIR-011 (ARB Nov. 25, 2013).

As we previously reported, Thomas E. Clemmons (“Clemmons”) was employed by Ameristar Airways, Inc. (“Ameristar”) as its Director of Operations in charge of pilots and training.  Soon after he was hired, Clemmons notified Ameristar senior management that pilots were being asked to work more hours than permitted by Federal Aviation Administration restrictions.  Senior management, however, rejected the schedule prepared by Clemmons and continued scheduling pilots in violation of regulations.  Clemmons subsequently sent an e-mail to Ameristar’s pilots mocking Ameristar’s President, encouraging pilots to resign, and stating that he would support the pilots’ unemployment claims upon resignation.  Ameristar was not aware of Clemmons’ letter at the time it terminated his employment. 

Ameristar did not learn of Clemmons’ letter until March 28, 2003.  At that time, Ameristar was contesting Clemmons’ claim for unemployment benefits.  Despite being aware of the letter, on at least two occasions Ameristar failed to mention it to the Texas Workforce Commission and instead claimed that it terminated Clemmons for failing to produce the most economical work schedules for pilots.  It was not until after the Texas Workforce Commission awarded unemployment benefits that Ameristar raised the insubordinate email as its reason for terminating Clemmons.  Based on the letter, the Texas Workforce Commission reversed its initial determination and concluded that Clemmons’ insubordination made him ineligible for benefits.

The ALJ initially found that Clemmons’ protected activity was a contributing factor in his termination and awarded relief.  With liability established, the remaining issue in this case was the amount of damages.  On remand from the ARB, the ALJ was tasked with determining whether after-acquired evidence (in this case, Clemmons’ insubordinate e-mail) would have caused Ameristar to terminate Clemmons such that his back pay recovery would be cut-off as of March 28, 2003 —the date Ameristar discovered the e-mail.

In determining whether the after-acquired evidence doctrine limited Clemmons’ back pay recovery, the ALJ first held that Ameristar had to prove that it would have terminated Clemmons for his e-mail by “clear-and-convincing evidence.”  Applying this standard, the ALJ held that “when an employer seeks to use after-acquired evidence of employee wrongdoing to limit a complainant’s damages, the employer must first establish that the wrongdoing was so severe that the employer would have terminated the employee on those grounds alone had it known of the wrongdoing at the time of the discharge.”  Thus, the relevant inquiry was whether Ameristar would have, as opposed to merely “could have,” terminated Clemmons for his e-mail.  Applying this standard and citing Ameristar’s inconsistent and contradictory statements to the Texas Workforce Commission, the ALJ concluded that Ameristar failed to meet its burden of proof and awarded Clemmons back pay beyond March 28, 2003.

On appeal to the ARB, Ameristar argued that the ALJ erred in 1) applying the more onerous “clear-and-convincing evidence” burden of proof; 2) ignoring the severe insubordination presented by the letter; and 3) subverting the principles of the after-acquired evidence doctrine.  The ARB summarily rejected each of Ameristar’s assignments of error.  Most damaging for Ameristar was its failure to raise the insubordination/misconduct defense in contesting claimant’s right to unemployment benefits shortly following the termination – defeating any hope of proving that it would have terminated the claimant based on his email communication alone.  The lesson here – if an employer wants to use after-acquired evidence to defeat a whistleblower claim, its actions will speak louder than words.

Topics:  ALJ, Confidential Information, Dodd-Frank, DOL, IRS, Retaliation, Sarbanes-Oxley, Whistleblower Protection Policies, Whistleblowers

Published In: Administrative Agency Updates, Civil Procedure Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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