"Actual Damages" Interpreted to Include Non-Economic Damages Under Pennsylvania's Whistleblower Law

by Littler
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A recent Pennsylvania Supreme Court decision has upheld that successful plaintiffs are entitled to non-economic damages under Pennsylvania’s Whistleblower Law, 43 P.S. §§1421-1428 (the “Law”).  In Bailets v. Pa. Turnpike Commission, 126 MAP 2016, J-91-2017, Pennsylvania’s high court affirmed an award of $1.6 million in non-economic damages to the plaintiff after finding that the defendant retaliated against him in violation of the Law. Whether non-economic damages are available under the Law was an issue of first impression in Pennsylvania. This decision serves as a cautionary tale to employers that are evaluating liability exposure in cases arising out of the Law.  

Background

The defendant employed the plaintiff for 10 years prior to his termination in 2008. As part of his duties and responsibilities, plaintiff reviewed bid proposals for the design and implementation of a computerized financial reporting system. One of the bids for the implementation contract came from the same company that was awarded the contract to determine the requirements necessary for the computerized financial reporting system’s implementation.

Plaintiff voiced concerns to his immediate supervisor about this potential conflict of interest. Plaintiff’s direct supervisor allegedly warned him that voicing his concerns would place his job in jeopardy. Although the company placed the highest bid, it was awarded the implementation contract. Plaintiff continued to lodge complaints regarding the company’s alleged poor performance throughout the system’s implementation process.

Plaintiff also complained about the company’s performance to a co-worker, who shortly thereafter became the defendant’s CFO. The newly appointed CFO immediately contacted defendant’s COO and explained his uncertainties about plaintiff and that they needed to “keep a short leash on him.” Less than one month later, plaintiff was reassigned to a different department. Within the following four months, defendant awarded the company an additional contract, while plaintiff continued to complain regarding the company’s performance. In November 2008, plaintiff was informed that his position was being eliminated for budgetary reasons and he was immediately removed from the building.    

The plaintiff filed suit in Pennsylvania’s Commonwealth Court, asserting a single claim of retaliation in violation of the Law. In an unreported single-judge opinion, the court granted summary judgment for defendant, finding that plaintiff was terminated for “legitimate employer objectives.” Bailets v. Pa. Turnpike Comm’n, No. 265 MD 2009, unpublished memorandum at 11 (Pa. Cmwlth. Feb. 4, 2014). Plaintiff appealed to the Pennsylvania Supreme Court ("the Court"), which reversed the granting of summary judgment and remanded the case for further proceedings.

After a four-day non-jury trial, the Commonwealth Court held that the defendant retaliated against plaintiff in violation of the Law. In addition to past and future lost earnings, amounting to $1.6 million, the court, holding that actual damages included non-economic damages, awarded the plaintiff non-economic damages resulting from the emotional impact that the termination had on the plaintiff – equal to the amount awarded for economic damages. After an unsuccessful post-trial motion practice, defendant appealed the judgment to the Court. On a limited appeal, the Court was faced with an issue of first impression, whether non-economic damages was an available remedy under the Law.

The Pennsylvania Supreme Court’s Analysis

The Law sets forth the following remedies available to prevailing whistleblowers:

A court, in rendering a judgment in an action brought under this act, shall order, as the court considers appropriate, reinstatement of the employee, the payment of back wages, full reinstatement of fringe benefits and seniority rights, actual damages or any combination of these remedies.

43 P.S. §142 (emphasis added). Unfortunately, the term “actual damages” was not defined in the Law, other legislature or Pennsylvania jurisprudence. In interpreting the limitations of and remedies encompassed in the term “actual damages,” the Court analyzed: (1) the purpose of the Law; (2) Pennsylvania jurisprudence interpreting non-economic damages as actual losses; (3) the language of the Law; and (4) the object sought by the available remedies of the Law. First, mindful of the tension between the remedial nature of the law and sovereign immunity considerations, the Court held that sovereign immunity must not limit the Law’s remedial “purpose – to protect whistleblowers who come forth with good faith reports of wrongdoing.” Second, the Court noted its longstanding precedent that non-economic losses have been construed as actual losses.1 Third, the Court held that the language used in the Law indicates the legislature’s intent to include non-economic loss in the term “actual damages.”

In coming to this holding, the Court noted that in light of the other listed available remedies – specifically “back wages” – the use of “actual damages” would be superfluous if it was not to include non-economic damages, as the term would otherwise solely encompass future economic loss. Fourth, the Court noted that in passing the Law, the legislature sought to “‘protect those who inform authorities of wrongdoing,’ and that absent some assurance an ‘employee will ultimately be put in no worse a position for having exposed the wrongdoing[,]’ the Commonwealth would forego the benefit whistleblowers provide.”2 The Court rationalized that if “actual damages” excluded non-economic damages, whistleblowers would be uncompensated for any humiliation, mental anguish or embarrassment suffered as a result of exposing their employers’ wrongdoings – which would undermine the legislature’s objective of providing remedies necessary to place whistleblowers in the same position as they would have otherwise been had they not exposed their employers’ wrongdoing.

Implications for Pennsylvania Employers

The Pennsylvania Supreme Court’s decision permits the recovery of non-economic damages in state-law whistleblower actions, increasing the remedies available to plaintiffs to recover. Employers should be aware of all remedies available to alleged whistleblowers when evaluating their exposure liability in early case assessments. Furthermore, employers should continue to stress the importance of non-retaliation policies to its workforce and ensure that the appropriate education and training is in place internally to be confident all employees are aware of and following company procedures.

 

Footnotes

1 See Corcoran v. McNeal, 161 A.2d 367 (Pa. 1960); Laurelli v. Shapiro, 206 A.2d 308 (Pa. 1965); Singer v. Sheppard, 346 A.2d 897, 901 n.9 (Pa. 1975).

2 Bailets, J-91-2017 at 16 (citing O’Rourke v. Dep’t of Corrections, 778 A.2d 1194 (Pa. 2001)).

 

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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