Whistleblower Law Blog
Topic: Whistleblower Laws (State/Local)
Public Employees Fired for Filing Whistleblower Suit
Two Charleston, South Carolina airport employees were fired for filing a whistleblower-protection lawsuit because their public employer said it was improper for employees to sue the agency while working for it. The Charleston County Aviation Authority fired the two employees one week after they filed a lawsuit alleging that they were wrongfully demoted for raising concerns about spending irregularities and failures of the leaders of the agency to follow purchasing policies.
The complaint was filed on January 25, 2015 under South Carolina law in Karina Labossiere and Darla Seidel v. The Charleston County Airport District, Case No. 2016-CP-10-388, by former accounting assistants, Karina Labossiere and Darla Seidel. Their jobs were reclassified several grades below administrative assistance after the two plaintiffs started complaining about lack of adherence to procurement processes. As part of their job duties, the two plaintiffs were required to maintain accounts payable and receivable files, process payment, reconcile statements, analyze financial information, and ensure the purchase order process is followed.» Read more
New Jersey Supreme Court Extends Whistleblower Protections to “Watchdog” Employees
On July 15, 2015, in Lippman v. Ethicon, Inc., the New Jersey Supreme Court held that whistleblower protections under New Jersey’s Conscientious Employee Protection Act (CEPA) extend to actions taken by employees as part of their normal job duties.
Dr. Joel S. Lippman was employed by Ortho-McNeil Pharmaceuticals, Inc. (OMP) and Ethicon, Inc. as the World-Wide Vice President of Medical Affairs and Chief Medical Officer. Lippman, in his role as Medical Officer, was asked to provide his opinion about the safety of OMP and Ethicon’s products.
Lippman, after he was terminated from his high-level position, filed a retaliation claim under New Jersey’s Conscientious Employee Protection Act. The New Jersey trial court granted OMP and Ethicon’s motion for summary judgment, determining that disclosures Lippman made as part of his normal job duties were not CEPA-protected conduct.
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U.S. Supreme Court Declines to Hear Appeal of California Ruling that Arbitration Agreements Cannot Waive Claims Under the State’s Private Attorneys General Act
On January 20, 2015, the U.S. Supreme Court declined to hear a challenge to a California Supreme Court ruling that employees could not, through arbitration agreements, waive representative claims under the state’s Private Attorneys General Act (PAGA). PAGA allows private citizens to step into the shoes of the government and sue for workplace violations on behalf of California’s Labor and Workforce Development Agency. Such plaintiffs can recover a share of any penalties recovered by the state. Workers can sue on behalf of themselves and other current and former employees in representative suits.
In Iskanian v. CLS Transportation Los Angeles LLC, the California Supreme Court held that arbitration agreements with mandatory class waivers are generally enforceable in light of the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, which established that the Federal Arbitration Act (FAA) preempted state laws finding such waivers unenforceable. However, in Iskanian, the California Supreme Court reasoned that agreements waiving workers’ rights to bring PAGA actions undermined the purpose of the statute and disabled a key enforcement mechanism for the state’s labor code.
The decision in Iskanian stemmed from a 2006 suit filed by former CLS Transportation limousine driver Arshavir Iskanian. Iskanian, who had signed an arbitration agreement with the company, brought a proposed wage class action under PAGA against CLS.
The California Supreme Court found that employees bringing representative claims against their employers are actually bringing those claims on behalf of the state, rather than the employees themselves. For that reason, the court found that the arbitration agreements signed by the employees did not preempt state law.
After the California Supreme Court ruled in Iskanian’s favor on June 23, 2014, CLS filed a petition for certiorari on September 22, 2014, asking the U.S. Supreme Court to review the decision. CLS argued that California’s courts and legislature had a history of ignoring the preemptive effect of the Federal Arbitration Act.
The U.S. Supreme Court’s decision to decline CLS’s petition is expected to increase the number of representative claims under PAGA and to incentivize defendants to remove such actions to federal courts. Law 360 quoted Nicholas Woodfield, Principal and General Counsel of The Employment Law Group, P.C., in a story about the implications of the Iskanian ruling:
Several federal district courts recently have refused to apply Iskanian, instead requiring the employees to arbitrate their PAGA claims, . . . As such, it is almost certain that we will see more employers trying to remove PAGA cases to federal court, as the federal courts are not bound by the California Supreme Court’s decision.
Illustrating this point, on October 17, 2014, the U.S. District Court for the Central District of California granted a defendant’s motion to compel arbitration in Langston v. 20/20 Cos. Inc., holding that the FAA preempts California’s rule against arbitration agreements in which the right to bring representative PAGA claims is waived.
However, in March 2014, the U.S. Court of Appeals for the Ninth Circuit determined that Chase Investment Services Corporation could not remove a PAGA suit to federal court. In Bauman v. Chase Investment Services Corp., the Ninth Circuit concluded that PAGA actions are not similar enough to class actions under Rule 23 of the Federal Rules of Civil Procedure to warrant removal from state court.
The California Supreme Court, on the same day it decided Iskanian, also held in Bridgestone Retail Operations LLC v. Milton Brown that representative claims under PAGA cannot be waived. Bridgestone has petitioned for certiorari as well, although the chances of the Court granting that petition now appear slim.
The state Supreme Court found that employees bringing representative claims against their employers are actually bringing those claims on behalf of the state, rather than the employees themselves. Therefore, the court found that the arbitration agreements signed by the employees did not preempt state law.
DC Court of Appeals Upholds $300,000 Award to DC Employee Harassed for Giving Truthful Testimony
On January 16, 2015, the U.S. Court of Appeals for the District of Columbia Circuit held in Williams v. Johnson that the District of Columbia Whistleblower Protection Act (DCWPA) protects employees who cooperate in good faith in an investigation. In April 2005, Christina Williams was tasked by her employer, the D.C. Department of Health, Addiction Prevention and Recovery Administration (APRA), with overseeing the implementation of ACIS, a new client information system. Williams was later required to testify before the D.C. Council regarding the implementation. Williams testified that the program was not useful and that its rollout was behind schedule. Williams’s testimony contradicted more optimistic testimony given by her supervisors.
The supervisors harassed Williams after her testimony. Williams sued under the DCWPA and eventually resigned her position with APRA. At trial, a jury determined that Williams’s testimony warranted protection under the DCWPA and awarded her $300,000.
On appeal by APRA, the D.C. Court of Appeals affirmed the jury’s verdict. The Court of Appeals held that a reasonable jury could view the statements Williams made in her testimony as disclosing an abuse of authority or a violation of law and thus warranting protection under the DCWPA. The Court noted that Williams testified truthfully, knowing that her statements conflicted with what her supervisors wanted her to say.
Maryland Attorney General Urges Adoption of Expanded State False Claims Act
On February 5, 2015, Maryland proposed a new, expanded state False Claims Act that would better allow Maryland to deter and recover damages for fraud against the state. Maryland Attorney General Brian Frosh urged adoption of the Act, which would expand Maryland’s current limited version that only applies to Medicaid and health-care related fraud.
Under the proposed False Claims Act, Maryland may receive triple the damages for its losses, while the whistleblower who initiates the claim is allowed to receive a portion of the state’s recovery and is also protected against retaliation in the work place. The state’s current version of the Act has allowed it to recover $28 million a year in each of the past two years from Medicaid-related cases alone. Adopting the proposed expansion will allow Maryland to achieve greater success in deterring fraud and recovering funds, much like the federal government.
Under the federal False Claims Act, the federal government recouped nearly $5 billion in 2012. To incentivize states to adopt laws more closely mirroring the federal False Claims Act, the federal government, under the Deficit Reduction Act of 2005, allows states to collect an additional 10% of federal Medicaid funds recovered through a state action.
Virginia Attorney General’s Office Intervenes in $1.15 Billion Suit Against 15 of the World’s Largest Banks in an Action Under the Virginia False Claims Act
Like most states, Virginia has its own state statute that mirrors the federal False Claims Act and allows whistleblowers to collect rewards for bringing to light fraud against the state government. Virginia’s Fraud Against Taxpayers Act, like its federal counterpart, permits the state to intervene in cases brought by qui tam (false claims) relators. On September 16, 2014, Virginia’s Attorney General Mark Herring did just that, filing a 317 page complaint alleging that fifteen of the world’s largest banks knowingly misrepresented the financial stability of mortgage securities to the state’s retirement system in the years leading up to the financial crisis in 2007 and 2008.
The complaint alleges that as a direct result of the banks’ misrepresentations, the state’s retirement system purchased doomed mortgage securities and ultimately lost $383.91 million. The Commonwealth seeks $1.15 billion in damages from the banks (three times the amount of actual damages, as permitted by the statute), plus civil penalties for each violation. The relator was Integra REC, LLC, a financial modeling firm. This historic lawsuit demonstrates the price that can be paid for fraud against taxpayers and the government. And because the relator may receive between 15 to 25 percent of the ultimate settlement ($172.5 million to $287.5 million if the full $1.15 billion sought is awarded), it also demonstrates the incentives for whistleblowers to expose fraud.
New York Awards Whistleblower $300,000 for Reporting Tax Evasion Scheme
New York continued to crack down on tax cheats under its strengthened False Claims Act (FCA), awarding a whistleblower more than $300,000 for reporting an out-of-state retailer’s failure to collect sales tax on high-end appliances it delivered to New York customers.
D.C. Legislation Would Extend False Claims Act Treatment to Taxes
On February 5, 2013, D.C. Councilmember Mary M. Cheh (D-Ward 3) presented the “False Claims Act of 2013” to the Committees on Finance and Revenue. This bill would extend the current False Claims Act which fails to apply to violations of the tax code.
The False Claims Act of 2013 would enable whistleblowers to receive a reward for providing the District with non-public information that assists the District of Columbia in collecting tax funds that it is owed. Under the proposed law, tax fraud whistleblowers would be eligible for a reward only if the D.C. Government succeeding in recovering the owed tax payments.
The propose law would allow the government and whistleblowers to file a tax-based claim under the False Claims Act if the tax fraud in question exceeded $350,000 and if the entity or taxpayer has an income in excess of $1 million.
The introduction of this bill in D.C. is significant as is part of a broader trend of states and local jurisdictions considering extensions of local whistleblower statutes. If D.C. passes this bill, it would join the State of New York, which recently passed a False Claims Act statue allowing qui tam recoveries for those who report significant tax fraud.
The Employment Law Group® law firm regularly represents IRS, SEC, and CFTC whistleblowers. Our whistleblower lawyers recently published an article, “Rewarding Whistleblowers for Disclosing Tax Violations to the IRS” for The CPA Journal.
City of Sacramento to Set up Anonymous Whistleblower Hotline
The City of Sacramento, California has announced that within the next two months it will adopt a toll-free anonymous whistleblower hotline. The hotline will cost about $200,000 to fund and will be staffed by a live person twenty-four hours a day, seven days a week, every day of the year.
This hotline is in response to a January 2013 council meeting in which City Auditor Jorge Oseguera presented a report showing that a hotline Sacramento had established in March 2012 and which did not offer callers anonymity had proven ineffective, receiving only nineteen calls since its inception. The City Council hopes that by accepting anonymous reports from callers, city employees and other members of the public will report concerns about fraud, waste, and abuse.
The Employment Law Group® law firm has an extensive nationwide whistleblower practice representing employees who have been victims of retaliation
R. Scott Oswald Publishes Article Review of Whistleblower-Favorable Trends in 2012
R. Scott Oswald, managing principal of The Employment Law Group, P.C., recently published an article in Law360 reviewing favorable developments in employment law for whistleblowers during 2012.
According to Oswald, these developments “further open the door to greater whistleblower revelations in the future, resulting in fewer laws being broken, savings for taxpayers, safer working conditions, increased awards to relators, other benefits and even lives being saved.”
Among the significant developments for whistleblowers in 2012 discussed were:
- The Department of Justice collecting nearly $5 billion in False Claims Act settlements and judgments
- The IRS and SEC Whistleblower Offices announced some of their first and largest awards
- The passage of the Whistleblower Protection Enhancement Act (WPEA) strengthened legal protections for federal employees who blow the whistle by disclosing government abuse, fraud and waste
- States continued to enact local False Claim Acts to come into compliance with the federal False Claims Act
- The Administrative Review Board (ARB) at the Department of Labor continued its whistleblower-favorable trend
- Federal courts interpreted the Dodd-Frank Act’s anti-retaliation provisions to include internal complaints, with the first Dodd-Frank claims surviving a motion to dismiss in federal court.
The article, “2012 Opens The Door For More Whistleblower Participation”, was published in the January 3, 2013 edition of Law360.
The Employment Law Group® law firm has an nationwide whistleblower protection practice representing employees who have been victims of retaliation, including a $819,000 False Claims Act whistleblower retaliation verdict on behalf of a client.