The New Whistleblower's Handbook

by Stephen Kohn

  For example, a company may state that it simply “loved” the employee and greatly “appreciated” the fact that the employee’s whistleblowing cost them millions of dollars, but unfortunately, the company had no alternative but to “lay off” the employee due to “lack of work.”

  Sometimes the justification for firing a whistleblower is malignant. A company uses allegations of serious performance failures to justify firing the worker. Often the employee is confronted with a choice at the time of his or her discharge—if he or she “voluntarily resigns” and signs various releases (which will prevent the whistleblower from suing the company), the company will keep the so-called performance-based reasons for the firing confidential and may even provide a reference for finding another job. The gun is put to the employee’s head: Quit and drop any cases, or the company will fire you for misconduct. Meanwhile the company is very aware of the fact that firing the employee for “cause” can make it difficult for the whistleblower to find another job.

  The risks for whistleblowers attacked in this manner are enormous. Given the resources available to a company, including ready access to witnesses and documentation, how does an employee defeat a company’s performance-based allegations?

  Sometimes you can get lucky and the proof of causation is self-evident. In a rare case the company admits that the reason it fired the employee was retaliatory. This usually occurs in circumstances in which the company does not understand that the employee’s conduct is legally protected, and thus its admission as to why the employee was fired becomes legally damning. For example, many laws protect employees who blow the whistle outside of the “chain of command.” Under these laws, if management admits that the employee was fired because he or she violated the “chain of command,” the company indirectly admits to the wrongdoing. Direct evidence that an employer was angry with a worker who tipped off a government inspector or raised a concern to upper management without the “courtesy” of telling his or her immediate boss can be key to proving causation. But in most cases the proof of causation will be far more subtle.

  An Iowa federal court judge explained how difficult it can be for employees to prove that their protected activities caused their termination:

  Employment discrimination and retaliation, except in the rarest cases, is difficult to prove. . . . Today’s employers, even those with only a scintilla of sophistication, will neither admit discriminatory or retaliatory intent, nor leave a well-developed trail demonstrating it. Because adverse employment actions almost always involve a high degree of discretion, and most plaintiffs in employment discrimination cases are at will, it is a simple task for employers to concoct plausible reasons for virtually any adverse employment action ranging from failure to hire to discharge.

  One important method an employee can use to prove causation is by demonstrating that an employer’s justification for an adverse action was not truthful. If a company lies about an employee’s performance, that lie can constitute “persuasive” circumstantial evidence of “intentional discrimination.” Writing for the U.S. Supreme Court, Justice Sandra Day O’Conner put it this way:

  The fact finders disbelief of the reasons put forward by the defendant (particularly if disbelief is accompanied by a suspicion of mendacity) may, together with the elements of the prima facie case, suffice to show intentional discrimination. Thus, rejection of the defendant’s proffered reasons will permit the trier of fact to infer the ultimate fact of intentional discrimination.

  If a company lies about an employee’s alleged poor performance, or fails to properly credit an employee’s good performance, an employee is in a strong position to prove pretext.

  Disparate Treatment and Circumstantial Evidence

  The U.S. Supreme Court recognized that there rarely is direct proof of causation. Few employers will admit that they fired an employee for blowing the whistle. Consequently, the Court has ruled that employees can rely solely on circumstantial evidence to prove causation. No “smoking gun” is necessary to win a case, and the employer never has to admit that whistleblowing played any part of the decision to fire the employee. Of course such admissions can make a case much stronger, but they are not required (and most often never exist).

  “[E]vidence that a defendant’s explanation for an employment practice is ‘unworthy of credence’ is one form of circumstantial evidence that is probative of intentional discrimination.”

  Justice Clarence Thomas, Desert Palace v. Costa (2003)

  Although the types of circumstantial evidence an employee can rely on to prove causation are case specific, the timing of an adverse action is another factor heavily relied on in whistleblower cases. How did the boss view the employee before he or she became a whistleblower? How was the employee viewed after the whistleblower incident? Other than becoming a whistle-blower, did anything else happen within the employment context that could rationally explain why there was a change in attitude toward the employee after the whistleblowing?

  Both the timing of an adverse action and demonstrating pretext can be key to demonstrating the link between the protected activity and the adverse action. Other factors can also come into play. The following list is not exhaustive, but it sets forth some of the factors courts have considered to sustain a finding of causation or pretext:

  • Excellent performance rating before the whistleblowing, and performance problems after the protected disclosure;

  • The failure of an employer to follow routine procedures, such as adequately investigating the charges against the employee or failure to seek an employee’s input prior to making a decision to downgrade or terminate the employee;

  • Absence of previous complaints against the employee;

  • Disparate treatment between the way the whistleblower was treated and the manner in which other employees who did not blow the whistle were treated;

  • A determination that an employee was not guilty of the alleged violations and the failure of the employer to adequately look into the charges and/or follow procedures generally afforded other employees to prove their innocence;

  • Statements that an employee’s protected activity was “disloyal” or somehow wrong. Any remarks whatsoever that indicate that the employer was upset or displeased with an employee’s protected activities, including statements indicating that the employee was a troublemaker or failed to follow the chain of command;

  • A pay increase shortly before the whistleblower disclosure was made and adverse action shortly after the disclosure;

  • Hostility or anger directed toward an employee’s protected activities;

  • Shifting explanations for the reason(s) given for the adverse action;

  • Advising employees not to report safety problems or to talk with government inspectors;

  • Any dishonesty by an employer regarding facts material to a case, including knowledge of protected activity, reasons given for taking adverse action against an employee, or statements about the validity of the underlying whistleblower disclosure.

  The nature of the whistleblowing may, unto itself, provide evidence of improper motive by the employer, especially when the company actually engaged in misconduct and has a reason for keeping it secret. As explained in a nuclear safety case:

  Antagonism toward activity that is protected . . . may manifest itself in many ways, e.g., ridicule, openly hostile actions, or threatening statements, or, in the case of a whistleblower who contacts the NRC, simply questioning why the whistleblower did not pursue corrective action through the usual internal channels. In addition, deliberate violations of NRC regulations suggest antagonism toward the [government] regulatory scheme and thus may provide support for an inference of retaliatory intent.

  In some cases, employers inadvertently admit to facts that prove causation, such as when managers testify that they are upset that employees went above them to raise a concern. Who would not be upset that a subordinate ignored them and went over their head in raising a concern? Who would not be ups
et that a lower-level employee did not have the courtesy of pointing out errors and giving time to fix the problem before making a “federal case”? Who would not be embarrassed by such acts of disloyalty? These may appear to be simply honest feelings or reasonable reactions from a manager to a whistle-blower. The only problem with these admissions is that they constitute direct evidence of guilt. An admission that a supervisor was upset or troubled by an employee’s whistleblowing constitutes evidence of discriminatory motive.

  The “Contributing Factor” Test

  Under most state and federal laws, employees have the burden of demonstrating both causation and pretext. Employees must prove these two elements by a preponderance of evidence. However, starting in 1989, Congress came to understand that this burden was often difficult for an employee to meet. Companies generally control information about employment practices, thus proving that a company deviated from procedures or covered up misconduct was very difficult. Likewise, witnesses are often under the control of the employer because of fear, a mistaken sense of loyalty, or concerns over their own jobs.

  In the Whistleblower Protection Act of 1989 (the law covering most federal employees), Congress overruled the judge-made precedent regarding the proof necessary to win a whistleblower case. It created a brand-new standard designed to make it easier for employees to win their cases. This standard is commonly referred to as the “contributing factor” test.

  In enacting the “contributing factor” test, Congress explained its intent:

  The bill makes it easier . . . to prove that a whistleblower reprisal has taken place. To establish a prima facie case, an individual must prove that whistleblowing was a factor in the personnel action. This supersedes the existing requirement that whistleblowing was a substantial, motivating or predominant factor in the personnel action. One of the many possible ways to show that the whistleblowing was a factor . . . is to show that the official taking the action knew (or had constructive knowledge) of the disclosure and acted within such a period of time that a reasonable person could conduce that the disclosure was a factor in the personnel action. The bill establishes an affirmative defense for an agency. [C]orrective action would not be ordered if the agency demonstrates by clear and convincing evidence that it would have taken the same personnel action in the absence of the disclosure.

  Instead of having to prove hostility toward the whistleblowing as the main motivating factor in an adverse action, the employee need only prove that the hostility was “a factor,” regardless of how small. As explained by the Federal Circuit Court of Appeals, “contributing factor . . . mean(s) any factor which, alone or in connection with other facts, tends to affect in any way the outcome of the decision.”

  Just as the burden of proving causation was decreased for the employee, the burden for proving a legitimate business reason was significantly increased for management. Instead of the employee having the burden of proving pretext, the burden shifted to the employer. The employer had to demonstrate a legitimate reason for the discipline or discharge. This burden was increased from preponderance of evidence to “clear and convincing” evidence, a much higher standard.

  Evidence of causation and pretext are normally the most important elements in proving a whistleblower case and Congress’s intervention made it easier for whistleblowers to win their cases under laws that apply the contributing factor test. Today these laws include the following: the Consumer Product Safety Act, the Whistleblower Protection Act, the Automobile Safety Whistleblower Act, the Contractor Whistleblower Act, the Affordable Care Act, Seamen Whistleblower Protection Act, the Sarbanes-Oxley Act, the Food Safety Modernization Act, the Atomic Energy Act, the Consumer Financial Protection Act, the Airline Safety Act, the Surface Transportation Act, the Railroad Safety Act, the Pipeline Safety Improvement Act, and the Stimulus Spending Act. Some states are also following this precedent, including the public employee whistleblower law enacted by the District of Columbia.

  The Qui Tam Alternative

  Proving retaliation is not easy. This is why many whistleblowers, when they can, shift the focus of their claim from a wrongful discharge case to a False Claims Act case. If an employee’s whistleblowing concerns misuse of taxpayer monies, and he or she has strong proof that the employer engaged in contracting or procurement abuses, shifting the focus of the case from proving employment discrimination to proving a false claim may be a good tactic.

  When proving a false claim, issues such as an employee’s performance or proof of retaliation are normally not material to the case. The issue is completely different: Regardless of whether or not the whistleblower was a “good employee,” did the company rip off the taxpayer? If the answer is yes, the whistleblower prevails on his or her qui tam whistleblower case. It is often in the employee’s best interest to focus his or her limited resources on proving fraud against the government. The ability of whistleblowers to focus their energy on rewards-based laws was significantly enhanced when Congress amended the Internal Revenue Code in 2006 and enacted the Dodd-Frank Act in 2010. These laws expanded the scope of potential qui tam claims from just government contracting to tax, securities, and commodities fraud. In every case, it is essential to determine whether the whistleblower’s case is just an employment retaliation case or whether the whistleblower can prove frauds covered under the qui tam laws. An employee can pursue both a retaliation case and a claim for a whistleblower reward, but that decision should be made before any lawsuit is filed.

  Animus, Pretext, and Corporate Culture

  Some day customs and attitudes within the workplace will change. Raising allegations that a company is threatening public safety, ripping off taxpayers, or violating the law will be accepted within corporate culture. Some day large institutions will recognize that responsiveness in the face of credible allegations of wrongdoing serves both the public interest and the long-term interest of the institution. That day is not at hand. Sometimes Congress has stepped in, and new whistleblower laws enacted after 1989 have often made the job of proving retaliation easier for whistleblowers by including the contributing factor test in modern whistleblower protection statutes. Even with this modification, winning a whistleblower retaliation case is still very difficult, and it requires careful attention to necessary facts that prove causation and motive in every case (regardless of who has the burden of proof).

  PRACTICE TIP

  Checklist 5 provides a list of factors used to demonstrate discriminatory motive and pretext in retaliation cases.

  RULE 26Get Every Penny Deserved

  Many attorneys and their clients focus their efforts on winning a case and do not spend the time and effort putting forward a proof of damages. It is easy to focus on the battle to save whistleblowers’ jobs and reputations and prove that the whistleblowers were right. But in doing so, it is also equally important to stay focused on ensuring that if whistleblowers win the case, they will get all the relief they deserve.

  The basic approach to setting damages in whistleblower employment discrimination cases is known as the “make whole” rule. Damages are designed to place the wrongfully discharged whistleblower in the precise place he or she would occupy if the discrimination never occurred. The bottom-line standard for obtaining relief was set forth in an 1867 U.S. Supreme Court case, which stated that “compensation” awarded to a victim must be “equal to the injury . . . the injured party is to be placed, as near as may be, in the situation he would have occupied if the wrong had not been committed.”

  Just as the scope of protected activity is different under every whistleblower law, so is the scope of relief. Each statute generally sets forth the relief that can be granted. In deciding which law or laws a claim should be filed under, it is very important to carefully review the scope of relief available.

  The major categories of damages relevant in whistleblower cases include the following:

  • Reinstatement. Employees are entitled not just to reinstatement to a job, but reinstatement to their old job, or
if not possible, a comparable job. This includes a position with the same status and promotional opportunities as the one they lost.

  • Front pay. Front pay is an alternative to reinstatement. It is available in cases when an “irreparable animosity” exists between the company and the whistleblower. The amount of front pay is calculated to compensate employees for lost future earnings if they are not reinstated. However, employees are not automatically entitled to front pay, and the authority to award this form of relief is vested with a judge or jury. In order to be entitled to front pay in lieu of reinstatement employees must demonstrate that a “productive and amicable working relationship” between the parties “would be impossible.”

  • Back pay and benefits. Employees are entitled to an award of back pay and lost benefits. However, employees need to be fully aware that companies can escape large back-pay awards by alleging that the employee failed to “mitigate” damages. This means that an employee cannot simply be fired and await the outcome of the legal case. They are under an obligation to look for new employment. If an employee does not look for work, the amount of damages for which he or she may be entitled can be reduced if the employee “did not exercise reasonable diligence” in trying to find a new job. A company has the burden of proving that an employee did not exercise reasonable diligence.

  • Compensatory damages. Compensatory damages are awarded for pain and suffering, humiliation, emotional distress, and loss of reputation. Although not required, expert psychological testimony is often relied upon to justify major emotional distress damages. Sometimes referred to as “special damages,” compensatory damages are available under state public policy tort claims and most federal statutes. A request for compensatory or special damages should be pleaded in the initial complaint, as this is sometimes a requirement for obtaining a jury trial.