Former Plant Manager of a Nuclear Facility Files Whistleblower Suit

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A former manager of the San Onofre Nuclear facility, one of two nuclear power plants in California, is suing the California utility company, South California Edison, charging that the company wrongfully terminated him in retaliation for his efforts to blow the whistle on safety violations at the facility .

Paul Diaz, the plaintiff in the case, was fired after the federal Nuclear Regulatory Commission sent a warning letter in March, 2010, to Southern California Edison, the principal owner of the San Onofre plant. It rebuked the utility for a workplace climate that, the agency said, had the “chilling effect” of preventing employees from raising safety concerns.

Diaz’s supervisors tried to dissuade him from airing safety issues. “They told him: ‘Don’t be a superhero,’” she said.

In October, Diaz, 35, was fired.

According to the suit, Southern California Edison was warned by nuclear regulators in the March, 2010, letter as a result of anonymous complaints sent via email about safety shortcuts, incomplete testing, falsified records and “a culture of cover-up.” The lawsuit, which seeks unspecified damages, also says that the long hours and frequent demands for overtime led to frequent employee fatigue.

The company issued a statement saying that officials had not yet received the lawsuit and would not comment on its allegations. “However, we can say that, by policy, SCE considers retaliation against employees who raise safety concerns a termination offense,” the statement said.

Senator Grassley proposes improved Whistleblower Protections

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U.S. Sen. Grassley: Focuses on update to Whistleblower Protection Act

Senator Chuck Grassley of Iowa, a longtime advocate for strong Whistleblower Protections, recently co-sponsored legislation to provide an update to the Whistleblower Protection Act of 1989 by restoring congressional intent of the original law. Grassley said that whistleblowers are being denied protections they should have under the law because of decisions of the Merit Systems Protection Board, the Federal Circuit Court of Appeals, and the general anti-whistleblower sentiment held by those in executive branch agencies.

In 1989, Grassley and Senator Carl Levin of Michigan co-authored the original Whistleblower Protection Act. The law provided protection for federal employees who expose waste, fraud and abuse in federal agencies. Grassley introduced the update with Senators Daniel Akaka of Hawaii; Susan Collins of Maine and Joe Lieberman of Connecticut.

“Whistleblowers are key to unlocking the secrets deep in the closets of our bureaucracy. They’ve helped me uncover untold amounts of waste, fraud and abuse across the federal government,” Grassley said. “This important update to the Whistleblower Protection Act will restore the congressional intent of the law and also includes a provision we worked out in the last Congress to provide employees in the intelligence community whistleblower protections for the first time.”

The Iowa senator has been an ardent supporter for individual whisteblowers- regardless of party or the bureaucracy in the way. tagon, the FBI, the Bureau of Alcohol, Tobacco, Firearms and Explosives, the IRS, the Interior Department, the Department of Health and Human Services, the Food and Drug Administration, and the Securities and Exchange Commission.

The updated legislation would:

• clarify that “any” disclosure of gross waste or mismanagement, fraud, abuse, or illegal activity may be protected, but not disagreements over legitimate policy decisions;
• suspend the Federal Circuit Court of Appeals sole jurisdiction over federal employee whistleblower cases for five years;
• extend Whistleblower Protection Act coverage and other non-discrimination and anti-retaliatory laws to all employees of the Transportation Security Administration;
• clarify that whistleblowers may disclose evidence of censorship of scientific or technical information under the same standards that apply to disclosures of other kinds of waste, fraud, and abuse;
• codify and strengthen the anti-gag provision that has been part of every Transportation-Treasury Appropriations bill since 1988;
• allow jury trials under certain circumstances for a period of five years;
• provide the Merit Systems Protection Board with authority to consider and grant summary judgment motions in certain cases for a period of 5 years;
• clarify that employees protected by the Whistleblower Protection Act may make protected classified disclosures to Congress using the same process as intelligence community employees;
• establish protections for the intelligence community modeled on existing whistleblower protections for FBI employees;
• establish a process within the executive branch for review if a security clearance is allegedly denied or revoked because of a protected whistleblower disclosure;
• establish Whistleblower Protection Ombudsmen to educate agency personnel about whistleblower rights; and
• provide the Office of Special Counsel with the independent right to file “friend of the court” briefs, or amicus briefs, with federal courts.

DOE Delays Whistleblower Protection Rule

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DOE

The Department of Energy recently announced in the Federal Register a 60 day stay of its new regulation permitting civil penalties against contractors and subcontractors that retaliate against an employee reporting fraud, waste or abuse. The DOE cited the Chief of Staff’s January 20, 2017 memorandum, which calls for a 60 day delay in the effective date of new regulations so that they can be reviewed by the incoming administration.

Did the Supreme Court Help Whistleblowers in EEOC v. Abercrombie?

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The Supreme Court reversed the Tenth Circuit decision in E.E.O.C. v. Abercrombie & Fitch Stores, Inc. this week and allowed the employment discrimination action against Abercrombie to proceed.

The case involved a claim of intentional discrimination under Title VII. Abercrombie was accused of failing to hire an applicant because of her religion. During the applicant’s interview, she wore a headscarf. Abercrombie has a policy that “caps” are not permitted to be worn by its employees. Because of this policy, Abercrombie did not hire the applicant.

Justice Alito’s opinion focuses largely on the words “because of” in Title VII. His analysis separates the defendant’s motive and knowledge, concluding that certain motives for employment decisions are prohibited “regardless of the state of the actor’s knowledge.” “[Title VII’s] disparate-treatment provision prohibits actions taken with the motive of avoiding the need for accommodating a religious practice. A request for accommodation, or the employer’s certainty that the practice exists, may make it easier to infer motive, but is not a necessary condition of liability.”

The False Claims Act has similar “because of” language in its anti-retaliation protections. It prohibits certain adverse employment actions “because of lawful acts done … in furtherance of an action under this section ….” 15 U.S.C. 3730(h)(1). This section has generally been interpreted to require the employer’s knowledge of protected activity by an employee. See, e.g., Eberhardt v. Integrated Design & Const., Inc., 167 F.3d 861, 868 (4th Cir. 1999); U.S. ex rel. Yesudian v. Howard Univ., 153 F.3d 731, 736 (D.C. Cir. 1998).

The knowledge requirement can pose problems for a whistleblower that has not explicitly told their employer that they have engaged in protected activity. If proof of employer knowledge was not required, the law might protect an employee from actions taken against potential or suspected whistleblowers where there was not otherwise enough evidence to meet the current law’s test for improper conduct.

Of course, because the Supreme Court’s decision was interpreting Title VII, it may ultimately have no effect on whistleblower retaliation law. It will be up to federal judges to decide the extent of the impact of this decision in the coming years.

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Senate Considering Antitrust Whistleblower Protections Again

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The bipartisan bill promoting whistleblower protections for individuals reporting antitrust violations, the Criminal Antitrust Anti-Retaliation Act (“CAARA”), is back in the Senate.

Second Circuit: Dodd-Frank Protects Internal Whistleblowers From Retaliation

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Ever since the 5th Circuit held that Dodd-Frank whistleblower retaliation protections do not extend to internal reporters within a company, the SEC has been filing amicus briefs in internal retaliation cases arguing in favor of its position that the SEC whistleblower program rules against retaliation by employers cover internal whistleblowers as well as those filing a Form TCR with the securities regulator.

Today, the Second Circuit agreed with the SEC’s position, overturning a decision to dismiss the lawsuit of a whistleblower reporting accounting irregularities within Neo@Ogilvy. The media has raised the possibility that the Supreme Court may need to step in to address this issue if the circuit split continues.

The dispute arises from the potential ambiguity within the Dodd-Frank’s meaning of the term whistleblower. Corporations have argued that the term is defined by the statute and applies only to individuals filing a Form TCR pursuant to the SEC procedures. The SEC argues that the meaning is ambiguous in the context of the anti-retaliation protections. Previously, the 5th Circuit ruled that internal reports were not sufficient to gain the protections of the law. The Second Circuit was asked to decide the issue in Liu last year but dismissed the case on other grounds, reaching only the extraterritoriality issue.

The CFTC whistleblower rules, however, do not go as far as the protections offered by the SEC, limiting employee protections to adverse employment actions after the filing of a Form TCR.

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False Claims Act Whistleblowers Unprotected While Job Applicants, According to Sixth Circuit

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Whistleblowers are not protected from discrimination by § 3730(h) of the False Claims Act when applying for future jobs, according to a Sixth Circuit decision in Gary Vander Boegh v. EnergySolutions, Inc., Case No. 14-5047, ___ F.3d ___ (6th Cir. Nov. 18, 2014) last week.

The plaintiff worked as a landfill manager first for the U.S. Department of Energy and, after management of the landfill was contracted out by the DOE, for the subcontractor in charge of waste management services including the landfill. While employed by the subcontractor, he reported environmental violations and engaged in other protected activity. When management of the landfill was awarded to a new contractor, the plaintiff applied for the position at the new subcontractor but another candidate was selected.

He brought a lawsuit under a number of laws, including 31 U.S.C. § 3730(h), the section of the False Claims Act protectiong whistleblowers from retaliation. Section 3730(h) authorizes back pay, reasonable attorneys’ fees and other compensation when “any employee, contractor, or agent … is … discharged … because of lawful acts done … in furtherance of an action” under the False Claims Act.

This section of the law was expanded to include contractors or agents by Congress in the Fraud Enforcement and Recovery Act of 2009. When Congress did so, it also removed the language “by his or her employer” from the section. Originally, the False Claims Act provided for “[a]ny employee who is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of his employment by his or her employer because of [a protected activity] shall be entitled to all relief necessary to make the employee whole.”

The removal of the language about employers could suggest a Congressional intent to broaden this section beyond employees but it has so far not been interpreted that way. Instead, in United States v. Kiewit Pac. Co., No. 12-CV-02698-JST, 2014 WL 1997151, — F. Supp. 2d — (N.D. Cal. May 14, 2014), the court concluded that Congress did not express an intent to broaden the notion of retaliation when it removed “by his or her employer.” Facing a different issue, the Court concluded that removing the employer language did not open § 3730(h) up to authorize a retaliation lawsuit by an entity. It believed the congressional intent behind the amendment was simply to include certain individuals who were not technically employees within the scope of the protections. Several other courts have come to similar conclusions when addressing the question of whether retaliation lawsuits against individual employees are appropriate following the amendment.

The Sixth Circuit opinion is the second to recently tackle the question of employment protections for whistleblowers after having moved on from their employer. In late October, the Southern District of Ohio denied protection to a False Claims Act whistleblower who reported on a previous employer in Kem v. Bering Straights Information Technology, Case No. 2:14-cv-263, 2014 WL 544842 (S.D. Ohio October 22, 2014). According to the complaint, the plaintiff was terminated after revealing his previous experience as a whistleblower to his supervisor. The court dismissed the case because the statement by the plaintiff was not protected activity under the law but implied that the result may have been different if the plaintiff’s attorney had argued that the protected activity happened at his previous employer. For further discussion, view our blog post discussing Kem.

As corporate fraud and legal violations lead more employees to become whistleblowers, the problem of delayed retaliation will only get worse. It is an area that needs to be remedied by either the Courts or Congress. If individuals will be freely discriminated at in the hiring process by corporations afraid the applicant will blow the whistle on them too, then it could chill whistleblowing under the False Claims Act by individuals concerned about their future employment prospects.

Earlier this year, the Supreme Court interpreted the definition of employee in the Sarbanes-Oxley Act whistleblower provisions in Lawson v. FMR. It concluded that 18 U.S.C. § 1514A protects employees of privately held contractors and subcontractors reporting on a public company. Analyzing the problem that Congress was attempting to address when passing SOX, the Supreme Court concluded that accountants and lawyers were such an integral part of the solution that they could not have been excluded.

Looking at SOX with respect to job applicants, it looks like the law has similar language to the False Claims Act. SOX prescribes that “[n]o [covered] company … may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment …”

If this interpretation is more widely adopted, it could lead leave whistleblowers open to discrimination in the hiring process for the rest of their life. This is shortsighted, especially when the names of relators become public when the False Claims Act lawsuit is unsealed. If the courts continue in this interpretation, Congress should step in immediately to correct it.

Fortunately, the Dodd-Frank Act has different language. It prohibits employers from discriminating against a whistleblower in the terms and conditions of employment. 15 U.S.C. §78u-6(h)(1)(A). There is no mention of the term employee in either the retaliation provision or the SEC definition of a whistleblower at 17 C.F.R. § 240.21F-2(b)(1). Given the difference in language, SEC whistleblowers should not face the same problem from statutory interpretation of the retaliation section.

Court Rules on Confidentiality Agreements for SEC Whistleblowers

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A U.S. District Court in the Southern District of California has recently ruled on the validity of a SEC whistleblower’s defense to the enforcement of a company’s confidentiality agreement. In the decision, the Court accepts the validity of a public policy defense to a limited whistleblower disclosure of confidential information concerning securities fraud.

Grassley Reintroduces Legislation for Antitrust Whistleblower Protection

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Personal Injury Lawyers Philadelphia PA

Senators Chuck Grassley and Patrick Leahy reintroduced the Criminal Antitrust Anti-Retaliation Act into the Senate. CAARA prohibits employer retaliation against employees providing information to the Department of Justice about conduct violating criminal antitrust law.

The legislation as currently written does not provide for rewards for antitrust whistleblowers. The Government has expressed concern that it will be more difficult to make their case under the criminal law with a higher burden of proof than civil cases if their star witness of the conspiracy will receive a reward. The United States already provides limited immunity to certain individuals or companies that come forward first with evidence of their participation in an antitrust conspiracy.

Internationally, several countries do provide monetary awards in this area. The United Kingdom, South Korea, Hungary and Pakistan all pay for information about price fixing cartels. A Government Acountability Office report in July 2011 found support for rewards in the United States mixed.

The bill is one of a number under consideration by Congress and the States. The Motor Vehicle Safety Whistleblower Act sponsored by Senators Thune and Nelson to incentivize auto whistleblowers has already passed the Senate. New York’s Attorney General Eric Schneiderman has also announced a proposal for the Financial Frauds Whistleblower Act to compensate whistleblowers in the banking, insurance and financial services industries.

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SEC Whistleblowers May Not Receive Jury Trial in Retaliation Cases

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A recent decision in a Georgia federal court presents serious implications for SEC whistleblowers subject to retaliatory employment actions.  In an apparent case of first impression, on Nov. 12, U.S. District Judge J. Owen Forrester of the United States District Court for the Northern District of Georgia rendered a decision holding an SEC whistleblower is not entitled to a jury trial in a retaliation action.  The whistleblower in the matter was a former compliance manager for BlueLinx Holdings, Inc. who brought his concerns that the company violated securities laws to the SEC and the company’s internal ethics committee.

The Dodd-Frank Wall Street Reform and Consumer Protection Act enacted a series of sweeping regulatory reforms, designed to prevent the abuses and risky Wall Street behavior, which in large part led to our nation’s latest economic calamity, dubbed the “Great Recession.”  In addition to financial reforms, Dodd-Frank mandated the creation of the Securities and Exchange Commission’s Office of the Whistleblower.  This office is tasked with processing and overseeing complaints of securities violations brought forth by knowledgeable whistleblowers.

Critically important to the program’s success, Dodd-Frank also created significant anti-retaliation protections for whistleblowers, which mirror those of the False Claims Act.  Pursuant to Dodd-Frank, it is unlawful for an employer to take retaliatory actions, including but not limited to termination, against employees attempting to report securities violations.  Dodd-Frank expressly grants whistleblowers, subject to retaliatory action, the right to file a civil lawsuit in federal court, seeking doubled back-pay, reinstatement, and attorney fees and costs.

In his decision, Judge Forester determined that these individuals are not entitled to a jury trial, as required by the Seventh Amendment to the U.S. Constitution.  Judge Forester determined that the remedies available to SEC whistleblowers in retaliation actions are inherently equitable in nature.  Plaintiff’s seeking equitable remedies, such as injunctive relief, are not entitled to a jury trial.  The Court was not persuaded by the plaintiff’s argument that the statutory relief of double back-pay was akin to compensatory or punitive damages, prayers for relief which generally entitle a litigant to a jury trial.  Finally, the Court found legislative silence on the issue favored the defendant’s position.

While the implications of this case outside the Northern District of Georgia are not yet known, if the rationale employed by Judge Forester is widely adopted the ramifications for SEC whistleblowers could be significant.  Generally speaking, a jury trial in an action claiming that a whistleblower was subject to retaliation is certainly preferable to a bench trial.  Many trial lawyers will attest that the juries are more receptive than judges to the emotional drama presented by the facts of such cases.

The case is Pruett v. BlueLinx Holdings, Inc., case number 1:13-cv-02607, in the U.S. District Court for the Northern District of Georgia.

McEldrew Young Purtell Merritt is a nationwide leader in whistleblower representation and has successfully represented numerous clients in some of the nation’s largest qui tam cases for over a decade.  For a free confidential consultation with one of our SEC whistleblower attorneys concerning whistleblower protections from retaliation, please call Eric L. Young, Esquire at (800) 590-4116 or complete the online form here.

 

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