Articles Posted in Retaliation

Employees who report or object to practices that they believe to be illegal or contrary to public policy are commonly known as “whistleblowers.” Some of the biggest cases of fraud and corruption in recent history—both in government and in the private sector—have resulted from whistleblower reports. Employees and other insiders are often in the best position to provide evidence of wrongdoing, but doing so can pose great risk to their own jobs. Numerous laws therefore protect whistleblowers from retaliation, including New Jersey’s Conscientious Employee Protection Act (CEPA). A lawsuit filed in New Jersey alleges that an automobile manufacturer retaliated against the plaintiff, in violation of CEPA, after he reported concerns to several supervisors and managers about possibly deceptive practices. Williams v. Tesla, Inc. et al., No. BUR-L-000194-18, complaint (N.J. Super. Ct., Burlington Cty., Jan. 26, 2018); removed to No. 1:18-cv-04120 (D.N.J., Mar. 23, 2018).Under CEPA, employers may not retaliate against an employee who reports suspected illegal, fraudulent, or otherwise wrongful conduct to a supervisor or a public body, including law enforcement, regulatory agencies, and legislative bodies. Retaliation is also prohibited if an employee participates in a public investigation of allegedly fraudulent or illegal activity, such as by testifying or providing other information; or if an employee “objects to, or refuses to participate in” acts that the employee believes to be illegal or in violation of public policy. N.J. Rev. Stat. 34:19-3. Aggrieved employees can file suit, and remedies may include reinstatement, lost wages, attorney’s fees and costs, and injunctive relief. Id. at § 34:19-5.

The defendant in Williams manufactures electric-powered automobiles and sells them to the general public. The plaintiff states in his complaint that he began working for the defendant in 2011. He claims that he became aware that the defendant “fail[ed] to disclose to consumers high-dollar, pre-delivery damage repairs prior to any transaction with consumers.” Williams, complaint at 2. The plaintiff “believed this practice to be illegal and/or fraudulent.” Id. He also allegedly learned that the defendant would “receiv[e] vehicles designated as ‘lemons,’” a term referring to a car with irreparable defects. Id. The plaintiff claims that the defendant would sell these vehicles to consumers without disclosing their “lemon” status, as required by state law. See N.J. Rev. Stat. § 56:12-35.

The plaintiff alleges that he reported his concerns to his direct supervisor, a regional manager, and a vice president in late 2016 and early 2017. He was working as a regional manager at that time. The supervisor and the regional manager reported to a director identified in the plaintiff’s complaint. The plaintiff claims that this director demoted him from regional manager to service manager, allegedly telling the plaintiff that he had “a ‘brand’ at the company and that there was no place for” him there. Williams at 3. The director allegedly demoted him again in July 2017, and he claims that a regional manager terminated him in September of that year, offering only pretextual reasons.

Enforcement of a wide range of laws and regulations depends on reporting by people with knowledge of possible violations, often known as “whistleblowers.” In cases involving suspected wrongdoing by an employer, many potential whistleblowers may hesitate to speak out, for fear of losing their jobs. In New Jersey, employment statutes protect whistleblowers against retaliation by their employers. The U.S. Supreme Court recently ruled on a dispute over the whistleblower protections in the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”). It held that, unlike many other whistleblower protection laws, Dodd-Frank protects people who report their concerns to the government, but not those who only report internally. Digital Realty Trust, Inc. v. Somers, 583 U.S. ___ (2018).

New Jersey whistleblowers may report their concerns to government regulators or to internal control officers. The New Jersey Conscientious Employee Protection Act (CEPA) protects public and private employees who disclose suspected legal violations, or who refuse to take part in acts that they reasonably believe are illegal or unethical. This includes disclosures made “to a supervisor or to a public body.” N.J. Rev. Stat. § 34:19-3(a). The language of Dodd-Frank, however, is not as clear on this issue.

Congress passed Dodd-Frank as a response to the financial crisis of 2008. The statute defines “whistleblower” as one or more individuals who report alleged violations of securities laws or regulations “to the Commission, in a manner established, by rule or regulation, by the Commission.” 15 U.S.C. § 78u-6(a)(6). The term “Commission” is defined elsewhere in the same chapter as the Securities and Exchange Commission (SEC), with an exception when “the context otherwise requires” a different interpretation. Id. at § 78c(a)(15). The question for the Supreme Court was whether Dodd-Frank’s whistleblower protections apply to someone who makes a report to someone other than the SEC.

When lawmakers and their staffs draft proposed legislation, they must consider any and all possible interpretations of the language they use. Even then, the legislative process may alter or amend a bill in ways that affect the potential meaning of certain words or phrases. Confusion over ambiguities in some statutes is inevitable. The U.S. Supreme Court recently granted certiorari in a case that involved a dispute over the meaning of the word “whistleblower” in the anti-retaliation provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or “Dodd-Frank.” The lower-court decision from the Ninth Circuit deferred to the interpretation of the Securities and Exchange Commission (SEC), which applied a broad definition of the term. This conflicts with a Fifth Circuit decision finding that Dodd-Frank’s whistleblower protection is limited to a narrow definition provided within the statute. Thus, the status of New Jersey whistleblowers remains unclear pending the Supreme Court’s resolution of the issue.

Dodd-Frank creates incentives for “whistleblowers”—employees and other insiders—to report violations and protects them from retaliation. Employers may not terminate or otherwise retaliate against whistleblowers for reporting Dodd-Frank violations to the SEC, or for “making disclosures that are required or protected” by other statutes. 15 U.S.C. § 78u-6(h)(1). Reading this provision in isolation, one might think that it applies to people who report legal violations to the SEC, other government agencies, or company management. An earlier subsection, however, defines “whistleblower” specifically as someone who reports securities law violations to the SEC. Id. at § 78u-6(a)(6). The dispute before the Supreme Court concerns whether Dodd-Frank’s anti-retaliation provision only applies to this narrow definition of “whistleblower,” or whether it uses a broader definition.

The plaintiff worked for the defendant as a Vice President. He made several reports to his superiors “regarding possible securities law violations by the company,” and he was fired shortly afterwards. Somers v. Digital Realty Trust, Inc., 850 F.3d 1045, 1047 (9th Cir. 2017). He sued for retaliation under Dodd-Frank. The district court held that he was a “whistleblower” within the meaning of the statute, even though he did not make a report to the SEC. The Ninth Circuit affirmed this ruling on several grounds.