Wednesday, June 21, 2017

“Follow the Rules Act” Becomes Law

On June 15, 2017, President Trump signed the “Follow the Rules Act,” H.R. 657 ("the Act"), after it passed both the House and Senate unanimously. The Act amends the Whistleblower Protect Act ("WPA"), 5 U.S.C. § 2302(b)(9)(D), to protect federal employees when they are, “refusing to obey an order that would require the individual to violate a law, rule, or regulation[.]” The Act added the last three words: “rule or regulation.”

Through this law, Congress makes clear that it has always intended that federal employees would be protected from retaliation when they refuse to violate a rule or regulation. The House Committee Report No. 115-67 stated, “the provision was an explicit rejection of the general policy for federal employees to ‘obey first, grieve later.’”

The new Act was necessary because the Federal Circuit in Rainey v. Merit Sys. Protection Bd. focused on the word “law” and held that § 2302(b)(9)(D) only protects federal employees when they are refusing to violate a law passed by Congress.

To justify this limited view of the WPA’s protections, the Federal Circuit relied on the Supreme Court’s 2015 decision in Department of Homeland Security v. MacLean, 135 S. Ct. 913 (2015). There, the Supreme Court was considering the provision in § 2302(b)(8)(A), which protects a disclosure about a violation of a law, rule or regulation, fraud, waste, abuse, or a danger to public health and safety:
if such disclosure is not specifically prohibited by law and if such information is not specifically required by Executive order to be kept secret in the interest of national defense or the conduct of foreign affairs[.]
Federal Air Marshal Robert “Bob” MacLean had disclosed a 2003 plan by TSA to shut down travel by the air marshals to save money. MacLean leaked the plan to MSNBC, and TSA found the money to restore air marshal travel within 24 hours. Two years later, TSA figured out that MacLean had been the whistleblower and fired him for it. MacLean argued that because he only violated a TSA regulation prohibiting disclosures, and not any law passed by Congress, his disclosure was protected.

Notably, Sections 2302(b)(8)(B) and (b)(9)(C) of the WPA protect disclosures to the Office of Special Counsel and any Inspector General, regardless of whether the information disclosed is classified or not.

The Supreme Court agreed with MacLean, and explained its reasoning in part as follows:
a broad interpretation of the word “law” could defeat the purpose of the whistleblower statute. If “law” included agency rules and regulations, then an agency could insulate itself from the scope of Section 2302(b)(8)(A) merely by promulgating a regulation that “specifically prohibited” whistleblowing. But Congress passed the whistleblower statute precisely because it did not trust agencies to regulate whistleblowers within their ranks. Thus, it is unlikely that Congress meant to include rules and regulations within the word “law.”
If the Federal Circuit in Rainey had focused on this text of the Supreme Court’s decision in MacLean, then it would quickly see that the term “law” in Section 2302(b)(9)(D) has a broader meaning than it does in Section 2302(b)(8)(A) because the two uses of the word serve different purposes. In Section 2302(b)(9)(D), Congress used the word “law” to protect federal employees when they take a stand against an illegal order. As it is improper for agency officials to order staff to violate regulations, those regulations should be considered “law” for purposes of protecting the employees under Section 2302(b)(9)(D).

Instead, the Federal Circuit focused on the distinction between “law” and “law, rule or regulation” as those terms are used in Section (b)(8)(A) to decide on the meaning of “law” in Section (b)(9)(D). Because they are different words, the court reasoned, they must have different meanings. The outcome today shows that courts should be more focused on the remedial purpose of the law, rather than the particular words used.

Dr. Timothy Rainey was a Supervisory Foreign Affairs Officer in the State Department’s Bureau of African Affairs. In 2013, he was serving as a contracting officer representative (“COR”) for the Africa Contingency Operations Training and Assistance program. He had refused to follow his supervisor’s order to tell a contractor to rehire a terminated subcontractor. Dr. Rainey argued that carrying out the order would have required him to violate Federal Acquisition Regulation (“FAR”) section 1.602-2(d), 48 C.F.R. § 1.602-2(d), by improperly interfering with personnel decisions of a prime contractor and requiring the prime contractor to operate in conflict with the terms of the contract. On October 13, 2013, Dr. Rainey’s supervisor relieved him of his duties as the COR.

Dr. Rainey originally convinced the MSPB’s Administrative Judge ("AJ") that he had a valid claim under the WPA. However, after the AJ conducted a hearing in the case, the Supreme Court issued its decision in MacLean. The AJ relied on MacLean and dismissed the case. The MSPB and Federal Circuit affirmed. Last December, the Supreme Court denied Dr. Rainey’s request to hear the case.

Significantly, because Congress intended today’s new law to be a clarification of what it always meant in 5 U.S.C. § 2302(b)(9)(D), the MSPB is likely to hold that it has retroactive effect, and should be applied to all pending cases. The House Committee Report helpfully declares the purpose of H.R. 657 as follows:
H.R. 657, the Follow the Rules Act, clarifies that the prohibition against certain personnel actions includes personnel actions taken against any employee or applicant for employment for refusing to obey an order that would violate a rule or regulation.
The MSPB previously held in Day v. Department of Homeland Security that the 2012 Whistleblower Protection Enhancement Act amendments to the scope of protection were clarifying, and therefore have retroactive effect. I co-wrote an amicus brief in Day.

The bottom line is that the Federal Circuit’s holding in Rainey is now legislatively overruled. Indeed, Congress has made clear that § 2302(b)(9)(D) has always protected refusals to violate rules or regulations. Whistleblowers who have cases pending now on this issue need to inform their judges about this new law, and the application of the MSPB’s holding on retroactivity in Day. Together, these points should make clear that such whistleblowers have always had protection under the WPA. 

By Richard R. Renner.


This blog is provided to our readers for informational purposes only. It is not offered as legal advice. Communication of information through this blog does not create an attorney-client relationship. You should not rely upon information contained in this blog without first seeking professional legal advice. If you would like a telephone screening or consultation with a KCNF attorney, you are welcome to call 202-331-9260 to begin our intake process, or submit your legal issue at http://www.kcnlaw.com/Contact.shtml.


Monday, June 12, 2017

Senate Passes Bill Limiting Civil Service Protections at VA

On June 6, 2017, the U.S. Senate passed a bill by voice vote (which means there was no roll call taken and no record of who supported the legislation). While the bill purports to protect war veterans, instead it actually limits the rights of dedicated federal civil servants without ensuring better treatment for the vets. On its face, the Department of Veterans Affairs Accountability and Whistleblower Protection Act of 2017 looks like a progressive piece of legislation. For example, it creates a central office, the Office of Accountability and Whistleblower Protection, to which whistleblowers within the Department of Veterans Affairs (“VA”) may make protected disclosures about waste and mismanagement without fear of retribution. But, upon a closer look, this bill actually shaves away civil service protections that are an integral part of federal employment.

Currently, under 5 U.S.C. § 7513, the VA (together with most other federal agencies) has to provide most of its employees with 30-days’ notice and a chance to respond if it proposes to remove, demote, or suspend them for more than 14 days. The new bill cuts in half the time in which the employee may consult with an attorney and prepare a well-reasoned response from 15 to 7 days. If an employee is removed under current laws, he or she usually has 30 days to file an appeal with Merit Systems Protection Board (“MSPB”). This bill limits the appeal deadline to 10 days for most VA employees. Further, the MSPB Administrative Judge (“AJ”) assigned to the appeal is required to issue a decision within 180 days – regardless of any stalling tactics used by the agency’s attorneys. If the AJ fails to do so, the MSPB must submit a report on the matter to Congressional committees.

Within this expedited review period, the agency’s burden of proof drops from the current preponderance of the evidence standard to the substantial evidence standard, which is much easier for an agency to prove. (In brief, the difference is between “the employee probably did it” – preponderance – and “the employee may have done it” – substantial evidence.) Under current law, if the AJ determines that the agency has met this standard, but he or she believes that the discipline was too harsh given the facts of the case, he or she may mitigate the penalty by imposing a less severe form of discipline (i.e., demotion instead of removal); under the new bill, the AJ would not have that discretion – if he or she finds that the agency has met its burden, he or she may not mitigate the penalty. Additionally, if the VA wishes to remove an employee for performance issues, as opposed to misconduct, under this bill the agency would no longer be required to first put that employee on a Performance Improvement Plan in order to give him a chance to better his job performance.

Reports indicate that the House is likely to pass this legislation and the President is eager to sign it. Some commentators have argued that mismanagement and waste within the VA puts the country’s veterans at risk and radical changes are needed to set the agency right. However, others are concerned that this legislation is not about protecting the veterans but rather a way for small-government politicians to eventually push through wide-sweeping civil service reforms and drastically reduce the size of the federal government.

If you are an employee of the VA or any other federal agency and are facing proposed discipline, you may contact our firm to set up a consultation to discuss your legal rights.


Written by Sarah Martin.

This blog is provided to our readers for informational purposes only. It is not offered as legal advice. Communication of information through this blog does not create an attorney-client relationship. You should not rely upon information contained in this blog without first seeking professional legal advice. If you would like a telephone screening or consultation with a KCNF attorney, you are welcome to call 202-331-9260 to begin our intake process, or submit your legal issue at http://www.kcnlaw.com/Contact.shtml.

Monday, June 5, 2017

Burakiewicz, Holland, and DePriest Join KCNF

Kalijarvi, Chuzi, Newman & Fitch, P.C., is pleased to announce that attorney Heidi R. Burakiewicz has joined the firm as a Partner, Stephanie Bryant Holland has joined the firm as Of Counsel, and Robert DePriest has joined the firm as an Associate.

Burakiewicz, Holland, and DePriest have an established practice representing federal employees and their unions in overtime pay, wage and hour violations, free speech and association rights, discrimination, harassment, retaliation, and Privacy Act claims.

Burakiewicz is lead counsel in Martin et al. v. U.S., a collective action on behalf of over 25,000 federal employees in the U.S. Court of Federal Claims. In a July 2014 ruling, the Court determined that the government violated the Fair Labor Standards Act (“FLSA”) by failing to pay the essential employees whom it required to work during the October 2013 shutdown on their regularly scheduled pay dates. In a February 2017 ruling, the court ruled that the government is liable for liquidated damages to the essential employees because it did not act in good faith.

Burakiewicz is also lead counsel in White et al. v. Sessions, a class action on behalf of over 500 female employees of the Federal Bureau of Prisons in Coleman, Florida, alleging that the government failed to take steps to prevent inmates from egregiously sexually harassing them. The case settled in December 2016 for $20 million dollars and a long list of negotiated changes designed to eradicate the sexual harassment. The judge described the outcome as “impressive by any standard” in the January 17, 2017 decision preliminarily approving the settlement.

Biographies of Burakiewicz, Holland, and DePriest are available here.

“We are so pleased to have Heidi R. Burakiewicz, Stephanie Bryant Holland, and Robert DePriest join us,” said Elaine Fitch, Managing Partner of KCNF. “Their practice is a national leader in ground-breaking federal sector compliance with wage and hour and other employment protections.”

Written by Richard Renner.


This blog is provided to our readers for informational purposes only. It is not offered as legal advice. Communication of information through this blog does not create an attorney-client relationship. You should not rely upon information contained in this blog without first seeking professional legal advice. If you would like a telephone screening or consultation with a KCNF attorney, you are welcome to call 202-331-9260 to begin our intake process, or submit your legal issue at http://www.kcnlaw.com/Contact.shtml.

Friday, May 19, 2017

Ninth Circuit Holds that Dodd-Frank Offers Broad Protection for Whistleblowers

On March 8, 2017, a three-judge panel of the Court of Appeals for the Ninth Circuit ruled in favor of Paul Somers, a former Vice President of Digital Realty Trust. Mr. Somers was fired after disclosing what he viewed to be several serious securities law violations. What distinguished Mr. Somers from many of his fellow Dodd-Frank whistleblowers—and indeed, what could make this an issue for the Supremes—was that Digital Realty Trust fired him before he had the opportunity to transmit this information to the Securities and Exchange Commission (SEC), which is tasked under Dodd-Frank to investigate and prosecute such violations. This, Digital Realty Trust attempted to argue, precluded Mr. Somers from the whistleblower retaliation provisions under Section 21F of the Exchange Act, entitled “Securities Whistleblower Incentives and Protection.”

The Ninth Circuit disagreed. It ruled that Dodd-Frank’s anti-retaliation provision “unambiguously” protected employees who made only internal disclosures. The two-judge majority referred to the legislative history of the Sarbanes-Oxley Act, a law Congress enacted in the aftermath of the 2002 Enron collapse to safeguard investors and to restore public confidence in financial markets. Sarbanes-Oxley, or SOX, plays a key role in Section 21F of the Exchange Act, which states:
No employer may discharge, demote, suspend, threaten, harass, directly or indirectly, or in any other manner discriminate against, a whistleblower in the terms and conditions of employment because of any lawful act done by the whistleblower—

(i) in providing information to the Commission in accordance with this section;

(ii) in initiating, testifying in, or assisting in any investigation or judicial or

administrative action of the Commission based upon or related to such information; or

(iii) in making disclosures that are required or protected under the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201 et seq.), this chapter, including section 78j-1(m) of this title, section 1513(e) of Title 18, and any other law, rule, or regulation subject to the jurisdiction of the Commission.

While Subsections (i) and (ii) clearly only protect disclosures that are made to officials, Subsection (iii) potentially allows for far broader protections. Indeed, the SEC itself interprets Subsection (iii) as providing anti-retaliation protection to internal disclosures:

Finally, our interpretation best comports with our overall goals in implementing the whistleblower program. Specifically, by providing employment retaliation protections for individuals who report internally first to a supervisor, compliance official, or other person working for the company that has authority to investigate, discover, or terminate misconduct, our interpretive rule avoids a two-tiered structure of employment retaliation protection that might discourage some individuals from first reporting internally in appropriate circumstances and, thus, jeopardize the investor-protection and law-enforcement benefits that can result from internal reporting.

The Ninth Circuit’s interpretation deepens the pre-existing circuit split between the Second Circuit and the Fifth Circuit. Where the Second Circuit similarly favored broad protections for employee whistleblowers in Berman v. Neo@Ogilvy LLC, the Fifth Circuit took a much narrower view. In Asadi v. G.E. Energy, LLC, the Fifth Circuit ruled that Khaled Asadi, who served as G.E. Energy’s Iraq Country Executive, could not be considered a “whistleblower” when he reported up his chain of command about practices that he believed violated the Foreign Corrupt Practices Act. The Fifth Circuit hinged its analysis on 15 U.S.C. § 78u–6, which defines “whistleblower” as “any individual who provides, or 2 or more individuals acting jointly who provide, information relating to a violation of the securities laws to the Commission, in a manner established, by rule or regulation, by the Commission.” According to the Fifth Circuit, this definition of a whistleblower was “clear,” “unambiguous,” and simply did not protect internal disclosures.

All three courts overlooked a line of cases that have held that reports to company officials are a normal way for workers to commence disclosures that later lead to the government. As such, they deserve the same legal protections as direct disclosures to the government. In Phillips v. Interior Board of Mine Operations Appeals, the D.C. Circuit held that coal miners are protected for making safety complaints to their supervisors. In Kasten v. Saint Gobain Performance Plastics Corp., the Supreme Court held that an oral report to a supervisor about a wage violation is protected under the phrase “filed any complaint.”

Somers v. Digital Realty Trust is still an important victory for whistleblower rights. A narrow interpretation of Dodd-Frank gives employers a perverse incentive to quickly terminate employees after internal disclosures are made, but before they have an opportunity to make a disclosure to the SEC (even though the whistleblowers would still have 180 days to file a SOX retaliation complaint to OSHA). Not only does a narrow interpretation result in serious gaps in legal protection for whistleblowers, but it also completely vitiates the very purpose of federal statutes designed to root out waste, fraud, and abuse.



Written by Nina Ren.



This blog is provided to our readers for informational purposes only. It is not offered as legal advice. Communication of information through this blog does not create an attorney-client relationship. You should not rely upon information contained in this blog without first seeking professional legal advice. If you would like a telephone screening or consultation with a KCNF attorney, you are welcome to call 202-331-9260 to begin our intake process, or submit your legal issue at http://www.kcnlaw.com/Contact.shtml.

Wednesday, May 10, 2017

The Polygraph Confessional

Although the Federal Employee Polygraph Protection Act of 1988, administered by the Department of Labor protects most employees from being required to take a polygraph, federal employees or contractors engaged in national security-related activities may well find themselves required to take and pass a polygraph exam as a condition of being granted access to secure facilities or information.

The idea that simultaneously measuring pulse, blood pressure, respiration, and other largely involuntary physiological functions provides an objective indication of the subject’s state of mind including, especially, whether he or she is telling the truth, has been around for more than a century.  And, although courts have been reluctant to embrace the technology of the polygraph, the federal government relies on the technology to screen employees and contractors before they are allowed to access sensitive or classified information.

Within the federal government, polygraphs are part of the toolbox of Credibility Assessment (CA), which is described as “the multi-disciplinary field of techniques and procedures that assesses truthfulness and relies on physiological reactions and behavioral measures to test the agreement between an individual’s memories and his or her statements.” This sentiment is also reflected in the Polygraph And Credibility Assessment (PCA) Procedures and the Counterintelligence Polygraph Program. Within the Intelligence Community, the Director of National Intelligence (DNI) is charged with administering the CA program; within DOD, the Under Secretary for Defense (Intelligence) (USD(I)) has primary responsibility for the program, but it is the Director of the Defense Intelligence Agency (DIA) who actually manages the Credibility Assessment program. The National Center for Credibility Assessment (NCCA), located at Fort Jackson, South Carolina, provides training for Credibility Assessment for all federal agencies, as well as research into the effectiveness of various techniques and tools.

Polygraph exams may be administered “for personnel security screenings, issue-specific examinations, the adjudication for access to specific types of classified information, and the resolution of other examinee issues.”  Most employees encounter the requirement as part of a new job or security clearance application. You fill out the SF-86 and, if it is required for your agency or job, you find yourself scheduled for a polygraph examination.

If you, as a federal government employee (whether military or civilian) or contractor, are required to undergo polygraph exam, you should receive notice of the exam and its specific purpose. You will be asked to give consent in writing to being polygraphed. You should be told that you may consult a lawyer before either giving consent or being polygraphed. (But your lawyer cannot attend the polygraph session.) At the polygraph, as with providing information on the SF-86 and throughout the clearance application process, you should be wholly truthful and forthcoming in answering questions. At the same time, you should be careful not to agree to statements that are suggested to you by the polygrapher but are not, to your knowledge, true. Hold firm to what you know. Other than technical questions (such as those used to calibrate the polygraph), you should be asked only questions relevant to the particular focus of the polygraph exam. For personnel security screenings, the questions asked in a polygraph exam must arise out of the Adjudicative Guidelines, ICPG 704.2.

You should know that if, during a polygraph exam, you report a possible violation of federal or state criminal laws, the agency is bound to report that information to the Attorney General, the Department of Justice, and to federal investigative agencies (or, in the case of state or local laws, to the relevant law enforcement agency). This holds true for violations of the Uniform Code of Military Justice (which would be reported to the Secretary of Defense and the relevant military criminal investigative unit). Facts that seem to indicate a crime in the planning stages will also be reported.

If you refuse to undergo a polygraph exam, or fail to cooperate during a polygraph examination, you are likely to find that your clearance may be denied or revoked. What the IC calls “purposeful non-cooperation” may also result in a negative determination. Under ICPG 704.6(E)(3)(c), “purposeful non-cooperation” includes confirmed use of polygraph countermeasures. This would include the use of drugs, biofeedback training, or behavioral countermeasures to overcome the physical responses measured by a polygraph. Indeed, instances of an employee simply researching such countermeasures on the web in the days before the exam, if admitted, has been used to justify denying a security clearance.

Federal employees take – and pass – polygraph exams pretty commonly as part of vetting for security clearances. Before undergoing a polygraph, it is good be familiar with the regulations, what they require of you, and how they protect you, although (as noted above) making yourself too familiar may be disqualifying. If you would like to discuss an upcoming polygraph exam, we would be happy to help.

This blog was written by Mary Kuntz.

This blog is provided to our readers for informational purposes only. It is not offered as legal advice. Communication of information through this blog does not create an attorney-client relationship. You should not rely upon information contained in this blog without first seeking professional legal advice. If you would like a telephone screening or consultation with a KCNF attorney, you are welcome to call 202-331-9260 to begin our intake process, or submit your legal issue at http://www.kcnlaw.com/Contact.shtml.

Monday, May 1, 2017

Wrongful termination and the internal investigation in Virginia


This blog continues to assess the relationship between wrongful termination and an internal or external investigation. We previously discussed Maryland and District of Columbia law.  We are now focusing on the law in the Commonwealth of Virginia.

Virginia courts strongly adhere to the common law employment-at-will doctrine. As in Maryland and the District of Columbia, Virginia employers can terminate at-will employees for any legal reason or for no reason at all, unless it violates a law or there is a “public policy” exception.

However, the public policy exception is limited. The Supreme Court of Virginia identified a narrow exception to this rule in Bowman v. State Bank of Keysville. Under Bowman, wrongful discharge under its “public policy” exception must fit into one of two categories. The first involves laws containing explicit statements of public policy (e.g., “It is the public policy of the Commonwealth of Virginia [that]...”). The second category involves laws that do not explicitly state a public policy, but instead are designed to protect the “property rights, personal freedoms, health, safety, or welfare of the people in general,” where such laws must be in furtherance of “an [underlying] established public policy” that the discharge from employment violates.

Subsequent Virginia Supreme Court decisions have held that viable Bowman claims for wrongful discharge are limited to three factual circumstances. In Rowan v. Tractor Supply Co., the Court explained: (1) the employer violates a public policy enabling the exercise of an employee's statutorily-created right; (2) the public policy violated by the employer is explicitly expressed in a statute and the employee is clearly a member of the class of persons directly entitled to the protection enunciated by the applicable public policy; or (3) the discharge is based upon the employee's refusal to engage in a criminal act.  Importantly, and as a threshold matter, caselaw indicates that the plaintiff must identify a Virginia statute establishing a public policy that has been violated by the employer.

In contrast with the decision by the Maryland Court of Appeals in Wholey v. Sears Roebuck, there is no internal whistleblowing defense offered to employers in Virginia. Though there is not much case law directly on point, in Seay v. Grace Jefferson Home, et al., the circuit court overruled a demurrer when plaintiff “brought to her employer’s attention certain violations of state law, and cooperated with a state inspector who was investigating those alleged violations. In permitting the wrongful discharge claim to continue, the Court emphasized that the plaintiff “complained to her employer” and also “complained to a representative of the governmental agency charged with investigating wrongdoing of the type complained of.”

Notably, in Bowman, the Supreme Court stated that it was relying in part on the decision in Harless v. First National Bank in Fairmont (also cited in Seay). In Harless, the Supreme Court of West Virginia held that a bank employee, discharged as a result of attempts to require his employer to comply with both state and federal consumer credit protection laws, had stated a cause of action for wrongful termination. In Harless, the interactions were internal. Specifically, the plaintiff brought allegedly illegal actions to the attention of his superiors who were vice presidents of the bank. Subsequently, plaintiff appeared before a bank committee which was investigating the matter. Later, plaintiff was interviewed by one of the defendants and the bank’s auditor. Thereafter, his employment was terminated.

Thus, the analysis in Virginia focuses on the public policy allegedly violated, and not to whom a complaint of wrongdoing is made.

As to internal whistleblowing, there are reports documenting how the large majority of employee disclosures are made internally. Most employees want to see their issues resolved within the chain of command, or within other processes of their employer. This makes protecting the internal whistleblower all the more important to encourage employees to disclose violations and to allow employers to detect them. Please contact our Firm if you are interested in further information on this issue.

Written by Marc Pasekoff.


This blog is provided to our readers for informational purposes only. It is not offered as legal advice. Communication of information through this blog does not create an attorney-client relationship. You should not rely upon information contained in this blog without first seeking professional legal advice. If you would like a telephone screening or consultation with a KCNF attorney, you are welcome to call 202-331-9260 to begin our intake process, or submit your legal issue at http://www.kcnlaw.com/Contact.shtml.

Wednesday, April 26, 2017

Working in Cuba

[Photo by Laura Yeomans]
I had the privilege of traveling to Cuba last month as part of the U.S. delegation to the IX Conference of Labor Lawyers and Trade Unionists. Our delegation of 17 lawyers, legal workers, and trade unionists visited a variety of workplaces in Cuba, met with jurists, trade union leaders, and environmentalists, and ate in a variety of fine and very reasonably priced restaurants.

What we learned is that Cuban workers are cash poor, health-care rich, well-educated, egalitarian, participatory, and eager to exchange ideas. Cuba remains a Third-World developing country with a thriving Latin American culture of music and dance.

Long exploited for sugar, coffee and tobacco production, Cuban workers rose from slavery to poverty in the 19th and 20th centuries. Our delegation saw the remains of a 19th century tobacco plantation that relied on slave labor. Urban labor often came from slaves who “bought” their freedom. In 1875, Spain outlawed slavery, but the process took until 1886 to free Cuba’s last slaves. A series of revolutionary movements challenged both the Spanish and, after its 1898 victory over Spain, American domination of Cuba. These culminated in the 1959 revolution, followed by a U.S. trade embargo that remains in force to this day.

About 27% of Cubans belong to unions affiliated with the CTC (Central de Trabajadores de Cuba). That compares with 4.5% of Americans who belong to unions. In Cuba, a job is guaranteed. Workers do not always like the work available to them, and they have the option to start their own business, or form a coop.

During our conference, we heard a presentation written by Muriel Castro, Fidel Castro’s daughter, about how transgender Cubans could use a new non-agricultural coop law to form businesses that would give them an alternative to the discrimination they face in more traditional workplaces.

Since employment is guaranteed, and salaries have very little variation, employment lawyers in Cuba are rarely asked to handle wrongful termination cases. Most labor law disputes involve discipline. Lawyers in private practice belong to collective firms, called “bufetes,” although clients would be represented by the individual lawyer and not by the firm. The fee for hiring a lawyer for a typical labor dispute would be in the range of $1 to $5. The bufete can approve a higher fee in difficult cases.

Cuba passed a labor law in 2014 that protects lesbians, gays, bisexuals and transgender workers from discrimination on the job. The law was considered at local and provincial levels, with feedback to the national legislature before its final adoption. In the U.S., Congress still has not passed a law explicitly protecting members of the LGBT community from employment discrimination, although some courts have determined that Title VII’s prohibition of sex discrimination applies. Cuba is now considering a new family law that would legalize same-sex marriages, but it is not yet adopted. We met a lesbian anthropologist who could not get on the waiting list for IVF services because her marriage to her wife is not yet recognized in Cuba. In this respect, the U.S. Supreme Court accomplished an advancement in legal equality that the national legislatures have not yet done in either the U.S. or in Cuba.

For those who do qualify for IFV or other health care procedures, it would be entirely free to Cubans. There is no need for health insurance, claim forms, co-pays or deductibles. Similarly, college education is also free for all Cubans accepted to be students at the universities.

During our conference, we heard that Cuba is debating a modification to the labor law that would allow managers to award bonuses of up to 2.5% of annual wages for superior performance. Progress in advancing the law is stalled by the details of assuring that performance would be determined objectively rather than subjectively. Meanwhile, in the U.S., the top 1% earns 23% of all earnings. That represents an income inequality in the U.S. of 2,300% compared to the 2.5% that Cuba is considering. Cuban labor lawyers expressed how some increase in wage flexibility might encourage additional foreign investment.

Speaking of investment, it is not coming from the U.S. due to the trade embargo. European, Canadian and Asian interests dominate the investments in hotels, industry and transportation.

Delegates from other Latin American countries had mostly depressing news about governmental plans to scale back on labor protections. One bright spot was Ontario, Canada, which has decided to improve its labor law to encourage unionization. Under the new law, workers can establish a union just by getting a majority of the workers to sign an authorization card. It also expands the opportunities for unionization for domestic workers and the employees of franchises.

I presented a paper called The Uneven Web of Whistleblower Protection. After explaining how being fired can be a serious blow for an American worker, and how the fear of getting fired can deter workers from challenging management, I described the array of whistleblower laws that protect some speech for some American workers. I called attention to the number of areas where Congress has and has not passed any whistleblower protection. We protect food safety whistleblowers, but not pharmaceutical safety whistleblowers. The Affordable Care Act protects health insurance coverage whistleblowers, but not patient protection whistleblowers. We have no federal whistleblower protections specifically for tax compliance whistleblowers or for employees misclassified as independent contractors. My main point was that we can learn about which sectors of our economy have influence over legislation by looking at the holes in our protections for worker free speech.

We saw many other Americans staying at the hotels with us. The U.S. embargo permits U.S. citizens to travel for professional or research purposes. Signing the required declaration about this purpose was easy for us given the conference and other educational activities we attended. Individuals can plan their own trip, get their own visa and schedule air travel to Cuba on American or Jet Blue airlines.

Both American and Cuban workers can learn from their dialogue with each other. Lifting the U.S. trade embargo will go a long way toward increasing that dialogue.

By Richard Renner.

This blog is provided to our readers for informational purposes only. It is not offered as legal advice. Communication of information through this blog does not create an attorney-client relationship. You should not rely upon information contained in this blog without first seeking professional legal advice. If you would like a telephone screening or consultation with a KCNF attorney, you are welcome to call 202-331-9260 to begin our intake process, or submit your legal issue at http://www.kcnlaw.com/Contact.shtml.

Thursday, April 6, 2017

Competing Holdings on Sexual Orientation Discrimination in 7th and 11th Circuits

In the past month, two different Courts of Appeals issued decisions about Title VII and sexual orientation discrimination in the workplace and they came to opposite conclusions. The disagreement between the Seventh and Eleventh Circuits virtually guarantees that the Supreme Court (and its newest Justice, Neil Gorsuch, should he survive the confirmation process) will decide the outcome eventually. However, the appeal will not be coming from the defendant in the Seventh Circuit decision, will not be coming from the defendant in the Seventh Circuit decision accepts the holding that Title VII covers sexual orientation discrimination, but still asserts that it did not discriminate against the plaintiff.

In early March, the Court of Appeals for the Eleventh Circuit held that, while a claim of discrimination based on gender non-conformity is actionable under Title VII of the Civil Rights Act of 1974, sexual orientation discrimination is not.

In Evans v. Georgia Regional Hospital, Jameka Evans began working for the hospital as a security guard in August 2012. She wore her hair short and dressed in a male guard’s uniform. Although she is a lesbian, she did not “broadcast” her sexual orientation in the workplace. The head of Evan’s department continually harassed her because Evans did not carry herself in a “traditional woman[ly] manner.” After being passed over for a promotion for which she was more qualified, Evans went to the hospital’s Human Resource’s office and lodged a complaint. The harassment continued until Evans voluntarily left her job in October 2013 due to the hostile working environment.

Evans filed first at the EEOC and then in federal court. However, she asked the court to allow her to proceed in forma pauperis and appoint her counsel, as she did not have the assets to pay the filing fee. The case was assigned to a magistrate judge who reviewed Evans’ petition and determined that, per 28 U.S.C. § 1915(e)(2)(B)(ii), Evans had “fail[ed] to state a claim on which relief may be granted.” Specifically, the magistrate found that Title VII “was not intended to cover discrimination against homosexuals” and that claims of discrimination based on gender non-conformity were “just another way to claim discrimination based on sexual orientation.” The magistrate judge recommended that the case be entirely dismissed. The district court adopted the magistrate’s Report & Recommendation and appointed counsel from the Lambda Legal Defense and Education Fund to represent Evans on appeal.

Evans appealed to the Court of Appeals for the Eleventh Circuit and argued that the district court was wrong to dismiss her sexual orientation discrimination claim. On this point, the Court of Appeals agreed with the lower court and held that there is no sexual orientation action under Title VII. To support its holding, the court relied on a Fifth Circuit case from 1979, Blum v. Gulf Oil Corp.: “Discharge for homosexuality is not prohibited by Title VII”. The court was dismissive of Evans’ reliance on two Supreme Court cases to support her claim: “Price Waterhouse [v. Hopkins] and Oncale [v. Sundower Offshore Services, Inc.] are neither clearly on point nor contrary to Blum. These Supreme Court decisions do not squarely address whether sexual orientation discrimination is prohibited by Title VII.” The court, additionally, found holdings from nine other circuit courts of appeals extremely persuasive that sexual orientation discrimination is not actionable under Title VII.

Curiously, Evans also argued that the district court was wrong to dismiss her gender non-conformity discrimination claim, and on this the Court of Appeals partially agreed. The court pointed to its earlier cases which held that discrimination based on a failure to conform to a gender stereotype is sex-based discrimination and constitutes an avenue for relief under Title VII. However, the court concluded that Evans had not “provided enough factual matter to plausibly suggest that her decision to present herself in a masculine manner led to the adverse employment actions.” Even so, the court held that the district court should have given Evans a chance to amend her complaint and plead more facts to support her claim.

Thus, while the Fifth Circuit ordered the district court to give her an opportunity to amend her complaint in order to include more facts about her gender non-conformity discrimination, it barred her from pursuing her claims of sexual orientation discrimination in this litigation.

Despite the Eleventh Circuit’s decision in Evans, the Court of Appeals for the Seventh Circuit came to a contrary holding less than one month later.

In Hively v. Ivy Tech Community College of Indiana, Hively, a lesbian, taught as an adjunct professor from 2000 until 2014, when her contract was not renewed. During her tenure at the College, she had unsuccessfully applied for at least six full-time teaching positions. Like Evans in the Eleventh Circuit, Hively first filed pro se at the EEOC and then in federal court. The College moved to dismiss Hively’s complaint, and the district court agreed, based on Seventh Circuit precedent that held that sexual orientation is not a protected class under Title VII.

Again, as in Evans, the Lambda Legal Defense and Education Fund represented Hively on appeal to the Seventh Circuit. The three judge panel assigned to the case affirmed the district court’s dismissal of the matter. Hively then requested en banc review (i.e., by the entire court). In an eight to three decision, the Court of Appeals overruled its prior decisions and held that discrimination on the basis of sexual orientation is a form of sex discrimination and, therefore, prohibited under Title VII.

Here, the Court of Appeals approached the issue from two directions. First, the court explained that “[a]ny discomfort, disapproval, or job decision based on the fact that the complainant – woman or man – dresses differently, speaks differently, or dates or marries a same-sex partner, is a reaction purely and simply based on sex” and, therefore, any adverse actions taken against complainant based on that discomfort is illegal under Title VII. Second, the court explored the associational discrimination theory propounded by Hively. Hively argued that Loving v. Virginia struck down miscegenation laws and, therefore, paved the way for a line of employment cases holding that an employee can make a claim of associational race discrimination if his employer treats him adversely on the basis that he is married to a spouse of a different race. The court accepted that argument: “No matter which [protected] category [under Title VII] is involved, the essence of the claim is that the plaintiff would not be suffering the adverse action had his or her sex, race, color, national origin, or religion been different.” The Court of Appeals remanded Hively to the district court to continue litigation.

Moreover, while the Eleventh Circuit totally rejected Evans’ reliance on the Supreme Court’s Oncale decision as “not on point”, the Seventh Circuit embraced the decision as support for its holding. While Oncale did not specifically involve sexual orientation, the decision (which did involve harassment of a man by a group of men) said this:

Title VII prohibits “discriminat[ion] . . . because of . . . sex” in the “terms” or “conditions” of employment. Our holding that this includes sexual harassment must extend to sexual harassment of any kind that meets the statutory requirements.

The Seventh Circuit interpreted that language as holding that “the fact that the enacting Congress may not have anticipated a particular application of the law cannot stand in the way of the provisions of the law that are on the books.” That holding is totally opposite the Eleventh Circuit’s holding in Evans.

Based on decisions like these, it is becoming increasingly apparent that we will not have a nationwide understanding of what protections Title VII offers LGBTQ workers until the Supreme Court decides the issue. However, Ivy Tech Community College has already announced that it will not seek Supreme Court review of the decision. In the meantime, local laws protect LGBTQ people from employment discrimination in approximately 20 states and the District of Columbia.


Written by Sarah Martin


This blog is provided to our readers for informational purposes only. It is not offered as legal advice. Communication of information through this blog does not create an attorney-client relationship. You should not rely upon information contained in this blog without first seeking professional legal advice. If you would like a telephone screening or consultation with a KCNF attorney, you are welcome to call 202-331-9260 to begin our intake process, or submit your legal issue at http://www.kcnlaw.com/Contact.shtml.

Thursday, March 9, 2017

Want That Clearance? Failing to Pay Taxes is Not Just a Matter of Whether you Owe Money

As holders of a security clearance know, financial problems can make getting or keeping a clearance hard. On the application for a security clearance, the SF-86 (or “E-QIP” when electronic), applicants are asked to report, for the last seven years, bankruptcy, financial problems due to gambling, delinquency on alimony or child support, adverse judgments or liens, repossessions, defaults, evictions, and other signs of financial difficulties or irresponsibility. As Paragraph 18 of Guideline F under the Adjudicative Guidelines, which encompass federal regulations governing the adjudication of clearances, explains:
Failure to live within one’s means, satisfy debts, and meet financial obligations may indicate poor self-control, lack of judgment, or unwillingness to abide by rules and regulations, all of which can raise questions about an individual’s reliability, trustworthiness, and ability to protect classified or sensitive information.
The issue for a security clearance is not the debt itself but what it indicates about “an individual’s reliability, trustworthiness, and ability to protect classified or sensitive information.”

Decisions of the Defense Office of Hearing and Appeals (“DOHA”) which adjudicates security clearance cases for federal government contractors, make clear that merely paying off past-due debts, while a good start to answering concerns raised under this Guideline, is neither sufficient nor absolutely necessary. Nevertheless, a sympathetic reason for the debt, such as having to suddenly care for an elderly parent, coupled with a demonstration that the applicant has addressed it and is in the process of paying it off, can be sufficient to mitigate the concerns past due debts can raise against a clearance.

That is generally not true, however, in the case of taxes. An applicant who fails to file or pay federal or state taxes faces an almost insurmountable burden to mitigate the concerns raised. Adjudicative Guidelines ¶ 19(g) specifies that failure to file or pay taxes raises a concern under Guideline F. The reason for this, as the DOHA Board explained in a recent decision, is that:
Failure to comply with Federal and/or state tax laws suggests that an applicant has a problem with abiding by well-established Government rules and regulations. Voluntary compliance with rules and regulations is essential for protecting classified information. See e.g., ISCR Case No. 14-04437 at 3 (App. Bd. April. 15, 2016). Applicant’s repeated failure to file his Federal income tax returns in a timely manner does not demonstrate the high degree of good judgment and reliability required of persons granted access to classified information. See, e.g., ISCR Case No. 14-01894 at 5 (App. Bd. August. 18, 2015).
The Appeal Board also explained that:
As we have noted in the past, a clearance adjudication is not directed at collecting debts. See, e.g., ISCR Case No. 07-08049 at 5 (App. Bd. July. 22, 2008). By the same token, neither is it directed toward inducing an applicant to file tax returns. Rather, it is a proceeding aimed at evaluating an applicant’s judgment and reliability. Id. A person who fails repeatedly to fulfill his or her legal obligations does not demonstrate the high degree of good judgment and reliability required of those granted access to classified information. See, e.g., ISCR Case No. 14-01894 at 5 (App. Bd. August. 18, 2015). See Cafeteria & Restaurant Workers Union Local 473 v. McElroy, 284 F.2d 173, 183 (D.C. Cir. 1960), aff’d, 367 U.S. 886 (1961).
Even when the reason for the tax debt is very sympathetic, the implications of the failure to file taxes will likely result in denial of the clearance. In ISCR Case No. 15-03205 (App. Bd. August 8, 2016), the Appeals Board sustained a negative clearance decision despite acknowledging that the applicant’s financial difficulties were largely due to his efforts to support his mother through bankruptcy. The Board sustained the Administrative Judge’s determination that the applicant’s failure to file or pay taxes nevertheless raised serious security concerns.

Failing to file even when an individual owes no taxes and expects a refund does not excuse the failure to file for security clearance purposes. In ISCR Case No. 14-00221 (App. Bd. June 29, 2016), the Appeal Board reversed a favorable finding, concluding that the Applicant’s argument that he had three years to file for a refund was immaterial. “By failing to file those tax returns in a timely manner, Applicant did not demonstrate the high degree of good judgment and reliability required of persons granted access to classified information."

While DOHA in the past has demonstrated no inclination to treat the failure to file or pay taxes as anything but disqualifying for security clearance holders, that may soon change. Beginning in June 2017, DOHA will use a revised set of regulations to evaluate applicants for security clearances. Under the revised Guideline F, a new mitigating factor has been added:
the individual has made arrangements with the appropriate tax authority to file or pay the amount owed and is in compliance with those arrangements.
Adjudicative Guidelines (effective 08 June 2017), paragraph 20(g). This should mean that in the future, an applicant’s failure to pay taxes may be excused if the applicant has set up a payment plan with the IRS or state tax office and can show a track record of meeting obligations under the plan. In this respect, tax delinquency may be treated like any other financial problems, such as an unpaid credit-card bill. Whether tax debt will become, with the revised Guidelines, much like other debts considered under Guideline F, remains to be seen.


This blog was written by Mary Kuntz.


This blog is provided to our readers for informational purposes only. It is not offered as legal advice. Communication of information through this blog does not create an attorney-client relationship. You should not rely upon information contained in this blog without first seeking professional legal advice. If you would like a telephone screening or consultation with a KCNF attorney, you are welcome to call 202-331-9260 to begin our intake process, or submit your legal issue at http://www.kcnlaw.com/Contact.shtml.

Tuesday, February 28, 2017

Wrongful Termination and the Internal Investigation in the District of Columbia

This blog continues to assess the relationship between wrongful termination and an internal/external investigation. We previously discussed Maryland law. We are now focusing on the law in the District of Columbia.

Whereas Maryland provided a distinction between an internal and external communication, the District of Columbia does not. Instead, D.C. law focuses on the substance of the communication.

Under District of Columbia law, “employment is presumed to be at will, unless the contract of employment expressly provides otherwise.” Thus, an employee who serves at the will of his or her employer may be discharged “at any time and for any reason, or for no reason at all.”

As in Maryland and Virginia, D.C. courts recognize three separate categories of protected conduct under the exception to the employment at-will doctrine: (1) refusing to engage in illegal activity; (2) exercising a constitutional or statutory right; and (3) reporting criminal conduct to supervisors or outside agencies.

Historically, an employee received protection only if terminated in retaliation for refusing to break the law. Thereafter, in Adams, D.C. recognized a cause of action for wrongful termination but warned that courts should confine the application of the public policy exception to very narrow cases where an employee’s refusal to violate the law was the exclusive cause for termination.

Thereafter, the D.C. Court of Appeals clarified that “the very narrow exception created in Adams should not be read in a manner that makes it impossible to recognize any additional public policy exceptions to the at-will doctrine that may warrant recognition.”

In Carl v. Children's Hospital, a nurse was terminated for testifying before the District of Columbia Council concerning proposed tort reform, for taking a position contrary to the interests of her employer, and for appearing as an expert witness for plaintiffs in medical malpractice cases. Though she did not assert a violation of any law, the D.C. Court of Appeals reasoned that the Adams decision did “not foreclose any additional ‘public policy’ exceptions to the general rule that employment contracts are always at will unless they expressly provide otherwise.” To fit within the parameters of the Carl decision, a terminated employee must “make a clear showing, based on some identifiable policy that [has] been officially declared in a statute or municipal regulation, or in the Constitution, that a new exception is needed” to the employment at-will doctrine. There must also be a “close fit” between the policy and the conduct at issue in the allegedly wrongful termination.

Thus, courts applying District of Columbia law have applied this public policy exception where employers fired at-will employees for: (1) refusing to violate statutory or regulatory laws, Adams; (2) reporting wrongdoing in government contracting, Myers v. Alutiiq Int’l Solutions, LLC; (3) refusing to participate in partisan political and legislative activities in violation of section 501(c)(3) of the Internal Revenue Code and Department of Labor regulations, Riggs v. Home Builders Inst.; (4) following District of Columbia food safety laws, Washington v.Guest Servs., Inc.; and (5) threatening to report improper storage of pharmaceuticals, Liberatore v. Melville Corp. In Coleman v. Dist. Of Columbia, the Court catalogued public policies that were sufficient to support a wrongful termination claim.

Likewise, an internal communication that meets the Carl requirements provides an employee with protection. For example, in Liberatore, the plaintiff, a drug store pharmacist/manager, was terminated after internally reporting the fact that the store’s failure to control its air temperature adversely affected the condition of certain drugs it stored. The D.C. Circuit noted that the case was not within the “narrower public policy exception announced in Adams” because the plaintiff “did not present his employer with an outright refusal to violate a specific statute or regulation,” and it was not clear that plaintiff's threat to report his employer to the FDA was the sole reason for his termination. However, the Court held that the plaintiff’s allegations were sufficient to support a claim for wrongful discharge because he internally reported – and threatened to report to the FDA – conditions that violated both federal and D.C. laws protecting the public from the purchase of adulterated drugs, thereby implicating an expanded public policy of the kind discussed in Carl. In doing so, it observed that D.C. law did not appear to “draw a distinction between a threat [to lodge a complaint] and an actual complaint to the appropriate enforcement official,” nor would it bar suit where the alleged illegal conduct by supervisors had been reported only to management.

The District of Columbia has recognized that where there is already a statutory framework in place, there is “no need to create a new exception to the at-will employment doctrine.” Thus, in Carter, the Court declined to create a public policy exception where the plaintiff's conduct “fell squarely under the aegis of the District's Whistleblower Protection Act,” which “provides that an employee aggrieved by a prohibited personnel action may bring a civil action for monetary and equitable relief.” For more information, look at LeFande v. District of Columbia and Kassem v. Washington Hosp. Center. In Kassem, the Court decided that the exception was unavailable “where the very statute creating the relied-upon public policy already contains a specific and significant remedy for the party aggrieved by its violation”. Overall, since Carl, wrongful termination in the District of Columbia has been held to encompass claims of discharge in retaliation for whistleblowing, as explained by the Court in Liberatore, Taylor v. WMATA, and Fingerhut v. Children’s Nat’l Med. Ctr.

After Carl, decisions in the District of Columbia have used a case-by-case analysis, initially resulting, in general, in a more liberal interpretation of the claim for wrongful discharge.

Recently, however, the U.S. District Court noted that the trend “following the Supreme Court’s restatement of pleading standards in Twombly and Iqbal, is towards requiring a closer fit between the public policy and the whistleblowing.” For example, in Mpoy v. Fenty, a special education teacher who alleged wrongful discharge after disclosing instructions from the principal to falsify test scores was determined not to have identified a clear mandate of public policy, and in Leyden v. Am. Accreditation Healthcare Comm’n, the plaintiff who alleged conflicts of interest at a healthcare accreditation organization was held to have failed to identify public policy specifically prohibiting the conduct she internally reported. The Clay decision cited with approval the summary from Leyden that the “common denominator” in viable wrongful discharge claims is “the existence of specific laws or regulations that clearly reflect a policy prohibiting the activity about which the employee complained whether or not the employer actually violated the law or regulation.”

In some of these cases, other federal or local laws may provide better protections. For example, a worker with a food safety issue could find relief from retaliation through the Food Safety Modernization Act (FSMA), 21 U.S.C. § 399d. FSMA claims must be filed with OSHA within 180 days of each adverse action. Sadly, workers with pharmaceutical safety issues have no specific job protections under federal law, even though the FDA regulates both food and medications. KCNF maintains a chart of available whistleblower protections here.

This blog was written by Marc Pasekoff.


This blog is provided to our readers for informational purposes only. It is not offered as legal advice. Communication of information through this blog does not create an attorney-client relationship. You should not rely upon information contained in this blog without first seeking professional legal advice. If you would like a telephone screening or consultation with a KCNF attorney, you are welcome to call 202-331-9260 to begin our intake process, or submit your legal issue at http://www.kcnlaw.com/Contact.shtml.

Thursday, February 23, 2017

Wrongful Termination and the Internal Investigation in Maryland

Suppose a licensed medical provider inquired into a possible claim for wrongful termination. Further suppose that this former at-will employee questioned certain medical practices and initiated an internal investigation with the employer. After management’s investigation concluded that no misconduct occurred, management decided to terminate the employee.

This blog addresses implications of an internal investigation under Maryland law. Subsequent blogs will address implications under Virginia and District of Columbia law.

“At-will employment” is very common in the United States and means that the employee serves at the pleasure of the employer and may be discharged for any reason or no reason at all – except for an illegal reason. The typical exceptions to “at-will” are government civil service employment, which has certain Constitutional protections; statutes, such as the anti-discrimination laws, which prohibit termination for certain reasons; and contracts, either union contracts or individual contracts, which require a showing of “cause.”

In Maryland, wrongful discharge is another exception. To establish a claim for wrongful discharge, an employee must show that (a) the employee was discharged, (b) the discharge violated a clear mandate of public policy, and (c) there was a nexus between the employee’s conduct and the decision to fire the employee.

The public policy exception is narrow. Maryland courts have found wrongful discharge based on public policy in only two circumstances – when the employee refused to violate the law or the legal rights of a third party, and when the employee exercised a specific legal right or duty. Significantly, and contrary to common assumptions, the public policy exception to the discharge of an at-will employee in Maryland does not provide general protection for “whistleblowing.

Maryland’s Court of Appeals made clear that “internal” whistleblowing would not be protected in Wholey v. Sears Roebuck. Wholey was a former security officer for 24 years with Sears and was promoted to store security manager. In this position, his responsibilities included investigating suspicious behavior and reporting theft by both customers and employees. After observing the store manager engage in theft, he submitted a report to Sears’ district manager for security. The district manager authorized installation of a camera, but the surveillance was later removed by senior Sears officials and the investigation ended. Soon thereafter, Mr. Wholey was terminated.

Mr. Wholey won at trial, but his verdict was reversed on appeal. In a plurality opinion, the Court of Appeals recognized a new public policy exception to the employment at-will doctrine, stating that an employee who was fired for reporting illegal activities to the proper authorities could bring a viable claim under the wrongful discharge doctrine, but denied that protection to employees who made their reports to their chain of command. Thus, Mr. Wholey’s claim ultimately failed because he “merely investigate[d] suspected wrong-doing and discuss[ed] that investigation with co-employees or supervisors.” Consequently, the court created a distinction between external investigations (which sustained a claim for wrongful discharge) and internal reporting (which did not).

The “external/internal reporting dichotomy” remains in effect. However, the Wholey opinion offers additional guidance concerning the viability of a potential wrongful discharge claim. In particular, the Wholey Court stated that “one may have a viable claim of wrongful discharge if terminated for acting pursuant to a legal duty when the employee’s failure to perform that duty could result in potential liability.”

With respect to the medical provider at the beginning of this blog who was terminated after reporting and investigating certain medical practices, the circumstances are different. Our licensed medical provider is protected by the Maryland Health Care Worker Whistleblower Protection Act She was also required to comply with reporting and disclosures requirements under the Code of Maryland regulations (“COMAR”). One requirement was an affirmative duty to disclose certain alleged misconduct. Compare Bleich v. Florence Crittenton Serv., which recognized a wrongful discharge claim for an educator terminated for filing child abuse and neglect report as required under COMAR, with Thompson v. Memorial Hosp., which determined that a legal duty to report misadministration of radiation belonged to the hospital, not the employee-physicist (although internal reports of unsafe handling of radiation are protected by the federal Energy Reorganization Act). Conversely, the Court of Special Appeals has declined to find an exception based on general fiduciary duties.

An “esoteric theory” about acting in the “public good” by investigating criminal activity is insufficient. However, a viable claim for wrongful discharge may exist if an individual can “point to any statute or regulation pertaining to duties” that would hold the individual accountable for failing to investigate or report alleged misconduct.

Maryland’s General Assembly has not shown much interest in expanding whistleblower protections. If it chose, it could adopt the principles of federal statutes such as the Whistleblower Protection Enhancement Act, which protects employees from retaliation for disclosing violations of law, imminent threats to public health or safety, and gross financial mismanagement.

Federal courts have long recognized that whistleblower protections need to protect those who make reports to their supervisors, since that is how most employees normally raise an issue. See here and here. Yet even today, federal courts have split on the issue of whether SEC compliance issues are protected under the Dodd-Frank Act when they are raised only within the affected company. For example, in Asadi v. G.E. Energy (USA), L.L.C., the Fifth Circuit found no protection; in Wallace v. Tesoro Corp., the Fifth Circuit found SOX protection for internal disclosures; in Berman v. Neo@Ogilvy LLC, the Second Circuit adopted SEC guidance in finding internal reports are protected.

Even the United States Chamber of Commerce recognizes internal reporting as its preferred method of whistleblowing and fraud detection. It made these comments to the SEC on implementation of Section 21F of the Securities Exchange Act in December of 2010 (pp. 3-4):
Effective compliance programs rely heavily on internal reporting of potential violations of law and corporate policy to identify instances of non-compliance. These internal reporting mechanisms are cornerstones of effective compliance processes because they permit companies to discover instances of potential wrongdoing, to investigate the underlying facts, and to take remedial actions, including voluntary disclosures to relevant authorities, as the circumstances may warrant…
Protection for internal disclosures has found uneven protection from the courts. Employees who want to raise issues at work, but are afraid of retaliation, can benefit from early advice of legal counsel. Finding the right way to make a disclosure can make the difference between having job protections or not.


This blog was written by Marc Pasekoff.


This blog is provided to our readers for informational purposes only. It is not offered as legal advice. Communication of information through this blog does not create an attorney-client relationship. You should not rely upon information contained in this blog without first seeking professional legal advice. If you would like a telephone screening or consultation with a KCNF attorney, you are welcome to call 202-331-9260 to begin our intake process, or submit your legal issue at http://www.kcnlaw.com/Contact.shtml.

Monday, February 20, 2017

Agreements Must Include OWBPA Language to Waive an Age Discrimination Claim

In the 1980’s, after the Age Discrimination in Employment Act (ADEA) was passed, American businesses realized they could not simply fire their older employees as in the past. Accordingly, older employees found themselves confronted with proposed separation agreements, under which in exchange for their irrevocable resignation and waiver of claims, they would receive their stock options (or some other benefit). Some of those employees sued nonetheless, alleging that they were the victims of age discrimination and their waivers were not “voluntary.”

Although the ADEA and Title VII are found in different parts of the U.S. Code, courts found their goals sufficiently similar to impose on ADEA waivers the requirements that they be signed “knowingly, willfully and free from coercion.” In making that determination, several courts adopted the following factors:

  • the plaintiff’s education and business experience,
  • the amount of time the plaintiff had possession of or access to the agreement before signing it
  • the role of plaintiff in deciding the terms of the agreement,
  • the clarity of the agreement,
  • whether the plaintiff was represented by or consulted with an attorney, and
  • whether the consideration given in exchange for the waiver exceeds employee benefits to which the employee was already entitled by contract or law.
EEOC v. Am. Express Publ’g Corp., 681 F. Supp. 216, 219 (S.D.N.Y. 1988), quoted in Bormann v. AT&T Commc’ns, Inc., 875 F.2d 399, 403 (2d Cir. 1989). The court in Bormann added that it would look at “whether an employer encourages or discourages an employee to consult an attorney . . . and whether the employee had a fair opportunity to do so.”

In 1990, Congress amended the ADEA by adding the Older Workers Benefit Protection Act (OWBPA), which establishes specific requirements for a “knowing and voluntary” release of ADEA claims. This statute was designed to protect the rights and benefits of older workers through a strict, unqualified statutory stricture on waivers. Specifically, the OWBPA, adopting the growing number of judicial decisions, requires satisfaction of the following seven factors for a waiver of age discrimination claims to be considered “knowing and voluntary”:

  1. A waiver must be written in a manner that can be clearly understood.
  2. A waiver must specifically refer to rights or claims arising under the ADEA.
  3. A waiver must advise the employee in writing to consult an attorney before accepting the agreement.
  4. A waiver must provide the employee with at least 21 days to consider the employer’s final offer.
  5. A waiver must give an employee seven days to revoke his or her signature.
  6. A waiver must not include rights and claims that may arise after the date on which the waiver is executed.
  7. A waiver must be supported by consideration in additional to that to which the employee already is entitled.
Items 3-4 must be included in the waiver agreement. Even when a waiver complies with these seven requirements, a waiver of age claims will be invalid and unenforceable if an employer used fraud, undue influence, or other improper conduct to coerce the employee into signing it or it if contains a material mistake, omission, or misstatement.

Prior to October 2016, the U.S. Equal Employment Opportunity Commission (EEOC or Commission) held that the protections of the OWBPA are only triggered when an employee raises an age discrimination claim before signing a waiver/release agreement. Thus, if a federal employee signed a waiver agreement for an EEO complaint alleging race discrimination, that waiver would preclude claims of age discrimination even if the agreement did not include the OWBPA language cited above.

In Hester S. v. EEOC, however, the Commission overruled that interpretation of the OWBPA. Specifically, the Commission held that “the OWBPA applies to waivers of ADEA rights or claims regardless of whether the rights or claims were raised before the execution of the waiver agreement.” In Hester S., the complainant initiated contact with an EEO counselor in April 2011, alleging discrimination on the basis of disability and in reprisal for protected EEO activity when she was issued a performance improvement plan and denied a reasonable accommodation. In June 2011, complainant expanded her bases to include race, national origin, sex, and age. In May 2011, complainant was presented with a settlement agreement, which she signed. Amongst other provisions, the settlement agreement stated:

(5) The Employee hereby agrees to accept the Agency’s actions detailed [above] in full resolution of any pending or anticipated claims or other rights of actions that occurred on or before the date of the signing of this Agreement . . . .

. . .

(7) The Employee represents that at the time of the signing of this Agreement, the Employee has no pending claims against the Agency, including but not limited to EEO complaints.

In August 2011 (almost three months after complainant signed the settlement agreement), complainant filed a formal EEO complaint alleging that the agency harassed and discriminated against her on the bases of race, sex, national origin, disability, age, and in reprisal for prior protected EEO activity arising under the Rehabilitation Act when the agency failed to provide her with a reasonable accommodation for her disability. In its final decision, the agency dismissed complainant’s complaint on the ground, among others, that it failed to state a claim because it was resolved by a settlement agreement.

On review, the Commission determined that, indeed, the settlement agreement constituted a waiver or release of complainant’s August 2011 EEO complaint and settled complainant’s claim that she was subjected to discrimination on the bases of race, national origin, sex, disability, and in reprisal for EEO activity—complainant’s non-age claims. Because the OWBPA governs waivers or releases of ADEA claims, however, the Commission made it clear that age claims cannot be validly waived unless the requirements of the OWBPA have been met—even if the age claim purportedly waived by a release was not filed until after the execution of the waiver. Thus, despite the agency’s assertion that complainant knowingly and voluntarily signed the agreement, because the complainant was not (1) advised in writing to consult with an attorney prior to executing the agreement, (2) given a period of at least 21 days within which to consider the agreement, and (3) given a seven-day period in which she could revoke the agreement after its execution, the Commission held that the waiver was not effective to waive complainant’s age discrimination claims and directed the agency to reinstate these claims.

Given the EEOC’s holding in Hester S., an agency’s failure to comply with the OWBPA’s stringent waiver safeguards will now void a settlement agreement, with regard to the ADEA claims, irrespective of whether the employee had filed an ADEA claim at the time the agreement was effected. This change in Commission precedent is consistent with the congressional purpose of the OWBPA: to prohibit employers from discriminating against individuals age 40 and older because of age—no exceptions.

By: Aaron Herreras


This blog is provided to our readers for informational purposes only. It is not offered as legal advice. Communication of information through this blog does not create an attorney-client relationship. You should not rely upon information contained in this blog without first seeking professional legal advice. If you would like a telephone screening or consultation with a KCNF attorney, you are welcome to call 202-331-9260 to begin our intake process, or submit your legal issue at http://www.kcnlaw.com/Contact.shtml.