If at first you succeed, try it again. 

Well, that may not be how the saying goes, but the first back-and-forth post between me and Nina Pirrotti, an employee-side attorney, was so well received that we’re back for another conversation. 

Today’s topic: What legislation are we both keeping our eyes out for at the Connecticut General Assembly?  

The Dialogue Begins

Dan Schwartz: So Nina, our first post was such a hit that I think we’re due for an encore.  Thanks for being up for this.

It has only bewn a few weeks, but it feels like we’re moving at warp speed on developments.  We could spend another post just on The Donald, sorry, Mr. President. Somehow I think we’re likely to talk about that again soon.

But let’s focus today on some of the legislative items we’re keeping an eye on, particularly in Connecticut. Each year, it seems like our General Assembly likes to roll out fresh employment law ideas.

Is there a particular bill that you’re keeping your eye on now from an employee-side perspective?

nina_t_pirrotti1-150x150Nina Pirrotti: I’m so glad you asked!   Yes, let me tell you about one bill that has been on my mind on the federal level (I am speaking about it at an ABA conference in sunny Puerto Vallarta really soon) and then I will give you a couple of highlights from our backyard.  

The federal bill that looms large for me right now (although concededly perhaps not as large as the prospect of sitting on the beach, tequila based beverage in hand) is the misleadingly named  Lawsuit Abuse Reduction Act (“LARA”) which would force judges to respond to Rule 11 motions in a particular manner. 

Rule 11 allows for the possibility of sanctions to be imposed on attorneys or parties who submit (or later advocate for) pleadings which have been filed for an improper purpose or which contain frivolous arguments or claims. 

While Rule 11 motions rear their ugly heads relatively rarely in litigation, a newly invigorated Republican majority in Congress has proposed LARA which would amend the sanctions provisions in Rule 11 to remove all judicial discretion – – regardless of the circumstances of the individual case- – in two critical respects. 

First it would require the court to sanction any attorney, law firm, or party who violates the rule.  Second it forces judges who find the rule has been violated to order the offending party to pay  the other party’s attorneys’ fees and costs.  Those in my world who oppose LARA say that there is no proof Rule 11 is not working in its current form, that the changes would burden the courts and that  its “once size fits all” mandatory sanctions would unfairly penalize employees in civil lawsuits.

Closer to home, two bills come to mind.  The first is a proposed modification of C.G.S.A. 31-51m, a statute which bars employers from retaliating against employees who report  employers’ unethical or legal wrongdoings to public bodies. 

The modification seeks to  protect employees who complain about such conduct internally or who refuse to participate in an activity they believe to be in violation of the law.   It also seeks to extend the timeline to bring an action under the law (employees now have only 90 days to file) and to provide for a greater array of damages if the employer violates the statute.

The second is a proposal to provide eligible employees with paid Family and Medical Leave Act leave.  The proposed legislation would require employees to contribute 1/2 of 1% of their wages to it (there would be no employer contribution) and employees cannot opt out it.   

We plaintiff employment lawyers would welcome both pieces of legislation as long overdue and reasonably tailored to protect Connecticut’s workforce.

What are your thoughts from the other side of the aisle, Dan?    Or is there other proposed legislation that has captured your attention?

Continue Reading The Dialogue: What Legislation We’re Keeping Our Eyes On

GA2So last week I provided a recap of a few of the labor & employment law bills still being kicked around the legislature.  From talking with a few folks in on the process, here are some other bills to keep an eye on (whether in this original form or as an amendment to an existing bill).

  • House Bill 5367 would reform the unemployment compensation process a bit. It makes several changes to unemployment benefits and eligibility requirements for receiving them by 1) increasing from $15 to $50 the minimum amount of weekly unemployment benefits most claimants can receive; 2) increasing from $600 to $2,000 the minimum amount most claimants must earn during their base period (the first four of the last five calendar quarters) to be eligible for benefits; and, 3) requires most claimants’ benefits to be based on their average quarterly wages during all four quarters of their base period, instead of during their two highest earning quarters.  The reforms would make Connecticut more consistent with neighboring states. The CBIA has supported this bill.
  • House Bill 5237 — the so-called “ban the box” bill — is one I’ve touched on before.  It was recently referred to the Appropriations Committee. It’s being closely watched by business interests and should be a top item for employers to track.
  • House Bill 5591 would create a Connecticut Retirement Security Authority (“authority”) to establish a program for individual retirement accounts (IRAs) for eligible private-sector employees, who are automatically enrolled in the plan unless they opt out.  The bill would apply to all private sector employers that employ at least five people each of whom was paid at least $5,000 in wages in the preceding calendar year.  There is a significant administrative cost however to this bill and in light of the state’s fiscal crisis, it seems unlikely that it will be passed this year.
  • House Bill 5402 is still kicking around too.  It would greatly expand the state’s whistleblower protection laws by expanding protection to employees who (1) make reports to their supervisors or managers (either directly or through a third party) or (2) participate in the employer’s or a public body’s investigation or similar proceeding on request of a supervisor or manager or the public body. Not surprisingly, business interest groups have been opposing this bill because it greatly expands the scope of the protection and would change time deadlines as well.

Many other bills died in committee earlier this month so at least the scope of the potential changes out there is known. How much gets passed this year will depend, at least in part, on how the state can resolve its projected deficits.  Connecticut has been seen, of late, as being anti-business (see, e.g., GE) and the governor has made it clear that he’s not in favor of additional tax hikes on businesses.

So stay tuned!

It’s Baseball Season; a time for the Sox to come out and play.

Not the Red Sox — this is, after all, a legal blog (run by a Yankees fan, no less).  No, today, we’re talking about Sarbanes-Oxley (SOX) Whistleblower Protection.

Still with us. 

My colleague, Clarisse Thomas, has taken a look back at the U.S. Supreme Case of Lawson v. FMR LLC , which was decided last month.  Now that the dust and analysis have settled on the case, she gives us some practical and useful tips on what to take away from the case. 

A month ago, the Supreme Court significantly expanded — and dangerously I might add — the scope of Sarbanes-Oxley’s whistleblower protection provision. Now, not only does the provision protect employees of publicly traded companies, but it also protects employees of any private contractor or subcontractor who may work for those public companies. So, private employers, beware…

The case appears to be based more on public policy concerns than the actual text of the statute.

Let’s look first at the language of the law itself.  SOX’s whistleblower provision says:

§ 1514A. Civil action to protect against retaliation in fraud cases

(a) Whistleblower protection for employees of publicly traded companies. No [public] company . . . or any officer, employee, contractor, subcontractor, or agent of such company . . . may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of any lawful act done by the employee . . . .

Although the provision’s heading expressly indicates protection for employees of public companies, the Court held that the caption heading was just a “short-hand reference,” and therefore not intended to exclude employees who may work for private employers.

The problem in Lawson was that the public companies at issue were not public employers to which the statute’s protections would apply. They in fact were mutual funds, which, by their very nature, have no employees. Thus, given the statute’s limitations, the Court extended the statute’s reach to private contractors and subcontractors, and in doing so, dramatically increased the exposure of these private employers to potential liability.

The Court’s reasoning was simple: “It is common ground that Congress installed whistleblower protection in the Sarbanes-Oxley Act as one means to ward off another Enron debacle.” Herein lies the basis for the Court’s ruling. The term Enron was mentioned 34 times throughout the majority opinion.

Because the Court chose not to limit its holding in any way, the dissent opined that the decision would open the floodgates for whistleblowing lawsuits that are beyond the scope of SOX’s protections. The majority dismissed these concerns, by noting that such claims can be addressed later on.

Truth be told, a month after the case was decided, it remains unclear what the impact of this case will really be.  But because the case provides very little guidance as to the scope of claims that may be beyond SOX’s protections, and as to the types of private employers to which it applies, this decision will no doubt result in threatened and actual lawsuits in the years (if not months) to come.

What can private employers do to protect themselves? Much has been written (including a good summary in Employment Law 360) but the basic tips remain as follows:

  • As with a lot of these types of technical provisions, knowledge is key.
  • Familiarize yourself with SOX’s whistleblower protections and provide training to supervisory and managerial employees in furtherance of this goal.
  • Understand the full extent of the contractual relationship you may have with a public company, so that you can better assess whether Lawson may apply, given that relationship.
  • Consider preparing (or revising) policies that prohibit retaliation, to include the protected activities set forth in SOX’s whistleblower statute.
  • Finally, ensure that there are sufficient avenues in your workplace for employees to complain about possible SOX violations (being able to report an issue to just an immediate supervisor may not be enough), and ensure that sufficient procedures are in place to identify and prevent retaliatory conduct against employees who may report possible SOX violations.

The SOX are going to be playing ball for a long time to come.

Connecticut’s whistleblowing statute (Conn.Gen. Stat. Sec. 31-51m) protects employees who have made a complaint to a “public body”.

But what exactly is a “public body”? Well, there is a definition but a recent Superior Court case had to look beyond that to determine if a complaint to a special ombudsman would count.

The facts of the case are somewhat unique but can highlight the law of unintended consequences.

In 2003, the Plaitniff filed a federal lawsuit alleging sex discrimination and harassment.  In 2008, the parties settled that case. The settlement agreement called for the appointment of an ombudsman, employed by the town who was charged with investigating the plaintiff’s discrimination, harassment and retaliation claims.

In February 2010, she filed a complaint under the ombudsman protocol highlighted in the settlement agreement.  On February 10, 2010, the ombudsman released a report substantiating the claims of retaliation and finding that the employer “continue[d] to be impacted” by the prior litigation.

From there, the relationship between the employer and the plaintiff continued to deteriorate, at least as referenced in the court’s decision, and in September 2010, she was terminated from her employment as a police officer.

The threshold question for the court was whether the special ombudsman was a “public body” under state statute. The court concluded that it was, relying on the definition of a public body that “any person to the extent such person is deemed to be the functional equivalent of a public agency pursuant to law” can be one. The court held that the lawsuit in this case met that standard (whether she will ultimately prevail at trial is a different question altogether).

For employers, the case is significant because it suggests that a “public body” can be both broad and created by the parties themselves.  For public employers in particular, caution should be exercised when creating an ombudsman-like program.

The decision also addresses whether Connecticut’s anti-retaliation statute, Conn. Gen. Stat. Sec. 46a-60(a)(4) pre-empts other statutes, such as Connecticut’s whistleblowing statute, under Sec. 31-51m. The court fairly easily dismisses such an argument concluding, in part, that because the legislature knew of the anti-retaliation provisions at the time it enacted the whistleblowing statute, it must have intended both statutes to exist concurrently.

Since the publication of my post last week on House Bill 6667 on free speech in the workplace, there’s been a lot of followup press coverage.  Two that I would highlight include this Patch.com article, and this blog post by Mara Lee at the Hartford Courant

The CBIA also highlighted the post on its website as well. 

Today, a new substitute of the bill was released that erased any pretense about the stealth nature of the bill.  It deleted all of the first 16 sections of the bill, and merely left the last section on employee free speech.   The report from the Office of Legislative Research is being compiled now and should be released any day now. 

Last week I discussed a lot of issues with the bill, but today’s post focuses on three in particular.

1.  First, the new substitute would do something remarkable.  It would amend Conn. Gen. Stat. Sec. 31-51q to delete public employers from its scope.  In other words, if passed, it would apply the free speech protections merely to employees of private-sector companies

Of course, for public employees, that distinction won’t matter as much because public employees would still have First Amendment protection.

But its a strange thing to happen nonetheless because it was only through a judicial decision, Cotto v. United Technologies Corp. in 1999, that 31-51q was applied to private sector employees. 

By eliminating this distinction, the law (if passed) would put a concern outlined by Justice Zarella in his recent concurrence into the spotlight again — namely that it would place the “employee’s statutorily created free speech right in potential conflict with the employer’s constitutional free speech right”. 

In other words, the employer’s right to free speech is protected by the Constitution while the employee’s right is statutorily created.  The proposed law says that the employer will not have a “defense” to a claim to say that the employee’s speech was job related.

But if the employer’s right to free speech is protected by the Constitution, there are then serious questions about whether this bill — even if it were a good idea — would withstand Constitutional muster.  After all, a statute cannot overturn the Constitution. 

As the Connecticut Supreme Court concluded, limiting the protection of speech in the workplace to non-work related speech, “keeps courts from the constitutionally untenable task of, in essence, having to choose sides in a work-related viewpoint dispute between two private actors.”

The proposed bill would create a conflict of exactly the type that the unanimous court worked so hard to prevent and create constitutional issues, the likes of which we haven’t seen in a long time. 

2. This goes, of course, to the second issue with the bill.  A careful reading of the Court’s decision in Schumann — for which this bill is in response to — shows that the court did not create a “defense” for employers to use in free speech cases.  Rather, it held that job related speech was not protected speech in the first place. 

What would the language in the bill then do? That’s a good question that — putting the Constititonal issues aside — would also be the subject of years of litigation.  

Perhaps that’s the point.

3. Another issue with the bill is the strange result it is trying to achieve.   In my brief research, I could find no court decision or state statute that would give private-sector employees more free speech protection than their public-sector counterparts. 

Testimony from groups like the Connecticut Employment Lawyers Association and the Connecticut Trial Lawyers Association, suggested that the bill merely ensures that whistleblowers at private companies would have enough protection.

But the Schumann case was quite clear that the whistleblower protections under Conn. Gen. Stat. 31-51m are unaffected by the decision. 

As the court stated in footnote 21, “[O]ur opinion in this case does not affect the whistle-blower protections afforded statutorily by General Statutes § 31-51m, which are not at issue in this case.”

Indeed, the language would directly contradict decades of well-established precedent in courts that have held that their role is “to prevent unlawful [employment] practices, not to act as a `super personnel department’ that second guesses employers’ business judgments.”

Creating free speech protections for job-related speech by private employees would inevitably force the courts to second-guess employers’ business judgments — something that just doesn’t happen in employment law.

Once again, the bill is a solution in search of a problem and should be rejected by the legislature.

Some cases are easy to explain in a short blog post.

This is not one of them.

But a new Connecticut Appellate Court case released today, Grasso v. Connecticut Hospice, Inc. (download here)  has too many nuggets of information to pass up.  It is an example to employers about how cases never truly seem to be over in this litigious climate and that details are important — even in settlement agreements. 

Background Facts

Here are the background facts:

  • Plaintiff employee worked as an employee for the hospice from 1998-2010. 
  • In 2009, she filed two complaints with OSHA regarding some defective chairs.  The administration ordered the hospice to repair the chairs.
  • Later that year, the Plaintiff then filed a whistleblower complaint with OSHA claiming that she had been retaliated against and harassed since the filing of the OSHA complaints. The administration found “reasonable cause” to believe a violation had occurred.
  • Thus in January 2010, the Hospice and Plaintiff entered into a settlement agreement on the whistleblower complaint where she worked as a part time employee in two offices.  The agreement contained a release of future claims for events that occurred prior to the execution of the agreement.
  • End of story, right? Wrong. One week later, the Plaintiff-Employee wrote to the company and alleged that they were breaching the settlement agreement.  Later that year, she quits.
  • You know what happens next, right? She filed a six-count complaint in Superior Court alleging a whistleblower violation, breach of the settlement agreement, breach of the employee handbook and claims of intentional infliction of emotional distress.   The defendant filed a counterclaim asking for declaratory judgment on the release she signed.  The Superior Court granted summary judgment to the employer.

The legal rulings

Reading the headline, I’m sure a few of you rolled your eyes.  Dodd-Frank? Sarbanes-Oxley? Those statutes are seen as dull and tedious.  But a new federal court decision in Connecticut should start to change that, and it has implications for employers nationwide. 

The case is Kramer v. Trans-Lux, which you can download here. It addressed an employer’s motion to dismiss a claim of whistleblower retaliation under the Dodd-Frank Act. Ultimately, the court allowed the employee’s claim to proceed, noting that under the facts alleged, the employee has a viable claim.

What was the case about?  According to the applicable complaint (which the court assumed as true for purposes of deciding the motion), the plaintiff was a Vice-President of Human Resources with responsibility for ensuring that the company’s benefit plans were in compliance with applicable law.  He claimed that he expressed concern about the makeup and number of people on the pension plan committee and that he did not believe the company was adhering to its pension plan. 

He claimed that he contacted the audit committee and, importantly, claimed that he sent a letter to the SEC regarding the company’s failure to submit a 2009 amendment to the board of directors.  He then claimed that he was reprimanded and the subject of an investigation. Shortly thereafter, he was stripped of his responsibilities and later terminated. Continue Reading A New Whistleblower Retaliation Statute Grows Up: Dodd-Frank is the new Sarbanes-Oxley.

I’ll be the first to admit that the words “Sarbanes-Oxley Act” are likely to induce a big collective yawn from many of you out there.  Even the acronym “SOX” doesn’t liven things up.  (Then there are people, like Doug Cornelius at the Compliance Building blog who eat this stuff up.)

But here’s what you need to know as an employer: Terminated employees can bring a whistleblowing claim under SOX without using the words “fraud” but just by complaining about what they perceive to be as a violation of federal law.  Indeed, the caselaw on these claims is starting to mirror the pattern of retaliation claims — and we all know how notoriously difficult it is to defend against those types of claims.

SOX, not socks.

A relative new case out of the federal court in Connecticut illustrates this issue.  In Barker v. UBS AG (download here), the employer’s motion for summary judgment was denied on a SOX whistleblower claim. 

What does a terminated employee (who, the employer contends, was terminated during a reduction in force) have to show to get her case to trial? Initially, to establish a prima facie case, the plaintiff must demonstrate by a preponderance of the evidence that: (1) she engaged in protected activity; (2) the employer knew of the protected activity; (3) she suffered an unfavorable personnel action; and (4) circumstances exist to suggest that the protected activity was a contributing factor to the unfavorable action.

If the plaintiff meets her burden, the employer can then avoid liability if it can prove by clear and convincing evidence [a much higher standard of proof] that it would have taken the same personnel action in the absence of the protected activity.

And what is “protected activity”? This is where things differ slightly from retaliation claims. Here, as the court explains it.  the employee must she “had both a subjective belief and an objectively reasonable belief that the conduct [s]he complained of constituted a violation of relevant law” and  the employee’s communications “must definitively and specifically relate to [one] of the listed categories of fraud or securities violations” in SOX.

Continue Reading Pull Up Your SOX: The New Whistleblowing Claim Grows Up

It’s FINALLY a nice spring day outside in Connecticut (see the picture of the Connecticut River taken this morning) so no need to spend a minute more than necessary to catch up on some other employment law-related items you might have missed during the week:View of Hartford, CT

 

In yesterday’s post, I talked about the significant changes to COBRA that are in the new economic stimulus law. Today’s post focuses on another, less-publicized provision in the new law regarding whistleblowers.  Courtesy: Library of Congress

Employers that expect to receive funds from the stimulus package need to be aware of the provisions so that you can be in compliance with the law and minimize the risk of whistleblower claims.

Which Employers May Fall Within Scope of the Provision?

While it’s not exactly clear who is a "non-Federal employer" who received "covered funds", it’s likely that given the intent of the act, that this law will apply to any employer who gets a grant, contract or another payment associated with the stimulus bill.  

What Conduct Is Protected?

The new rules protect disclosures to both outside  and inside individuals by aggrieved employees.  These might include disclosures to a person with supervisory authority over the employee, or to a state or federal regulatory or law enforcement agency.          

What Types of Disclosed Information Are Covered?

In order for the employee to be covered, that person must reasonably believe that the information he or she discloses is evidence of:

  • Gross mismanagement of an agency contract or grant relating to stimulus funds;
  • A gross waste of stimulus funds;
  • A substantial and specific danger to public health or safety related to the implementation or
    use of stimulus funds;
  • An abuse of authority related to the implementation or use of stimulus funds; or
  • A violation of a law, rule, or regulation that governs an agency contract or grant related to
    stimulus funds.
     

Notably, if the employee first submits a claim to the inspector general of the agency administering the funds, the employee may have the opportunity to bring a civil suit for a jury trial under some circumstances.  

Action Steps for Employers

While the provisions of the law are new, the concepts behind them are not. Employers should remain steadfast in ensuring that employees are not retaliated against for filing non-frivolous claims and that any actions taken against an employee are well-documented and supported by legitimate non-discriminatory reasons. 

(H/T to Point of Law, among others, for passing on word of the provisions.   Check out JD Supra for additional information as well.)