January 1, 1900

by Todd J. Leon

In dealing with relationships with employees, employers are frequently faced with difficult decisions. Perhaps the most complex of these involves situations where the employer wishes to terminate an employee who has been the proverbial "squeaky wheel" over a period of time. In taking action against this employee, the employer must be ever-cautious in guarding against potential lawsuits-especially where the employee has reported what he or she believes to be wrongdoing by the employer.

When the employer opts to terminate a troublesome employee, a substantial possibility exists that the jilted employee will pursue legal action against the employer for wrongful termination. Such a lawsuit may include a variety of claims, including those for breach of contract, retaliatory discharge or even discrimination. Commonly, the terminated employee will file suit under the commonly known "Whistleblower" Statute, also known as the "Conscientious Employee Protection Act" or CEPA. In a recent lawsuit that was successfully defended by Hill Wallack, a former employee claimed that he had been wrongfully terminated in violation of CEPA. The employee had a long and well-documented history of poor performance and negative incidents in the workplace. However, the plaintiff alleged that he was fired because he had uncovered what he believed to be fraudulent billing practices of his employer. Although the plaintiff's job responsibilities did not include the investigation of billing irregularities, he undertook precisely such a review of a particular file in question. The employee's independent investigation of his employer's alleged fraud caused the employee to violate his employer's policies against breaching client confidentiality to uncover evidence of fraud. As a result of the employee's inquiry and complaint of fraudulent billing, the employer performed an internal audit of the client's file, which revealed that the client had been correctly billed. Although, informed of the employer's determination, the employee was nonetheless dissatisfied with the result and wrote a memo to the CEO of the company, demanding that the client's file be reviewed again, and that the client be reimbursed for fees that he should not have paid. The employer maintained that the client was properly billed, and that it had not engaged in any wrongdoing though the employer terminated the employee based upon the employee's historically poor job performance (which predated the employee's complaint of fraud) and based upon the subsequent breach of the employer's client confidentiality policy.

Consequently, the employee filed a Complaint against his former employer, claiming that his termination violated the Whistleblower Act. Hill Wallack successfully defended the lawsuit on the basis of the employee's well-documented record of poor performance, as well as his breach of the employer's employment policies; the matter was dismissed on a motion for summary judgment.

It is important to note that every employment case is different and is often based on the perception of the parties, commonly referred to as the "he said, she said" scenario. This article addresses some of the steps that an employer can take to best defend such a case.

What Must the Employee Prove?

To prevail on a CEPA claim, an employee must show that: (1) he or she reasonably believed that his or her employer's conduct was violating either a law, a rule or regulation promulgated pursuant to a law; (2) he or she performed whistleblowing activity by reporting or complaining about the employer's alleged violation; (3) an adverse employment action was taken against the employee; and (4) a causal connection existed between the whistleblowing activity and the adverse employment action. A report of perceived employer wrongdoing by an employee to his employer qualifies as whistleblower activity.

If the employer wishes to terminate the employee or to take some other measures against him, including actions such as a demotion, the denial of a raise, or even something seemingly so innocuous as the restriction of computer access privileges, it should clearly document and rely solely upon non-retaliatory reasons for the adverse employment action. If the employer's termination of the employee is, even in part, because he has reported some wrongdoing, the employer opens itself up to potential liability under CEPAbased theory of retaliatory discharge.

Damages for a CEPA violation may be costly as an employee can recover lost past and future wages, emotional damages, attorneys' fees and potentially punitive damages to an employee that prevails upon an action.

One of the key issues facing an employer when it ultimately decides to take adverse employment action against an employee who has voiced a complaint in the workplace is the timing of the action. If the employer responds with adverse action too quickly, the employee will surely point to the swiftness of the decision as evidence of the employer's retaliatory nature.

The timing issue is relevant to the third prong of a successful retaliation claim mentioned above, which requires the employer to show the existence of a causal link between his protected activity and the adverse employment action. Our courts have generally found that the timing of the allegedly adverse action may be suggestive of retaliatory motive, but that the timing alone is insufficient to create an absolute inference of causation. In other words, our courts have generally recognized that close temporal proximity between the employee's action and his termination may be generally indicative of a retaliatory discharge by the employer, but it is not absolute proof of improper motive.

What Can An Employer Do to Protect Itself?

Unfortunately, there is nothing an employer can do that will absolutely insulate it from ever being sued by an employee for adverse employment action, including wrongful termination. However, an employer can certainly take steps to help combat a possible argument by an employee that such adverse employment action was in direct retaliation for engaging in protected activity. Such precautions may include:

Documenting the poor job performance of the worker throughout or at any time during the employee's entire career. This may include formal written notice to the worker of deficient performance of duties or improper behavior in the workplace. It may also include memoranda by supervisors documenting verbal counseling of the worker with respect to poor performance or misbehavior. Such memoranda should be written contemporaneously with or shortly after an incident or warning being given.

Documenting the process by which the employer evaluates the employee and determines the type of adverse action it takes with respect to the employee. If the decision is made by a management team, the employer must ensure that the team base its recommendation or decision on performance or inappropriate conduct while disregarding the employee's action or complaint which could be characterized as "whistleblower" activity.

Consideration of the timing of the decision to terminate. Unless the employee has an extremely welldocumented pattern of poor performance or inappropriate behavior, or there is strong evidence that the termination decision has already been made, taking adverse action immediately after the employee engages in whistleblower activity may be problematic. Taking additional time to document the employee's poor performance or improper behavior may help to insulate the employer or supervisory team that reviews the employee's history from information related to the employee's "whistleblowing."

As always, Hill Wallack stands ready to assist any employer that is dealing with any issue of employment law, including the process of terminating an employee or defending a complaint filed by a former worker. However, seeking the advice of counsel before taking adverse employment action against an employee can minimize an employer's exposure to wrongful termination lawsuits.

Todd J. Leon is an associate of Hill Wallack where he is a member of the Litigation Division and Trial & Insurance Practice Group.