W orkplace Labor Update APRIL 2003 From The Editor’s Desk The V enable Workplace Labor Update has a new format for the new millen- nium! A s we continue to strive to keep clients abreast of the ever complex and shifting web of laws governing their workforces, V enable has been searching for a way to transmit important legal updates to clients in an even more up-to-the-minute fashion. The solution? More issues per year ( 6 annually instead of 4) transmitted electronically right to your desktop. Beginning with this A pril 2003 issue, V enable will publish the WLU on a bi- monthly basis and transmit it to clients using email, rather than “snail mail,” distribution. What you are holding in your hand now is one of two hard copy versions of the WLU for 2003. Beginning with the June 2003 issue, we will only be distributing the WLU electronically – with the exception of our “end of the year” wrap-up issue, which will continue to be distributed in print. To facilitate the process of transferring our mailing list to the new electronic format – and to ensure that you continue to get the updates on employment and labor laws and regulations, important case law developments and practice tips and pointers you have www.venable.com come to rely on– we ask you to take a moment to subscribe to the new WLU by sending an email to Ruth Kaufman at rgkaufman@ venable.com or by visiting V enable.com and registering online. A s always, we welcome your comments and suggestions throughout the transition process. A New Whistle Stop For Whistleblowers I t has probably not escaped the attention of long-time readers of this Update that I N T H I S I S S U E countless words have been devoted to describing yet another lancing of the basic employment rule of law that employees are employed at-will. The rule has been pricked again in the wake of the concerns flowing from the revelations of corporate 1 From the Editor’s Desk corruption and last year’s calamitous bankruptcies, which generated new legislation designed to protect the public from corporate mismanagement. While such reforms A New Whistle Stop for 1 are welcomed by many, the Sarbanes-Oxley A ct also laid tracks for new restrictions on Whistleblowers an employer’s ability to discipline at-will employees. Less well-publicized than its securities fraud and corporate responsibility Does Your “Retention” Bonus or provisions, the Sarbanes-Oxley A ct also contains new protections for so-called 3 Commission Plan Conflict with whistleblowers. Commencing on page 116 of a 130-page Bill, the Sarbanes-Oxley A ct Maryland Wage Payment Law? includes a new provision affording new whistleblower protection to employees of publicly traded companies. The law provides that publicly traded companies may not Military Service Counts Toward 4 discriminate against an employee because the employee has lawfully provided FMLA Leave Eligibility information to or assisted an investigation regarding conduct which the employee reasonably believes constitutes a violation of securities laws or any federal law relating to shareholder fraud. To be protected conduct, the employee’s acts must be lawful and the information must be provided to a federal regulatory or law enforce- ment agency, a member of Congress, or, importantly, “a person with supervisory authority over the employee . . .” continued on pa ge 2
WORKPLACE LABOR UPDATE / APRIL 2003 A N ew Whistle Stop ... continued from page 1 The law creates a new enforcement scheme and substantive rights to employees. Thus, under the law , covered employees who believe they have been discharged or otherwise discriminated against because of their protected activities may file a complaint with the Secretary of Labor. Such complaints must be filed within 90 days of the date on which the violation occurs. If the investigation is not completed within 180 days of the filing of the complaint ( unless that delay is due to the bad faith of the claimant) , the claimant may file suit in federal district court. Employees found to have been the victims of discrimination are entitled to all relief necessary to make them whole, including reinstatement, back pay with interest, and compensation for any special damages, including litigation costs, expert witness fees, and reasonable attorneys’ fees. The provision allowing for the recovery of civil damages is not the only protection afforded whistleblowers. The law also provides that anyone who knowingly retaliates against or takes any action “harmful” to any person, including interfering with their employment, for providing truthful information to a law enforcement officer relating to the commission or possible commission of a federal offense can be subject to stiff criminal sanctions. Unlike the civil remedies provision, this section is not limited to employees of publicly traded companies. How Does Sarbanes-Oxley Change the Law? Under current law , an employee asserting wrongful discharge must demonstrate that his/ her discharge contravened a clear mandate of public policy . Typically, such mandates are found in constitu- tional rights or in statutes. Consistent with this requirement, several courts, including the Maryland Court 2 of A ppeals, have held that internal complaints of wrongdoing cannot form the basis of a wrongful discharge claim. A t least for publicly traded companies, the Sarbanes Oxley A ct creates a clear mandate of public policy protecting internal complaints, as well as complaints to public officials. This is not, however, necessarily bad news for employers. Wrongful discharge law provides that if the statute establishing the clear mandate of public policy also contains a procedure for relief, the employee must rely on that procedure, including its provisions for damages, in lieu of a tort claim for wrongful discharge. The Sarbanes-Oxley A ct contains exactly this sort of provision. Moreover, the Sarbanes-Oxley A ct may preclude claims for punitive damages, since the A ct expressly states that the remedies available are limited to the relief required to make whole the employee. Because punitive damages are not make whole relief, but are designed to punish and deter, it would appear that such damages are not available. The situation is less clear, however, for companies that are not publicly traded. Thus, employees of privately owned companies should not have a claim for wrongful discharge as a result of internal complaints, although such a claim may exist if the complaint were made to public officials. Paradoxically, employees of privately owned companies who are discharged for complaining of illegal activity to public officials might be entitled to the panoply of damages available in a wrongful discharge suit, including punitive damages in appropriate cases. What Should Employers Do? Given this new prescription for potential liability , all employers, but especially publicly traded employers, should takes steps to protect employees who speak out about illegal corporate conduct. Employers may wish to consider establishing a reporting procedure for complaints about corporate fraud and other misdeeds. Such a policy should, like the policy relating to harassment on the basis of sex or other protected characteristics, provide multiple opportunities for employees to complain and provide reassurances of non-retaliation. In addition, supervisors should be trained in connection with the policy. Employers should promptly investigate allegations of wrongdoing — publicly traded employers must do so. Because investigations into misconduct at publicly traded companies must be conducted by someone without a financial stake on the outcome, corporate counsel should be involved early on. The investiga- tion and the procedure must be beyond reproach. A lthough not legally mandated, privately owned employers would be wise to consider similar measures. A lthough it is too early to tell whether these new whistleblower provisions will result in increased claims, employers would be well advised to take simple steps now to assure that their place of employment does not become a whistle stop for whistleblowers.
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