John J. Sarno, Esq.Date, Time, and Location

2011 Garden State Council SHRM Conference – Atlantic City Convention Center, Atlantic City, NJ

Ethics in Human Resources Management

What happens when MANAGERS BLOW THE WHISTLE?

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Ethical Dilemmas

Managers owe a duty of loyalty to the employer to

1) carry out its policies faithfully and 2) to advance the employer’s interest.

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The “Whistleblower” Case

• Whistleblowing activity, i.e.: disclosure or objection, or refusal

• Reasonable belief that employer violated a law, rule, regulation, was fraudulent or criminal, or violated a “clear mandate of public policy”,

• Adverse employment action• Causation

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Not every employee complaint is whistleblowing

Not every employee refusal, rejection or objection is whistleblowing

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Employee’s “Reasonable Belief”

Employee should have some objective rationale for her belief that employer’s conduct violates law, is fraudulent or is incompatible with a clear mandate of public policy. Generally, an employee should be able to articulate a law, regulation or code.

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Probing Employee’s Reasonable Belief

Does employee say anything like:‒ Wrong or not right‒ Not honest‒ Unsafe‒ Illegal or against the law‒ Violating my rights‒ Unethical

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Generally speaking, whistleblowing must protect the public or further some important public interest.

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What is a “clear mandate of public policy concerning public health, safety or welfare?”

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Important public policies concerning public health, safety or welfare can be found in the constitution, statutes, professional rules of conduct, government agency rulings, court decisions…

Pierce v. Ortho Pharmaceutical Corp. (NJ Supreme Court, 1980)

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“Retaliatory Action” means the discharge, suspension or demotion of an employee, or other adverse employment action taken against an employee in terms and conditions of employment.

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Klein v. UMDNJ(NJ App. Div. 2005)

Generally speaking, the employers “adverse employment action” must either impact “compensation or rank” or be “virtually equivalent of discharge.”

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A lateral transfer does not constitute an adverse action if the transfer has no impact on tangible benefits or opportunities.

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Maimone v. Atlantic City(NJ Supreme Court 2006)

A transfer from detective to patrolman resulting in a 3% reduction in salary and lost overtime constitutes adverse action.

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Whistleblower Policy

• Summarize the law• Establish a complaint procedure• Identify the person who receives complaint• Person who receives the complaint should not

be the decision-maker

Note: In-house counsel, HR Managers and Supervisors can also be whistleblowers.

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Parker v. M&T Chemicals(NJ App. Div. 1989)

Employee, in-house counsel, refuses to take custody over the trade secrets of a competitor which were inadvertently unsealed. He writes a memo to his boss indicating that the company may be in violation of a court order. He is later reprimanded and demoted. Court permits suit to proceed but leaves unresolved ethical issues when in-house lawyers sue employer/client.

The Cases:

Quinlan v. Curtiss-Wright Corp

Stengart v. Loving Care Agency

Supreme Court of New Jersey (2010)

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Quinlan v. Curtiss-Wright Corp

• The Facts• Employed since 1980 as benefits analyst,

promoted to executive director of HR in 1999.• Signs confidentiality agreement • In 2000 Ken Lewis is hired in HR and promoted

to corporate director of HR in 2003

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• Quinlan complains and is given bonus and raise• Lawsuit is filed in 2003 alleging unequal pay• While employed, confidential documents,

including salary information and performance evaluations are copied and given to lawyer

• Fired for “breach of duty” and “theft of company documents.”

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• Lawsuit is amended to include “retaliation.”• Jury awards $10.7 million dollars-

‒ Back pay‒ Front pay‒ Emotional distress‒ Punitive damages‒ Interest‒ Counsel fees

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Did Quinlan Engage In “Protected Activity?”

N.J. Law Against DiscriminationObjectionsRefusalsDisclosuresResistingProviding InformationPursuing a Claim

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Court Adopts “Flexible Totality of The Circumstances” Test.

Factors:‒Relevance to case‒ Company policy‒ Purpose of copying and disclosure‒ To whom?‒ Would documents be destroyed?‒ Could documents be obtained in another way?‒Whether documents were available in ordinary

course of business

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Court finds that violating confidentiality policy could be “protected activity”

Employee could be fired

Could be retaliation

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Stengart v. Loving Care Agency

The Facts:

‒ Employed in 1994 and was Director of Nursing

‒ Was given a laptop computer with e-mail program and internet access

‒ Employer’s Electronic Communications policy is published in Employee Handbook

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The Employer’s Policy

E-mail and voice mail messages, internet use and communication and computer files are considered part of the company's business and client records. Such communications are not to be considered private or personal to any individual employee.

…The principal purpose of electronic mail (e-mail) is for company business communications. Occasional personal use is permitted…(Emphasis added).

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• Stengart resigns employment on January 2, 2008, alleging discrimination and harassment.

• She refuses to be interviewed as part of employer’s investigation.

• Quits on January 14th and returns laptop.

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• In anticipation of her resignation, Stengart exchanges e-mails with her attorney during several days in December, 2007 and in January, 2008.

• She used the laptop during working time, accessing her Yahoo account over the internet.

• Lawsuit is filed on February 7, 2008 alleging discrimination and harassment, and constructive discharge.

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• Browser software on the laptop automatically made a copy of each web page viewed and shared them on the hard drive in a “cache” folder.

• Among the items saved were files containing emails Stengart had exchanged with her lawyer.

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Are The Emails “Private?” Is There A “Reasonable Expectation of Privacy?”

Factors to consider – ‒ Adequacy of the policy‒ Does the company routinely monitor emails?‒ Are emails sent from company’s account or

Yahoo/AOL/Gmail account?‒ Are the emails “privileged?”‒ Location of computer

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Court suggests that by allowing for “occasional personal use”, employees may have a right to privacy in some “personal” e-mails.

Policy is unclear whether it covers emails transacted from personal accounts.

Policy does not warn employees that such emails are stored on hard drive and that they can be retrieved.

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What Does This Mean:

• Employees can be fired for disloyalty

• Some acts at disloyalty are protected activity

Factors:MotivationHow disruptiveDoes employee have a belief that the law is being violated?

But: Extremely high-risk if protected activity

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• Seek advice on any complex case

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Next Steps

• Review policies and agreements• Inform all employees of policies• Consider a security audit• Manage by “walking around”• Have expert advice available

-EANJ-Law Firm

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Thank You

www.eanj.org

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