Minding Your Ps and Qs: Whistleblower Protection and Employer Defenses 17th Annual Texas Higher Education Law Conference University of North Texas Denton,

Minding Your Ps and Qs:Whistleblower Protection and

Employer Defenses 17th Annual Texas Higher Education Law Conference

University of North TexasDenton, Texas

March 25-26, 2013

Mari McGowanAbernathy, Roeder, Boyd & Joplin P.C.

Employer Posting Required

The law requires each governmental The law requires each governmental employer to notify employees of their employer to notify employees of their rights under the Texas Whistleblower Act rights under the Texas Whistleblower Act “by posting an appropriately worded sign “by posting an appropriately worded sign in a prominent place in the workplace.” in a prominent place in the workplace.”

Tex Gov’t Code 554.009







Purpose of the Texas Whistleblower Act

Protect public employees from employer Protect public employees from employer retaliation when reporting in good faith a retaliation when reporting in good faith a violation of law, and violation of law, and

Secure lawful conduct from those Secure lawful conduct from those conducting the affairs of state and local conducting the affairs of state and local governmentgovernment

Tarrant County v. McCraryTarrant County v. McCrary, 310 S.W.3d 170, , 310 S.W.3d 170, 173 (Tex. App. – Fort Worth 2010, pet. denied)173 (Tex. App. – Fort Worth 2010, pet. denied)

Who is “protected” ?A state or local governmental entity may not A state or local governmental entity may not suspend or terminate the employment of, or suspend or terminate the employment of, or take other adverse personnel action against, atake other adverse personnel action against, a

• public employeepublic employee

• who in good faith reports a violation of law who in good faith reports a violation of law

• by the employing governmental entity or by the employing governmental entity or another public employeeanother public employee

• to an appropriate law enforcement authorityto an appropriate law enforcement authorityTEX. GOV’T CODE §554.002(a)TEX. GOV’T CODE §554.002(a)

“Public Employee” defined………an employee or appointed officer (other than an an employee or appointed officer (other than an independent contractor) who is paid to perform independent contractor) who is paid to perform services for a state or local government.services for a state or local government.• must be paid (not a volunteer, student, guest, etc.)must be paid (not a volunteer, student, guest, etc.)• either part-time or full-timeeither part-time or full-time• cannot be independent contractor (will depend on cannot be independent contractor (will depend on

the employer’s extent of control)the employer’s extent of control)

TEX. GOV’T CODE §554.001(4); TEX. GOV’T CODE §554.001(4); Permian Basin Cmty. Ctrs. Permian Basin Cmty. Ctrs. for MHMR v. Johns, for MHMR v. Johns, 951 S.W.2d 497, 501 (Tex. App. – El 951 S.W.2d 497, 501 (Tex. App. – El Paso 1997, no writ)Paso 1997, no writ)

What is the public employee protected from?

A state or local governmental entity may not A state or local governmental entity may not suspend or terminate suspend or terminate the employment of, or take the employment of, or take other adverse personnel action other adverse personnel action against, aagainst, a

• public employeepublic employee

• who in good faith reports a violation of law who in good faith reports a violation of law

• by the employing governmental entity or another by the employing governmental entity or another public employeepublic employee

• to an appropriate law enforcement authorityto an appropriate law enforcement authority

TEX. GOV’T CODE §554.002(a)TEX. GOV’T CODE §554.002(a)

Adverse Personnel Action…

..”is an action that affects the employee’s ..”is an action that affects the employee’s compensation, promotion, demotion, compensation, promotion, demotion, transfer, work assignment, or performance transfer, work assignment, or performance evaluationevaluation.”.”

. . . the action must be “. . . the action must be “material and likely to material and likely to deter a reasonable, similarly situated deter a reasonable, similarly situated employee from reporting a violation of the employee from reporting a violation of the lawlaw.”.”

TEX. GOV’T CODE §554.001(3); TEX. GOV’T CODE §554.001(3); Montgomery Cty. Montgomery Cty. v. Park, v. Park, 246 S.W.3d 610, 613 (Tex. 2007)246 S.W.3d 610, 613 (Tex. 2007)

Important Whistleblower Act CasesState v. Lueck, 290 S.W.3d 876, 885 (Tex. 2009)

• • Plea to Jurisdiction is proper vehicle to challenge whether Plea to Jurisdiction is proper vehicle to challenge whether factual elements exist to support a claim.factual elements exist to support a claim.

• • Internal policy recommendation of TxDOT was not a report Internal policy recommendation of TxDOT was not a report of a violation of law that the Act was designed to protect. of a violation of law that the Act was designed to protect.

• • Even if email did report a violation of law, the employee’s Even if email did report a violation of law, the employee’s supervisor was not an appropriate law enforcement authority supervisor was not an appropriate law enforcement authority to whom such a report should be made.to whom such a report should be made.

• • Email report indicated employee knew his supervisor was Email report indicated employee knew his supervisor was not the proper authority within TxDOT to regulate the not the proper authority within TxDOT to regulate the reported violations…so he could not have formed a good-reported violations…so he could not have formed a good-faith belief that the supervisor was authorized to enforce faith belief that the supervisor was authorized to enforce such violations.such violations.

Important Post – Lueck Whistleblower Cases

Galveston Indep. Sch. Dist. v. Jaco, Galveston Indep. Sch. Dist. v. Jaco, 331 S.W.3d 182 (Tex.331 S.W.3d 182 (Tex.

App.—Houston [14th Dist.] 2011, pet. denied)App.—Houston [14th Dist.] 2011, pet. denied)

Univ. of Houston v. Barth, Univ. of Houston v. Barth, 2011 Tex. App. LEXIS 6866 (Tex.2011 Tex. App. LEXIS 6866 (Tex.

App.— Houston [1st Dist.]) Aug. 25, 2011, pet. filed)App.— Houston [1st Dist.]) Aug. 25, 2011, pet. filed)

Tex. Dep’t of Transp. v. Garcia, Tex. Dep’t of Transp. v. Garcia, 2010 Tex. App. LEXIS 47792010 Tex. App. LEXIS 4779

(Tex. App.— Corpus Christi, June 24, 2010, no pet.)(Tex. App.— Corpus Christi, June 24, 2010, no pet.)

Univ. of Tex. Southwestern Med. Ctr. v. GentilelloUniv. of Tex. Southwestern Med. Ctr. v. Gentilello, , 317 317

S.W.3d 865 (Tex. App.—Dallas 2010, pet. filed)S.W.3d 865 (Tex. App.—Dallas 2010, pet. filed)

Important Post – Lueck Whistleblower Cases

City of Elsa v. Gonzalez, City of Elsa v. Gonzalez, 325 S.W.3d 622 (Tex. 2010)325 S.W.3d 622 (Tex. 2010)

Univ. of Tex. San Antonio v. Wells, Univ. of Tex. San Antonio v. Wells, 2011 Tex. App. LEXIS 9202011 Tex. App. LEXIS 920

(Tex. App.—San Antonio Feb. 9, 2011 no pet.)(Tex. App.—San Antonio Feb. 9, 2011 no pet.)

Tex. Water Dev. Bd. v. Neal, Tex. Water Dev. Bd. v. Neal, 2010 Tex. App. LEXIS 3225 (Tex.2010 Tex. App. LEXIS 3225 (Tex.

App.— Austin Apr. 28, 2010, pet. denied) (unpublished)App.— Austin Apr. 28, 2010, pet. denied) (unpublished)

Moreno v. Tex. A&M University-Kingsville, Moreno v. Tex. A&M University-Kingsville, 339 S.W.3d 902339 S.W.3d 902

(Tex. App.— Corpus Christi May 5, 2011, pet. filed)(Tex. App.— Corpus Christi May 5, 2011, pet. filed)

DART v. CarrDART v. Carr, , 309 S.W.3d 174 (Tex. App.—Dallas, pet. denied)309 S.W.3d 174 (Tex. App.—Dallas, pet. denied)

“Good Faith Report of Violation of Law” means . . .

Good Faith (subjective and objective Good Faith (subjective and objective element) . . . element) . . .

(1) the plaintiff believed the conduct violated the (1) the plaintiff believed the conduct violated the law; and law; and

(2) the plaintiff’s belief was reasonable in light (2) the plaintiff’s belief was reasonable in light of his/her training and experience.of his/her training and experience.

TEX. GOV’T CODE §554.002(a); City of Elsa v. TEX. GOV’T CODE §554.002(a); City of Elsa v. Gonzalez, 325 S.W.3d 622, 626 (Tex. 2010)Gonzalez, 325 S.W.3d 622, 626 (Tex. 2010)

Good Faith . . .

Good Faith (subjective and objective Good Faith (subjective and objective element) . . . element) . . .

• does not does not require that plaintiff is rightrequire that plaintiff is right• does not does not require that a law is actually require that a law is actually

violatedviolated• doesdoes have to be honest and objectively have to be honest and objectively

reasonablereasonable

Vela v. City of Houston, Vela v. City of Houston, 186 S.W.3d 49, 53 (Tex. App. – 186 S.W.3d 49, 53 (Tex. App. – Houston [1Houston [1stst Dist.] 2005, no pet.) (because of electrician’s Dist.] 2005, no pet.) (because of electrician’s 18 years of experience as electrician, his erroneous belief 18 years of experience as electrician, his erroneous belief of code violation was of code violation was notnot in good faith) in good faith)

“Report of Violation of Law . . .”

Report . . . Report . . .

• generally any “generally any “disclosure of informationdisclosure of information” tending ” tending to show a violation of law (oral report, phone to show a violation of law (oral report, phone call, email, written letter)call, email, written letter)

Violation of Law - “law” defined in sec. 554.001(1) Violation of Law - “law” defined in sec. 554.001(1) as: as:

(A) a state or federal statute;(A) a state or federal statute;

(B) an ordinance of a local governmental entity; or(B) an ordinance of a local governmental entity; or

(C) a rule adopted under a statute or ordinance.(C) a rule adopted under a statute or ordinance.

What is a “violation of law” . . .?DART v. Carr, DART v. Carr, 309 S.W.3d 174 (Tex. App.—309 S.W.3d 174 (Tex. App.—Dallas 2010, pet. denied)Dallas 2010, pet. denied)

• • a plaintiff is not required to identify a specific law a plaintiff is not required to identify a specific law when making the reportwhen making the report

• • A plaintiff does not have to establish an actual A plaintiff does not have to establish an actual violation of lawviolation of law

• • However, However, there there must be some law must be some law prohibiting prohibiting the the complained of conduct to state a claim. complained of conduct to state a claim.

• • An internal policy is not a law.An internal policy is not a law.

• • Otherwise “any complaint, grievance or Otherwise “any complaint, grievance or misconduct could support a claim.”misconduct could support a claim.”

What is a “violation of law” . . . ?

Galveston Indep. Sch. Dist. v. Jaco, 331 Galveston Indep. Sch. Dist. v. Jaco, 331 S.W.3d 182 (S.W.3d 182 (Tex. App.—Houston [14th Dist.] Tex. App.—Houston [14th Dist.] 2011, pet. denied)2011, pet. denied)

• • UIL rules are not rules “adopted under a statute UIL rules are not rules “adopted under a statute or ordinance.”or ordinance.”

• • This court gave a strict and narrow construction This court gave a strict and narrow construction of “law” and the definition of “law” in of “law” and the definition of “law” in Whistleblower Act.Whistleblower Act.

Is a University rule a law?University of Houston v. Barth, 365 S.W.3d 438 (Tex. App.—Houston [1st Dist.] 2012, pet. filed)

The University Rule

The university maintained a written policy governing the U of H system called a SAM (“System Administrative Memorandum”).

Under the SAM, employees are directed to report criminal activity and advised that failure to do so may result in disciplinary action.

The officials identified in the SAM for reporting included the University police, University GC and its CFO.

BarthBarth Facts . . . Facts . . . Barth was a tenured professor in the Hotel Management College.

The College business manager told Barth that he The College business manager told Barth that he suspected the dean of the College, Alan Stutts, suspected the dean of the College, Alan Stutts, had engaged in questionable accounting practices, had engaged in questionable accounting practices, mishandled University funds, and entered into an mishandled University funds, and entered into an unauthorized contract for services on behalf of the unauthorized contract for services on behalf of the College.College.

Stutts was Barth’s supervisor.Stutts was Barth’s supervisor.

Barth reported Stutts’ conduct to the University’s Barth reported Stutts’ conduct to the University’s CFO, GC, internal auditor and Associate Provost.CFO, GC, internal auditor and Associate Provost.

BarthBarth Facts . . . Facts . . . After the report, Stutts gave Barth marginal ratings After the report, Stutts gave Barth marginal ratings on his evaluations which affected his merit raises.on his evaluations which affected his merit raises.

Barth was denied funds for travel related to his Barth was denied funds for travel related to his position.position.

Stutts withdrew from a symposium Barth created Stutts withdrew from a symposium Barth created and earned $10,000 in annual compensation. As and earned $10,000 in annual compensation. As a result, the symposium was canceled.a result, the symposium was canceled.

Barth grieved Stutts’ twice alleging retaliation and Barth grieved Stutts’ twice alleging retaliation and a lower-than-deserved merit evaluation which a lower-than-deserved merit evaluation which lowered his salary increase.lowered his salary increase.

Neither grievance was successful.Neither grievance was successful.

BarthBarth Facts . . . Facts . . . Barth then reported Stutts to the University Barth then reported Stutts to the University police department. No action was taken.police department. No action was taken.

The University CFO requested the internal The University CFO requested the internal auditor look into Barth’s allegations.auditor look into Barth’s allegations.

The auditor found Stutts violated portions of The auditor found Stutts violated portions of the SAM.the SAM.

Barth sued the University claiming a Barth sued the University claiming a violation of the Whistleblower Act.violation of the Whistleblower Act.

Barth Barth Court Ruling . . . Court Ruling . . .

Court found the employee reported a violation of law when he reported a coworker’s violations of the University’s financial rules.

The University contested the employee’s argument that its rules constituted a law adopted under statute or ordinance that could form the basis of a whistleblower claim.

Barth Barth Court Ruling . . . Court Ruling . . .

As a legislatively-created university, the court found the University Board of Regents was empowered to “enact bylaws, rules, and regulations necessary for the successful management and government of the university.”

Thus, the rules of the University were of the same force as an enactment of the Legislature and, therefore, a “law” under the Whistleblower Act.

“Appropriate Law Enforcement Authority”?

• • Media is NOT a proper law enforcement authority. Media is NOT a proper law enforcement authority. Beaumont v. Bouillion, Beaumont v. Bouillion, 896 S.W.2d 143, 145 (Tex. 896 S.W.2d 143, 145 (Tex. 1995)1995)

• • Police Chief and District Attorney were proper law Police Chief and District Attorney were proper law enforcement authority where employee reported a enforcement authority where employee reported a criminal violation to them . . . BUT criminal violation to them . . . BUT

• • Later report to the town manager against Chief and Later report to the town manager against Chief and DA alleging a failure to investigate was NOT DA alleging a failure to investigate was NOT protected because town manager as not a law protected because town manager as not a law enforcement authority. enforcement authority. Town of Flower Mound v. Town of Flower Mound v. TeagueTeague, 111 S.W.3d 742, 755 (Tex. App. – Fort , 111 S.W.3d 742, 755 (Tex. App. – Fort Worth, 2003, pet. Denied)Worth, 2003, pet. Denied)

Does the entity:• regulate under or enforce the law alleged

to have been violated; OR

• Investigate or prosecute a violation of criminal law.


City of Elsa v. Gonzalez, City of Elsa v. Gonzalez, 325 S.W.3d 622 325 S.W.3d 622 (Tex. 2010)(Tex. 2010)

• City council was NOT appropriate law enforcement City council was NOT appropriate law enforcement authority for purposes of the Texas Open Meetings authority for purposes of the Texas Open Meetings Act.Act.

• ““[T]he Whistleblower Act’s limited definition of a law [T]he Whistleblower Act’s limited definition of a law enforcement authority does not include an entity enforcement authority does not include an entity whose power is not shown to extend beyond its whose power is not shown to extend beyond its ability to comply with a law by acting or refusing to ability to comply with a law by acting or refusing to act or by preventing a violation of law by acting or act or by preventing a violation of law by acting or refusing to act.”refusing to act.”


Tex. Water Dev. Bd. v. Neal, Tex. Water Dev. Bd. v. Neal, 2010 Tex. App. 2010 Tex. App. LEXIS 3225 (Tex. LEXIS 3225 (Tex. App.— Austin Apr. 28, 2010, pet. App.— Austin Apr. 28, 2010, pet. denied) (unpublished)denied) (unpublished)

Plaintiff’s reports to her employer, the Texas Water Plaintiff’s reports to her employer, the Texas Water Development Board, regarding alleged violations of Development Board, regarding alleged violations of the Texas Labor Code were the Texas Labor Code were NOTNOT made to an made to an appropriate law enforcement authority. appropriate law enforcement authority.


University of Texas San Antonio v. Wells, University of Texas San Antonio v. Wells, 2011 Tex. App. LEXIS 920 (Tex. App.—San 2011 Tex. App. LEXIS 920 (Tex. App.—San Antonio Feb. 9, 2011, no pet.)Antonio Feb. 9, 2011, no pet.)

• • The focus is on the entity itself, not the The focus is on the entity itself, not the specific department or office that received specific department or office that received the report.the report.

• • University is objectively NOT an appropriate University is objectively NOT an appropriate law enforcement authority for a plaintiff’s law enforcement authority for a plaintiff’s complaints of criminal fraud.complaints of criminal fraud.


A Bad Day for Whistleblowers in Texas

On February 22, 2013, the Texas Supreme Court issued decisions in two whistleblower cases testing the “appropriate law enforcement authority” question:

University of Texas Southwestern Medical Center at Dallas v. Gentilello

Gertrude Moreno v. Texas A&M University – Kingsville

University of Texas Southwestern Medical Center at Dallas v. Gentilello, 317 S.W.3d 865 (Tex. App.—Dallas 2010, pet. granted)

Tenured professor of medicine held two chair positions.

During employment, he claimed he discovered that hospital residents were treating and performing surgical procedures on patients without the supervision of an attending physician in violation of Medicare and Medicaid regulations.

He reported the alleged violations to a supervisor who set the policies regarding the presence of attending physicians and who had the power to internally investigate Medicare and Medicaid violations.

UT Southwestern v. Gentilello

GentilelloGentilello Facts . . . Facts . . .

Professor’s chair positions were removed.Professor’s chair positions were removed.

He sued under the Texas Whistleblower Act He sued under the Texas Whistleblower Act alleging he had a good faith belief that alleging he had a good faith belief that Medicare and Medicaid violations were Medicare and Medicaid violations were occurring and he reported these violations occurring and he reported these violations to the person that he believed in good faith to the person that he believed in good faith had the authority to “investigate and had the authority to “investigate and correct” the violations.correct” the violations.

The Court of Appeals found a fact issue existed on whether the professor had a good faith belief that he reported to an appropriate law enforcement authority (the Clinical Department Chair). The medical center sought review.

The Texas Supreme Court overturned the decision of the Court of Appeals, holding that consistent with the court's prior cases, “the Whistleblower Act's constricted definition of a law-enforcement authority requires that a plaintiff's belief be objectively reasonable. On that score, purely internal reports untethered to the Act's undeniable focus on law enforcement—those who either make the law or pursue those who break the law—fall short.”

The Court noted that other states' whistleblower laws accommodate internal reports to supervisors; Texas law does not.

GentilelloGentilello Court Ruling . . . Court Ruling . . .

The Court stated that under the Texas Act, “the jurisdictional evidence must show more than a supervisor charged with internal compliance or anti-retaliation language in a policy manual urging employees to report violations internally. For a plaintiff to satisfy the Act's good-faith belief provision, the plaintiff must reasonably believe the reported-to authority possesses what the statute requires: the power to (1) regulate under or enforce the laws purportedly violated, or (2) investigate or prosecute suspected criminal wrongdoing.

GentilelloGentilello Court Ruling . . . Court Ruling . . .

Moreno v. Texas A&M - KingsvilleGertrude Moreno v. Texas A&M University – Kingsville, --- S.W.3d --- (Tex. 2013).

– Moreno was employed as Asst VP for Finance and Administration and Comptroller.

– Moreno’s supervisor obtained an out-of-state tuition waiver for his daughter to attend TAMUK at the Texas-resident rate. Moreno challenged that action resulting in the revocation of the waiver and her supervisor ultimately paid full tuition for his daughter.

– Moreno was then terminated with no explanation.

– Moreno appealed her termination through TAMUK’s grievance process alleging retaliation, and then sued under the Texas Whistleblower Act.

MorenoMoreno Court Ruling . . . Court Ruling . . .

The Court of Appeals found Moreno created a fact issue that she had a good-faith belief that her supervisor violated the law and she could have relied on the interpretation of the law given by the employer in forming her belief. The Court felt Moreno showed that she followed the college’s policy in reporting the violation to her supervisor and that the supervisor had both the duty and the power to enforce the rules.

Again, the Texas Supreme Court overturned the decision by the Court of Appeals.

Quoting the Quoting the Gentilello Gentilello Opinion: Opinion:

The Act, by its text and structure, restricts “law enforcement The Act, by its text and structure, restricts “law enforcement authority” to its commonly understood meaning. That is, authority” to its commonly understood meaning. That is, it protects employees who report to authorities that it protects employees who report to authorities that actually promulgate regulations or enforce the laws, or to actually promulgate regulations or enforce the laws, or to authorities that pursue criminal violations. The specific authorities that pursue criminal violations. The specific powers listed in section 554.002(b) are outward-looking. powers listed in section 554.002(b) are outward-looking. They do not encompass internal supervisors charged They do not encompass internal supervisors charged with in-house compliance and who must refer suspected with in-house compliance and who must refer suspected illegality to external entities.illegality to external entities.

The President's authority to compel compliance with The President's authority to compel compliance with state law on tuition waivers, was not the same as state law on tuition waivers, was not the same as enforcing the law in the sense required by the statute.enforcing the law in the sense required by the statute.

MorenoMoreno Court Ruling . . . Court Ruling . . .

The logical outcome of the Gentilello and Moreno decision is to force potential whistleblowers to take the agency's issues outside the organization, an option that agencies would not prefer.

However, agencies are protected from retaliation claims when an employee has complained internally, but failed to contact the appropriate enforcement authority.

Minding Your Ps and Qs:Whistleblower Protection and Employer Defenses

THANK YOU!!!Mari McGowan

Abernathy, Roeder, Boyd & Joplin, P.C.

1700 Redbud Blvd., Ste. 300

McKinney, Texas 75069

(214) 544-4000

www.abernathy-law.com

Documents

Minding Your Ps and Qs: Whistleblower Protection and Employer Defenses 17th Annual Texas Higher Education Law Conference University of North Texas Denton,