Whistleblowing & Compliance

Denise DadikaNew Jersey’s Appellate Division recently held that a jury waiver provision was unenforceable as to a former employee’s statutory employment claims. In Noren v. Heartland Payment Systems, Inc., Docket No. A-2651-13T3, __ N.J. Super. __ (Feb. 6, 2017), plaintiff signed an employment agreement with his then-employer that provided:

HPS and RM [employee] irrevocably waive any right to trial by jury in any suit, action or proceeding under, in connection with or to enforce this Agreement.

Following his termination of employment, Noren sued Heartland alleging, inter alia, violation of the Conscientious Employee Protection Act (“CEPA”), New Jersey’s employment whistleblower law.  The court denied Noren’s demand for a jury trial based on the jury-waiver provision in his employment agreement, and after a lengthy bench trial, dismissed Noren’s complaint. Noren appealed, challenging the application of the jury waiver provision to his CEPA claim.

On appeal, the court focused upon the fact that CEPA and the New Jersey Law Against Discrimination (“NJLAD”) expressly guarantee a right to a jury trial. Given the statutorily guaranteed right, the Appellate Court determined that in order for the waiver to be effective it must “clearly explain (1) what right is being surrendered and (2) the nature the claims covered by the waiver.”  The court found that the jury waiver at issue was unenforceable because it did not make any “reference to statutory claims and did not define the scope of the claims as including all claims relating to Noren’s employment.”

The Court noted that while it is “preferable for a waiver of rights provision to explicitly . . . include statutory rights, it is possible to provide the clarity necessary for a valid waiver without such specific reference.”  In doing so, the court relied upon the Court’s earlier decision in Martindale v. Sandvik, Inc., 173 N.J. 76 (2002), which upheld a mandatory arbitration provision because the language at issue – which provided for a waiver of any action or proceeding relating to individual’s employment, or the termination thereof – was clear, unambiguous and sufficiently broad to encompass plaintiff’s statutory claims.

In light of the Noren decision, New Jersey employers should review their jury waiver provisions to ensure that they clearly provide that an employee is waiving a right to a jury trial as to all claims relating to the individual’s employment and termination thereof, and consider referencing the statutory rights provided under CEPA and the NJLAD.

Daniel and Nathaniel
Nathaniel M. Glasser and Daniel C. Fundakowski

Last month, in United States ex rel. Helfer v. Associated Anesthesiologists of Springfield, Ltd., No. 3:10-cv-03076 (N.D. Ill. Jan. 14, 2016), the U.S. District Court for the Central District of Illinois held that the retaliation provision of the False Claims Act (“FCA”) requires a whistleblower to show that protected activity was the “but-for” cause of the alleged adverse action.

The FCA’s retaliation provision entitles an employee to relief if he is “discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against . . . because of lawful acts done . . . in furtherance of an action” under the FCA.  31 U.S.C. § 3730(h).

In Helfer, the relator alleged he was discharged for contacting Medicare to report concerns regarding the way Associated Anesthesiologists billed for labor epidurals.  The company denied the accusations, contending the relator was discharged for a combination of other things, including unauthorized contacts with third parties regarding the company’s business practices.

The company moved for summary judgment, arguing “but-for” causation, rather than “mixed motive,” is the proper standard for evaluating an FCA retaliation claim.  Largely relying on the Supreme Court’s interpretation of a similar Title VII retaliation provision in University of Texas Southwestern Medical Center v. Nassar,  the court held that “because the FCA retaliation provision uses ‘because of’ and not language specific to a standard of causation, the statute requires that Dr. Helfer shows that his protected conduct was a ‘but-for’ cause of his termination.”  Despite the court’s favorable ruling with respect to the FCA retaliation standard, the court nevertheless denied the motion for summary judgment, finding a genuine issue of material fact as to the reason for the relator’s discharge.

This case represents another in what has become an emerging trend of post-Nassar decisions rejecting the “mixed motive” analysis in favor of a requirement of “but-for” causation to sustain a cause of action under the FCA’s § 3730(h) retaliation provision.  This heightened analysis should assist employers in dismissing more frivolous lawsuits at early stages of the litigation, and make it easier for employers to demonstrate that the relator would have been subject to an adverse action regardless of the FCA-protected conduct.

By: Mollie O’Brien, James Flynn and Jiri Janko

The Supreme Court of New Jersey held on June 16th that a former registered nurse could not get his whistleblower claim to the jury because he failed to prove at trial that he held a reasonable belief that the conduct to which he objected violated a standard of patient care or a clear mandate of public policy.  James Hitesman v. Bridgeway, Inc., A-73-12,  involved allegations of improper quality of patient care at a long-term care nursing home facility, allegations that the plaintiff attempted to support with references to the American Nursing Association’s Code of Ethics (“ANA Code”), the Bridgeway Employee Handbook and its Statement of Resident Rights.  The Supreme Court ruled that these are not expressions of law or mandates of public policy on which Conscientious Employee Protection Act (“CEPA”) claims may rest.  This decision is of interest to employers, especially in the health care field, and to those watching the evolution of New Jersey’s whistleblower jurisprudence.

Part of appreciating the case’s import is understanding its facts.  Plaintiff was a nurse at the Bridgeway Care Center.  In January 2008, he reported to his supervisors, certain government health organizations, and a local television station that patients at the nursing home had experienced what he believed was an unacceptable increase in respiratory and gastrointestinal symptoms.  Bridgeway thereafter discovered that plaintiff disclosed to the television station partially-redacted patient records, which conduct violated Bridgeway’s confidentiality policy and the Health Insurance Portability and Accountability Act of 1996.  Accordingly, plaintiff was discharged.  Following his discharge, plaintiff brought a CEPA claim against Bridgeway.  He alleged that his discharge violated CEPA’s prohibition of retaliatory action against a licensed or certified health care employee who reports on, or objects to, an employer activity that the employee reasonably believes to constitute “improper quality of patient care” or which the employee reasonably believes to be “incompatible with a clear mandate of public policy concerning the public health.”  N.J.S.A. 34:19-3a(1), 3c(1), and 3c(3).

The case proceeded to trial, and at the close of plaintiff’s case, Bridgeway moved for an involuntary dismissal on the grounds that plaintiff failed to meet his burden in proving the first prong of a CEPA claim:  that he reasonably believed that Bridgeway violated a specific law or public policy.  The motion was denied, and the jury subsequently returned a verdict for plaintiff on liability, but awarded no damages.  The Appellate Division reversed, holding that the trial court’s denial of Bridgeway’s motion was improper. 

The New Jersey Supreme Court affirmed the reversal.  Following Dzwonar v. McDevitt, 177 N.J. 451 (2003), the Supreme Court held that, before submitting the claim to the jury, a trial court must find a substantial nexus between the employer’s practice, procedure, action or failure to act, and a law, rule, regulation, declaratory ruling, or professional code of ethics or public policy.  Under that analysis, plaintiff has the burden of identifying the legal authority or a clear mandate of public policy that provided a standard against which Bridgeway’s conduct could be measured.  The Court concluded that in this case plaintiff failed to meet this burden.  In the Court’s opinion, the sources that plaintiff identified – section 3.5 of the ANA Code, the Bridgeway Employee Handbook and its Statement of Resident Rights – failed to define an accepted standard of patient care or state a clear mandate of public policy.  While the ANA Code addressed the obligation of a nurse to report inadequate medical care, it neither governed Bridgeway’s patient care nor specified how Bridgeway should have treated its patients’ illnesses.  Lastly, Bridgeway’s handbook and Statement of Resident Rights was silent as to a standard for Bridgeway’s response to infectious diseases in patients or any authority that could be construed as an expression of public policy.  Accordingly, the Court concluded the trial court should have dismissed the lawsuit for plaintiff’s failure to identify a law or public policy that he believed to have been violated.

The dismissal confirms that New Jersey places a high burden on CEPA plaintiffs to identify specific sources of law or public policy that relate to the conduct of which they complain before their case will be submitted to a jury.  It separately establishes that a CEPA plaintiff must present evidence as to which law, rule, regulation, declaratory ruling, professional code of ethics or public policy he believes his employer violated at trial.  While Hitesman had identified other legal sources in prior motions, the court held that the trial court could not rely on those sources when deciding Bridgeway’s motion as it was constrained to consider only evidence that was presented for the jury’s consideration at trial.  Hitesman is also of interest for those awaiting the Court’s ruling in Lippman v. Ethicon, Docket No. 73324, another healthcare related CEPA case, where the parties and various amici curiae have asked the Court to determine whether reports made by employees in the regular course of fulfilling jobs as safety or quality inspectors amount to protected whistleblowing under CEPA. 

While some employers may read Hitesman as a harbinger of a hoped-for pro-employer ruling in Lippman, more sophisticated employers understand that handling the highly-specialized and highly regulated workplaces across the healthcare and life science industry will, regardless of the outcomes of Hitesman and Lippman, requires an integrated understanding of applicable and evolving employment law as well as applicable healthcare regulations and standards, and applicable facts.  Experienced counsel able to address those diverse but converging areas certainly can enhance that understanding.

 

On March 26, 2012, the U.S. Department of Health & Human Services Office of Inspector General (the “OIG”) published a report summarizing a February 23, 2012roundtable meeting between the OIG and compliance professionals from twenty-three pharmaceutical manufacturers.  The compliance officers and other professionals attending the meeting all represented companies currently operating under Corporate Integrity Agreements (or “CIAs”).  CIAs are generally negotiated between a company and the government in connection with settling various types of federal healthcare program fraud allegations.   Although the roundtable meeting was focused on pharmaceutical manufacturers’ experiences, many of the lessons learned from operating under CIAs are not unique to the pharmaceutical industry and could apply to all companies operating compliance programs.

As many in the health care industry are already aware, implementing an effective compliance program is one way to possibly reduce the risk of fraud and abuse activities occurring within an organization, as well as a way to identify and remedy questionable activities.  Among other things, an effective compliance program may also provide a communication system to permit and encourage potential “whistleblowers” to vent their frustrations through internal means, thus enabling a company to more promptly address suspected inappropriate activities.  As previous enforcement in the pharmaceutical industry has indicated, many whistleblowers that ultimately bring actions under the federal civil False Claims Act begin as disgruntled employees that did not believe their concerns were taken seriously by their organizations.  An effective compliance program may also be advantageous in reducing possible penalties in connection with enforcement activities.

The OIG’s March 26 report highlights discussions regarding the following topics:

  1. Challenges in Implementing CIAs,
  2. Compliance Program Structure and Oversight,
  3. Risk Identification and Monitoring Activities,
  4. Policies, Procedures and Training Activities, and
  5. Compliance Post-CIA.

Among other things, the OIG report details several suggestions by the pharmaceutical manufacturer compliance professionals relating to effective compliance practices, including the following:

  • While companies often implement computer-based modules to train their employees and to document such training, “in person” training is generally more effective.
  • In general, involving and updating the board of directors regarding compliance activities (something mandated by many CIAs) has been a positive experience. 
  • Boards of directors and company management should communicate a compliance message, including communicating that compliance may be “a competitive business advantage”.  Additionally, it was suggested that “compliance messages be delivered by senior, district, and regional managers; during in-person meetings with sales representatives; during various auditing and training interactions; at business unit meetings; and through bulletins from the human resources department.”
  • Having the compliance officer be a member of senior management and not subordinate to the general counsel or the chief financial officer has been a beneficial structure.
  • Integration of compliance into a company’s broader business operations “greatly enhances the effectiveness of compliance programs”.  The report highlights several examples of such compliance/business integration, and further suggests that, “to the extent possible, business units ‘own’ compliance.”  However, the report also notes that turnover in personnel may create challenges to compliance and business integration.   
  • Ensuring that “compliance personnel have ‘a seat at the table’ when sales and marketing activities are planned or discussed, … can help ensure that risks are preemptively identified and addressed.”
  • Field “ride-along” activities may not be highly beneficial in identifying specific compliance violations, but are beneficial in establishing open lines of communication between compliance and field personnel.
  • Compliance personnel should collaborate with business unit personnel and other affected stakeholders in the policy development and revision process.
  • Future areas of compliance challenges include state and federal “sunshine” reporting issues, social media and technology, and changing business models in the pharmaceutical industry.

Even if a healthcare employer already has a compliance program in place, updating and periodically revising that program will help to maintain its relevance and effectiveness.   The OIG has previously encouraged pharmaceutical manufacturers to pursue such periodic revisions of their compliance programs.  Accordingly, appropriate benchmarking of other companies’ compliance practices may be helpful as employers review their own programs (whether or not they are under a CIA).   The March 26 OIG report may be one source of benchmarking “industry standard” compliance program activities as pharmaceutical manufacturers and others structure their own compliance program.