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Supreme Court blows the whistle loud and clear on good faith

The Minnesota Supreme Court blew open the courthouse doors to whistleblowers on Aug. 9 by removing the requirement that the putative whistleblower act with the purpose of “exposing an illegality.”

Whistleblowers are now held to a good faith standard under the Minnesota Whistleblower Act.

It means that employees such as James Friedlander who spoke to employers about violations of law may maintain a whistleblower lawsuit in situations where the employers were already aware that the disputed conduct was occurring.

“After many years in which whistleblowers were denied their day in court we have clear direction from our Supreme Court that will protect whistleblower’s rights,” said plaintiff’s attorney Clayton Halunen.

“Employers will now be held accountable for illegal conduct and not be able to rely on technicalities to escape liability.”

David Pearson, attorney for the defendant, said only that his client was disappointed with the decision.

The result was not a complete surprise, said employment attorney Jeremy Robb. “You can see in the court’s decision that they felt constrained by the Legislature.”

Good faith

The court ruled in response to a certified question from the U.S. District Court of Minnesota: “Did the 2013 amendment to the Minnesota Whistleblower Act defining the term ‘good  faith’ to mean ‘conduct that does not violate section 181.932, subdivision 3’ eliminate the judicially created requirement that the putative whistleblower act with the purpose of ‘exposing an illegality?’ “

Yes, the court said in Friedlander v. Edwards Lifesciences, LLC, et al.

Since its enactment, the whistleblower act has prohibited an employer from discharging an employee who “in good faith” reports a violation of federal or state law. In Obst v. Microtron, the court held that good faith requires a putative whistleblower to act with the purpose of exposing an illegality. It followed that opinion in Kidwell v. Sybaritic in 2010.

In a January, 2017 article in Bench and Bar, attorney Stephen Premo, one of the plaintiff’s attorneys, wrote, “In practice, the expose-an-illegality rule created a significant gap in the law’s protections. Employees who reported actual, planned, or suspected violations of law with the purpose of investigating, opposing or even stopping unlawful activity of which the employer was already aware were largely unprotected under courts’ definition of good faith. This reading of the statute turned the statute on its head, permitting the most culpable employers—those complicit in, and perpetuating, unlawful activity—to terminate the most courageous employees with impunity. Such an application of the Whistleblower Act could potentially chill further opposition within the corporate structure and help facilitate continued unlawful activity.”

The Legislature amended the statute in 2013 to define good faith as reports that that are not knowingly false or made in reckless disregard of the truth of the matter asserted. The parties disagreed about the effect of the amendment, and the court adopted Friedlander’s position — that the amendment abrogates the prior case law, leaving only the statutory definition of good faith.

Content, not motives

Friedlander sued his former employers for a retaliatory discharge after he was fired after speaking about breaching customers’ contracts.

Friedlander became aware that his employer allegedly was failing to offer price concessions to customers in violation of their contracts. Friedlander discussed this with management, who were already aware of it.  He was then fired.

The defendants argued that he did not make his report in good faith, under the law, because he did not report new information to expose an illegality.

U.S. District Court Judge Susan Nelson certified the question of the definition of good faith to the Supreme Court.

The court said in Friedlander that when it defined good faith it filled a gap in the statute, but after the Legislature provided its own definition, the court was obliged to adhere to the plain language of the definition and give effect to all parts of the amended act.

The statutory definition moves the meaning of good faith away from the motives behind the report to only the content of the report, the court said.

“Any other conclusion would, in effect, render the ‘good faith’ definition section of the 2013 amendment superfluous, and run afoul of our presumption that the Legislature intends to change the law when it amends a statute,” the court said, in an opinion written by Chief Justice Gildea.

Employers have to be nimble

Employers can expect an uptick in MWA claims, Robb said, adding that Minnesota now has one of the most plaintiff-friendly whistleblower statues in the country.

Employers who are currently involved in whistleblower claims should consult their attorneys immediately to determine if they should change their litigation strategy, he said. “Employers have to be nimble.”

His suggestions for employers are: Take employees’ reports seriously by thoroughly investigating their reports; ensure that employees who make reports are not subject to retaliation; and when faced with the possible discipline of a whistleblower, engage outside counsel.

If they don’t have policies in place, said Robb, managers should be establishing plans or mechanisms that allow them to effectively evaluate an internal report. Those plans should make sure that the claims are investigated and the employee is given feedback.

Such a plan guides the actions after a report is made and also helps establish and demonstrate an employers’ good faith, Robb said.

It may be a good idea to have an investigation conducted by a third party depending on the circumstances, he said.

To mitigate the potential retaliation claims, Robb continued, every employer should have an anti-retaliation provision in a written policy or a handbook.

Timing is important if it is necessary to discipline a whistleblower, he continued.

“Courts are more willing to assume retaliation if the adverse action occurs quickly. After about two months the presumption of retaliation starts to diminish,” Robb said.

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