Whistleblower claims: what employers should consider

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In the three years since the Minnesota Supreme Court’s decision in Friedlander v. Edwards Lifesciences LLC, courts have begun to shape what is — and what is not — sufficient to make out a successful whistleblower claim under the Minnesota Whistleblower Act (MWA). While courts remain willing to grant summary judgment on MWA claims in certain circumstances, decisions issued in the last three years suggest that certain defenses that were available pre-Friedlander are, many times, no longer viable.

History of the MWA

The Minnesota Whistleblower Act was passed in 1987, born out of the  Minnesota Court of Appeals’ decision in Phipps v. Clark Oil & Refining Corp. Phipps was an employee at Clark Oil & Refining Corporation when he claimed that a customer requested leaded gasoline for her 1976 Chevrolet. Phipps allegedly refused to provide leaded gas, believing that to do so would violate federal laws and regulations. When Phipps was subsequently fired, he sued Clark Oil, alleging he was wrongfully discharged for refusing to violate the law. The Hennepin County District Court dismissed Phipps’ complaint, finding that no such cause of action existed. On appeal, the Minnesota Court of Appeals found that Phipps could pursue a wrongful discharge in violation of public policy claim. To prevail on such a claim, Phipps would have to establish that his termination transgressed “a clear mandate of public policy, either legislatively or judicially recognized.” Clark Oil then petitioned for review by the Minnesota Supreme Court.

Following oral argument before the Minnesota Supreme Court, but before an opinion was issued, the Minnesota Legislature enacted the MWA, Minn. Stat. § 181.932. As originally passed, the MWA protected, in part: “the employee, or a person acting on behalf of an employee, [who] in good faith, reports a violation or suspected violation of any federal or state law or rule adopted pursuant to law to an employer or to any government body or law enforcement official.”

Judicial Interpretation of the MWA

In the years that followed, Minnesota court decisions shaped the requirements for a claim under the MWA. Courts quickly adopted the McDonnell Douglas burden-shifting framework used for retaliation claims under the Minnesota Human Rights Act, requiring an MWA plaintiff to first establish a prima facie case of retaliation by showing: (1) the employee engaged in protected conduct; (2) the employee suffered an adverse employment action; and (3) a causal connection existed between the two. See Cokley v. City of Otsego, 623 N.W.2d 625 (Minn. Ct. App. 2001) (citing Hubbard v. United Press Intern., Inc., 330 N.W.2d 428 (Minn. 1983)).

The Minnesota Supreme Court further articulated what became the requirements for statutorily protected conduct under the first prong of prima facie case, holding:

“A whistleblower claim need not identify the specific law or rule that the employee suspects has been violated, so long as (1) there is a federal or state law or rule adopted pursuant to law that is implicated by the employee’s complaint, (2) the employee reported the violation or suspected violation in good faith, and (3) the employee alleges facts that, if proven, would constitute a violation of the law or rule adopted pursuant to law.” Abraham v. Cnty of Hennepin, 639 N.W.2d 342 (Minn. 2002) (citing Obst v. Microtron, Inc., 614 N.W.2d 196 (Minn. 2000)) (numbering added).

Accordingly, by 2002, the analysis for a prima facie case under the MWA looked as follows:

In 2000, the Minnesota Supreme Court weighed in again, in Obst v. Microtron, to set the standard for what it meant to make a report in “good faith.” Obst stated that courts must look “not only at the content of the report, but also at the reporter’s purpose in making the report. The central question is whether the reports were made for the purpose of blowing the whistle, i.e., to expose an illegality.” Making a report in “good faith” thereafter became synonymous with making a report “for the purpose of exposing an illegality.”

Under this framework and the precedent set by Obst, employers regularly obtained summary judgment on MWA claims by arguing that because a plaintiff’s reports were not made for the purpose of exposing an illegality, the plaintiff could not establish that the report was made in good faith. For example, reporting something about which an employer already was aware was not for the purpose of exposing an illegality. Peterson v. Bio-Medical Applications of Minnesota, 992 F.Supp.2d 934 (D. Minn. 2014); Weigman v. Everest Institute, 957 F.Supp.2d 1102 (D. Minn. 2013). Reporting something that an employee was required to report as part of their regular job duties was not reporting for the purpose of exposing an illegality. Skare v. Extendicare Health Services, Inc., 431 F.Supp.2d 969 (D. Minn. 2006); Freeman v. Ace Telephone Ass’n, 404 F.Supp. 2d 1127 (D. Minn. 2005). Reporting conduct for purposes of obtaining clarification, reporting conduct to stand up for oneself or to rebut a potentially adverse employment action, reporting conduct for the purpose of voicing animosity and discontent toward a supervisor, or even voicing a concern based on personal beliefs that conduct was “unethical” did not meet the standard. Becker v. Johnson, 210 F.Supp. 3d 1110 (D. Minn. 2016); Ewald v. Royal Norwegian Embassy, 2 F.Supp.3d 1101 (D. Minn. 2014); Savoie v. Genpak, LLC, 2014 WL 6901783 (D. Minn. Dec. 5, 2014); Romano v. ING ReliaStar Life. Ins., 2013 WL 3448079 (D. Minn. July 9, 2013); Mellon v. Hospice Preferred Choice, Inc., 2011 WL 70612 (D. Minn. Jan. 10, 2011); Arends v. Extendicare Homes, Inc., 2008 WL 1734205 (D. Minn. Apr. 20, 2008).

In the years that followed Obst, Minnesota courts (state and federal) granted summary judgment for the employer on an MWA claim over 30 times on the grounds that the plaintiff had not established a genuine issue of material fact that he or she made a report for the purpose of exposing illegal conduct.

2013 amendments to “good faith”

In 2013, the Legislature amended the MWA to add a statutory definition of “good faith.” Rather than the definition from Obst, the Legislature defined “good faith” to mean “conduct that does not violate section 181.932, subdivision 3.” Section 181.932(3) states: “This section does not permit an employee to make statements or disclosures knowing that they are false or that they are in reckless disregard of the truth.” As a result, the 2013 amendment lowered the standard for a “good faith” report to anything that was not “knowingly false or in reckless disregard of the truth.”

Friedlander v. Edwards Lifesciences LLC.

Four years later, the Minnesota Supreme Court addressed the disconnect between Obst and its progeny and the 2013 amendment to the MWA. In Friedlander v. Edwards Lifesciences LLC, the plaintiff, James Friedlander, worked for Edwards Lifesciences as its director of corporate accounts in the company’s Heart Valve Therapy division. In 2014, Edwards entered into a contract with a national organization whereby health care facilities that met certain growth metrics were entitled to price concessions or rebates. The duty to apply the concession or rebate was triggered once the facility met the growth metric.

In January 2015, several senior sales executives discussed the contract and decided that even though several facilities were on track to meet the growth metrics, Edwards would only give price concessions to those facilities that requested them. Friedlander opposed the plan, stating that Edwards was obligated to issue price concessions to all facilities that met the requirements under the contract. A similar conversation occurred again in March 2015, and Friedlander again spoke out in opposition. Friedlander’s employment was terminated a few months later, in July 2015.

Following his termination, Friedlander brought a claim for wrongful discharge under the MWA, arguing that he was terminated for his reports of “actual, planned, and suspected violations of law” to his superiors, including breach of contract, breach of the duty of good faith and fair dealing, breach of fiduciary duty, and violations of California’s Unfair Competition Law.

Edwards moved for judgment on the pleadings, arguing that under Obst, Friedlander had not engaged in any protected conduct because his reports were not made to “expose an illegality” since he did not report the plan to anyone who did not already know about it. Friedlander countered by relying on the 2013 amendments to the MWA, stating that “good faith” requires only refraining from making statements or disclosures “knowing that they are false or that they are in reckless disregard of the truth.” Friedlander argued that the effect of the amendment was to legislatively overrule the judicially constructed expose-an-illegality requirement from Obst. Because Friedlander’s report was neither knowingly false nor made in reckless disregard for its truth, it was protected under the MWA regardless of whether Edwards was already aware of the underlying activity.

Faced with a conflict between existing precedent and interpretation of the 2013 amendment, the district court certified the following question to the Minnesota Supreme Court:

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?”

The Minnesota Supreme Court held that “the 2013 amendment to the Minnesota Whistleblower Act, defining the phrase “good faith” to mean “conduct that does not violate section 181.932, subdivision 3,” eliminated the judicially created requirement that a putative whistleblower act with the purpose of exposing an illegality.”

The Post-Friedlander Landscape.

Employers and defense counsel alike feared that Friedlander would make it incredibly difficult to win summary judgment on MWA claims on the issue of “good faith” by lowering the standard and making it inevitably a question of material fact.

In the years that have followed, however, courts have continued to grant motions for summary judgment on MWA claims, albeit on different grounds. Of the 32 orders reported by Lexis and WestLaw since Friedlander in cases where the employer moved for summary judgment on a retaliation claim, Minnesota state and federal courts have granted summary judgment for the employer 27 times.

Of the 27 orders for summary judgment, 20 were based on the plaintiff’s failure to establish a prima facie case of retaliation, three were based on the plaintiff’s failure to establish that the employer’s legitimate, non-retaliatory business reason was pretext for retaliation, and four were on miscellaneous grounds (i.e., preemption issues, exclusivity provisions, and employee/independent contractor/joint employer considerations).

Taking a closer look at the grounds on which courts found the plaintiff failed to establish a prima facie case of retaliation, the opinions show courts (and lawyers) have been reluctant to wade into the motivation behind the complaint itself. Of the 20 successful post-Friedlander summary judgment motions based on the failure to establish a prima facie case, the winning arguments are broken down as follows:

• Report does not implicate a violation of the law: 8
• Facts, if true, do not establish a violation of the law: 2
• Report not made in good faith: 0
• No adverse action: 1
• No causal connection: 12

After Friedlander, defendants have wisely focused on aspects of the prima facie case other than “good faith,” including that the report does not implicate a violation of the law at all. These arguments track the Minnesota Supreme Court’s guidance in Kratzer v. Welsh Cos., 771 N.W.2d 14, 22 (Minn. 2009): “A mere report of behavior that is problematic or even reprehensible, but not a violation of the law, is not protected conduct under the Minnesota Whistleblower Act.” For example, in Steffens v. State, 2019 WL 5884570 (Minn. Ct. App. Nov. 12, 2019), the plaintiff complained that his employer used an emergency appointment power to avoid having the plaintiff complete new hire paperwork. The court stated that while this “may appear problematic, it is not illegal.” Similarly, in Gibson v. Special School District #1, 2020 WL 1129871 (Minn. Ct. App. Mar. 9, 2020), the plaintiff alleged that she reported a number of concerns, including that special education students felt isolated and did not have the help they needed, that they often sat around with no work to do, and that she did not like the way another faculty member completed paperwork or conducted project-based learning. She also complained that another faculty member used her name to give credits for his work and that she did not believe the principal edited her notices to staff appropriately. Ultimately, the court found that, “[a]lthough she characterizes her report as a charge of harassment and discrimination against [the principal], she does not cite a specific violation, suspected violation, or planned violation of any federal or state law or common law or rule adopted pursuant to law that she believed the principal committed.” So, even following Friedlander, general complaints of workplace concerns or misconduct that do not rise to the level of illegal activity remain insufficient under the MWA.

Courts also remain willing to grant summary judgment in MWA cases on causation grounds by relying on well-established concepts of temporal proximity and intervening causes. Indeed, under the MWA, “while close proximity between an alleged report and termination may support an inference of reprisal, temporal proximity alone is generally insufficient to establish an inference of retaliatory motive.” Warmbold v. MINACT, Inc., 2017 4838752 (D. Minn. Oct. 24, 2017). And “the presence of intervening events [may] undermine[] any causal inference that a reasonable person might otherwise have drawn from temporal proximity.” Id. In Warmbold, for instance, although the plaintiff was terminated three weeks after engaging in protected conduct, the court found his intervening performance issues, some of which he admitted to in his deposition, undercut any alleged causal connection. Id. Similarly, in Slaughter v. Independent School District No. 833, 2020 WL 4579014 (Minn. Ct. App. Aug. 10, 2020), the court found there was no causal connection between the plaintiff’s protected conduct and her termination where, in the interim, plaintiff engaged in an investigatory interview wherein she admitted intentionally disobeying directives from her supervisor. Causation remains a strong area for dispositive motion practice on MWA claims following Friedlander.

Going forward

Friedlander undoubtedly cost employers some leverage in terms of defending MWA claims. When faced with a whistleblower allegation, employers and defense counsel are best served to focus on what works and avoid entering into the “good faith” arena:

• To the extent possible, determine exactly what the complainant said when making a report. Did the complainant specifically report that he or she believed conduct was illegal? Even if not explicitly stated, could the complaint be reasonably construed to implicate a legal violation as opposed to merely a report of problematic workplace behavior?
• Assume that the conduct reported by the complainant occurred exactly as reported in the complaint. Does that amount to a violation of the law?
• Did the complainant suffer an adverse employment action after making a complaint (i.e., was the complainant terminated? Demoted? Reduced pay? Relocated?)
• Assuming the complainant establishes that he or she suffered an adverse employment action, how much time elapsed between the alleged complaint and the adverse employment action? Did the individual who made the decision regarding the adverse employment action know that the complainant blew the whistle? Are there any facts suggesting a causal connection between blowing the whistle and the adverse action, aside from any potential temporal proximity?

As always, employers should be careful not to dismiss any employee report or complaint potentially involving a suspected, planned or actual violation — even when the employer suspects the complaint is not being made in good faith. Instead, employers must be diligent about following best practices every time the whistle might be blowing:

• Have an established plan in place for investigating and responding to employee concerns or complaints.
• Take all complaints seriously.
• Interview relevant witnesses.
• Preserve relevant documents.
• Contact outside counsel for advice before taking adverse action against a whistleblower.

Terran Chambers defends employers of all sizes in all stages of employment-related litigation, from responding to demand letters and charges of discrimination to defending claims and appeals in state and federal courts. In addition, Terran works with college, university and secondary education institutions to address the unique needs and challenges they face in the employment space.

Sean Somermeyer represents employers in litigation and advising on complex issues. This includes defending clients in court, conducting internal investigations, responding to government investigations and counseling on difficult issues.