USDOL/OALJ Reporter: ARB Decision Caselist - March 2016

PROTECTED ACTIVITY; COMPLAINT ABOUT BONUS PLAN TO RESPONDENT FOCUSED ON ALLEGATIONS OF VIOLATIONS OF STATE WAGE LAWS, BUT WHICH INCLUDED ALLEGATIONS OF MISREPRESENTATION DURING TELECONFERENCE THAT FOLLOWED UP ON EARLIER EMAIL MEMORANDUM, FOUND TO CONSTITUTE PROTECTED ACTIVITY UNDER SOX WHERE COMPLAINANT REASONABLY BELIEVED THAT THERE MAY HAVE BEEN A VIOLATION OF STATE LAW

In Dietz v. Cypress Semiconductor Corp. , ARB No. 15-017, ALJ No. 2014-SOX-2 (ARB Mar. 30, 2016), the ALJ found that the Complainant reported violations fraud statutes to the Respondent, and that, in retaliation, the Respondent placed an undeserved disciplinary memo in the Complainant’s personnel file and constructively discharged him in violation of the SOX whistleblower provision.

The Complainant became a program manager for the Respondent after his former employer was acquired by the Respondent, and the Complainant successfully reapplied for a job with the Respondent. The Respondent requires certain employees to participate in its “Design Bonus Plan,” which mandated that the employees pay 10% of their salaries into the plan and which provided payouts based on the performance of the team. On April 12, 2013, the Complainant sent an email to the Respondent’s Senior Vice President stating that he believed the plan violated specific state statutes. He made no mention of fraud or of any of the statutes listed in the SOX whistleblower provision. On April 22, 2013, during a teleconference with company attorneys, the Complainant again complained about the legality of the bonus plan and the fact that employees who reapplied for jobs with the Respondent after the acquisition had not been told about the compulsory deductions from base salary.

On appeal, the Respondent argued that the alleged violations reported by the Complainant were of state wage laws, not the federal fraud statutes, and therefore not protected by the SOX whistleblower provision. The ARB noted that the ALJ had seemed to believe that it was self-evident that the Complainant’s allegations, which primarily consisted of his claim that the bonus plan violated state wage laws, related to fraud. The ARB stated that

   That, however, isn’t quite right: an allegation of a violation of state wage laws is, by itself, insufficient to constitute protected activity under SOX’s whistleblower provision without some allegation of a knowing misrepresentation or concealment of a material fact. In fact, lots of violations of state (and even federal) wage laws do not constitute fraud. If an employer were to pay its workers less than the minimum wage, that would be illegal; but allegations that an employer did that would not constitute protected activity under the SOX whistleblower provision. Ditto for failing to pay overtime or the employer’s share of Social Security or for violating countless other laws that amount to pocketing money that legally belongs to employees. That was the crux of what Dietz accused Cypress of doing with its bonus plan. Put another way, larceny is not the same as fraud.

   Rather, to be fraud, there has to be some form of trickery, of deception, a “knowing misrepresentation or knowing concealment of a material fact.” Without that, the alleged wrongdoing isn’t fraud. Of course, Dietz only had to have a reasonable belief that Cypress engaged in fraud, but Dietz’s “reasonable belief” had to include a reasonable belief that Cypress knowingly either misrepresented or concealed facts, not just that Cypress was, in the words of Dietz’s brief, “illegally siphoning money from its employees to its corporate coffers” in violation of state wage laws.

   Thus, to answer the question of whether Dietz’s actions constitute “protected activity” under the SOX whistleblower provision requires us to analyze whether Dietz reasonably believed not only that Cypress’s bonus plan’s compulsory deductions violated state wage laws but also that Cypress was knowingly misrepresenting or concealing material facts about the bonus plan from its employees.

USDOL/OALJ Reporter at 9-10 (footnotes omitted).

The ARB found that substantial evidence supported a finding that the Complainant reasonably believed that the Respondent knowingly failed to disclose to the employees who reapplied for jobs with Respondent after the acquisition of the former employer, that the bonus plan required compulsory deductions from their salaries, “possibly inducing them to take jobs at Cypress without understanding that their true base salary was effectively less than they thought.” Id . at 10 (footnote omitted). Although on appeal both parties focused on whether the April 12 email to the Senior Vice President was protected activity, the ARB reviewed the record and found that by April 22, 2013, the Complainant’s “characterization of his concerns clearly also included allegations of misrepresentations and/or concealment of material facts.” Id . at 11.

The ARB indicated that the April 22, 2013 teleconference could be viewed as part the Complainant’s overall course of potential protected activity. In a footnote the ARB also stated that it could characterize the teleconference as a second, separate act constituting protected activity. The ARB stated that “[w]hether this would in fact be a violation of the federal mail or wire fraud statute, we of course make no determination. But, given [the Complainant’s] position in the company—as a manager of employees, including former ... employees [of the company acquired by the Respondent], who seemed confused about the way the bonus plan worked and unaware that the plan required employees to contribute from their base salary in a manner that might well violate state wage laws—his belief was reasonable.” Id . at 12. The ARB stated: “In short, on April 22, 2013, [the Complainant] ‘provided information . . . regarding . . . conduct [that he] reasonably believ[ed]’ violated either 18 U.S.C. § 1341 (mail fraud) or 18 U.S.C. § 1343 (wire fraud) to [the Respondent’s] General Counsel, someone ‘working for [the Respondent] who has the authority to investigate, discover, or terminate misconduct.’ This constitutes protected activity within the meaning of the SOX whistleblower provision.” Id (footnote omitted).

CONSTRUCTIVE DISCHARGE; WHEN EMPLOYER ACTS SO AS TO COMMUNICATE TO REASONABLE EMPLOYEE THAT HE WILL BE TERMINATED FROM EMPLOYMENT, AND THE EMPLOYEE RESIGNS, EMPLOYER’S ACTIONS MAY AMOUNT TO CONSTRUCTIVE DISCHARGE

In Dietz v. Cypress Semiconductor Corp. , ARB No. 15-017, ALJ No. 2014-SOX-2 (ARB Mar. 30, 2016), the ALJ found that the Complainant reported violations of the federal mail and wire fraud statutes to the Respondent, and that, in retaliation, the Respondent placed an undeserved disciplinary memo in the Complainant’s personnel file and constructively discharged him in violation of the SOX whistleblower provision.

The Complainant had engaged in protected activity under SOX when he complained about misrepresentations in the Respondent’s bonus program. Thereafter, the Respondent began undermining the Complainant’s ability to perform his job by removing project resources; notified the Complainant that it was going to begin formally documenting purported performance issues; and issued a formal disciplinary memo directing the Complainant to respond with a memo outlining what he had done wrong and what he should have done instead. The Complainant responded with a letter disputing the allegations; alleging retaliation; and stating that he was terminating his employment but would be willing to continue for a while for the sake of his colleagues on his current project. The next day, the Complainant was directed to attend a meeting with several company officials; the meeting did not have an agenda, which was unusual at the company. The Complainant feared that he would be fired, and instead of attending the meeting and tendered his immediate resignation.

On appeal, the Respondent argued that it did not constructively discharge the Complainant.

   The legal standard ordinarily used to determine what constitutes a constructive discharge is whether the employer has created “working conditions so intolerable that a reasonable person in the employee’s position would feel forced to resign.” Constructive discharge is a question of fact, and the standard is objective: the question is whether a “reasonable person” would find the conditions intolerable, and the subjective beliefs of the employee (and employer) are irrelevant.

   But that is not the only method of demonstrating constructive discharge. When an employer acts in a manner so as to have communicated to a reasonable employee that [he] will be terminated, and the . . . employee resigns, the employer’s conduct may amount to constructive discharge.” Under this standard, an employee who can show that the “handwriting is on the wall” and the “axe is about to fall” can make out a constructive-discharge claim. While the ALJ seemed to conflate these two standards at times, it is clear that, even though she did not rely on legal authority supporting this second way of finding a constructive discharge, her intuition about the law was correct.

USDOL/OALJ Reporter at 12-13 (footnotes omitted).

In a very fact-specific decision, which the ARB conceded was a close call, the ARB found that substantial evidence supported the ALJ’s conclusion that there had been a constructive discharge. What made the case difficult was that, on its face, the Complainant appeared to have resigned. The record, however, showed that the Respondent had a “turnaround process” of quickly and forcefully attempting to retain employees who express an intent to resign, that the Complainant was aware of that process, and therefore his resignation was essentially found by the ALJ to constitute an opening gambit in a negotiation over the alleged performance issues. One member of the Board dissented from this part of the decision, stating that under the test found in Bobreski v. J. Givoo Consultants , ARB No. 13-001, ALJ No. 2008-ERA-3, slip op. at 13-14 (ARB Aug. 29, 2014), for conducting a substantial evidence review, “it is error to look at individual pieces of evidence in isolation and assess its strength standing alone, resulting in a fragmented and most likely distorted view of the evidence.” USDOL/OALJ Reporter at 24 (footnote omitted). This member found that it was not “logical to infer, from the record as a whole, that [the Respondent] was going to ‘fire’ [the Complainant] when [the Complainant] had already expressly resigned.” Id .

CONTRIBUTING FACTOR CAUSATION; WHETHER EVIDENCE OF PRETEXT MAY BE CONSIDERED UNDER FORDHAM

In Dietz v. Cypress Semiconductor Corp. , ARB No. 15-017, ALJ No. 2014-SOX-2 (ARB Mar. 30, 2016), the ALJ found that the Complainant reported violations of the federal mail and wire fraud statutes to the Respondent, and that, in retaliation, the Respondent placed an undeserved disciplinary memo in the Complainant’s personnel file and constructively discharged him in violation of the SOX whistleblower provision. On appeal, the Respondent argued that under Fordham v. Fannie Mae , ARB No. 12-061, ALJ No. 2010-SOX-51 (Oct. 9, 2014), an ALJ is categorically prohibited from considering employer evidence in assessing whether an employee’s protected activity was a contributing factor in the adverse personnel action, and therefore the ALJ in this case erred by using the Respondent’s lack of credibility in determining the “contributing factor” element of a SOX claim. The ARB rejected this argument, stating: “While there is disagreement on this Board about the merits of Fordham , we all agree that ALJs are not precluded from considering evidence of pretext, inconsistent application of an employer’s policies, and inconsistent explanations for the adverse personnel actions to support a finding that a complainant has met his burden to show that his protected activity was a contributing factor.” USDOL/OALJ Reporter at 20-21 (footnote omitted). One member of the Board in a dissent and concurrence, stated that he agreed with the Respondent about what Fordham said. Nonetheless, this member indicated that he did not “understand how a respondent’s reasons are only relevant to the question of contribution if the ALJ finds those reasons to be false.” Id . at 25. In a footnote, this member also indicated that he believes that Fordham is in conflict with other ARB precedent.

FINDINGS OF FACT; ALTHOUGH IT IS PREFERABLE THAT ALJS DRAFT THEIR OPINIONS WITH A DISCRETELY IDENTIFIABLE SET OF FINDINGS OF FACT, ARB DECLINES TO REMAND BASED ON LACK OF SUCH WHERE THE FULL CONTEXT OF THE ALJ’S EXHAUSTIVE DECISION SUPPORTED REJECTION OF THE RESPONDENT’S AFFIRMATIVE DEFENSE

In Dietz v. Cypress Semiconductor Corp. , ARB No. 15-017, ALJ No. 2014-SOX-2 (ARB Mar. 30, 2016), the ALJ found that the Complainant reported violations of the federal mail and wire fraud statutes to the Respondent, and that, in retaliation, the Respondent placed an undeserved disciplinary memo in the Complainant’s personnel file and constructively discharged him in violation of the SOX whistleblower provision. On appeal, one of the arguments the Respondent made about the ALJ’s determination on the Respondent’s affirmative defense was that the ALJ muddled the legal standard, and that her “failure to separate factual findings that support the proper affirmative defense from proof that allows [Dietz] to meet his lower standard renders [her decision] unintelligible, and it must be set aside.” USDOL/OALJ Reporter at 21 (quoting Respondent’s brief). The Respondent requested a remand. The ARB found that whatever misstatements the ALJ may have made about the standard the ALJ, and whatever may be said about the way she handled findings of act, the ARB was compelled to affirm because the facts the ALJ found in her exhaustive 82-page decision clearly supported the conclusions that the Complainant’s protected activity was a contributing factor in the adverse actions, and that the Respondent would not have taken the adverse actions in the absence of the Complainant’s protected activity. In regard to findings of fact, the ARB wrote:

   The only authority Cypress cites for such a drastic remedy for the ALJ’s minor misstatements and unwillingness to restate her factual findings is the regulatory provision that lays out the procedures for ALJs in SOX whistleblower claims. But, the provision Cypress cites [29 C.F.R. § 1980.109(a)] says nothing about “set[ting] aside” an ALJ’s decision. All it says is, “The decision of the ALJ will contain appropriate findings[] [and] conclusions . . . .” Now, Cypress may well be correct when it (at least implicitly) argues that the world would be a better place (and certainly our job would be easier) if ALJs drafted all their decisions with specific findings of fact listed separately from their conclusions of law, facts that would then be referenced specifically in the legal analysis, section by section. But that is not what the regulation Cypress cites provides, and in any event, it says nothing about remanding if the ALJ’s decision fails to “contain appropriate findings[] [and] conclusions.” We decline to set aside a decision that is well-supported by substantial evidence simply on the basis of the word “appropriate” in a procedural regulation.

USDOL/OALJ Reporter at 22 (footnotes omitted). The ARB noted that the Respondent could have cited the OALJ rules of practice and procedure at 29 C.F.R. § 18.57(b) (2014), which required the ALJs clearly delineate their findings of fact as such. The ARB, however, stated that even under this more robust provision, it would not remand for failure to include specific “findings of fact” given the clarity of the ALJ’s decision as to why she rejected the Respondent’s claim that it would have taken the same adverse action in the absence of the Complainant’s protected activity.

[Editor’s note: OALJ’s Rules of Practice and Procedure were revised in 2015. The text cited by the ARB of the prior rule at 29 C.F.R. § 18.57(b) (2014) about findings of fact no longer appears in the rules. Rather, the 2015 version of the rules only state: “At the conclusion of the proceeding, the judge must issue a written decision and order.” 29 C.F.R. § 18.92 (2015). This change was made because the content of an ALJ decision is already governed by the APA at 5 U.S.C. § 557(c). See 77 Fed. Reg. 72142, 72174 (Dec. 4, 2012) (preamble to proposed rule)]

[STAA Digest II Q]
PETITION FOR INTERLOCUTORY REVIEW DISMISSED WHEN PETITIONER FAILED TO TIMELY RESPOND TO ORDER TO SHOW CAUSE WHY PETITION SHOULD NOT BE DISMISSED

In Griffin v. First Student, Inc. , ARB No. 16-042, ALJ Nos. 2015-STA-49 and 53 (ARB Mar. 29, 2016), the ALJ issued a decision and order denying Motions for Summary Decision filed by both Respondents. The ALJ indicated that a hearing date would be set once First Student, Inc. had the opportunity to respond to new allegations raised by the Complainant. The Complainant then filed a petition requesting that the Administrative Review Board review the ALJ’s decision and order.

In its order dismissing the Complainant’s petition, the Board noted that because the ALJ had not issued a final decision, the petition was for interlocutory review. The Board has the authority “to review interlocutory rulings in exceptional circumstances, provided such review is not prohibited by statute.” However, when the Board ordered the Complainant to show cause why the Board should not dismiss the interlocutory appeal, the Complainant failed to file a timely response. Consequently, the petition was dismissed.

[STAA Digest II I]
SETTLEMENT REACHED AFTER ARB ISSUED ITS FINAL DECISION; ARB DENIES MOTION FOR VACATUR OF ITS DECISION BASED SOLELY ON THE FACT THAT THE PARTIES SUBSEQUENTLY ENTERED A SETTLEMENT AGREEMENT

In Kirk v. Rooney Trucking Inc. , ARB No. 14-035, ALJ No. 2013-STA-42 (ARB Mar. 24, 2016), the ALJ found that the Respondent violated the whistleblower provision of the STAA, and the ARB affirmed the ALJ’s decision on appeal. The parties then entered into a settlement agreement. Subsequently, the Respondent filed a motion with the ARB seeking that the ARB set aside its Decision and Order after recognizing and approving the settlement agreement. The ARB denied the motion because the motion failed to contain any argument stating grounds for the requested relief. The ARB stated that it would not vacate its final order merely because the parties settled and the Respondent requested that the final order be vacated. The ARB cited the following in a footnote:

    See In re Dubrowsky , 268 B.R. 6, 8 (E.D.N.Y. 2001) (discussing U.S. Bancorp Mortg. Co. v. Bonner Mall P’ship , 513 U.S. 18 (1994), and other cases relying on Bancorp , for the proposition that vacatur is an exceptional measure that is not warranted merely upon a showing that the parties have settled or that a settlement agreement provides for vacatur).

USDOL/OALJ Reporter at 2, n.4.

Order granting the Administrator’s motion to dismiss the petition for review where the Petitioner consented to the dismissal.

Dismissal based on the failure of the Complainant to respond to the ARB’s order to show cause why it should not dismiss his appeal for failure to file an opening brief.

[STAA Digest II J]
APPELLATE BRIEF MUST INCLUDE A CERTIFICATE OF SERVICE; FAILURE TO DO SO IS GROUNDS FOR DISMISSAL OF APPEAL

In Sorenson v. Terracare Associates, LLC , ARB No. 16-005, ALJ No. 2015-STA-1 (ARB Mar. 22, 2016), the ARB dismissed the pro se Complainant’s appeal because the Complainant failed to submit a certificate of service of his appellate brief despite repeated direction from the ARB, and warnings that failure to do so would result in dismissal of the appeal. The ARB had informed the Complainant that the certificate of service must state “that the brief had been served on Respondent and its counsel, the addresses where it was served, the date on which it was served and the signature of the person who served the brief....” USDOL/OALJ Reporter at 1.