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Court Upholds Employer's Termination of Whistleblower Who Refused to Stop Blowing the Whistle

February 2013

By: James B. Sherman, Esq. and Phoebe A. Taurick, Esq.

In Wood v. SatCom Marketing, LLC, the U.S. Court of Appeals for the Eighth Circuit upheld the employer's termination of an employee who openly opposed its announcement to force employees to be paid only by direct deposit. The court determined that the employee's actions where based on her good faith belief that the employer's new policy would violate Minnesota wage payment laws and, therefore, she was legally protected as a "whistleblower." However, the court also held that the employer had legitimate reasons to fire her for conduct that fell outside of her protected status - namely, her refusal to allow the employer to address her complaints through its counsel and instead disrupting the workforce with her ongoing argument, all while failing to do her job as instructed. The employer's handling of this delicate situation and the court's ruling in support of the employer's decision ultimately to discharge the employee, provides Minnesota employers with guidance on how to handle an employee that engages in legally "protected activity" without fear of violating laws against retaliation.

The case involved an employee who objected to the company's announcement that it would mandate all employees be paid by direct deposit. The employee claimed that mandating direct deposit of paychecks violated Minnesota wage payment requirements. In response to her complaint the employer indicated it would have the matter reviewed by legal counsel; however, the employee would not let the issue drop. Instead she began researching the issue online and complaining to others in the company, focusing more on proving her position than doing her job. Frustrated with the employee's behavior the employer suspended her for failure to complete assigned tasks, using company time and resources on unauthorized projects, and defying management's directives on work assignments. Ultimately the employer offered her the choice of returning to work provisionally under an action plan, or accepting a severance package in exchange for her resignation. The employee chose to return to work, but when she continued her stubborn opposition to the direct deposit of pay, she was terminated.

The employee sued, claiming her suspension and termination amounted to retaliation in violation of the Minnesota Whistleblower Act, the Minnesota Human Rights Act, and the Fair Labor Standards Act. A trial court initially found that her repeated opposition to the direct pay issue was not protected as whistle-blowing. The appellate court disagreed but noted that "the assumption of [the employee's] good faith weakens with each passing report" given her knowledge that the employer was aware of the issue and told her its legal counsel would review the matter. Nevertheless, the court upheld the trial court's dismissal of the employee's retaliation claims because, even if she did engage in protected conduct, the employer terminated her for legitimate, non-discriminatory reasons - failing to do her job and insubordination - rather than in retaliation for her protected conduct.

This case illustrates that even whistleblowers and others who engage in so-called "protected activities" (claiming legal rights or complaining of unlawful practices) may nevertheless be disciplined, at least where they clearly cross the line as did the employee in this case. Such matters are tricky and their outcome can turn on timing, minor communications and nuances. Therefore, it is a good idea to consult with knowledgeable legal counsel before taking disciplinary action against an employee that has blown the whistle or otherwise engaged in other "protected activities." Although these situations may be delicate, taking appropriate, well thought out action is often preferable to just letting a "protected" employee do as they please.