Blow the whistle when employers actually violate the law or it might blow in the wind or in your face

By Ilona Demenina Anderson

The FWA

The Florida Whistleblower Act (FWA) protects employees against retaliation from employers when employees report a violation of the law by their employers or they refuse to participate in unlawful activity or violations of law by their employer. Thus, if Florida employees report violations of law committed by their employers to law enforcement or government agencies, they are protected and they can claim damages if their employers retaliate against them by firing them or withholding benefits from them.

Application of the FWA, standard of proof required

Two cases decided by the courts in Florida are in apparent conflict on the issue of whether employees have to prove that there was an actual violation of the law by their employers or if they could claim damages on proof that they only had a reasonable belief in good faith that their employers were violating the law. The 2013 case of Aery v. Wallace Lincoln-Mercury held that employees only need to show that they reasonably believed in good faith that a violation of law occurred. The 2015 case of Kearns v. Farmer held that the employee must show that the employer actually violated the law.

Florida courts have been applying the holding in the case of Aery, asserting that it is enough for employees to: have a reasonable and good faith belief that their employer violated the law, that they reported the violation to the authorities, and that because they reported the violation, their employer committed some act of retaliation against them and they suffered as a consequence of engaging in the protected activity of reporting a violation of the law.

The problem is, some employees report a violation of law by their employers but it later turns out that the employers have not violated the law at all. The employers would suffer distress and financial loss resulting from a false charge of having committed an unlawful act. And yet, the employee who made an erroneous report of a violation of law still gets protection from the FWA. The employer would be penalized for terminating that employee’s services.

Employees may refuse to follow the orders of their employers, in effect, refusing to do their jobs, on the mistaken belief that what their employers are asking them to do is a violation of law. Later, when it turns out not to be a violation of law, the employer is barred from firing the employees who had refused to do their jobs. This contradicts Florida’s status as an “at-will” employment state.

The holding in Kearns

Kearns, an employee at a car dealership, processed the loan applications of customers who sought to purchase cars from the dealership. He noticed that in loan application documents submitted by the dealership to the banks, the features and specifications of the cars were exaggerated, describing features that the cars did not have. Kearns noted that one customer, a nurse, reported income that was false. When Kearns spoke with the nurse, the nurse stated that it was the sales agent that filled out the forms.

Kearns feared being implicated in fraud. He knew that the information in the loan applications sent by the dealership to the banks was erroneous and that the bank relied on the false information in granting car loans. Kearns refused to process the fraudulent loan applications and reported the matter to the manager and later, to the parent corporation of the dealership. An investigation was conducted and Kearns was terminated from his employment.

He filed a suit and claimed that he had refused to participate in an unlawful activity by the employer and that his termination was a retaliatory act by the employer for which he sought damages under the FWA. The car dealership resisted Kearns’ claims, asserting that Kearns could not possibly have known that there was a violation of law on the part of the employer. The court ruled that Kearns proved an actual violation of law: he knew that the cars and the customer information were false, he directed attention to the error, he noted that the practice of providing false information continued. The banks approved the loan applications relying on the false information provided by the dealership. The car dealership obtained pecuniary benefit because, with the car loan approved, the sales pushed through. These were actual violations of law and Kearns refused to participate in these violations and reported those violations for which he was fired. Thus, he succeeded in proving that his claims squarely fall under the protection of the FWA.

The holding in Aery

Aery was an automobile parts manager at another car dealership. Aery noted that when a customer brought a car in for repairs, the body shop manager ordered spare parts from authorized dealers and then bought identical used parts from other dealers. The body shop manager then installed the used parts in the customer’s car, returned the spare parts for credit, but filed an insurance claim for the brand new spare parts that were, in fact, returned. Refusing to take part in what he thought was insurance fraud and fraud of customers, Aery reported the body shop manager’s conduct to the general manager of the car dealership. An investigation ensued but the body shop manager was not sanctioned and the fraud persisted. Aery reported every instance where the same illegal acts were committed. Still, the car dealership did nothing. Aery was later terminated. He sued under the FWA. He claimed that his termination was consequent to his refusal to participate and his having reported the illegal acts of the car dealership. The court ruled that Aery did not need to prove the exact statute that was violated, it was sufficient that there was prima facie showing that a violation of the law occurred. The court pointed out that Aery had reasonable belief that the acts of the dealership were in violation of the law.

The holding in Graddy

The seeming contradiction in the two cases can be reconciled. In Kearns, although the employee could not pinpoint to an actual statute that was violated, the facts he knew from personal knowledge showed clearly an actual violation of the law. In Aery, the employee could not point out the actual statute that was violated, either, but he had personal knowledge of acts which gave rise to a reasonable belief on his part that there was a violation of the law. His reasonable belief was based on facts that showed a prima facie case for a violation of the law.

This confusion has been put to rest with the decision in Graddy v. Wal-Mart, promulgated on February 14, 2017. This latest decision held that employees are protected only when there is an actual violation of law on the part of their employer.

Graddy was a pharmacist at Wal-Mart. A customer came into the pharmacy to have a prescription filled. Graddy called the doctor who issued the prescription and discovered that the doctor never issued the prescription. The doctor reported the matter to the police and the police went to Wal-Mart. The officer asked Graddy if she could fill the prescription despite it being fraudulent so that the customer could be arrested as soon as the customer paid for it. Graddy entered the prescription into the computer system and authorized the dispensing of the drug even if Graddy knew that the prescription was fraudulent. The customer was arrested by the police.

Wal-Mart conducted an investigation into the sting operation and reprimanded Graddy for taking part in it. Wal-Mart’s company rules prohibit pharmacists from dispensing drugs when they know that the prescription is fraudulent as this act is a crime.

Graddy believed that it was unlawful for Wal-Mart to prohibit her as an employee to cooperate with police officers. She believed that Wal-Mart’s policy prohibiting pharmacists from filling fraudulent prescriptions to help law enforcement was a violation of law. Graddy was fired from her job. Graddy then filed a suit under the FWA. She claimed that her termination from her job was an act of retaliation for opposing Wal-Mart’s unlawful policy of preventing pharmacists from dispensing medication under a fraudulent prescription even when it was done in cooperation with law enforcement in a police sting operation.

In court, Graddy argued that she had a good faith, objective, and reasonable belief that Wal-Mart violated the law by prohibiting her from cooperating with a police operation. Wal-Mart argued that Graddy did not object to an actual violation of law, she was the one who authorized the filling of a prescription she knew to be false. She did not refuse to participate in an activity that was a violation of law – she actually violated the law by filling in a fraudulent prescription, herself, violating the law and Wal-Mart’s rules. Wal-Mart did not actually violate the law when it reprimanded and fired Graddy for filling in a fraudulent prescription because Graddy violated the law, not Wal-Mart. Thus, Graddy’s belief that Wal-Mart violated the law was neither objective, reasonable or in good faith.

The District Court ruled that the employer must be in actual violation of the law for the protection under the FWA to operate. It does not provide protection for employees who merely allege or suspect violations of the law by their employer. The Court analyzed the language of the statute and saw that the relief and protection given to an employee who passes information to a government agency for an “alleged” violation of the law is a different protection. If Graddy merely passed information to the police, then an alleged or a suspected violation of law is sufficient for protection under the FWA.

In Graddy’s case, she did not report any unlawful activity, she herself committed a criminal act. She did not blow the whistle on an act of the employer that violated the law. In prohibiting her from dispensing drugs with a fraudulent prescription, Wal-Mart was not violating any law, it was in fact, upholding the law.

In a nutshell

The doctrine of these cases can be summarized as follows: an employee is protected from acts of retaliation from employers when the employer violates the law and the employee refuses to participate in the violation of law or the employee reports the violation of law by the employer. In this type of situation, the employee must show that the employer actually violated the law. Failing to show that the employer actually violated the law, the protection of the FWA will not be available to the employee (Graddy ruling). The employee need not pinpoint to the actual statute violated but there must be proof of facts that show an actual violation of law (Kearns) or proof of facts that give rise to a reasonable belief that an actual violation of law has occurred (Aery).

References:

The National Law Review: Florida Whistleblower Act Requires Showing of Actual Violation, Federal Court Rules

FindLaw: AERY v. WALLACE LINCOLN MERCURY LLC

FindLaw: KEARNS v. FARMER ACQUISITION COMPANY

Casetext: GRADDY V. WAL-MART STORES E., LP

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