There are a number of whistleblower laws that are intended to protect employees who report, object to or refuse to participate in conduct that may be either illegal, fraudulent or endangers the health and safety of individuals and the public. Within the past month, there have been two significant legal developments that have interpreted New Jersey's Conscientious Employee Proctection Act ("CEPA") and the Dodd Frank law passed by Congress in 2010.
The first development involves the CEPA statute that protects New Jersey employees from employer retaliation against those employees who are whistleblowers. During the past several years, management lawyers have tried to gut the statute by arguing in the courts that those employees who blow the whistle as part of their job duties should not be protected by the CEPA. The danger of this argument is that an employer could include in its employee manual, employment application or other writings a job requirement that all employees must report illegal, fraudulent or unsafe activities thus leaving the employee without any legal protection under the CEPA. The New Jersey Supreme court just recently addressed this very issue in Lippman v. Ethicon, Inc. This case involved an employee whose job duties was to evaluate the safety of the products manufactured and sold by his employer. The case was dismissed by the trial court on the theory that he was just doing his job and was not a whistleblower under CEPA. That decision was overturned by the New Jersey Appellate Division who ruled that the CEPA's provisions do not support such a legal conclusion. However, that Court added an extra requirement that concerned watch dog employees only; namely that to prove illegal retaliation, the watch dog employee had to show that he/she complained internally within the company and that he/she did all they could to make sure the employer complied with the law. The case then went to the New Jersey Supreme Court which ruled unanimously in favor of the employee. That ruling stated that CEPA's express wording does not give the employer a get out of jail free card if an employee reports, objects to or refuses to participate in illegal or fraudulent activity as part of their job duties. The New Jersey Supreme Court also ruled that the CEPA's wording does not require a watchdog employee to complain internally and that he/she did everything they could to get the employer to comply with the law in order to be protected by the CEPA. In other words, if an employee reports, objects to and/or refuses to participate in conduct that he/she reasonably believes violates the law, endangers the public or is fraudulent, then an employer can be found liable and pay damages if it retaliates against such an employee.
The second development involves an interpretive guidance that the Securities and Exchange Commission ("SEC") just issued that also protects employees who blow the whistle against employers who are publicly traded on stock exchanges. The regulation interprets the relatively recent Dodd Frank law. This guidance basically says that Dodd Frank's whistleblower protections not only extend to those individuals who submit information to the SEC in order to obtain a whistleblower reward but also to those employees who complain internally to their employer. This guidance resolves an ambiguity in the law and federal courts will most likely defer to the SEC's expertise when this issue is litigaged in Dodd Frank cases.
All in all, these two developments will greatly enhance whistlebower protection to New Jersey employees.