Many employees find themselves in a real quandary when the employer asks them to commit an illegal or unethical act. Texas law protects a worker who is asked to break a criminal statute. But, some employees become so vexed about their situation that s/he goes to the media. That is what happened in Peine v. HIT Services L.P., 479 S.W.3d 445,  2015 WL 6490290 (Tex.App. Hou. 2015). Joseph Peine was a CPA working as a CFO for HIT Services, a heavy turbine business group. According to Peine’s evidence, the company was in financial trouble. It had a history of inflating earnings in the past. He was hired to help turn things around, he alleged. This concerns a motion for summary judgment, so Mr. Peine’s allegations should be assumed as correct. The CFO alleged he was asked to inflate earnings for the year. He was told to claim a project had been completed, when it had not been completed. Mr. Peine refused. His boss, Durg Kumar threatened him and others in the CFO office if the CFO did not follow orders. He said he would “clean house” if the CFO did not comply with his order.

Mr. Peine went around Kumar to talk to higher-ups. Mr. Kumar went around Peine to get things included in the quarterly financial statement. The parent company placed Mr. Peine on leave with pay while it investigated claims made about him. About the same time, Mr. Peine contacted a Thomson Reuters reporter and provided documents. He suggested they wait to see if HIT would fix the problems before going forward with any news report. Soon, the company investigation uncovered the email from Peine to the reporter. The investigator, an in-house attorney, recommended that Mr. Peine be fired for violating the company’s confidentiality policy. Within a couple of months of his initial complaint to the parent company, Mr. Peine was fired.

The CFO filed a lawsuit based on Sabine Pilot Services, Inc. v. Hauck, 687 S.W.2d 733 (Tex.1985). Sabine Pilot is that rare case of judge-made law. That decision recognized an action to sue for a termination resulting from a worker’s refusal to follow an illegal order. The employer moved for traditional summary judgment alleging that Mr. Peine violated the confidentiality policy. The employee responded that there was a genuine issue of fact regarding why he was fired. The court of appeals discussed the standard of proof for a Sabine Pilot case. Sabine Pilot actions require a showing that the “sole cause” of the termination was the order to commit an illegal act. The Plaintiff pointed to statement by Kumar that he would “clean house” if the CFO did not do as he wished and a statement by the parent company that Mr. Peine was a “liability.” Those statements represent direct evidence, said the plaintiff. But, the court of appeals did not accept these statements as direct evidence. The court found they were circumstantial evidence, since there was no indication the persons making those statements had a direct role in Mr. Peine’s termination.

The court did not seem to be aware that in acknowledging the possibility of two different motivations, it was implicitly agreeing that that a jury should decide this issue, not a judge. If there is more than one possible interpretation of the evidence, then under the rules, the decision belongs to the jury, not a judge. But, this irony does not help the plaintiff. Since, few, perhaps no, plaintiffs will survive an appeal to the Texas Supreme Court.

The Plaintiff also presented an expert witness in the area of government compliance. That expert testified that this was a classic case of retaliation. But, the court was still troubled by the fact that he might have been fired for violating the confidentiality policy. The expert could not speak to that possible motivation. Mr. Peine then argued that he expressed concerns to a public forum and should be protected. But, no, said the court, Texas does not recognize freedom to report illegal activities in a private work place. That is true. The Texas whistle blower law only applies to government employees, not private sector workers.

So, the court affirmed the grant of summary judgment. Based on the decision, it does not appear the plaintiff contested whether he truly violated the confidentiality clause. Some employers claim to have such a policy, but upon closer examination, it turns out they often ignore it. It is also unfortunate he went to a reporter. Otherwise, his case should have been solid. Many employees, faced with an unjust termination, reach out to any possible avenue of protection. People who are facing the end of their financial well-being do desperate things. See decision here.

There are a lot of myths out there about employment law. From time to time, I talk about a few of those myths.

At will
“At will” employment means an employee can be fired for anything.” Texas is an at-will state. An employee can indeed be fired for a lot of things, but not for sex, religion, race, national origin, disability, violation of laws, etc. So, yes, an employer can fire you for wearing a blue tie to work, but not because you are too old. The anti-discrimination statutes provide several exceptions to the at-will doctrine.

Probation period
“Probation periods means an employee can be fired for anything.” Not quite. A probation period means an employe can be fired for anything except sex, religion, race, national origin, disability, violation of laws, etc. See above paragraph.

Copy of file
“Employees have a right to a copy of his/her personnel file.” That depends on whether the employee is public sector or private. I have found no authority in Texas law saying that employees of private businesses can obtain a copy of their personnel file. As a public sector employee, an employe’s rights are governed by the Freedom of Information Act for federal employees and the Open Records Act for state employees. I can find no authority providing that a private sector employee has a right to a copy of his/her personnel file.

Rest breaks
“Employees get periodic breaks during the work day.” I was told as a young warehouseman that we had a right to a 10:00 o’clock break and another at 3:00 pm. The times could vary slightly. Since then, I have looked for the authority for those breaks. There is no such authority. Most likely, that is or was part of the influence of collective bargaining agreements (union agreements). CBA’s do often provide for such breaks. But, for non-union employees, there is no authority for a mid morning break and a mid-afternoon break. There is no state law or regulation on rest breaks or meal breaks. Federal regulations do not require a meal break. But, Federal regulations encourage work places to provide rest breaks, but such breaks are not required. See 29 CFR Sec. 758.18.

Non-compete agreements
Some folks outside and inside Texas believes non-compete agreements are not enforceable in Texas. Yes, they are and have always been enforceable. They became much more enforceable with the decision in Marsh USA Inc. v. Cook, 354 S.W.3d 764 (Tex. 2010). I previously wrote about that decision here.

Free speech
The right to free speech exists only for government workers. There is no general right to free speech in a private workplace. But, there is protection for employees who discuss “terms and conditions” of employment. Those sorts of discussions are protected by the National Labor Relations Act. I discussed those protections here. But, as far as discussing politics, football or cooking, there is no right to discuss whatever a worker wishes in the private workplace.

Whistleblowing
There is no general whistle blower protection in Texas. I think most people think of whistleblowing as reporting wrongdoing to some law enforcement type entity. Employees in the private sector do not have protection against whistleblowing. But, there is a protection from asking employees to violate criminal statutes. This sort of lawsuit is known as a Sabine Pilot type action. I discussed Sabine Pilot actions here. These Sabine Pilot actions only apply to violations of law that involve criminal punishment.

Not Written up before termination
People still ask me or tell me that the employer did not write them up before firing them. Well, employers do not have to do that. Yes, most large employers have nice looking employee manuals which state that employees must be wrritten up before termination. But, these manuals are not binding. They have not even been arguanbly binding since about the early 1990’s. This is one employment myth that may never go away. I wrote about employee manuals here.

Privacy
Some folks still think they have some degree of privacy at work. Email is a frequent issue. Generally, email produced with use of the employer’s equipment and server belongs to the employer. The employer may review your email anytime. I wrote about workplace email here and here. The one exception appears to be when the employee accesses his/her private email server which is password protected.

There is no prohibition on private sector employers searching desks to my knowledge. But, the U.S. Constitution Bill of Rights applies to state governments. So, in the public sector, a worker has some protection from unreasonable searches if s/he has a reasonable expectation of privacy” that society is prepared to recognize as reasonable. See O’Connor v. Ortega, 480 U.S. 709 (1987), on remand, Ortega v. O’Connor, 817 F.2d 1408 (9th Cir. 1987). But, the “expectation of privacy” can be limited by office practices and by legitimate regulation. And, HIPAA does protect medical information in most work situations.

So, as I tell folks on occasion, if you want fairness at work, then form a union. Or, persuade your state legislature to make a few changes in the law, so all workers will benefit.

The City of San Antonio runs the city’s airport.  But, the Airport has its own police department.  Until 2009, the airport police department was separate from the San Antonio Police Department.  Airport Police Officer Russell Martin complained about Sgt. Orlandop Battles’ time entries.  In 2008, Officer Martin, a veteran of some 30 plus years in law enforcement, said Sgt. Battles was recording his time inaccurately.  Four days after his complaint, Officer Martin was assigned to work with Sgt. Battles.  A remarkable coincidence.  

Officer Martin asked to not work with Sgt. Battles.  He said working with him would result in "fiscticuffs or shooting."  The officer explained later that he meant the statement as a shock statement to get his supervisor’s attention, not as a threat.  The pairing was changed.  He would not work with Sgt. Battles.  Six months later, having forgotten about the statement, Officer Martin was told he would be terminated for making threats.  As a city employee, Officer Martin appealed the decision to a semi-independent board, the city’s civil commission.  The commission found in favor of the veteran officer, by a vote of 2-1.  But, the City Manager, Sheryl Sculley, overruled the commission’s finding.  She upheld the termination.  Officer Martin filed suit in state district court.  

A year and a half later, he amended his petition to add a federal claim based on 42 U.S.C. §1983.  Sec. 1983 requires that states and local governments provide basic procedural due process when terminating public employees.  The Plaintiff argued that when the City Manager overturned the civil commission’s finding, she did so without affording him a hearing.  She made a paper decision.  She did not first conduct her own hearing before reaching her decision. . 

Some four years after filing suit, the parties have now reached a settlement.  Gilbert Garcia, a San Antonio Express news columinst says it is the largest settlement by the city in recent memory, $225,000.  All because the City Manager ignored the recommendation of her own commission.  And, all because the airport police could not accept one veteran officer making fairly routine complaints about a co-worker.  See San Antonio Express News report here (requires an account).

According to the court’s file, the settlement was actually reached in late July.  It took some three months for the San Antonio City Council to finally address the settlement. The City Council will vote on the settlement the week of Oct. 1.  Settling with public entities takes longer, but the plaintiff does not need to fear the public entity will declare bankruptcy.  Mostly anyway….

In a recent opinion, the Texas Supreme Court clarified one key aspect of whistle blower complaints.  The Texas Whistleblower statute applies to government employees only.  See Tex. Govt.C. Sec. 554.001, et seq.  The statute protects an employee who reports a possible violation of law.  The report or question must be to an "appropriate law enforcement authority."  Tex. Govt. C. Sec. 554.002.  Some court decisions have allowed reports to the employer in certain situations, such as if the employer has an office that is responsible for internal enforcement of the law in question.

But, now, according to the Texas Supreme Court, "appropriate law enforcement authority" means the entity that actually "promulgates regulations" or "enforces" the law in question or "pursues criminal violations."  In Texas A&M Kingsville v. Moreno, the employee reported a violation of the law regarding tuition waivers to the President of the University, and to the Texas Higher Education Coordinating Board.  Her supervisor, Dr. Saban, was claiming a tuition waiver for his daughter, to which he was not entitled.  Dr. Saban became angry, and accused Ms. Moreno of butting into his personal business.  But, the school required the supervisor to pay back the school the amount of the discounted tuition.  TAMU-K essentially agreed with Ms. Moreno. 

Twenty-one days later, Dr. Saban personally terminated Ms. Moreno.  She filed suit.  The employer moved for summary judgment, which was granted.  On appeal, the summary judgment was reversed.  TAMU-K appealed. 

The president has the authority to enforce the law within the university, noted the Supreme Court. The Supreme Court addressed her report to the HECB in a footnote.  In that footnote, the Court found that Ms. Moreno did not report a violation of law.  She merely asked questions about whether what Dr. Saban was doing satisfied the requirements of the tuition waiver law.  According to the Supreme Court, she did not mention the name of Dr. Saban or otherwise indicate her supervisor was violating the law. Yet, in her brief, the employee said the opposite, that she reported Dr. Saban’s apparent improper use of tuition waiver to an official with the HECB. 

In resolving a motion for summary judgment, the court is supposed to accept the employee’s version of the facts.  The Texas Supreme Court seems to have ignored that fundamental principle.   See decision here.  The Court appears to agree that the HECB would constitute the appropriate law enforcement authority for purposes of tuition waivers.  

But, disregarding the non-movant’s version of the facts is a significant error.  The employee has evidence that Dr. Saban prevaricated.  Dr. Saban claimed that the A&M Chancellor, Mike McKinney, told him to terminate Ms. Moreno.  But, Mr. McKinney denied telling him to do so and said he would not do that.  Ignoring the non-movant’s version of facts when the employee impeaches the key witness for the employer is an egregious error by the Court.  Indeed, to obtain the tuition waver, Dr. Saban completed a form in which he falsely claimed to be teaching more than part-time.  He had to know this representation was false when he made it. 

On several levels, the Supreme Court committed error in this decision.  Worse, these are the sort of errors that should have been apparent to the Court.  The Court issued this decision without oral argument,  a step usually reserved for cases in which the answer seems apparent.  This is not such a case.  The facts and the legal issues are complicated.  The Court devoted less attention to this suit than it deserved.  

The Federal False Claims Act, also known as qui tam lawsuits, have been around since the Civil War.  In Fact, the False Claims Act was passed to deal with the many fraudulent government purchases during the Civil War.  The Federal government was defrauded many times by contractors during the Civil War.  The act allows a person who first reports fraud on the government to receive 30% of any money recovered.  The trick, so I am told, is to get the U.S. Attorney to join in the lawsuit.  One can expect the U.S. Attorney or the Department of Justice to join only the strongest qui tam lawsuits. 

Department of Justice has indeed joined in Floyd Landis’ lawsuit for fraud against Lance Armstrong for defrauding the Postal Service. The suit alleges that Mr. Armstrong defrauded the government when he accepted payments for riding on their cycle team.  According to the DOJ Complaint, team officials assured the Postal Service for years that the cycle team was not doping.  

The Postal Service paid $40 million to be the sponsor and paid Lance Armstrong $17 million.  But, under the False Claims Act, the government and Floyd Landis must also show that the government was harmed.  According to the Armstrong response to the lawsuit, the Postal Service gained some $139 million due to the Armstrong brand.  The defense cites the Postal Service’s own internal study.  See CBS news report

So, the extent of the harm to the U.S. government could be a problem.  But, yes, when you get the US Attorney involved, the lawsuit has truly begun. 

Its a quote I appreciated from the first time I heard it: "I come in peace. I didn’t bring artillery. But, I am pleading with you, with tears in my eyes: If you f— with me, I’ll kill you all."  Marine Gen. James M. Mattis said this to several Iraqi tribal leaders in 2003 during the violent aftermath of the Iraq invasion.  Marine Carl Newman used this quote as a tattoo.  Later, working for Union Pacific Railroad, he ran into job problems.  Mr. Newman complained about several safety issues at the railroad.  He was fired, he alleges in a lawsuit, for whistle-blowing.

But, Union Pacific claims he was fired because the tattoo violates the company’s violence in the workplace policy.  The latest issue of Army Times refers to the tattoo to warn soldiers about having too many visible tattoos.  I find it unlikely any employer would truly believe a tattoo like that promotes violence in the workplace.  But, there is some prejudice among some civilians against Iraq and Afghanistan veterans.  Who knows what truly motivates an employer.  But, I will will be pulling for former Marine Carl Newman…….

A Bexar County jury has awarded a former police officer $1.28 million.  Tomas Padilla was a police officer for the University Health System.  He was terminated in 2009 shortly after complaining that the officer he had replaced was trying to recruit patients and visitors to the hospital to make false claims about Officer Padilla.  Officer Padilla was a supervisor at the time.  The report by Mr. Padilla amounted to a whistle blowing claim.  Government workers in Texas have the right to report violations of law. 

The trial lasted six days.  The jury award includes lost back pay and lost future pay.  Mr. Padilla can now try to regain his peace officer certification.  See San Antonio Express News report

There is no statute in Texas protecting workers from being forced to commit illegal acts.  So, prior to 1985, if your employer told you to rob the local bank and you refused, you could have been fired.  But, now there is judge-made law in the form of Sabine Pilot v. Hauck, 687 S.W.2d 733 (1985) that found protection for a worker being forced by an employer to commit an illegal act.  See decision.  In the 20 years plus since the decision was issued, the courts have established that a Sabine Pilot action applies to laws involving criminal actions.  If an employee is asked to commit a criminally illegal act, then that employee is protected from adverse action by the employer.  But, we did not know whether this protection would be based on contract or tort law.  If it is based on tort, then it would provide for emotional suffering type damages and punitive damages.  

Now, we learn that a Sabine Pilot lawsuit is indeed based on tort.  According to the recent Texas Supreme Court decision in Safeshred v. Martinez, No. 10-0426 (Tex. 4/20/12), it is based on tort or personal injury actions.  So, punitive damages are available.  See decision.  The Supreme Court, never friendly to plaintiffs, found that to award punitive damages, a plaintiff must show more than the termination for refusal to commit an illegal act.  The plaintiff must show specific intent to cause harm to the plaintiff apart from the termination itself.  The court provides an example where the employer circulates false rumors about the employee so as to prevent him from finding future employment or makes looking for future employment more difficult than it ought to be.  In those situations, says the Supreme Court, the employee would be entitled to seek punitive damages. 

So, that means firing an employee for refusing to commit an illegal act is not in itself enough to justify punishment.  The Supreme Court is saying there must be something more.  For example, in the Martinez case, Louis Martinez drove a truck between San Antonio, Austin, Dallas and Houston everyday for Safeshred.  Prior to each haul, he was required to conduct pre-inspections of his truck.  He consistently discovered safety violations of his vehicle.  But, he was always told to drive the truck anyway.  On one trip, he was cited by DPS for improperly secured cargo – because the straps were worn or cut.  DPS told him not to drive the truck again.  Mr. Martinez explained what happened and showed the citation to Safeshred.  But, again he was told to drive.  Finally, prior to a fourth trip with the defective truck, the driver objected again to driving with an unsafe load.  Mr. Martinez was told to drive the truck or go home.  He went home. 

The Supreme Court found this evidence of disregard for public safety by Safeshred was not enough. Title VII discrimination cases would require some evidence of malice or "reckless indifference" to the law.   I would think Safeshred’s repeated indifference to public safety would be enough to justify punitive damages.  A jury clearly thought so. 

Louis Martinez filed suit.  The jury found for the truck driver and awarded him $7,569 in lost wags; $10,000 in mental anguish; and $250,000 in punitive damages.  The trial judge reduced the $250,000 to $200,000 due to caps on such damages.  The court of appeals reversed the mental anguish finding. 

Due to this Texas Supreme Court decision, the $200,000 is removed from the verdict.  It is as if the $200,000 was never awarded.  A company that committed some dangerous acts, putting motorists in some peril on the highway at least three times will in the end, pay no more that $7,569.  

Whistleblowers have a rough row to hoe.  George Green knows this better than anyone.  A former architect for the Texas Dept. of Health and Human Services, he blew the whistle on shoddy building practices at DHHS some 25 years ago.  DHHS fired him in 1989 for alleged sick leave issues.   In 1991, the jury awarded him $13.7 million in total damages.  But, because that amount was so high, he had to lobby the state leglslature to pass a bill appropriating that amount.  Under state law, a state official cannot sign a check over a certain dollar amount.  It was four years before the state legislature awarded this amount. He lobbied himself and hired others to help him lobby the state government.  He received his check sometime in the early 90’s.  

The jury awarded some $10 million in punitive damages.  Apparently, Plaintiff Green reached an agreement with former Lt.-Gov. Bob Bullock that the state would not pay punitive damages.  The whole concept of "punitive damages" is hard for defendants to accept.  That agreement apparently caused him tax trouble with the IRS.  See San Antonio Express News report.  Punitive damages are, I am told, taxable income to the person receiving them.  So, I presume Mr. Green did not pay all of his taxes.  After all his trouble with the IRS and paying lawyers, Mr. Green emerged with only $300,000.  

Mr. Green appealed the tax issues to the Fifth Circuit Court of Appeals in New Orleans and lost.  The court found that Mr. Green’s damages were punitive damages, regardless of the agreement he reached with Bob Bullock.  Mr. Green had tried to argue that the damages were actual damages based on his health issues. I have to say that does sound like risky strategy.  Courts and the IRS would surely look at the actual jury award and jury charge to determine what the jury awarded.  Any subsequent agreement would appear to be designed to avoid tax liability. 

He also lost a lawsuit filed by a consultant.  That cost him $600,000.  He says he had some 200 attorneys, accountants and consultants working for him at various times.  Now, he lives on his father’s monthly retirement check, trying to start a business growing grapes and tending bees. 

But, it sounds like he would still today, after all these troubles, still have blown the whistle….

The Fifth Circuit overturned summary judgment for the employer in Schroeder v. Greater New Orleans Federal Credit Union, No. 10-31169 (5th Cir. 12/19/11).  The employee was fired after she complained about violations of law and regulation at a credit union.  Mary Schroeder filed suit based on 12 U.S.C. §1790b and La.Rev.Stat.Ann. § 23:967(A).  Sec. 1790 is a whistleblower protection act for credit union employees.  The trial court granted the employer’s motion for summary judgment.  The plaintiff was fired Oct. 8, 2008 by the Louisiana credit union.  See Fifth Circuit opinion here

The appellate court overruled the summary judgment, finding that the lower court did not construe the available evidence in favor of the non-movant.  Sec. 1790b provides that a credit union employee may file suit if s/he is fired for reporting violation of law or regulation.   The three judge panel found that some evidence supported the employer, but some evidence supported the employee regarding the requirement to show causal connection between her reports of violations and her termination.  The court analogized by using the elements of proof for Title VII retaliation.  

One critical issue was whether Ms. Schroeder reported her concerns to the National Credit Union Association prior to her termination or after her termination.  There was some evidence that she made reports prior to her termination on Oct. 8, 2008.  Letters to the NCUA were dated Oct. 6, although the NCUA did not log them in until Oct. 21.  As the court noted, the trial judge should have construed that evidence in favor of the non-movant.  

Also, several co-workers knew Ms. Schroeder planned to go to the NCUA in June, 2008,  Phone records showed she made several calls to the NCUA in June, 2008.  She has a copy of her two Oct. 6 letters to the NCUA.  And, her attorney sent an email to the NCUA on Oct. 1, 2008.  As the court correctly noted, the lower court was required to view the evidence in light most favorable to the non-movant. So, the court concluded that Ms. Schroeder and her attorney submitted complaints in June and October, 2008 prior to her termination. 

Under Title VII and Sec. 1790b, the employee must show a causal connection between her opposition activity and her termination.  Regarding this causal connection, the court noted that Ms. Schroeder suffered no discipline until she was fired.  And, in fact, the employer praised her performance when she was demoted.  On the other hand, she was said to be "abrasive" to work with.  The court found overall that this evidence regarding her work performance was "neutral."  

Ms. Schroeder was demoted some two weeks prior to her first complaint to the NCUA.  But, her pay decrease came closely after her first calls to the NCUA.  And, her letters and her lawyer’s email came shortly before her termination.  The court noted the competing inferences available from this evidence.  But, again, the court must draw inferences in favor of the non-movant.  Refreshingly, the court reaffirmed that such fact issues should be decided by a jury not by the judge.  So, the court found a close temporal proximity between her reports and her termination. 

The court of appeals then reversed the trial judge and sent the matter back to the trial judge for a trial on the merits. 

It is refreshing to hear the Fifth Circuit affirm the right to a trial by jury on key factual issues.  Perhaps, jury trials are not completely gone from the Fifth Circuit.