Assisting, testifying or otherwise participating in a proceeding regarding the alleged violation; or

Transcription

1 WHISTLEBLOWER ALERT Sep 08, 2010 Whistleblower Alert: DOL/OSHA Publishes Interim Final Rule For Handling Consumer Product Safety Improvement Act Whistleblower Cases, Reiterates Existing Jurisdictional Limits Section 219 of the Consumer Product Safety Improvement Act of 2008 ("CPSIA"), enacted August 14, 2008, prohibits retaliation against employees of manufacturers, private labelers, distributors or retailers who engage in one or more of the following types of protected activities: Providing the employer-respondent, the federal government, or a state attorney general with information relating to any violation of a legal requirement enforced by the Consumer Product Safety Commission ("CPSC" or "Commission"), or any act or omission that the employee reasonably believes to be a violation; Assisting, testifying or otherwise participating in a proceeding regarding the alleged violation; or Refusing to participate in any activity, policy, practice, or assigned task that the employee reasonably believes to be in violation of a legal requirement enforced by the Commission. The whistleblower protection provisions of CPSIA were effective upon enactment, enabling aggrieved individuals to file complaints challenging any adverse employment action occurring within the 180 day period prior to enactment allegedly resulting in the individual's having engaged in protected activity. Only one administrative law judge decision in a CPSIA case has been reported to date; the complaint was dismissed, although the order has been appealed.[1] It is unknown how many other CPSIA whistleblower claims may be in the pipeline, but a new interim final rule ("IFR"), published on August 31, 2010 by the U.S. Department of Labor, Occupational Health and Safety Administration ("DOL/OSHA"), will likely govern such cases going forward. The IFR defines key terms and establishes procedures and time frames for the handling of CPSIA whistleblower complaints. DOL/OSHA concurrently published interim final rules providing new or updated case handling procedures governing whistleblower claims under the Surface Transportation Assistance Act, as amended by the 9/11 Commission Act of 2008, and the Rail Safety Improvement Act of 2008.[2] This Alert discusses the significant substantive interpretations and procedural regulations contained in the IFR. Comments on the IFR must be submitted on or before November 1, 2010, and must include the agency name and OSHA docket number, OSHA Definition of "Consumer Product" and Important Exclusions What constitutes a "consumer product" within the jurisdiction of the CPSC is central to the determination of whether or not an alleged complaint about a particular product sold in commerce is arguably protected under the whistleblower provision of the CPSIA. As is illustrated by the first CPSIA whistleblower case noted above, jurisdictional exclusions are key as efforts to assert a CPSIA right may affect makers of foods, drugs, cosmetics, devices or other products specifically excluded from CPSC jurisdiction. The IFR adopts the definition of consumer product contained in the Consumer Product Safety Act ("CPSA"), subject to the exclusions enumerated by Congress to the extent regulated by other federal agencies. Thus, for a complaint to be cognizable under CPSIA it must relate to an article, or component thereof, produced or distributed for sale to a consumer for use in or around the home, with the exception of 1) tobacco and tobacco products; 2) motor vehicles and motor vehicle equipment; 3) pesticides; 4) aircraft and aircraft component parts PARIS Keller and Heckman LLP

2 and appliances; 5) boats, vessels and appurtenances to vessels; and 6) foods, drugs, cosmetics or devices.[3] Also excluded are articles not customarily produced or distributed for sale to, or use or consumption by, or enjoyment of, a consumer. Note, however, that in proposed rules implementing testing and certification requirements under Section 102 of CPSIA, the Commission has proposed rules to accommodate testing of components and raw materials.[4] Any person who elects, voluntarily, to certify compliance of a component part with an applicable rule "must assume all responsibilities of a manufacturer" with respect to compliance of the component part with the applicable rule. This, in turn, leads to the potential that a component part or raw material certifier opens themselves up to potential whistleblower liability exposure in situations where normally they are not a maker of a consumer product as defined by CPSC. Requirements and Burdens of Proof in a CPSIA Whistleblower Claim CPSIA whistleblower cases, like any whistleblower case, should be governed by clear procedures, including standards of proof at each phase. The IFR provides a detailed roadmap for CPSIA actions, which we summarize below. Filing and Investigation Stage At the filing stage, a complainant must make a prima facie showing that he or she engaged in a form of CPSIA protected activity and that activity was a contributing factor in the adverse employment action described in the complaint. If the complainant fails to satisfy this burden, per the IFR, OSHA must dismiss the complaint without investigation. The burden remains on complainant at the investigative stage to sustain his or her prima facie burden. If at any time during the course of an investigation the employer-respondent is able to demonstrate by clear and convincing evidence that it would have taken the same adverse action in the absence of the protected conduct, dismissal of the complaint is mandatory. According to the IFR, the decision of the Assistant Secretary for OSHA to dismiss a complaint without investigation, or to initiate or terminate an investigation, is discretionary and not subject to de novo review by an administrative law judge ("ALJ'). The statute provides for the award of attorney's fees to a respondent for bad faith conduct on the part of a complainant. Presumably, the filing of objections and request for review based on such a discretionary decision would support such an award to the extent respondent is made to incur attorney fees as a result of the complainant's action. Reasonable Cause Finding and Preliminary Order If the investigation results in a finding of a reasonable cause of discrimination based on protected activity, the Assistant Secretary is required to issue a preliminary order directing the employer-respondent to immediately reinstate the complainant to the same position, with full back pay and benefits, and to award the complainant attorney's fees incurred in challenging the adverse action. For obvious reasons, an employer-respondent generally would not want to reinstate the complainant while prosecuting a de novo appeal (particularly given the protracted nature of the DOL review process); however, the CPSIA specifically authorizes the district courts to enforce such preliminary orders upon application by the Secretary of Labor.[5] The IFR, however, provides the employer-respondent with a means of staying the back pay order by filing objections and a request for de novo review with the Office of the Chief Administrative Law Judge, in conjunction with objections to the underlying reasonable cause finding, within 30 days of the date of the finding and preliminary order. The IFR declares the preliminary order to be final and non-appealable should the employer-respondent fail to file timely objections. ALJ Hearing Stage Since the statute is silent as to the applicable burden of proof at the hearing stage, the

3 he Secretary has announced the intention to apply the same test applicable in other whistleblower cases: the complainant bears the ultimate burden of establishing, by a preponderance of the evidence, that a contributing factor to the adverse employment action alleged in the complaint was complainant's CPSIA-protected activity. Assuming the complainant satisfies that burden, then the burden of proof shifts to the employer-respondent to establish by clear and convincing evidence that it would have taken the same action regardless of protected conduct. If complainant fails to satisfy the preponderance test, the burden never shifts to the employer-respondent and the complaint must be dismissed. Once the burden shifts, however, the complaint will be sustained unless the employer-respondent satisfies the clear and convincing test. Under the IFR, to sustain the claim of a violation, the complainant must demonstrate by a preponderance of the evidence that protected activity was a contributing factor in the adverse action alleged in the complaint. No relief may be granted where the employer-respondent demonstrates by clear and convincing evidence that it would have taken the same adverse action in the absence of any protected behavior. The decision of the ALJ contains findings, conclusions and an order granting remedies, including affirmative action to abate the violation in the form of reinstatement, where appropriate, together with compensation for back pay and other terms, conditions and privileges, and compensatory damages. At the request of the complainant, the ALJ must assess against the employer-respondent all costs and expenses (including attorneys and expert witness fees) reasonably incurred. If the ALJ determines that the employer-respondent has not violated the law, an order will be issued denying the complaint. If, upon the request of the employer-respondent, the ALJ determines that a complaint was frivolous or was brought in bad faith, the judge may award the employer-respondent a reasonable attorney's fee, not exceeding $1,000, hardly a significant disincentive to discourage frivolous complaints. Discretionary ARB Review Subject to the Substantial Evidence Standard The IFR makes clear that there is no appeal of right from a decision of an ALJ in a CPSIA case. To preserve the opportunity for appeal, a party must file a petition for review with the ARB within 10 days following the issuance of the ALJ recommended decision and order, setting forth all issues, conclusions and orders to which the party objects and the grounds for reversal. Failure to identify a specific issue within the petition will result in the waiver of that issue for purposes of the appeal. The ARB has discretion to accept or reject the petition, just as in any other whistleblower action over which DOL has jurisdiction. If no party petitions for review, or if the ARB denies review, the decision of the ALJ becomes the final decision of the agency. If no timely petition for review is filed, the resulting final order will not be subject to judicial review. If the ARB accepts the case for review, the decision of the ALJ will be inoperative unless and until the ARB issues an order adopting the decision. Assuming the employer-respondent's appeal is successful at the hearing stage and the ALJ issues an order denying the complaint, the preliminary order of reinstatement issued in conjunction with a reasonable cause finding at the conclusion of the investigation nevertheless remains in effect pending completion of any ARB review, unless the ARB grants a motion by employer-respondent to stay the order based on exceptional circumstances. The IFR empowers the ARB to specify the terms under which any briefs are to be filed.[6] The IFR also clarifies that the substantial evidence standard applies with respect to ARB review of the ALJ's factual determinations, not the de novo review standard advocated by some public interest firms representing whistleblowers. In this regard, Chairman Paul Igasaki has indicated intent to require that all objections to fact findings be accompanied by citations to the hearing record supporting the appellant's view that the findings are not supported by substantial evidence. This requirement should greatly reduce the burden upon the ARB and its staff and expedite the review process. The decision and

4 order of the ARB constitutes the final agency order. Roles of the Assistant Secretary for OSHA and the Consumer Product Safety Commission The IFR provides that, at the discretion of the Assistant Secretary for OSHA, the Assistant Secretary may participate as a party or as amicus curiae at any time at any stage of the proceedings. The right of participation includes, but is not limited to, the right to petition for review of a decision of an ALJ, including a decision approving or rejecting a settlement agreement between the complainant and respondent. Whether or not the Assistant Secretary elects to participate in a case, copies of all documents must be sent to the Assistant Secretary and the Associate Solicitor, Division of Fair Labor Standards. Under the IFR, in the discretion of the Secretary of Labor, the Consumer Product Safety Commission may be granted permission to participate as amicus curiae at any time in the proceeding. Whether or not the CPSC participates in a case, copies of all pleadings must be served on the CPSC. Withdrawal of Complaints At any time prior to the filing of objections to the Assistant Secretary's findings and/or preliminary order, a complainant may withdraw his or her complaint by filing a written withdrawal with the Assistant Secretary. If the withdrawal is approved, the Assistant Secretary will notify the employer-respondent. If the complaint is withdrawn because of a settlement, the settlement must be submitted for approval. A complaint may not be withdrawn during any subsequent stage of the DOL proceedings. Withdrawal of Objections At any time before the Assistant Secretary's findings and/or order become final, a party may withdraw its objections by filing a written withdrawal with the ALJ (if currently pending before the ALJ) or with the ARB (if objections to the ALJ's findings are pending before the ARB). If the ALJ approves the request for withdrawal, the decision of the Assistant Secretary becomes the final order of the Secretary; if the ARB approves, the decision of the ALJ becomes the final order of the Secretary. Investigative Settlements At any time after the filing of a complaint, and before the findings and/or order are objected to or become a final order by operation of law, the case may be settled if the Assistant Secretary, the complainant, and the respondent agree to the settlement. Adjudicative Settlements At any time after the filing of objections to the Assistant Secretary's findings and/or order, the case may be settled if the participating parties agree to a settlement and the settlement is approved by the ALJ if the case is before the judge, or by the ARB if the ARB has accepted the case for review. A copy of the settlement must be filed with the ALJ or the ARB. Any approved settlement becomes the final order of the Secretary and subject to enforcement. Judicial Review Within 60 days after issuance of a final order of the ARB (or the ALJ, if the ARB denies a petition for review), an aggrieved party may file a petition for review in the United States Court of Appeals for the circuit in which the violation allegedly occurred or in the circuit where the complainant resided on the date of the violation. A final order of the ARB is not subject to judicial review in any criminal or other civil proceeding. District Court Jurisdiction of CPSIA Whistleblower Complaints The United States district courts have de novo jurisdiction over CPSIA retaliation claims filed by complainants, without regard to the amount in controversy, provided there is no final agency order within 210 days of the filing of the administrative complaint and the delay is not due to the complainant's bad faith. Either party may request a jury trial. The IFR requires that a complainant file advance notice of his or her intention to file such a complaint with the Assistant Secretary, the ALJ or the ARB, depending on the stage of the proceeding, and must serve said notice on all parties to the proceeding, with notice of service to the Regional Administrator, the Assistant Secretary, and the Associate Solicitor for the Division of Fair Labor Standards. The complainant must also serve a copy of the district court complaint on all of the above as soon as possible after the complaint has been filed with the court. The Secretary has taken the position that once a final decision is issued, the kick-out provision is moot and the complainant has no right to file a de novo lawsuit in federal court, even if the decision is issued after the 210 day period has run. Avoiding the added expense of court litigation by assuring speedy resolution at the agency level is desirable for all parties. Observations and Comments Based on our experience in representing employers in whistleblower investigations, hearings and appeals before the Department of Labor, we applaud the efforts of the Department to expedite the processing of whistleblower complaints and reduce the

5 he growing backlog of appeals pending before the ARB. Delays in adjudication can be extremely prejudicial to employers, particularly in cases where a preliminary order of reinstatement has been issued by the Assistant Secretary based upon a weak prima facie case that protected activity was a contributing factor in an alleged adverse employment action. The decision to stay the back pay order upon the filing of objections with the ALJ and to grant the ARB authority to lift a preliminary order of reinstatement should the ALJ sustain the employer's appeal of a reasonable cause finding and the ARB has agreed to accept complainant's petition for review should also provide much-needed balance to the process, particularly given the virtually non-existent penalties for frivolous actions by complainants. By providing a detailed articulation of the appropriate order and burden of proof, and clarifying that the substantial evidence standard governs ARB review of CPSIA and other whistleblower cases, the Department has offered both employees and employers a clear roadmap for CPSIA whistleblower actions. Lastly, we agree with the Secretary that once a final agency order has issued, a complainant may no longer proceed to federal court on a de novo complaint, since to permit such action would defeat the Congressional purpose to provide a swift and less formal resolution of whistleblower claims. It remains crucial for employers in the consumer product supply chain to offer mechanisms for their employees to submit complaints and concerns about matters related to consumer products. Offering a mechanism, and adhering to established procedures, should help employers avoid whistleblower actions. Those procedures should also include mechanisms to identify products that are outside the jurisdiction of the CPSC and thus not within the ambit of CPSIA whistleblower protections, along with mechanisms to address legitimate issues internally and with other agencies having jurisdiction, to the extent required. Employers should also provide CPSIA whistleblower training to managers, supervisors and human resource personnel regarding the scope of protected activity, the right to exercise management prerogatives outside the bounds of protected activity, and the need to timely document unsatisfactory employee conduct or performance so as to defeat an inference of causation between protected activity and a legitimate, non-discriminatory adverse employment action. Lastly, it is important for supervisors and managers to document the legitimate, non-discriminatory business reasons for an adverse employment action impacting a broad class of employees (e.g., a layoff, a plant closing or a plant re-location) where one or more members of the class have engaged in prior CPSIA protected conduct. Keller and Heckman's Whistleblower Defense Team offers advice and assistance in compliance programming, supervisor training, internal investigations and documentation, analysis of employee claims and personnel actions, government investigations, and litigation defense. For more information regarding these services, contact Manesh Rath, rath@khlaw.com, for information regarding these services. Keller and Heckman's Consumer Product Safety Team advises clients regarding compliance with laws and regulations enforced by the CPSC. The CPS Team works closely with the Whistleblower Team in defending employer-respondents charged with violations of the CPSIA and related laws. For more information regarding the services offered by the CPS Team, contact Sheila A. Millar, millar@khlaw.com, or Jean-Cyril Walker, walker@khlaw.com. [1] See Saporito v. Publix Supermarkets, Inc., 2010-CPSIA (ALJ Recommended Dec. & Order, March 5, 2010) (dismissing complaint for failure to state a claim and awarding attorney's fees to the employer-respondent up to the statutory maximum of $1,000 on the ground that the complaint was frivolous and in bad faith; complainant appealed the ALJ's findings and order to the Administrative Review Board which has not yet issued a decision). [2] The OSHA Office of the Whistleblower Protection Program is responsible for investigating and enforcing the whistleblower provisions of 19 federal statutes dealing with employee health and safety, environmental and nuclear protection, corporate financial fraud and security, and consumer protection, including the CPSIA. The DOL Office of the Chief Administrative Law Judges is responsible for conducting de novo hearings in whistleblower

6 cases based upon objections filed by any party aggrieved by a determination rendered by OSHA. The ARB provides the final level of review in DOL whistleblower cases, just as it does for a broad variety of wage, worker's compensation, discrimination, and labor condition application cases subject to the jurisdiction of the Secretary of Labor. [3] In Saporio v. Publix Supermarkets, Inc., supra, complainant asserted protected activity based on complaints relating to alleged toxic substances used in the manufacture of milk product packaging, a claim rejected as non-cognizable by OSHA and by the ALJ. Alternatively, the ALJ rejected the complaint on the grounds that it was purely speculative and failed to meet the reasonableness standard. [4] See 75 Fed. Reg (May 20, 2010) (testing, certification and labeling of consumer products and children's consumer products) and 75 Fed. Reg (May 20, 2010) (component testing). [5] By contrast, Congress neglected to expressly provide for jurisdiction in the district courts to enforce preliminary orders issued under the whistleblower provisions of the Sarbanes Oxley Act. See Bechtel v. Competitive Technologies, Inc., No (2d Cir. May 1, 2006) (vacating a district court order based on lack of jurisdiction and due process grounds); Tennessee Commerce Bancorp v. Solis, No (6th Cir. May 25, 2010) (staying enforcement of pending preliminary order due to the existence of a serious legal question regarding jurisdiction and the likelihood of irreparable harm to the employer-respondent, pending the outcome of an expedited circuit appeal). [6] Recently, ARB Chairman Paul Igasaki served notice of the Board's intent to expedite the briefing process in all whistleblower cases to further the goal of reducing the substantial backlog of cases and meeting the legislative goal of issuing final administrative orders within 210 days of the filing of the complaint. During legislative negotiations on CPSIA, the business community heavily criticized the 210-day timeframe written into the law as unrealistic. Maintaining tight administrative deadlines is thus central to both the statutory framework and to fairness of the process.