Alan Schorr’s Employment Case of The Week ending September 6, 2013

Lippman v. Ethicon, Inc., —N.J. Super.— , 2013 WL 4726834 (App. Div. September 4, 2013)

In a case certain to end up in the New Jersey Supreme Court, an Appellate Division panel in Lippman v. Ethicon, Inc. refused to follow a line of cases that had denied protection under the Conscientious Employee Protection Act (CEPA) to employees whose job involved reporting wrongdoing.

In 2008, an appellate panel in Massarano v. New Jersey Transit, 400 N.J. Super. 474 (App. Div. 2008), stated that Ms. Massarano was merely doing her job as the security operations manager by reporting that documents were being destroyed. Although plaintiffs subsequently argued that the language in Massarano was dicta and contrary to the purposes of CEPA, employers increasing began citing the Massarano case, and the Court began to follow it as law.

One such example was the unpublished case of White v. Starbucks Corp., 2011 WL 6111882 (App. Div. 2011), in which the Appellate Division, following Massarano, denied CEPA protection to a district manager that reported food safety violations. The Supreme Court denied certification, 210 N.J. 108 (2012).

In this case, Joel S. Lippman, M.D. was a medical doctor who over a period of years had voiced safety concerns about a variety of products manufactured by Ethicon. He was a vice president at the time of his termination. Ethicon claimed that they terminated Lippman because he had an “inappropriate relationship” with a direct subordinate, but the employer did not have a policy prohibiting such dating, nor had anyone else ever been disciplined for similar behavior. Despite the foregoing, the Trial Court granted summary judgment in favor of Ethicon. Following Massarano, the Trial Court ruled that Lippman was not a whistleblower because reporting safety violations was part of Dr. Lippman’s job.

The Appellate Division reversed. In doing so, the Court addressed the Massarano decision directly. The Court reasoned that “watchdog” employees, like Dr. Lippman, were intended to be protected by CEPA:

Indeed, the facts of this case illustrate the gaping holes this line of reasoning creates in the wall erected by the Legislature to protect whistleblowers from retaliation. “Watchdog” employees, like plaintiff, are the most vulnerable to retaliation because they are uniquely positioned to know where the problem areas are and to speak out when corporate profits are put ahead of consumer safety.

The Court expressly refused to follow the holding of the Massarano court:

In our view, the parties’ polarized positions are primarily predicated on the motion court’s incorrect legal assumption that an employee’s job title or employment responsibilities should be considered outcome determinative in deciding whether the employee has presented a cognizable cause of action under CEPA. We disagree that this notion is consistent with the legal principles established by our Supreme Court in construing the protections afforded to whistleblowers under CEPA. Furthermore, to the extent that such a notion was approvingly expressed or implicitly adopted by the panel in Massarano, supra, we explicitly decline to endorse it here.

The news for plaintiff employees was not all completely good, and there was a part of this ruling that may still leave the door open for employer defendants to be able to prevent recoveries by “watchdog” employees. The Court announced a new test for such “watchdog” employees to establish a prima facie case. Rather than the standard second prong that he or she performed a “whistle-blowing” activity, the new second prong for watchdog employees is:

that he or she refused to participate or objected to this unlawful conduct, and advocated compliance with the relevant legal standards to the employer or to those designated by the employer with the authority and responsibility to comply. To be clear, this second element requires a plaintiff to show he or she either (a) pursued and exhausted all internal means of securing compliance; or (b) refused to participate in the objectionable conduct.

The reason why this is troublesome is that it seems to add an additional burden upon “watchdog” employees to exhaust all internal means of securing compliance. Currently, CEPA section N.J.S.A. 34:19-4 requires employees to bring the matter first to the attention of a supervisor unless the employee is reasonably certain that the activity is known to the employer or the employee fears physical harm. It remains to be seen whether the new standard announced here for “watchdog” employees will be read in conjunction with N.J.S.A. 34:19-4, or whether Courts will require an additional level of exhaustion of remedies.

Frankly, I don’t understand why “watchdog” employees should have a different or higher standard at all. They are the most vulnerable, and therefore the employees most in need of CEPA’s protection. An employer should not be permitted to hire someone to guard against unlawful behavior and then retaliate against them when they properly do their job in a way that becomes unprofitable for the employer.

One last interesting observation: Judge Jose L. Fuentes, who wrote this opinion rejecting Massarano, was also on the panel for White v. Starbucks, which followed Massarano. In any event, I have confirmed that the defendants will, in fact, file for certification to the Supreme Court, and I would be shocked if the Supreme Court does not grant certification to resolve the Massarano issue and hopefully clarify this new test for “watchdog” employees.

Plaintiff’s Counsel: Bruce P. McMoran and Michael F. O’Connor, McMoran, O’Connor & Bramley.

Defendant’s Counsel: Francis X. Dee, McElroy, Deutsch, Mulvaney & Carpenter L.L.P., Howard M. Radzely, Morgan, Lewis & Bockius L.L.P. Stephen F. Payerle, and Elena Chkolnikova.

Appellate Judges: Fuentes, Harris, and Koblitz. Judge Fuentes on the opinion.

Trial Court Judge: Edward J. Ryan, J.S.C., Middlesex County.