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What is the most dangerous single-employee case filed today? Most defense lawyers could answer that quickly and definitively. In today’s environment, that label fits a retaliation or whistle-blower case. The discussion below describes the risks of such claims and ideas for defensive action. • Retaliation claim basics Retaliation and whistle-blower allegations typically take one of two forms: claims premised on specific statutory protections or tort claims based on public policy. In either type of claim, an employee typically alleges that termination occurred because he or she engaged in activity protected by law, such as the filing of a discrimination or harassment claim, or because of complaints about conduct that the employee reasonably believes constitutes a violation of law. Many statutes provide employees with express protections. For example, the federal Sarbanes-Oxley Act protects whistle-blowers who reasonably believe that the company’s conduct violates SEC regulations or federal law prohibiting various types of fraud. Statutory retaliation claims also arise under anti-discrimination laws such as Title VII or the California Fair Employment and Housing Act. Employees can also allege a public policy wrongful discharge tort from similar factual scenarios. An employee who successfully proves a whistle-blower or retaliation claim may be entitled to a broad array of remedies, including reinstatement, back pay with interest, compensation damages such as emotional distress, liquidated or punitive damages, attorneys’ fees and litigation costs. The liability can extend to individual managers as well as the company. Although a public policy wrongful discharge tort can only be alleged against the employer, civil liability may also flow to retaliating supervisors, officers or employees under many anti-retaliation statutes. Retaliation cases seeking these damages continue to flood into the California courts. Administrative claims have also increased. In the two years since enactment of Sarbanes-Oxley, more than 300 charges were filed under the statute’s whistle-blower provisions. Although employers have fared well when it comes to defending against these claims (226 out of 268 cases that reached determination at the OSHA investigative level as of Nov. 2, 2004, were dismissed or withdrawn), Sarbanes-Oxley claims continue to be costly, distracting and dangerous to employers. The increase continues in the equal employment context. The U.S. Equal Employment Opportunity Commission confirms that retaliation is one of the fastest growing equal employment claims, increasing from approximately 8,000 in 1993 to more than 22,000 annually in recent years. • Litigating retaliation claims One of the most troubling aspects of retaliation claims is the difficulty in getting the courts to grant summary judgment because the key issue often comes down to motive (i.e., whether the employee was terminated because of the underlying complaint). This means that while claims for harassment or discrimination may disappear on summary judgment, a retaliation case frequently proceeds on the plaintiff’s claim that termination occurred because he or she had raised harassment or discrimination concerns. Such a result raises tricky strategy questions regarding what the jury hears about the alleged underlying harassment or discrimination � or corporate wrongdoing � at the retaliation trial. For example, if the jury doesn’t hear that the complained-of harassment consisted of innocuous jokes in e-mails, will jurors assume it involved significantly worse conduct? Or if an employee wrongly claims that the company misstated earnings, is the evidence of actual earnings admissible � and does defense counsel really want to parade those numbers before a jury? This issue requires special attention from lawyers on both sides of the courtroom. Particularly troubling are the practical difficulties inherent in defending a retaliation claim. Potential jurors are all-too-inclined to believe that corporations and managers are ready to attack an employee who speaks out against a questionable or unlawful practice. This may seem, at face value, to be a reasonable proposition. Jurors are prepared to accept, for example, that if a manager is wrongly accused of harassment by an employee, that manager will naturally be outraged and determined to protect his or her reputation by bringing down the complainant. Of course, in a litigation-happy state like California, a termination is highly unlikely to silence a workplace critic. An employee, after all, is typically just a phone call away from a plaintiff’s lawyer. Nor has that employee lost the ability to complain vehemently to the SEC, board of directors, media, EEOC or anyone else who will listen. Certainly the Enron spectacle � clogging the media with gruesome descriptions of self-serving corporate malfeasance � has not helped. This means that an employer litigating a retaliation claim typically starts out with a disadvantage when it comes to a jury pool and that juror selection requires special attention to obtain an open-minded jury. • Creating the record What is an employer to do if faced with the all-too-common occurrence of an employee who, faced with discipline or performance counseling, attempts to blow the whistle or claims retaliation? Whistle-blower claims often require thorough and neutral internal investigations, which may eventually be produced to the plaintiff (and, in some cases, the government) in the course of subsequent litigation. The decision as to whether an investigation should be performed at all and, if so, by whom should be carefully reviewed with litigation counsel. Typically the investigation should be treated as privileged, although the employer may ultimately choose to waive the privilege. If the investigation is likely to be relied upon to defend the claims, neutrality is key. If the employee alleges high-level improprieties and the investigation may be pivotal to a defense, consider hiring an outside investigator. This doesn’t necessarily mean a lawyer. Instead, there are many professionals with human resources or accounting backgrounds who make excellent investigators. Each situation calls for a careful analysis of the appropriate background for the investigator (and potential key witness). Evidence, by the way, regarding such an investigation (or the lack of one) is not necessarily relevant to or admissible in the subsequent litigation of the retaliation claim. See, e.g. Kotla v. Regents of the Univ. of Cal., 115 Cal. 4th 283 (2004). What if the whistle-blower is a current employee tottering on the brink of discipline � hardly an uncommon scenario? In some cases it may be possible to isolate the decision maker from the complaint (i.e., not to inform the supervisor that the employee has raised a complaint). If the decision maker is unlikely to hear about the complaint otherwise, consider whether it makes sense to refrain from informing him or her. A subsequent termination could not have been “caused” by the complaint if the supervisor didn’t know about it. If the supervisor knows � or would likely be perceived to know � about the subordinate’s complaint, consider assigning a second, neutral decision maker to assess the proposed discipline or to take over responsibility for the employee’s fate. The second manager must be actually unbiased, and it is obviously helpful if that new manager appears to be neutral. There should be no friendship, reporting relationship or any other circumstances to suggest bias on that manager’s part or this process may be wasted effort. The company must also be prepared to accept the decision of the second manager. Thus, if that manager concludes that a proposed disciplinary decision may be tainted by retaliatory motive or that the termination is otherwise inappropriate, that decision should be followed. If the complainant is ultimately terminated and offered a severance package and release, review carefully any terms that concern the employee’s continued ability to blow the whistle to the world. These preventative measures � along with others that may apply to different circumstances � are well worth an employer’s time and attention, given the dangers of whistle-blower and retaliation claims in today’s legal environment. Lynne C. Hermle is an employment partner in the Silicon Valley office of Orrick, Herrington & Sutcliffe.

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