The state Supreme Court is considering how far New Jersey’s whistleblower law can reach when an employee alleges retaliation for complaining about conduct that might have violated company policy but was not necessarily illegal.

The court on Wednesday heard arguments in Battaglia v. UPS Inc., A-86/87-11, an appeal from a judgment awarding damages to a United Parcel Service worker demoted and assigned to the night shift after reporting other employees’ improper behavior to his supervisor.

Michael Battaglia complained about managers’ actions that he thought violated UPS policy, such as making derogatory comments about women, misusing corporate credit cards and filing false expense reports in order to cover the costs of buying alcoholic drinks at lunches that stretched for hours.

Following a month-long trial before Superior Court Judge Phillip Paley, the jury found that UPS violated both the Conscientious Employee Protection Act and the Law Against Discrimination. It awarded Battaglia $500,000 for economic losses and $500,000 for emotional distress, though Paley reduced the emotional damages award to $205,000. The jury found no cause for Battaglia’s claim for punitive damages.

The Appellate Division affirmed the CEPA violation, but vacated the emotional damages award and ordered a new trial. It also found that there was no reason to award punitive damages. Both sides filed appeals to the Supreme Court.

UPS’s attorney, Michael Bissinger, told the court there was no basis for there to be a valid CEPA claim.

Battaglia, he said, was not engaging in protected activity when he complained about the alleged misuse of corporate credit cards because there was no UPS policy saying nondriver employees could not drink alcohol at lunch and putting that in their expenses.

Bissinger, of the Piscataway office of Day Pitney, said Battaglia would have to have believed there was evidence of some clear illegal activity, such as fraud, for him to be protected by CEPA.

"There is no CEPA claim when the activity does not violate internal policies," Bissinger said.

Chief Justice Stuart Rabner said Battaglia suggested there was the misuse of company credit cards.

Bissinger said there was no evidence that the employees were violating company policies or any criminal statutes.

Justice Anne Patterson asked whether Battaglia might not have understood company policy and believed he was reporting illegal or fraudulent activity. "Is that actionable?" she asked.

"I don’t think so," Bissinger said. "We’re talking about UPS internal policy, not laws. Maybe if they were drinking and then driving."

Appellate Division Judge Anthony Parrillo, temporarily assigned, asked whether Battaglia did enough of an investigation before voicing his concerns.

"He could have done more, and should have done more," Bissinger said.

Battaglia’s lawyer, Maureen Binetti, told the court that Battaglia should receive CEPA protection.

"He was the quintessential UPSer," she said. "He is no longer the same person. His life was destroyed.

"Michael Battaglia tried to do the right thing," said Binetti, of Woodbridge’s Wilentz, Goldman & Spitzer.

If a person has a reasonable, not frivolous, belief that there is improper conduct, CEPA should apply, she said. "That’s what happened here."

"He’s not required to be a lawyer," Binetti said. "He was trying to protect the company from fraud by its managers."

Patterson asked whether there was anything beyond the purported credit card misuse or manipulation of the meals expense system.

Binetti pointed to the evidence that Battaglia also complained about the derogatory remarks made about female employees.

Justice Helen Hoens asked whether Battaglia had concerns that the employees’ behavior was causing poor work performance.

"That’s correct," Binetti said. "He believed that because of all the abuses going on."

Justices Barry Albin and Jaynee LaVecchia recused, as did Appellate Division Judges Ariel Rodriguez and Mary Catherine Cuff, also temporarily assigned.