Jottings By An Employer's Lawyer

Tuesday, December 20, 2011

Why Employers Don't Like Statutes Creating Causes of Action


One of the responses by the employer community to almost any proposed statutory cause of action is not that it supports employers who engage in whatever conduct is going to be prohibited, but that by adding yet another statutory cause of action, there is yet one more way for a lawsuit to be brought.

If you accept my basic premise, when a a lawsuit has been filed, the employer has lost, and from that point on, the only question is how much, then that argument makes sense. The issue is finding the balance, and I would argue that we have plenty of such legislation and could have a "holiday" to use a phrase currently in the political discussion from any additional new statutory causes of action. Particularly since causes of action never go away.

What brought about this particular post was a decision last week by the 7th Circuit which is a true head scratcher,  DeGuelle v. Camilli (7th Cir. 12/15/11) [pdf].

Among other things you had a
  • A Sarbanes Oxley complaint filed against a privately held company, so there was no coverage;
  • A RICO action predicated on the actions related to tax accounting that the terminated employee had been raising for years, and where
  • the Court relied on the provision in SOX that prohibits termination of a whistleblowing employee, because it is a listed statute for a predicate act for RICO purposes.
But I think what got me even more than the unusual legal aspect of the case was the account of the type of situation that anyone who has been doing this long enough has seen before. An irreconcilable difference of opinion develops between an employee feels who feels there is serious wrongdoing, an allegation that the company does take seriously, but disagrees with, and the inevitable bad outcome that occurs.

Because it is a review of summary judgment in favor of the employer, which was reversed, the Court had to accept all the allegations as true, and by doing so you have to assume egregious conduct including intentional tax violations and cover up.

But what is also true is that the employer had already sued the employee in state court for disclosing confidential information and obtained a judgement of $50,000 against him. To be fair, that is on appeal.

I obviously have no knowledge of who is right and who is wrong, but I do know that we have created in a relatively short period of time a very complex web of legal arguments for employees who are fired to say their termination was illegal. This decision points out how such statutes interact to create even more ways. 

Whether that is good or bad is a legitimate question, but we really are reaching the point where a weighing of the good and bad is in order.  Not just an automatic more is better.


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