WHISTLE WHILE YOU WORK:
WHISTLEBLOWING IN MINNESOTA

by Gerald T. Laurie and Andrew E. Tanick



Just whistle while you work
And cheerfully together
We can tidy up the place  1

Unlike the seven dwarfs in the story of "Snow White," many employees are finding that rather than whistling while they work, they are being forced to "blow the whistle" on their employer's suspected illegal activities. Until recently, such "whistleblowers"2 were afforded little protection against retaliation by their employers. In the 1980's, however, courts in a number of states recognized that a common law cause of action exists for whistleblowers who are the victims of retaliation by their employers3, and many states have enacted statutes expressly authorizing such claims4. In 1986 and 1987, Minnesota joined these states by first recognizing common law protection for whistleblowers5 and then enacting a "whistleblower statute."6 This article will discuss Minnesota's new protection of whistleblowers and advise the practitioner how best to counsel both employers and whistleblowers under the current law.


A. WHISTLEBLOWER PROTECTION.

Mirror, mirror, on the wall,
Who's the fairest of them all?  7

Compared to the limited protection afforded whistleblowers in most jurisdictions8, it may be said that Minnesota's whistleblower law is indeed "the fairest of them all." Minnesota's common law and statutory protection of whistleblowers is discussed below.

* Protection under the common law doctrine of discharge in violation of public policy.

Recognizing that the public interest is more important than any single employer's private interest, many courts have now recognized common law remedies for the termination of employment in violation of public policy9. Minnesota first recognized such a common law exception to the at-will employment rule in 1986. In Phipps v. Clark Oil & Refining Corp., the Minnesota Court of Appeals held that "a Complaint which alleges that an at-will employee was terminated for refusing to violate a law states a cause of action in Minnesota for wrongful discharge."10 Phipps involved a gas station employee who allegedly was fired when he refused his employer's directions to violate the federal Clean Air Act by pumping leaded gas into an unleaded-only car.

In January 1987, the Minnesota Supreme Court accepted review of Phipps. Before the supreme court issued its decision, however, the Minnesota legislature passed the "whistleblower" statute, Minn. Stat. § 181.932, which in part codified the court of appeals' Phipps decision.11 The supreme court then affirmed Phipps, holding that "an employee may bring an action for wrongful discharge if that employee is discharged for refusing to participate in an activity that the employee, in good faith, believes violates any state or federal law or rule or regulation adopted pursuant to law."12

In affirming Phipps, the Supreme Court agreed that a common law claim exists for wrongful discharge in violation of public policy. While the supreme court noted that the enactment of the new statute made it unnecessary for the court to decide "the policy question of whether or not Minnesota should join the three-fifths of the states that now recognize, to some extent, a cause of action for wrongful discharge,"13 the court did not indicate that its decision was based on the statute. Indeed, since Phipps' termination occurred before the statute was enacted, and the statute was not retroactive14, a decision upholding Phipps' claim could not logically have been based on the statute15. Moreover, the court noted with approval the fact that "other courts have held that their common law also protects those fired for their refusal to violate the law."16 Thus, the supreme court's affirmance of Phipps indicates that a common law whistleblower claim does exist in Minnesota. 17

Does it matter that a common law claim exists apart from the whistleblower statute? Yes. Minnesota's whistleblower statute imposes requirements on certain claimants which were not set forth in the Phipps common law rule, namely, that an employee who refuses to perform an action at the employer's direction must have an objective basis in fact to believe that the action is illegal, and that the employee tell the employer that the employer's directions are being refused because the requested activity is illegal.18 Also, the Minnesota Court of Appeals has indicated that a common law whistleblower claim may be based on a discharge that violates any legislatively or judicially recognized public policy, whereas the statute applies only to violations of laws, statutes or rules.19 Thus, unlike the statute, the common law would appear to protect employees who protest an employer's tortious conduct, breach of contract other action giving rise to common law liability.20

* Protection under the whistleblower statute.

Shortly after the court of appeals' Phipps decision, the Minnesota legislature enacted the "whistleblower statute."21 That statute, as amended in 1988, provides as follows:

An employer may not discharge, discipline, threaten, discriminate against penalize an employee regarding the employee's compensation, terms, conditions, location or privileges of employment because:22


(a) the employee a person acting on behalf of an employee, in good faith, reports a violation or suspected violation of any federal or state law or rule adopted pursuant to law to an employer or to any governmental body or law enforcement official;
(b) the employee is requested by a public body or office to participate in an investigation, hearing, inquiry; or
(c) the employee refuses an employer's order to perform an action that the employee has an objective basis in fact to believe violates any state or federal law or rule or regulation adopted pursuant to law, and the employee informs the employer that the order is being refused for that reason.23

The Minnesota whistleblower act applies to any employer, including the state and any political subdivisions, with one or more employees in Minnesota.24 The act does not cover independent contractors25, and does not affect any rights under a collective bargaining agreement.26

The act provides for the recovery of "any and all damages recoverable at law, together with costs and disbursements, including reasonable attorneys' fees . . .."27 Thus, damages for lost wages, emotional distress28, harm to reputation, and attorneys' fees would all be recoverable by a whistleblower. Also, injunctive or equitable relief may be obtained under the Minnesota act.29 Moreover, the Phipps decision indicated that punitive damages are available as well.30 This broad scope of recoverable damages offers substantial protection to whistleblowers in Minnesota.

B. LITIGATING THE WHISTLEBLOWER CLAIM.


Heigh ho, heigh ho
It's off to work we go   31

The litigation of whistleblower claims can be bitter, costly and time-consuming, since the employee's accusations often engender hostility between the parties. Moreover, whistleblower claims across the country have resulted in sizeable verdicts.32 Therefore, as one commentator advises, "both whistleblowers and employers should attempt to resolve their differences short of litigation whenever possible."33 Where settlement is not possible, however, litigation is necessary. Basic information for litigating whistleblower claims is set forth below.
1. The whistleblower claim as a separate cause of action in discrimination cases.

In addition to protecting employees who were previously powerless to avoid retaliation by their employers, the whistleblower cause of action also provides an additional claim for plaintiffs in certain discrimination cases. In many instances, an employee who "blows the whistle" on the employer's suspected employment discrimination may be subject to retaliation. This is especially true, it seems, in sexual harassment cases, where the victim's complaints of a supervisor's inappropriate conduct, for example, may be met by the termination of employment or other adverse action. In such a situation, the employee has always had at least two state law claims against the employer: sexual harassment34, and reprisal under the Minnesota Human Rights Act.35 Now the employee may add a third claim: violation of the whistleblower statute.36 Because employment discrimination is illegal, an employee who was discharged for reporting such a violation of law to the employer would have a valid claim under the whistleblower statute.37 Since the employee's whistleblower claim could be tried to a jury and would have the potential for unlimited punitive damages, unlike a claim under the Minnesota Human Rights Act,38 the whistleblower claim would significantly enhance the value of the plaintiff's lawsuit.39

* The burden of proof in whistleblower cases.

The burden of proof in a whistleblower case is the same as for a Title VII claim.40 The Minnesota Supreme Court in the Phipps case stated the burden of proof as follows:

after the plaintiff has demonstrated that his discharge may have been motivated by his good faith refusal to violate the law, the burden of production shifts to defendant to articulate another reason for the discharge. To prevail, however, the plaintiff must prove by a preponderance of the evidence that the discharge was for an impermissible reason.41

In establishing a prima facie case, a whistleblower must show that (a) he or she engaged in conduct protected under the act; (b) the employer took adverse action against the employee; and (c) there was a causal connection between the protected conduct and the adverse action.42 The employer must then come forward with a legitimate business reason for the adverse employment action.43 Finally, the whistleblowing employee must show that the employer's proffered business reason is a pretext, and that the adverse action was in fact motivated by the employee's whistleblowing.44

* Defenses available to employers.

Several affirmative defenses are commonly asserted in whistleblower claims. The employer may first contend that there was no objective basis in fact for the employee to believe that the employer had violated the law.45 Under a decision of the Minnesota Court of Appeals, the employer may also argue that the suspected illegal act was an internal matter which only marginally affected public policy concerns.46 In addition, the employer may assert that its adverse action toward the employee was based on legitimate business reasons, such as poor performance, insubordination business necessity.47 Moreover, if the whistleblower's motivation was personal and not for public interest, the good faith requirement for a whistleblower claim may not be met.48 Finally, the employer may bring a counterclaim for misappropriating or disclosing trade secret information,49 such as technical information or customer lists, where appropriate. A frivolous or bad faith counterclaim, however, may result in sanctions. 50

C. AVOIDING WHISTLEBLOWING CLAIMS.

As in most employment law matters, the best advice an attorney can give an employer with regard to whistleblower claims concerns the avoidance of such claims altogether by taking appropriate precautionary measures. For example, the employer should distribute a written policy setting forth internal procedures and mechanisms for reporting suspected illegal actions. Furthermore, the employer should gain the trust of employees and deal with the subject through ethics training, an open door policy, an ombudsman, an outside consultant, a grievance procedure or other internal mechanisms to review complaints.51

D. ADVISING THE PROSPECTIVE WHISTLEBLOWER.

Whistleblowers are often idealistic, non-traditional thinkers, who "march to a different beat." Nevertheless, they should be advised to use proper internal channels, to write a clear summary of the violation or suspected violation of law, and to focus on the disclosure of that violation, rather than on personalities. It is also helpful to have other professionals verify the alleged illegalities if possible. This will lend credence to the whistleblower and make retaliation less likely. The whistleblower should assume that he or she will not remain anonymous, and should anticipate retaliation and frustration. Furthermore, the whistleblower should be advised that in some instances, where no serious illegal act is involved, it simply may not be worthwhile to "blow the whistle." 52

E. CONCLUSION.

Whistleblower protection serves the lofty purpose of safeguarding those who put the public interest ahead of all other interests, including their employer's and their own. Minnesota's recognition of a common law whistleblower claim and enactment of a whistleblower statute go a long way toward allowing whistleblowers to "live happily ever after" in this state.

Reprinted from the Hennepin Lawyer
Official Publication of the Hennepin County Bar Association
September-October 1991/Volume 61, No. 1
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Footnotes

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(1) L. Morey & F. Churchill, "Whistle While You Work," from the Walt Disney Studios motion picture Snow White and the Seven Dwarfs.

(2) The broadest definition of a whistleblower is an employee who voices opposition, either internally or externally, to his or her employer's suspected illegal conduct. See D. Westman, Whistleblowing - The Law Of Retaliatory Discharge 19 (1991).

(3) Forty-three jurisdictions have recognized such claims. See Westman, supra note 2, at 198-211.

(4) As of 1991, twenty-four states have enacted statutes which protect public employees who "blow the whistle," and eleven states have enacted whistleblower statutes that protect both private and public sector employees. See Westman, supra note 2, at 52- 53, 177-87. There are also many federal laws which protect certain whistleblowers. See id. at 188-97.

(5) See Phipps v. Clark Oil & Refining Corp., 396 N.W.2d 588 (Minn. Ct. App. 1986), aff'd 408 N.W.2d 569 (Minn. 1987).

(6) See Minn. Stat. § 181.932 (1987).

(7) Snow White, supra note 1.

(8) See Westman, supra note 2, at 177-87, 198-211.

(9) See Westman, supra note 2, at 198-211.

(10) 396 N.W.2d 588, 595 (Minn. Ct. App. 1986), aff'd 408 N.W.2d 569 (Minn. 1987).

(11) See infra, section 2. By enacting the statute, the legislature did not preempt the common law doctrine established in Phipps. "There is a presumption that a statute is consistent with the common law, and therefore a statute creating a new remedy or method of enforcing a right which existed before is regarded as cumulative rather than exclusive of the previous remedies." Application of Shetsky, 239 Minn. 463, 60 N.W.2d 40, 45 (1953); see Wirig v. Kinney Shoe Corp., 461 N.W.2d 374, 377 (Minn. 1990) ("If statutory enactment is to abrogate common law, the abrogation must be by express wording or necessary implication.")

(12) Phipps v. Clark Oil & Refining Corp, 408 N.W.2d 569, 571 (Minn. 1987).

(13) Id.

(14) See Minn. Stat. § 645.21 (1990) (statutes are presumed to be prospective unless specifically made retroactive).

(15) The court implicitly acknowledged this argument by noting, after discussing the new statute, that "[t]he only question that remains is whether we should uphold the court of appeals' decision applying this public policy exception to the November 17, 1984 [i.e., before enactment of the statute] discharge of Phipps." Phipps, 408 N.W.2d at 571.

(16) Id.

(17) See Stowman v. Carlson Companies, Inc., 430 N.W.2d 490, 494 (Minn. Ct. App. 1988), pet. for rev. denied (Minn. 1989) (citing Phipps for the proposition that tort principles apply when an employee is terminated in contravention of some clear mandate of public policy recognized either judicially or legislatively); Freidrichs v. Western National Mutual Insurance Co., 410 N.W.2d 62 (Minn. Ct. App. 1987) (relying on Phipps in reversing dismissal of pre- whistleblower statute wrongful discharge claim); contra Steinbach v. Northwestern National Life Ins. Co., 728 F. Supp. 1389 (D. Minn. 1989) (holding that wrongful discharge claim was strictly statutory); Woods v. Magnetic Peripherals, Inc., 1989 Minn. App. LEXIS 325 (unpublished) (holding that Phipps merely recognized statutory cause of action); Maida v. The Maxi-Switch Co., 1988 Minn. App. LEXIS 1301 (unpublished) (same).

(18) Minn. Stat. § 181.932, subd. 1(c) (1990). There is no such requirement for employees who blow the whistle on the employer's suspected illegal activity. See § 181.932, subd. 1(a).

(19) See Stowman v. Woods, 430 N.W.2d at 494. It is unclear whether an employee could state a whistleblower claim in Minnesota for refusing to violate professional codes, such as the Rules of Professional Responsibility. The key element would probably be whether the conduct at issue would trigger clear public policy concerns. See Westman, supra note 2, at 91.

(20) In other jurisdictions, courts have recognized claims by employees who were discharged for refusing to commit tortious acts at the employer's request. See Kessler v. Equity Management, Inc., 82 Md. App. 577, 572 A.2d 1144 (1989); Delaney v. Taco Time International, 297 Or. 10, 681 P.2d 114 (1984).

(21) Minn. Stat. § 181.932 (1987).

(22) Note that the common law rule enunciated in Phipps applies only to discharge cases.

(23) Minn. Stat. § 181.932, subd. 1. Note that Phipps only addresses the situation in subpart (c).

(24) Minn. Stat. § 181.931, subd. 3 (1990).

(25) Minn. Stat. § 181.931, subd. 2.

(26) Minn. Stat. § 181.932, subd. 4. Under the doctrine of federal preemption, it is often argued that state courts may not regulate conduct which may be prohibited under federal law. There are certain exceptions to preemption, however. States may protect whistleblowers if there are important local interests which do not conflict with the federal statutory scheme. See Phipps, 408 N.W.2d at 571; see also Farmer v. Carpenters, 430 U.S. 290 (1977); Garibaldi v. Lucky Foods Stores, 726 F.2d 1367 (9th Cir. 1984). Whistleblowing would appear to fit within this exception. See Westman, supra note 2, at 134-48.

(27) Minn. Stat. § 181.935(a) (1990).

(28) See Westman, supra note 2, at 116 (all but one jurisdiction ruling on the issue have allowed damages for pain and suffering).

(29) Minn. Stat. § 181.935(a).

(30) In Phipps, the supreme court held that punitive damages were not available simply because the employer's wrongful conduct occurs before Minnesota had recognized a cause of action for whistleblowers. See Phipps, 408 N.W.2d at 573. The decision clearly indicates, however, that punitive damages are available in a claim arising from adverse action that occurs after 1987. Id. The decision is consistent with the law in most jurisdictions. See Westman, supra note 2, at 117.

(31) L. Morey & F. Churchill, "Heigh Ho," from Snow White, supra note 1.

(32) In recent years, for example, verdicts of $700,000, $2.5 million and $69.5 million have been handed down in other jurisdictions. See Schiller, Ashland Just Can't Seem To Leave Its Checkered Past Behind, Business Week, October 31, 1988, at 122; A Whistler's Win, U.S. News & World Report, August 1, 1988, at 9; They Whistled and Won, Time, June 27, 1988, at 50; Bowen, Blowing The Whistle On Georgia, Time, February 24, 1986, at 65.

(33) Westman, supra note 2, at 168.

(34) Minn. Stat. §§ 363.01, subd. 14, 41 (1990); 363.03, subd. 1 (1990).

(35) Minn. Stat. § 363.03, subd. 7 (1990).

(36) The common law rule as enunciated in Phipps may not apply in this situation, since Phipps only established a claim for an employee who is discharged for refusing to violate the law, and not for an employee who "blows the whistle" on the employer. An employee who refuses to practice unlawful discrimination and is fired as a result, however, would have a claim under Phipps, as well as under the statute. See Phipps, 396 N.W.2d at 595; Minn. Stat. § 181.932, subd. 1(c).

(37) Minn. Stat. § 181.932, subd. 1(a). Similarly, an employee who is retaliated against for participating in a public investigation, hearing or inquiry into alleged employment discrimination would also have a claim under the statute. See Minn. Stat. § 181.932, subd. 1(b).

(38) See Minn. Stat. §§ 363.071, subd. 2 (1990); 363.14, subd.2 (1990) (limiting punitive damages under the Minnesota Human Rights Act to $8,500 and providing for a trial by a judge sitting without a jury).

(39) The employee may not be entitled to double recovery under different legal theories for the same acts, however. See Wirig, 461 N.W.2d at 379.

(40) See Texas Department of Community Affairs v. Burdine, 450 U.S. 248, 260 (1981); Phipps, 408 N.W.2d at 572.

(41)Phipps, 408 N.W.2d at 572.

(42)See Westman, supra note 2, at 150-52.

(43)See id. at 152-53.

(44)Id. at 156-57.

(45)Many employers will argue that there was no illegal act at all. This argument, however, should be ineffective. The whistleblower statute requires only a "suspected" violation of law. See Minn. Stat. § 181.932, subd. 1(a).

(46)Vonch v. Carlson Companies, 439 N.W.2d 406, 408 (Minn. Ct. App.), pet. for rev. denied (Minn. 1989). In Vonch, the court of appeals limited whistleblower protection to claims that affect "clearly mandated" public policy. The court held that allegations of corporate travel and expense improprieties did not affect such concerns.

(47)See Westman, supra note 2, at 152.

(48)See Minn. Stat. § 181.932, subd. 1(a); see also Warthen v. Toms River Community Memorial Hospital, 199 N.J. Super. 18, 488 A.2d 229 (1985).

(49)See Minn. Stat. ch. 325C.

(50)See Hudson v. Moore Business Forms, 609 F.Supp. 467, 478 (N.D. Cal. 1985) (defense counsel sanctioned in the amount of $15,000 for bringing frivolous counterclaim against whistleblower).

(51)See Westman, supra note 2, at 169-75.

(52)See P. Raven-Hansen, "Do's and Don'ts for Whistleblowers: Planning for Trouble," Technology Review (May 1980).