Claim for Wrongful Discharge Based on Whistleblowing Rejected

Can a business terminate an employee for claiming its operations are somehow illegal or against public policy? For example, can an employer discharge an employee for complaining the business’s refusal to use electric vehicles or reduce the use of plastic is harming the environment? In Wisconsin, the answer is a qualified yes. A recent Wisconsin court of appeals case reviewed the standard for when a discharged employee can file a common-law claim for wrongful termination based on whistleblowing.

Background

Stephen Travers worked for EyeKor, Inc. as a senior director of clinical research, and Robert Ward worked for EyeKor as an IT manager. The company developed a proprietary system called Excelsior to manage ophthalmic testing, information gathering, and information analysis related to clinical trials, but Travers and Ward voiced concerns to superiors about the system, including that it didn’t comply with federal rules and regulations concerning data security established by the Food and Drug Administration (FDA) and regulated by the Health Insurance Portability and Accountability Act (HIPAA).

The two employees alleged that, in response to their concerns, EyeKor’s CEO became visibly and audibly upset with their refusal to join in the company’s noncompliance. They further alleged that EyeKor’s director of regulatory compliance responded to their concerns by saying, “We fake it until we make it.” The company eventually fired both Travers and Ward.

Employees File Suit

Travers and Ward sued EyeKor for wrongful discharge, claiming they believed it misrepresented to its clients and the public that Excelsior was compliant with federal regulations. They sought a permanent injunction against the company from engaging in employment practices in violation of the common law of the state of Wisconsin; an order requiring EyeKor to take steps to come into compliance with federal requirements; and full reinstatement for violations of the common law of the state of Wisconsin because their termination violated fundamental and well-defined public policy.

EyeKor asked the court to dismiss the employees’ complaint based on their failure to allege it terminated them either (a) for refusing a directive to violate the law or (b) in retaliation for fulfilling an obligation imposed by law.

The trial court agreed with EyeKor, stating Travers and Ward didn’t provide facts showing it required them to violate the law, and they didn’t point to any statute or regulation that requires them to report noncompliance. The court stated what Travers and Ward had pled in their complaint is akin to being discharged for their role as whistleblowers and noted the Wisconsin Supreme Court has repeatedly rejected a whistleblower exception. The two employees appealed.

Employees Appeal

The appellate court performed another review of the complaint. Noting that Wisconsin is an at-will employment state—meaning an employer can fire an employee for good cause, for no cause, or even for a cause that’s morally wrong—the appellate court examined a narrow exception that allows a discharged employee to pursue a wrongful discharge claim when the termination is contrary to a fundamental and well-defined public policy as evidenced by existing law. The appellate court observed that an employer cannot require an employee to act in an unlawful way, and that firing an employee for refusing to do so is a violation of public policy and therefore actionable.

The appellate court cited the Wisconsin Supreme Court’s 1986 ruling in Bushko v. Miller Brewing Co., however, which held that a wrongful discharge claim only applies when the employee is discharged for refusing a command to violate the law. In addition, the discharge must be for refusing a command to violate a public policy as established by a statutory or constitutional provision. This is different, the appellate court noted, than a situation in which the employee is discharged because they complied with a specific legal mandate imposed on them.

According to the appellate court, Travers and Ward failed to allege EyeKor terminated their employment either for refusing a directive to violate the law or for engaging in affirmative conduct required by the law. Importantly, the appellate court noted there were no allegations in the complaint that they were directed to do something and they refused, and no allegation that they were fired for complying with an affirmative obligation imposed on them by law.

Travers and Ward argued their complaints regarding regulatory compliance were motivated by a desire to protect the public. The appellate court concluded, however, this is more akin to whistleblowing, which the Wisconsin Supreme Court has expressly rejected as grounds for a common-law wrongful termination claim. Travers v. EyeKor, Inc., No. 2021AP1428 (Wis. Ct. App., Feb. 23, 2023).

Bottom Line

If you fire an employee for refusing to follow a command to violate a statutorily or constitutionally established public policy, or for refusing to be noncompliant with an affirmative duty imposed by law, you can be faced with a wrongful discharge claim. Conversely, you remain free to fire an employee for complaining about an issue they may perceive as wrong but doesn’t rise to the level of a legally established public policy.

This article, slightly modified to note recent updates, was featured online in the Wisconsin Employment Law Letter and published by BLR®—Business & Legal Resources. Reproduced here with the permission of BLR®—Business & Legal Resources.