Categories: Financial Services

The Administrative Review Board (“ARB”) on April 27, 2012 held that where an employer charged with retaliation under the AIR21 Statute can point to evidence of misconduct by a whistleblower which would have justified termination, but which was acquired after the termination had already occurred, that evidence may be used to limit the period for which back pay damages are recoverable. Clemmons v. Ameristar Airways, Inc., ARB Case No. 08-067. The ARB remanded the matter to the Office of Administrative Law Judges (“OALJ”) to clarify whether the employer must prove that it would have terminated the employee based upon the misconduct by a preponderance of the evidence, or by the heightened “clear and convincing evidence” standard.   

Although Complainant Had Proved Retaliation, Respondent Argued That Evidence of Improper Email Communications Would Have Resulted in Legitimate Termination

Complainant Thomas Clemmons had been Director of Operations for Ameristar Airways, and claimed that he had been terminated in retaliation for reporting air safety issues to the Federal Aviation Administration. He filed a claim under the whistleblower protection provisions of the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (“AIR21 Statute”), 49 U.S.C. § 42121. Following a hearing, the Administrative Law Judge (“ALJ”) found that Clemmons had been terminated in violation of the AIR21 Statute, and awarded back pay. 

During the hearing, Ameristar had submitted evidence of an email Clemmons had sent to other Ameristar employees on January 13, 2003 – one week prior to his discharge on January 20, 2003. Although Clemmons admitted that the email was “vulgar, rude, and improper for a manager to do,” the ALJ found that it could not provide a legitimate and non-retaliatory reason for his discharge as his managers were unaware of the email until March 28, 2003, more than two months after Clemmons had already been terminated. 

On appeal, the Fifth Circuit questioned whether the award of back pay should run from the January 2003 termination through the July 2004 hearing, as the ALJ and ARB had held, or should have been cut off in March 2003, as Ameristar arguably would have legitimately discharged Clemmons at that time because of the email. Ameristar Airways, Inc. v. ARB, 650 F.3d 562 (5th Cir. 2011). Citing the Supreme Court’s holding in McKennon v. Nashville Banner Publ’g Co., 513 U.S. 352 (1995), that “where there is after-acquired evidence of wrongdoing that would have led to termination on legitimate grounds had the employer known about it,” an award of back pay should be limited to the period “from the date of the unlawful discharge to the date the new information was discovered,” the court remanded for determination of whether the back pay award should be adjusted in light of the email.       

ARB Extends McKennon to AIR21 Statute, Asks ALJ to Consider Employer’s Burden of Proof  

At the outset, the ARB held McKennon applicable to limit back pay awards in whistleblower cases under the AIR21 Statute. Reasoning that the purpose of the AIR21 Statute is “to eliminate employer discrimination and retaliation against employees who report violations of air safety regulations” – a goal similar to that espoused by the Age Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of 1964, and the Equal Pay Act of 1963 considered by the Court in McKennon – the ARB concluded that McKennon’s holding was equally applicable to claims under the AIR21 Statute.

This left a remaining question, however, concerning an employer’s burden of proof as to after-acquired evidence of misconduct justifying termination: “must Ameristar prove by a preponderance of the evidence or clear and convincing evidence that it would have fired Clemmons on this alleged misconduct alone?” Although the ARB remanded the question to the ALJ for initial determination, it nonetheless hinted strongly that the stricter “clear and convincing” burden seemed more appropriate in its view:

In enacting AIR 21, Congress clearly imposed a heavy burden on an employer in the liability phase of a mixed motive case by requiring the employer to prove by clear and convincing evidence that it would have discharged the employee in the absence of the protected activity. It seems strange that the burden of proof would change in this case where the after-acquired evidence involved an incident occurring before the termination but merely discovered afterwards; that would result in a windfall to the employer solely because it learned of such information later. 

Although it will be up to the ALJ to determine the applicable standard in the first instance, indications are that clear and convincing evidence will ultimately be required by the ARB. The distinction is significant, as the ARB has described the clear and convincing evidence standard as “more rigorous than the preponderance-of-the-evidence standard.” In the ARB’s view, “clear and convincing evidence denotes a conclusive demonstration; it indicates ‘that the thing to be proved is highly probable or reasonably certain.’” Clark v. Airborne, Inc., ARB Case No. 08-133 (Sept. 30, 2010). By suggesting its likely insistence on this heightened standard of proof, then, the ARB has stayed true to its recent complainant-friendly inclinations. Even in cases such as Clemmons, where the severity of the employee’s misconduct is admitted, the ARB would require the employer to prove to a reasonable certainty that it would have terminated the employee based upon that misconduct, a heavy burden on the employer that can be expected to prove a boon to the employee.   

As catalogued in our earlier articles, it is still too early to know if the ARB’s expansive interpretation of various whistleblower protection statutes will pass muster as employers seek court review of some of these principles, and there appear to be ample grounds to question the current ARB’s fidelity to both statutory text and Congressional intent. But for the time being at least, it can be fully anticipated that this expansive approach to whistleblower protections will find its place in the ARB’s future whistleblower jurisprudence.

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