Categories: Financial Services
by Allen B. Roberts, Stuart M. Gerson, Frank C. Morris, Jr., and Michael J. Slocum

Our previous postings have noted the progression of decisions during the past two years by the U.S. Department of Labor (“DOL”) Administrative Review Board (“ARB”) that have liberally expanded substantive provisions of whistleblower statutes under its jurisdiction. Now, the ARB has enabled whistleblowers to maintain their administrative complaints and survive dismissal in circumstances where recital of the factual bases of their claims would be fatally deficient if filed in federal court instead of a DOL administrative proceeding. The currently constituted ARB has rejected the heightened pleading standards, announced by the U.S. Supreme Court and applicable in federal district courts, requiring that a complaint set forth sufficient factual allegations to “state a claim to relief that is plausible on its face.” Instead of that judicial standard, the ARB has elected to require that an administrative whistleblower complaint filed before the Occupational Safety and Health Administration (“OSHA”) and the DOL’s Office of Administrative Law Judges (“OALJ”) need only “give ‘fair notice’ of the protected activity and adverse action” in order to withstand a motion to dismiss; and complainants are afforded “sufficient opportunity to amend or supplement” a complaint that does not measure up in the first instance. Evans v. U.S. Environmental Protection Agency, ARB Case No. 08-059 (July 31, 2012).     

The new standards announced in Evans articulate the legal standard for analyzing the sufficiency of complaints, lowering the hurdle that a whistleblower must clear to bring a claim for retaliation under the twenty-one federal statutes administered by OSHA, meaning employers will likely find it increasingly difficult to obtain early dismissal of claims that lack merit on their face.

Evans Claimed EPA Exposed Employees to Excessive On-the-Job Hazards, and Retaliated Against Him for Complaints About the Practice.          

The vehicle for the ARB’s pronouncement is a case brought against the U.S. Environmental Protection Agency (“EPA”), the governmental agency responsible for enforcement of various environmental laws.  The EPA hired Douglas Evans as an Environmental Protection Specialist in Las Vegas, Nevada. In 2004, Evans wrote to the EPA Administrator, claiming that EPA had forced employees to participate in emergency response duties without adequate experience, and had assigned employees hazardous duty responsibilities that were not part of their previous job descriptions. Accusing Evans of making threats of violence at work, the EPA suspended him in May 2006, and Evans then filed a complaint with OSHA alleging retaliation in violation of several federal employee protection laws administered by OSHA, including the Clean Air Act, the Comprehensive Environmental Response, Compensation, and Liability Act, and the Safe Drinking Water Act. During the next roughly sixteen months, Evans filed a series of amended complaints, each of which alleged a further retaliatory action taken in response to the preceding complaint. 

In March 2008, an Administrative Law Judge (“ALJ”) dismissed Evans’ complaint, concluding that he had not alleged facts demonstrating that he had engaged in any protected activity under the various laws he cited. The ARB affirmed in April 2010, holding that Evans’ complaint had failed to state a claim under the standards articulated by the Supreme Court in Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). In the Iqbal/Twombly decisions, the Supreme Court had held that in order to survive a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a plaintiff in federal court must allege sufficient facts to state a claim “that is plausible on its face.” 

Dissatisfied with the ARB’s determination, Evans sought review by the Ninth Circuit Court of Appeals, but the DOL moved to return the case to the ARB because the ARB’s 2010 dismissal of Evans’ case could be altered by applying the 2011 decision by a differently constituted ARB in Sylvester v. Parexel Int’l, LLC, ARB Case No. 07-123 (ARB May 25, 2011). In Sylvester, a case brought under the whistleblower protection provisions of the Sarbanes-Oxley Act of 2002 (“SOX”), the ARB stated that “Rule 12 motions challenging the sufficiency of the pleadings are highly disfavored by the SOX regulations and highly impractical under the [OALJ] rules.” The Court granted the DOL’s unopposed motion and remanded Evans’ case for the ARB to reconsider the applicability of the Iqbal/Twombly decisions to an OSHA whistleblower complaint.

ARB Holds Iqbal/Twombly Federal Court Pleading Standards Inapplicable to Administrative Whistleblower Complaints, Adopts a “Fair Notice” Standard Instead.

The ARB began by reiterating its observation in Sylvester that litigation in the federal courts “materially differs” from litigation of administrative whistleblower complaints filed for investigation by OSHA, a procedural prelude to the OALJ adjudicatory process, commenced if a party files objections to an OSHA determination and requests a hearing with the OALJ. The ARB’s revised position is that whistleblower complaints “are informal documents that initiate an investigation” and are “often filed by a complainant acting without the assistance of counsel.” Furthermore, the ARB reasoned, “OSHA regulations expressly allow for investigatory complaints to evolve into complaints containing a prima facie claim of discrimination” and “an ALJ should not act on a Rule 12 facial challenge until it is clear that the complainant has filed a document that articulates the claims presented to the OALJ for hearing following OSHA’s findings.” 

Pointing to its Sylvester decision, the ARB therefore again deemed the “plausibility” standards required by Iqbal/Twombly and previously applied by the ARB to Evans’ case to be “inappropriate given the nature of the administrative whistleblower complaint process.” Rather, the ARB concluded that “administrative whistleblower complainants that give ‘fair notice’ of the protected activity and adverse action can withstand a motion to dismiss for failure to state a claim.” The ARB described the de minimis detail required:

[I]n deciding a Fed. R. Civ. P. 12(b)(6) facial challenge, fair notice is the proper legal standard for any complaint filed by the complainant or required by the ALJ in administrative whistleblower proceedings before the DOL. More specifically, a sufficient statement of the claims need only provide (1) some facts about the protected activity, showing some “relatedness” to the laws and regulations of one of the statutes in our jurisdiction, (2) some facts about the adverse action, (3) a general assertion of causation and (4) a description of the relief that is sought.

The ARB then turned to Evans’ challenge that the ALJ had not permitted him an opportunity to amend his complaint prior to dismissing it, and found the ALJ’s decision on this point to have been in error. The ARB stressed the “need for an ALJ to liberally provide a whistleblower complainant an opportunity to amend” and “emphasized” its view that “the assessment of facial challenges to whistleblower complaints must be conducted in a manner consistent with informal administrative procedures.” The ARB opined that:

Given the informal nature of an investigatory complaint filed with OSHA, and the absence of a regulatory requirement that supplemental information be forwarded to the OALJ on the filing of objections and request for hearing under 29 C.F.R. § 24.105(b), it is reasonable and prudent to expect ALJs to provide a complainant an opportunity to amend the complaint with additional factual information …. The ALJ should not dismiss a complaint for failure to state a claim until he or she has allowed the complainant a sufficient opportunity to amend or supplement the claim(s) contained in the complaint.

Because the ALJ had not afforded Evans such an opportunity, the ARB remanded.

Evans Marks ARB’s Further Complainant-Friendly Moves Away From Supreme Court Precedent.    

By reversing itself and rejecting the minimal pleading standards articulated by the Supreme Court in Iqbal/Twombly, the ARB has significantly lowered the threshold procedural hurdle that a whistleblower complainant must clear. Under Evans, rather than alleging sufficiently detailed facts to state a claim that is “plausible on its face,” a whistleblower complainant need only meet a far more lenient standard: (1) “some facts” about the protected activity showing “some ‘relatedness’” to a statute providing protection, (2) “some facts” about an adverse action taken by the employer, (3) a “general assertion” that these are causally related, and (4) a demand for relief.

Seen as part of a continuum, the ARB’s reversal of its prior Evans decision now adds a procedural foothold to the ARB’s steady expansion of substantive protections discussed in several prior postings, such as Sarbanes-Oxley Whistleblower Coverage Expanded by Department of Labor to Private Firms Serving Publicly Traded Companies, ARB Adopts Expansive View of Protections Afforded Whistleblowers Under the Consumer Product Safety Improvement Act, and Expansion of Protected Activity Under Sarbanes-Oxley Continues. The new Evans opinion will allow whistleblower complainants to secure administrative adjudication of their cases and survive dismissal they would encounter if similar pleadings were filed in federal court.  Federal court litigation is an alternative avenue generally available to whistleblower complainants under various statutes if administrative processes do not yield a final DOL decision within a specified time after a complaint is filed with OSHA (e.g., 365 days for Evans’ environmental claims; 180 days for SOX claims).

As with other ARB decisions altering precedent and expectations of employers, the ARB’s new revisionist interpretation of the pleading requirements for administrative whistleblower complaints will be subject to challenge by way of federal appellate court review.       

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