New Jersey Supreme Court Finds that New Jersey’s Whistleblower Protections Apply to “Watchdog” Employees

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On July 15, 2015, the New Jersey Conscientious Employee Protection Act (“CEPA”) was substantially expanded. In Lipmman v. Ethicon, the Court held that the protections of CEPA “extend[s] to the performance of regular job duties by watchdog employees.” This means that employees, whose job it is to monitor whether their employer complies with applicable laws, standards and regulations, are not barred from the whistleblower protections provided to other employees.

Enacted in 1986, CEPA protects New Jersey’s “whistleblowers” by prohibiting any retaliatory action against an employer because the employee discloses, or threatens to disclose to a supervisor or to a public entity any activity, policy or practice of the employer that is a violation of a law, or a rule or regulation. Retaliatory action under CEPA is defined as discharge, suspension or demotion of an employee, or any other adverse employment action taken against an employee with regard to the terms and conditions of employment. Noteworthy is that CEPA does not require an employee to actually establish that a complained of activity is illegal or unethical. Rather, an objection to a legal activity, as long as it’s made in good faith, may be sufficient to confer whistleblower status.

Joel Lippman served as Ethicon’s chief medical officer and worldwide vice president of medical affairs. Among his chief responsibilities was evaluating and ensuring the safety of Ethicon’s pharmaceutical products, as well as making recommendations to management concerning product safety. Ethicon is a subsidiary of Johnson and Johnson.

On numerous occasions, Mr. Lippman objected to the proposed and/or continued sale of certain products claiming that such products were unsafe or defective. Lippman claimed that he was terminated in 2006 after, in furtherance of his duties as Ethicon’s chief medical officer, he recommended the company recall a medical product he believed to be dangerous. Mr. Lippman’s recommendation faced resistance from other Ethicon executives. Ethicon ultimately recalled the product and Mr. Lippman was terminated several weeks after the recall. Ethicon asserted Mr. Lippman was lawfully terminated after it was discovered that he had engaged in an inappropriate relationship with someone who worked under his authority.

Mr. Lippman filed suit against Ethicon, arguing that his termination violated CEPA. The trial court disposed of the matter on summary judgment, holding that making recommendations and raising concerns about product safety was a central function of Lippman’s job and, therefore, he was not engaged in activity protected by CEPA.  On appeal, the appellate court found that “a plaintiff who reports conduct as part of his or her job is . . . entitled to the whistle-blowing protections afforded under CEPA.”  In doing so, the appellate court held that a heightened standard applied to watchdog employees, requiring that they either exhaust the “internal means of securing compliance” and/or outright refuse to participate in the conduct being questioned.

In a unanimous decision, the New Jersey Supreme Court rejected the heightened standard contemplated by the appellate court. While confirming “that watchdog employees are stripped of whistleblower protection [neither] as a result of their position [n]or because they are performing their regular job duties,” the Court rejected the “exhaustion” requirement offered by the appellate court. Rather, it determined that watchdog employees need not object to employer conduct, raise unpopular concerns, or even disagree with their employer.” The Court determined that such a requirement was “incompatible with prior precedent and imposes an obligation nowhere found in the statutory language.”

The Supreme Court sent the case back to trial court for further proceedings.

Lippman substantially expands whistleblower law in New Jersey. Prior to the Supreme Court’s July 2015 decision, courts had held that watchdog employees merely performing their job duties were not whistleblowers protected by CEPA. Lippman disregards that precedent. Now, any “watchdog” employee who voices an objection to corporate decisions, and who is later disciplined in some way, may be able to state a claim for violation of CEPA. It is also worth noting that a violation of CEPA may be claimed even where the company ultimately follows the watchdog employee’s advice, as it did in Lippman.

Given these protections, employers must remain vigilant in ensuring careful consideration is given to personnel decisions, especially pertaining to watchdog employees. Further, employers should train managers and supervisors regarding their compliance obligations and anti-retaliation laws. Employers must be even more diligent in investigating employee reports promptly, impartially (i.e., a supervisor who is accused should not be the one to investigate), and take appropriate corrective action. Should an employer elect to take disciplinary action, or any action that alters the terms and conditions of employment, thoughtful written documentation should be concurrently prepared explaining the legitimate business reason for the action. Finally, pursuant to the regulations, employers should ensure that they annually providing their employees with written notices advising them of their whistleblower protections under CEPA.

Contributor:  Meagan D. Bainbridge, Attorney at Law  |  Weintraub Tobin