Charles HAYNES v. FORMAC STABLES, INC.
Supreme Court of Tennessee, AT JACKSON.
Filed March 27, 2015
463 S.W.3d 34
November 5, 2014 Session
James M. Glasgow Jr., Union City, Tennessee; Timothy R. Holton, Memphis, Tennessee; and Michael P. McGartland and Eugene E. Borchardt, Fort Worth, Texas, for the appellee, Formac Stables, Inc.
Robert D. Meyers, Ryan M. Skertich, and Brandon D. Pettes, Memphis, Tennessee, for the amicus curiae, the Tennessee Defense Lawyers Association.
OPINION
Gary R. Wade, J., delivered the opinion of the Court, in which Sharon G. Lee, C.J., and Cornelia A. Clark and Jeffrey S. Bivins, JJ., joined. Holly Kirby, J., not participating.
I. Facts and Procedural History
Charles Haynes (the “Plaintiff“) worked as a horse groom for Formac Stables, Inc. (“Formac“). After Formac terminated the Plaintiff‘s employment in June of 2010, he filed a complaint for retaliatory discharge pursuant to both the common law and the Tennessee Public Protection Act (“TPPA“),
The Plaintiff alleged that during the three months following the incident he complained to the owner of severe headaches caused by the lack of рroper medical care. On June 29, 2010, the owner terminated the Plaintiff, allegedly because of his refusal to remain silent about the illegal stitching procedure.
In response to the Plaintiff‘s amended complaint, Formac again moved to dismiss, arguing that the Plaintiff had failed to state a valid claim for retaliatory discharge because, according to his own allegations, he hаd not reported the illegal activity to anyone other than the owner. The trial court granted the motion to dismiss, and the Court of Appeals affirmed the dismissal. Haynes v. Formac Stables, Inc., No. W2013-00535-COA-R3-CV, 2013 WL 6283717, at *6 (Tenn.Ct.App. Dec. 4, 2013). We granted review to address whether an employee asserting a whistleblower claim of retaliatory discharge must report illegal activity by his employer to someone other than the person responsible, even when that person is the manager, owner, or highest ranking officer of the company. This is an issue of first impression for this Court.
II. Standard of Review
In adjudicating a motion to dismiss pursuant to
III. Analysis
The sole issue before us is whether the Plaintiff has stated a viable claim for retaliatory discharge when he reported the illegal stitching procedure only to Formac‘s owner, who was primarily responsible for the conduct.
In Tennessee, the employee-employer relationship is ordinarily governed by the employment-at-will doctrine, “a long standing rule ... which recognizes the concomitant right of either the employer or the employee to terminate the employment relationship at any time, for good cause, bad cause, or no cause at all, without being guilty of a legal wrong.” Stein v. Davidson Hotel Co., 945 S.W.2d 714, 716 (Tenn.1997). In Clanton v. Cain-Sloan Co., 677 S.W.2d 441, 445 (Tenn.1984), this Court recognized an exception to the employment-at-will doctrine in the form of a common law cause of action for retaliatory discharge. While the claim in Clanton, 677 S.W.2d at 443, concerned an allegation that the employer had discharged an employee for filing a workers’ compensation claim, id., this Court later clarified that an employee may recover for retaliatory discharge in a variety of different contexts by establishing the following elements:
- (1) that an employment-at-will relationship existed;
- (2) that the employee was discharged[;]
- (3) that the reason for the discharge was that the employee attempted to exercise a statutory or constitutional right, or for any other reason which violates a clear public policy evidenced by an unambiguous constitutional, statutory, or regulatory provision;
and (4) that a substantial factor in the employer‘s decision to discharge the еmployee was the employee‘s exercise of protected rights or compliance with clear public policy.
Crews v. Buckman Labs. Int‘l, Inc., 78 S.W.3d 852, 862 (Tenn.2002). One of the factual scenarios that will support a common law cause of action for retaliatory discharge is when an employee is discharged for refusing to remain silent about his employer‘s illegal activity or unsafe practiсes—commonly referred to as a “whistleblower” claim. Gossett v. Tractor Supply Co., 320 S.W.3d 777, 787 (Tenn.2010) (citing Anderson v. Standard Register Co., 857 S.W.2d 555, 556 (Tenn.1993)).
Employees may also assert a whistleblower claim pursuant to the TPPA, which provides, in pertinent part, that “[n]o employee shall be discharged or terminated solely for refusing to remain silent about[] illegal activities.”
To prevail on a whistleblower claim pursuant to the TPPA or at common law, an employee must establish that he or she reported the employer‘s illegal aсtivity and that the “reporting of the illegal activity furthered a clear public policy.” Gossett, 320 S.W.3d at 788.3 Over time, our courts have attempted to clarify what an employee must do to meet the reporting requirement. In Merryman v. Central Parking System, Inc., No. 01A01-9203-CH-00076, 1992 WL 330404, at *7 (Tenn. Ct.App. Nov. 13, 1992), abrogated on other grounds by Guy, 79 S.W.3d at 537, and Anderson, 857 S.W.2d at 556, the Court of Appeals held that an employee may report the illegal activity to an outside entity, such as a law enforcement or regulatоry agency, or may report internally to company management.4 The court in Merryman concluded, however, that an employee cannot merely report the illegal activity to the person responsible for the activity. Id. at *7. Because Merryman had not reported his employer‘s illegal conduct to anyone other than the supervisor who was responsible, the court held that hе had “not become a ‘whistleblower‘” and, therefore, could not prevail on his retaliatory discharge claim. Id. Subsequent Court of
In Emerson v. Oak Ridge Research, Inc., the Eastern Section of the Court of Appeals held that an employee had satisfied the reporting requirement by reporting an incident of sexual harassment to the supervisor who subjected her to the harassment, who was the manager of the company. 187 S.W.3d 364, 371 (Tenn.Ct.App.2005). The court in Emerson distinguished Merryman as follows:
In Merryman, this [c]ourt ruled that simply reporting the behavior to the offending supervisor himself instead of reporting it to company managemеnt would not qualify the plaintiff as a whistleblower. In the case at bar, however, [the] plaintiff reported to both the offending supervisor and company management when she reported to [her supervisor], as he served in both capacities. Thus, Merryman is factually distinguishable.
Id. at 371 n.1. The court also noted that Emerson had reported her supervisor‘s conduct to an “outside entity” by contacting a local bar association “looking for an attorney because her boss was sexually harassing her.” Id. at 371 n.2.5
In contrast to Emerson, the Middle Section of the Court of Appeals held in Lawson v. Adams that an employee did not qualify as a whistleblower because he had reported his employer‘s operation of unsafe trucks only to the owner, who was responsible for the unsafe activity. 338 S.W.3d 486, 497 (Tenn.Ct.App.2010). The Lawson opinion contains no discussion of Emerson or whether the reporting was adequate in light of the offending party being the company ownеr.
In this case, the Western Section of the Court of Appeals rejected the Plaintiff‘s reliance on Emerson, ruling as follows:
If Emerson had created the exception to Merryman that [the Plaintiff] contends it did, the exception clearly would have been applicable to Lawson. The Lawson court declined to recognize such an exception. When a plaintiff brings a claim based on his refusal to remain silent about illegal activity, the plaintiff must establish that he madе “a report to some entity other than the person or persons engaging in the allegedly illegal activities.” [Lawson, 338 S.W.3d at 497 n.3 (quoting Collins, 241 S.W.3d at 885)]. [The Plaintiff‘s] complaint does not establish that he reported the illegal activity to anyone other than Formac‘s owner, who had allegedly engaged in it. We therefore affirm the trial court‘s dismissal of [the Plaintiff‘s amended] complaint for failure to state a claim.
Haynes, 2013 WL 6283717, at *6.
As our discussion of these cases demonstrates, there is a split of authority within the Court of Appeals pertaining to the reporting requirement for whistleblower claims. The Eastern Section Panel in Emerson expressly distinguished Merryman and carved out an exception for plaintiffs
The Plaintiff contends that the Court of Appeals Panels in Lawson and in this case erred by failing to recognize the ruling in Emerson that an employee may satisfy the reporting requirement by reporting illegal activity to an offending supervisor when that supervisor is also the manager, owner, or highest ranking officer in the company. The Plaintiff asserts that to deny him whistleblower status would encourage managers and owners to clаim that they participated in illegal activity as a means of avoiding liability for retaliatory discharge. In addition, the Plaintiff argues that disallowing internal reporting to an owner or manager responsible for illegal conduct will require employees to report to outside authorities, which will deprive employers of the opportunity to take corrective action.
Fоrmac emphasizes that whistleblower protection is available only to employees who report illegal conduct in a manner that advances the public interest. Gossett, 320 S.W.3d at 788 (“The employee has no cause of action [as a whistleblower] unless the employee shows that the reporting furthered some clear public interest.“). Formac contends that an emplоyee who reports only to the person responsible for the illegal conduct is acting in pursuit of a private interest, thereby failing to expose the employer‘s unlawful activity in furtherance of the public interest.
Formac‘s position is supported by the case law of courts in other jurisdictions addressing the same issue. In Fowler v. Criticare Home Health Services, Inc., 27 Kan.App.2d 869, 10 P.3d 8, 15 (2000). Affirming a summary judgment in favor of the employer, the Kansas Court of Appeals ruled as follows:
[W]e are unpersuaded by Fowler‘s argument that [the person he confronted] was the general manager, and that Fowler understood the initial directive to have come from [the general manager‘s] boss, the owner of the company. There was nothing about the fact that Fowler worked for a smaller company that prevented him from reрorting to law enforcement, if he felt company reporting avenues were closed to him.... A worker who wants to come under the protections of [the whistleblower cause of action] must seek out the intervention of a higher authority, either inside or outside of the company.
Id. at 15, aff‘d, 271 Kan. 715, 26 P.3d 69 (2001) (adopting the opinion of the Kansas Court of Appeals). In another analogous cаse, Drummond v. Land Learning Foundation, the employee confronted the owners of the employer, alleging that they had engaged in tax fraud. 358 S.W.3d 167, 169 (Mo.Ct.App.2011). The Missouri Court of Appeals found that the employee had not reported the illegal activity in a way that qualified him as a whistleblower:
“[T]o effectuate the clear mandate of public policy implicated in a given situation, it is axiomatic that the at-will emрloyee report or ‘blow the whistle’ to the proper authorities, which, depending on the circumstances, would include the employer, ‘internal whistleblowing,’ and/or a third-party authority, ‘external whistleblowing.‘” [Faust v. Ryder Commercial Leasing & Servs., 954 S.W.2d 383, 390-91 (Mo.Ct.App.1997).] Internal reporting to superiors of illegal actions by other employees can constitute protected activity. However, a report of wrongdoing to the wrongdoer is insufficient to invoke the whistleblowing public policy exception. Reporting to the wrongdoer does not expose the wrongdoer or his wrongdoing and, thus, does not further the accepted clear mandate of public policy. If wrongdoing occurred, the wrongdoer necessarily knew of the misconduct already because he is the one that engaged in thе misconduct and is not the person likely to remedy the wrong. While a report of wrongdoing to the wrongdoer may in some instances have the intended effect of stopping future criminal activity, it does not expose wrongdoers and their past wrongdoings in such a way as to remedy a public ill. Instead, “[i]t allows wrongdoers to escape detection and avoid prosecution for past wrongdoing, while in no way affording the victims an opportunity to protect themselves from further wrongdoing.” Faust, 954 S.W.2d at 391. Such is contrary to the clear mandate of public policy.
Drummond, 358 S.W.3d at 171 (citations omitted); see also Lykins v. CertainTeed Corp., 555 Fed.Appx. 791, 794 (10th Cir. 2014) (holding that whistleblower status requires “reporting [illicit activity] to someone higher than the wrongdoer, either inside the company, if available, or outside the company, when internal channels are unavailing“); Chipp v. Salvation Army, Nо. B167508, 2004 WL 729216, at *4 (Cal.Ct.App. Apr. 6, 2004) (“[The employee] failed to show that his employment was terminated in violation of public policy because he did not show that he disclosed the alleged wrongdoing to anyone not participating in the wrongful acts.... [The employee] therefore did not act as a whistle blower.“).
As these authorities demonstrate, the public policy underlying the whistleblowеr protections precludes relief for an employee who merely reports unlawful activity to the person responsible, even when that person is the manager, owner, or highest authority within the company. As we recognized in Guy,
[U]nder both the statute and the common law, the plaintiff must assert that his or her whistleblowing activity “serves a public purpose [that] should be protectеd. So long as employees’ actions are not merely private or proprietary, but instead seek to further the public good, the decision to expose illegal or unsafe practices should be encouraged.”
79 S.W.3d at 537 n.4. (second emphasis added) (quoting Wagner v. City of Globe, 150 Ariz. 82, 722 P.2d 250, 257 (1986)). When an employee reports wrongdoing only to the wrongdoer—who is already aware of his or her own misconduct—there has been no expоsure of the employer‘s illegal or unsafe practices. Such an employee necessarily fails to “blow the whistle” in a meaningful fashion because the employee has made no “effort[] to bring to light an illegal or unsafe practice.” Collins, 241 S.W.3d at 885 (emphasis added) (citing Guy, 79 S.W.3d at 537 n.4). We acknowledge that our decision will eliminate the option of internal reporting under certain circumstances, such as whеn the wrongdoer is the manager, owner, or highest authority within the company, as is the
IV. Conclusion
Because the allegations in the Plaintiff‘s amended complaint establish that he did not expose Formac‘s illegal conduct by reporting it to anyone aside from the person responsible for the conduct, the Court of Appeals properly affirmed thе dismissal of the amended complaint for failure to state a claim upon which relief may be granted. Costs of this appeal are taxed to Charles Haynes and his surety, for which execution may issue if necessary.