Labor and Employment - W. Christopher Arbery, Valerie N. Njiri, and Valerie H. Barney

• Publication year: 2008

Labor and Employmentby W. Christopher Arbery^* Valerie N. Njiiri^** and Valerie H. Barney^***

The trial and appellate courts within the Eleventh Circuit handed down a number of important opinions affecting labor and employment law during the survey period from January 1, 2007 to December 31, 2007. These included significant decisions defining key terms under the Sarbanes-Oxley Act ("SOX")¹ and there were notable decisions involving the Fair Labor Standards Act ("FLSA")² and the Family and Medical Leave Act ("FMLA").³

I. Sarbanes-Oxley Act

A. Reyna v. ConAgra Foods, Inc.

In Reyna v. ConAgra Foods, Inc.,⁴ the United States District Court for the Middle District of Georgia, Athens Division, in a case of first impression, found that section 806⁵ of the Sarbanes-Oxley Act⁶ protects employees who report allegations of fraud even if the allegations do not relate to shareholder fraud.⁷

Because the case was before the court on the defendants' motion for summary judgment, the court interpreted the facts in the light most favorable to the plaintiffs.⁸ Scarlett Reyna and Maria Ortega worked in the human resources department of a poultry processing plant owned by ConAgra Foods, Inc. ("ConAgra") in Athens, Georgia. Reyna worked as the Employment Coordinator and was responsible for hiring all nonexempt employees. Ortega worked as the FMLA Coordinator and assistant to the Benefits Coordinator, Denise Dimas. Ortega worked primarily with hourly employees and did not generally have access to the computer system containing information regarding management-level employees. Both employees reported to Angela Colquitt, the Personnel Manager. The employees alleged that Colquitt often made derogatory comments toward them based on their national origin and instructed them not to hire certain demographic types.⁹

In April or May of2003, Reyna allegedly brought an expired Immigration and Naturalization Service Employment Eligibility Verification Form ("I-9 form")¹⁰ to the attention of Colquitt. She informed Colquitt that it was illegal to keep the employee on the company's payroll. Colquitt allegedly instructed Reyna to create a false social security card for the employee, but Reyna refused to do so. Colquitt and Dimas allegedly prepared the false card and put it in the employee's file. Reyna allegedly was threatened with termination when she questioned whether this was legal, but she did not report the incident at that time.¹¹

In May 2003 Ortega learned that a plant supervisor had submitted a benefit change form adding a wife and child to his medical insurance without supplying documentation to substantiate the relationships.¹² Ortega knew that Colquitt had hired the employee's sister as a housekeeper and suspected that the "wife and child" were, in fact, the employee's sister and nephew.¹³ After Ortega unsuccessfully requested the required documentation three times, Dimas allegedly told Ortega that Colquitt would take care of it and that Ortega should not mention it again. In August 2003 both Ortega and Reyna were told to move out of the offices they had been occupying.¹⁴

Later in August 2003, the plaintiffs met with the plant's General Manager, Andy Harris. The plaintiffs told him that they planned to resign due to Colquitt's racial and ethnic comments. Harris asked them not to resign but instead to take vacations, which they agreed to do. During the meeting, Reyna and Ortega allegedly told Harris about the falsification of the medical insurance forms and the falsification of the social security card. In addition, they told him that Colquitt had demanded several prepaid vouchers for work boots, even though human resources employees were not eligible to receive the vouchers.¹⁵

Harris instructed the plant's Human Resources Manager, Dan Hoggard, who was also Colquitt's supervisor, to investigate the allegations. Hoggard did not interview Reyna or Ortega as part of his investigation. After Reyna and Ortega returned from vacation, Colquitt allegedly met with her subordinates and threatened to fire anyone who brought complaints to ConAgra without coming to her first. She relocated Ortega's office to the receptionist area, reduced her responsibilities, and required her to report to work at five o'clock in the morning.¹⁶

Harris met with Reyna on September 10, 2003 to discuss the boot vouchers, the social security card, and the falsification of the medical insurance. Harris asked her to give him any proof she had. Reyna told Ortega that she needed documentation of the insurance falsification, and Ortega typed a letter summarizing it. On September 12, 2003, Reyna put the documentation in Harris's office. Later that day, both Reyna and Ortega were given three-day suspensions by Colquitt and Hog-gard.¹⁷

ConAgra claimed that the documentation supporting the falsified insurance issue included a report from a computer system to which neither Ortega nor Reyna had access and that they were suspended pending investigation of the apparent breach of ConAgra's confidentiality policy. Reyna claimed she was told that she was suspended for removing confidential information regarding the boot vouchers from the human resources office. Ortega claimed she was told that she was suspended for informing Harris of the insurance issue, not for accessing the computer system.¹⁸

Hoggard claimed that during the three-day suspension, he was unable to determine how Reyna and Ortega had accessed the confidential computer system. He met with Harris and received permission to terminate both employees. Hoggard and Colquitt met with ConAgra's Regional Human Resources Director and agreed that the two employees should be terminated for violations of ConAgra's confidentiality policy. On September 17, 2003, Reyna and Ortega were terminated in separate meetings for violations of the confidentiality policy. The two employees claimed that they never saw the computer system report at issue and believed that they were terminated because they had reported Colquitt's alleged actions regarding the boot vouchers and the insurance falsifica-tion.¹⁹

Reyna and Ortega brought a claim in the United States District Court for the Middle District of Georgia alleging retaliation for reporting two incidents of fraud,²⁰ activities that are protected under SOX.²¹ The defendants moved for summary judgment, arguing that Reyna and Ortega did not engage in protected activity.²²

Section 806 of SOX protects employees of publicly traded companies from retaliation in the event that the employees

"provide information, cause information to be provided, or otherwise assist in an investigation regarding any conduct which the employee reasonably believes constitutes a violation of [18 U.S.C. Sec.] 1341,1343, 1344, or 1348, any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders."²³

Sections 1341,²⁴ 1343,²⁵ 1344,²⁶ and 1348²⁷ cover mail fraud, wire fraud, bank fraud, and securities fraud, respectively.²⁸

To establish a prima facie case of retaliation under section 806, plaintiffs must show that "(1) they engaged in protected activity; (2) the employer knew of the protected activity; (3) they suffered an unfavorable personnel action; and (4) circumstances are sufficient to suggest the protected activity was a contributing factor in the unfavorable action."²⁹

Reyna and Ortega claimed that the falsification of the status of the employee's sister and nephew to receive insurance coverage and the false social security card created for an employee's I-9 form were incidents of mail and wire fraud and, therefore, reporting them was a protected activity under SOX.³⁰ ConAgra claimed that the employees did not engage in protected activity under SOX because only reports of "'fraud against shareholders'" were protected activities under SOX.³¹ In addition, ConAgra claimed that even if the reports were protected activity, it could show that the two employees would have been terminated anyway, which constitutes a defense under SOX.³²

The Eleventh Circuit has not yet addressed whether reports of fraud must be related to shareholders to be protected activity under SOX, and the issue is not well settled.³³

Thus, to determine the meaning of SOX, the district court applied rules of statutory construction.³⁴ The district court first looked to the language of the statute and found that it "clearly protects an employee against retaliation based upon that employee's reporting of mail fraud or wire fraud regardless of whether that fraud involves a shareholder of the company."³⁵ The court applied the doctrine of the last antecedent to find that the modifier of "'relating to fraud against shareholders'" should be applied only to the last antecedent phrase and not to more remote phrases.³⁶ The court also looked to the "rule of punctuation" to supplement its interpretation.³⁷ Because the drafters of SOX did not set the phrase "'relating to fraud against shareholders'" apart by a comma, the rule of punctuation supported the interpretation that that phrase did not apply to more than the last antecedent phrase "'any provision of Federal law.'"³⁸ Accordingly, the court determined that reports of mail and wire fraud were protected activities under SOX, regardless of whether they were related to shareholders.³⁹

The district court denied ConAgra's motion for summary judgment and found genuine issues of material fact regarding whether: (1) Reyna and Ortega had a reasonable belief that the conduct they reported constituted mail or wire fraud, (2) Reyna and Ortega suffered an employment harm resulting from reporting the fraud, and (3) the defendants would have terminated them regardless of the protected activity.⁴⁰ On January 11, 2007, plaintiff Maria Ortega filed a notice of appeal.⁴¹

Although the Eleventh Circuit has not yet ruled on the question of whether section 806 of SOX protects employees who report allegations of fraud that are unrelated to...