Originally posted on: https://www.employmentlit.com/2022/09/19/wine-suppliers-illegal-activities-uncorked-by-employee-the-nj-court-rules-employee-is-a-protected-whistleblower/
By: Ty Hyderally, Esq., Francine Foner, Esq
The New Jersey Appellate Division recently considered three key issues under New Jersey’s whistleblowing statute, the Conscientious Employee Protection Act, N.J.S.A. 34:19-1 to 34:19-8 (CEPA): (1) what constitutes “whistleblowing activity” under CEPA; (2) causation; and (3) whether an employee who participates in the illegal activity about which he or she complain is barred from recovery under CEPA. Serena v. W.J. Deutsch & Sons, 2022 N.J. Super. Unpub. LEXIS 1547, 2022 WL 3711505. In this unpublished opinion, the Appellate Division’s findings on each of these issues is favorable for New Jersey employees who suffer an adverse action because of their objection to their employer’s unlawful activities.
Paul Serena (Serena) was hired by wine and spirits supplier Deutsch & Sons, Ltd., d/b/a Deutsch Family Wine & Spirits (Deutsch) as a New Jersey District Manager in 2003. Deutsch terminated Serena in 2018, which Serena alleged was because of his whistleblowing complaints.
Deutsch sold its alcohol products to distributors, who in turn sold to retailers. Serena reported to Regional Manager Edward Melia (Melia). Serena’s job duties included helping distributors sell Deutsch products to retailers. To incentivize distributors to sell more of Deutsch’s products, Deustch utilized incentive programs which provided cash and merchandize incentives to distributors who met certain sales goals. Such incentive programs are legal. Id. at *3. However, it is illegal for suppliers such as Deutsch to pay incentives of cash or merchandise directly to retailers. Id. In addition, distributors may legally incentivize directly to retailers, but such programs are limited to cash incentives of up to $300, and must be reported to the State of New Jersey and recorded in a “program book”. Id. at *4.
Serena alleged that he “repeatedly disclosed and objected to defendants’ alleged illegal practices, specifically the use of inducements directly to retailers.” Serena testified that he was
‘concerned’ about the illegal sales incentives and rewards programs they were working on together…..being questioned about the unusually large number of cases he kept in the warehouse to service the illegal programs; being stopped and pulled over by law enforcement with “fifteen, almost twenty cases of wine and spirits” in his vehicle; being required to purchase an “enormous amount of gift cards” to hand out to retailers; and being “discovered, arrested, losing [his] job, and going to jail.”
Id. at *16-17. Serena further testified that he complained to Melia numerous times when he had “something on my expense report that was of an illegal nature that was not a legal expense, that was not something that I should be doing. I would explain to him that he needed to approve it. I told him about why. And I would say, ‘It is illegal. I don’t like doing this, but . . .’ he would approve it.” Id. at *17. Serena also testified that in October 2017, he argued with Melia about his belief that “the gift card program was illegal because it was not filed with the State, nor was it in any distributor’s program book.” Id. a *10. Serena also voiced his concerns that he “ did not like going ‘to Staples and buy[ing] so many of them” and that he “feared ‘an audit [or] . . . someone above [Melia] in the accounting department . . . inquiring . . . why I am going to Staples, OfficeMax, and buying so many of these gift cards.’” Id. Plaintiff further testified that Melia ignored his repeated complaints, stating: “’[t]hat is the way we do things’”. Id. At his deposition, Melia disputed all of Serena’s allegations.
The Trial Court dismissed Serena’s complaint on the Defendants’ motion for summary judgment, finding that “while plaintiff reasonably believed Deutsch was violating a law or clear mandate of public policy, his actions did not constitute ‘whistle-blowing activity’ under N.J.S.A. 34:19-3(a).” The Appellate Division disagreed.
The Appellate Division first reviewed the definition of “whistleblowing activity” in CEPA, which states:
An employer shall not take any retaliatory action against an employee because the employee does any of the following:
- Discloses, or threatens to disclose to a supervisor or to a public body an activity, policy or practice of the employer, or another employer, with whom there is a business relationship, that the employee reasonably believes:
(1) is in violation of a law, or a rule or regulation promulgated pursuant to law, including any violation involving deception of, or misrepresentation to, any shareholder, investor, client, patient, customer, employee, former employee, retiree or pensioner of the employer or any governmental entity, or, in the case of an employee who is a licensed or certified health care professional, reasonably believes constitutes improper quality of patient care; or
(2) is fraudulent or criminal, including any activity, policy or practice of deception or misrepresentation which the employee reasonably believes may defraud any shareholder, investor, client, patient, customer, employee, former employee, retiree or pensioner of the employer or any governmental entity . . . .
N.J.S.A. 34:19-3(a). Id. at *15-16.
Under this broad definition, the Appellate Division reasoned that it was improper for the Trial Court to determine that Serena’s complaints did not amount to whistleblowing activity under CEPA, given the disputed testimony. In reversing the lower court, the Appellate Division opined that “it is not the role of the motion court to weigh competing testimony.” Id. at *18. Rather, the motion court was obligated to give plaintiff “’all reasonable inferences’ on the whistleblower issue,” which required submission of the issue to the jury. Id.
The Appellate Division further explained that to engage in whistleblowing activity, “CEPA does not require any magic words in communicating an employee’s reasonable belief of illegal activity.” Id at 17, citing Beasley v. Passaic Cnty., 377 N.J. Super. 585, 605-06 (App. Div. 2005). The Appellate Division also emphasized that “‘[t]he object of CEPA is not to make lawyers out of conscientious employees but rather to prevent retaliation against those employees who object to employer conduct that they reasonably believe to be unlawful . . . .’” Mehlman v. Mobil Oil Corp., 153 N.J. 163, 193-94 (1998).
The Appellate Division further found that Serena’s having raised his whistleblowing complaints less than one year before his termination was sufficient for a jury to infer that Serena’s termination was caused by his whistleblowing activity. Id. at *18-10.
Further, while Serena testified that participating in the illegal activities made him uncomfortable, he did so because he feared that otherwise he would be viewed as “insubordinate.” Id. at *10-11. However, the Appellate Division observed that even when an employee admits participation in the illegal activity, that does not necessarily bar recovery under CEPA. Id. at *19 citing Donofry v. Autotote Sys., Inc., 350 N.J. Super. 276, 288 (App. Div. 2001).
This decision makes clear that whistleblowing activities can include employee complaints which are not couched in legal terminology. Further, disputed testimony concerning the statements made by the whistleblower requires submission of the “whistleblowing activity” issue to a jury. In addition, this opinion supports that causation may be established where an adverse action occurs within one year of the whistleblowing activity. Finally, a whistleblower is not necessarily barred from recovery under CEPA because of his or her participation in the illegal activity. Overall, this opinion represents a victory for New Jersey employees.
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