At-Will Employee Entitled to Whistleblower Protections Under Nevada Law

An at-will employee who filed a complaint with Nevada's Occupational Safety and Health Administration (NOSHA) alleging retaliation for reporting unsafe medical practices had a "legitimate claim of entitlement" to retain her job without being fired for a prohibited reason under state law, a federal appeals court recently held. The court stressed that NOSHA is mandated to investigate facially valid complaints and file suit to remedy any violations found.

The plaintiff, a supervisor at an otolaryngology practice (focusing on the ears, nose and throat), alleged she had witnessed unsafe medical practices in her workplace, including the use of contaminated syringes and the sale of expired prescriptions. When her employer ignored her concerns, she filed a complaint with NOSHA. Following her complaint, she claimed that her employer retaliated against her, demoting her to a nonsupervisory role. She then filed a second whistle-blowing complaint but, fearing further retaliation, withdrew it before the employer learned of it.

A NOSHA official mistakenly copied the plaintiff's employer on a letter to the plaintiff acknowledging the withdrawal of her second complaint, and the retaliation allegedly worsened. Although she had never been the subject of a complaint in 23 years with the employer, she was issued 50 disciplinary write-ups following the employer's notification of the withdrawn complaint. The plaintiff filed an additional retaliation complaint and was fired three months later.

NOSHA suspended the investigation several months after the termination. Several NOSHA officials ordered investigators not to communicate with the plaintiff or inform her the investigation was not going forward, despite her repeated attempts to determine its status. Further, a settlement offer made by the employer was never communicated to her. Despite the employer's continued failure to document any allegations of misconduct by the plaintiff, as requested by a NOSHA investigator, the agency shut the case a year later.

The plaintiff sued four state officials, alleging they had violated her substantive and procedural due process rights as well as violated other laws. The district court dismissed all claims, and the plaintiff appealed.

On appeal, the 9th U.S. Circuit Court of Appeals agreed with the plaintiff's contention that Nevada's protection against discipline for safety and health whistleblowers creates a "legitimate claim of entitlement" to retain a job without being fired for a prohibited reason, even for at-will employees. The court rejected the district court's reasoning that the plaintiff, as an at-will employee, had not alleged a constitutionally protected property interest in continued employment.

"We now hold that Nevada's statutory and common law protections for whistleblowers create a limited property interest for plaintiffs who plausibly allege that they have been illegally terminated for health and safety whistleblowing," the court said. "Nevada OSHA statutes and case law prohibit employers from firing employees for properly reporting OSHA violations. … All Nevada employees who availed themselves of those rights are provided a legitimate entitlement, established by the state, not to be fired for those actions, and so have a property right in continuing employment if they do exercise those rights."

Although the property interest recognized by the court is narrower than the interest held by an employee with a contract assuring continued employment, its restricted nature "does not destroy the prospect of any property interest in continued employment," the court said.

The defendants' argument—that the plaintiff was not entitled to whistleblower protections because she had not made a plausible showing she was fired due to her complaints about health and safety violations, rather than due to her "numerous workplace problems"—failed, the court found. This argument was based on allegedly pretextual write-ups made in retaliation for whistleblowing. On a motion to dismiss, taking factual allegations in a complaint as true, "the presence of allegedly pretextual reasons for firing do not defeat the plausibility of [plaintiff's] allegation that her termination was retaliatory," the court said.

However, the court accepted the officials' argument that the plaintiff hadn't plausibly alleged that their conduct caused her firing. The letter informing the employer of the second whistle-blowing complaint—alleged to have "set in motion all of the retaliation to follow"—was negligently sent, according to the complaint. Thus, the plaintiff had not plausibly alleged she was deprived of her interest in continued employment free from retaliation by intentional actions of the defendants, as required under 42 U.S.C. §1983.

The plaintiff also argued in her briefing, however, that the state officials colluded with her employer to interfere in the whistle-blower investigation in order to secure her termination, which would constitute an intentional action. If the plaintiff can allege facts sufficient to show that the defendants coordinated with the employer after the letter was sent but before her termination, such acts may be sufficient to sustain either a "direct participation" or "setting in motion" theory, the court said in granting the plaintiff leave to amend her complaint.

In response to the plaintiff's contention that the statutory protections Nevada affords to whistleblowers extend to reinstatement to their jobs, the court clarified that, although the statute creates a property interest beyond continued employment, that interest doesn't extend to reinstatement because this is not within NOSHA's direct control. But the statute does require NOSHA to investigate complaints and, if violations are found, file suit to remedy the violations, including seeking reinstatement. The court noted the Nevada statute hews closely to the federal OSHA, which "places a mandatory burden on the secretary of labor to perform at least some investigation into facially valid complaints." For this reason, the court interpreted the Nevada law as placing the same mandatory burden on the NOSHA administrator to investigate.

"Although some complaints may be facially meritless and therefore not warrant an investigation, the administrator must undertake some investigation in cases involving facially meritorious complaints," the court explained. "And the requisites of pre-deprivation process should focus on safeguards ensuring that facially meritorious complaints are thoroughly investigated; one protection, for example, might be requiring NOSHA to explain any failure to investigate."

The appeals court held that the district court had erred in finding the plaintiff had no property right in the investigation of her whistle-blowing complaint. Further, the plaintiff plausibly alleged that NOSHA deprived her of procedural due process in protecting that right, the court said, reversing dismissal of her procedural due process claim.

Turning to the plaintiff's substantive due process claims, which alleged the officials' actions denied her 13 years of employment, the court found they were unsupported. Nothing in her complaint alleged the officials' conduct rose "to the level of a government blacklist or the revocation of a license to practice a particular profession," the appeals court said, holding that the district court did not err in dismissing the substantive due process claim.

The court found that the negligent infliction of emotional distress claim, pursued against only the defendant who sent the letter to the employer, was not barred by discretionary function immunity as the district court had held. To be protected by the discretionary function statute, a decision must 1) involve an element of individual judgment or choice and 2) be based on considerations of social, economic or political policy. While the decision to copy the employer on the letter sent to the plaintiff concerning her withdrawal of the whistle-blowing complaint did "involve an element of individual judgment or choice" because it wasn't required by the OSHA manual, this specific discretionary action "was not susceptible to considerations of social, economic, or political policy," the court said. "We see no basis for concluding that the allegedly negligent decision to copy [the employer] when sending the withdrawal letter involved such policy considerations."

"The letter informed [the employer] of whistleblowing activity—filing the complaint—of which it was previously unaware, without saying anything to warn against retaliation based on that activity. If anything, copying the letter to [the employer] was likely to lead to more retaliation, not less—exactly what [the plaintiff] alleges," the court said. Because no cognizable social, political or economic reason is offered for the specific act of copying the employer on the letter, the court reversed the dismissal of the negligent infliction of emotional distress claim.

The plaintiff's civil conspiracy claim alleging that the state officials conspired with her employer to deny her due process was insufficiently pleaded to support a plausible allegation that the parties engaged in concerted action with the intent to accomplish an agreed-upon unlawful objective, the court held. However, the court granted the plaintiff leave to amend her claim for civil conspiracy.

Armstrong v. Reynolds, 9th Cir., No. 20-15256 (Jan. 13, 2022).

Rosemarie Lally, J.D., is a freelance legal writer based in Washington, D.C.