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Home Corporate

New ARB rescues SOX whistleblower on equitable estoppel

WNN StaffbyWNN Staff
April 9, 2010
in Corporate, News
Reading Time: 4 mins read
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We waited a year for the Obama Administration’s new Secretary of Labor, Hilda Solis, to appoint new members to the Administrative Review Board (ARB), but now we finally get to see what a difference these appointments can make. Today the ARB released its decisions from March, and one decision shows what a difference the new appointments make. In Hyman v. KD Resources, ARB No. 09-076, ALJ No. 2009-SOX-20 (ARB Mar. 31, 2010), the new Board members made it easier for whistleblowers to assert the doctrine of “equitable estoppel” to excuse late filing. The official DOL digest of this decision follows in the continuation of this blog entry. The key concept is that the ARB would accept as grounds for equitable estoppel an employer’s indication, even in settlement negotiations, that the termination decision is not final and will be reconsidered. Indeed, “other situations might also give rise to equitable estoppel.” The ARB explains a distinction between “equitable tolling,” which is based on the circumstances or state of mind of the complainant, and “equitable estoppel,” which is based on the conduct of the respondent. This decision marks an expansion of circumstances in which equitable estoppel might apply. Also, the ARB held that once a complainant makes a showing of grounds for equitable estoppel, a complaint should not be dismissed without a hearing on that issue. ARB Chair Paul Igasaki and Vice-Chair E. Cooper Brown joined in the decision. These are Secretary Solis’ new appointments. The holdover member from the Bush Administration, Wayne Beyer, dissented. What a difference an election can make.

TIMELINESS OF COMPLAINT; EQUITABLE ESTOPPEL BASED ON ACTS OR OMISSIONS BY THE RESPONDENT THAT LULL THE PLAINTIFF INTO INACTION

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TIMELINESS OF COMPLAINT; EQUITABLE TOLLING OR EQUITABLE ESTOPPEL; GIVEN FACT INTENSIVE NATURE OF ISSUE, ALJ MAY NOT RELY MERELY ON AFFIDAVITS GIVEN IN RESPONSE TO AN ORDER TO SHOW CAUSE TO ESSENTIALLY DISPOSE OF A CASE BASED ON SUMMARY DECISION

In Hyman v. KD Resources, ARB No. 09-076, ALJ No. 2009-SOX-20 (ARB Mar. 31, 2010), the ALJ issued an Order to Show Cause, sua sponte, directing the Complainant to show cause as to why the complaint should not be dismissed because it was not timely filed. The ALJ found that the Complainant’s response lacked necessary evidence to support equitable tolling, and dismissed the complaint. On appeal, however, the ARB found that “the evidentiary documents submitted by Hyman in response to the Order to Show Cause that one or more of the Respondents’ officials and/or agents (either or all) led Hyman to reasonably believe that he would be returned to his former employment or alternatively given a one-year consulting contract, that he would be financially compensated for having been wrongfully terminated (including payment of back salary), and that KD Resources would resolve the SOX compliance issues that Hyman had raised.” USDOL/OALJ Reporter at 8. The ARB found that this showing was sufficient to establish a basis for applying equitable estoppel under the ground that “…the employer’s own acts or omissions have lulled the plaintiff into foregoing prompt attempts to vindicate his rights.” USDOL/OALJ Reporter at 7, quoting Bonham v. Dresser Indus., 569 F.2d 187, 193 (3d Cir. 1978). The ARB stated that “Under this basis for equitable estoppel it is immaterial whether the defendant engaged in intentional misconduct.” Id.

The ARB stated that the circumstances of the instant case were distinguishable from a party’s reliance upon settlement negotiations, which does not toll the running of the statute of limitations. The ARB stated that its holding was limited to a finding that the Complainant’s “response to the ALJ’s Order to Show Cause met the minimal requirements necessary to invoke equitable estoppel as a basis for tolling the running of the period for filing his complaint,”USDOL/OALJ Reporter at 9, and left it to the ALJ on remand to determine the issue of the timeliness on a more fully-developed evidentiary record.

In this regard, the Board indicated that the ALJ’s procedure for determining the issue of timeliness had been inappropriate. The Board wrote:

The ALJ’s disposition pursuant to the Order to Show Cause effectively constituted a disposition by way of summary decision pursuant to 29 C.F.R. §§ 18.41 (2009). As such we consider it to have been an inappropriate procedure for resolving the timeliness issue given the fact intensive nature of the considerations that must be resolved where equitable tolling or equitable estoppel is invoked. The courts have repeatedly held that whether equitable modification should be applied to toll the running of a statute of limitations is a fact intensive determination requiring close examination of the facts and equities. …. For example, such determinations almost invariably involve the credibility of witnesses. Consequently, as the Tenth Circuit has noted, “the issue of equitable tolling and estoppel [cannot] be resolved on the basis of the affidavits” because of the difficulty of determining credibility therefrom” Wilkerson v. Siegfried Ins., 621 F.2d 1042, 1044 (10th Cir. 1980).

USDOL/OALJ Reporter at 9 (some citations omitted).

[Editor’s note: But see Warner v. Xcel Energy, ARB No. 08-112, ALJ No. 2008-ERA-2 (ARB Mar. 29, 2010), in which the ARB affirmed the ALJ’s findings that the complainant had failed to show good cause for his failure to timely file his ERA complaint, and did not criticise the ALJ’s use of an order to show cause to address the timeliness issue, even though the complainant had alleged deception by the Employer.

The Warner decision turned on the fact that the Complainant was basing his deception argument on inability to timely obtain evidence to confirm his suspicion of retaliation. Thus, it appears that using an order to show cause is not an inherently inapproprate technique for an ALJ to address the issue of timeliness, but only that it may not be adequate if an issue of fact or witness credibility is material to the equitable ground being proffered.]

Tags: ARBCorporate WhistleblowersDepartment of Labor
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