case law update

In First Federal Whistleblower Retaliation Case, Fourth Circuit Explores Definition of “Rule”

While the Whistleblower Protection Enhancement Act (“WPEA”) protects whistleblowers from retaliation for disclosing a violation of law, rule, or regulation, the statute does not define those terms. In its first whistleblower retaliation case since Congress allowed whistleblower appellants from Board decisions to file in any U.S. Court of Appeals for a five-year trial period, the Fourth Circuit grappled with the definition of “rule” and its applicability to non-mandatory provisions.

An SEC employee reported violations of two provisions in the SEC Rules of Practice: Rule 900(a) and Rule 900(b), which apply to the Commission’s Adjudication section, the section that “assists the Commission in deciding appeals from administrative law judges, self-regulatory organizations, and the Public Company Accounting Oversight Board.” The employee, concerned about what “he viewed as an unacceptable backlog in unresolved cases based on his reading of two provisions in Rule 900(a) and Rule 900(b),” informed numerous individuals of his belief that the Commission was violating mandatory directives. In May 2013, the employee scheduled a meeting with the new SEC Chairwoman, Mary Jo White, and intended to discuss his ongoing concerns about the Rule 900 violations. However, the meeting was canceled four days prior to when it was scheduled, and the employee was terminated shortly thereafter for “poor work performance,” “failing to produce high quality work product on a timely basis, “failure to prioritize assignments,” and “inability to work cooperatively with senior level managers.”

The employee filed a whistleblower retaliation complaint with the Office of Special Counsel, but OSC did not pursue his claims. After OSC closed his case, the employee had the right to file an Individual Right of Action with the Merit Systems Protection Board, which he did. The MSPB administrative judge ruled that the employee had not made any disclosures protected by the Whistleblower Protection Enhancement Act, and denied the employee any corrective action. The employee appealed to the full Board, which at the time had only two of its three members. Because those two members disagreed on the correct outcome, the MSPB administrative judge’s decision became final. The employee then appealed the decision to the U.S. Court of Appeals for the Fourth Circuit.

The appeals court explained the governing whistleblowing law at the outset of its analysis: a federal agency cannot take—or fail to take—a personnel action due to “any disclosure of information by an employee…which the employee…reasonably believes evidences: (i)any violation of any law, rule, or regulation, or (ii) gross mismanagement, a gross waste of funds, an abuse of authority, or a substantial and specific danger to public health or safety.”

The appeals court went on to explain the MSPB’s typical evaluation of whistleblower claims under the burden-shifting framework, in which an employee first must establish a prima facie case by proving four facts: “(1) the acting official has the authority to take, recommend, or approve any personnel action; (2) the aggrieved employee made a protected disclosure; (3) the acting official used his authority to take, or refuse to take, a personnel action against the aggrieved employee; and (4) the protected disclosure was a contributing factor in the agency’s personnel action.”

Because the MSPB administrative judge concluded that the employee did not satisfy the second prong (whether the employee made protected disclosure) because none of the Rule 900 provisions were binding on the agency and so could not be “rules” for the purposes of the WPEA, the appeals court explored whether the employee’s disclosure of perceived Rule 900 violations were “protected disclosures” under 5 U.S.C. § 2302(b)(8).

The appeals court noted that none of “law, rule, or regulation” are defined by 5 U.S.C. § 2302(b)(8), but that “law” has since been defined as “statute” by the Supreme Court. The appeals court turned instead to the Administrative Procedure Act to define “rule,” affording it a broad definition as “the whole or a part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or describing the organization, procedure, or practice requirements of an agency.” Under that definition, the appeals court stated, Rule 900(a) appears to qualify as a “rule.” But the appeals court held that even accepting Rule 900(a) as a “rule” under the statute, a disinterested observer “could not reasonably concluded the Commission violated Rule 900(a)” because “the relevant aspects of the provision are aspirational and discretionary, such that a failure to strictly adhere to them could not reasonably be seen as a “violation.”

Citing language from the rule that indicates it was subject to the Commission’s discretion and schedule, the appeals court characterized the text of Rule 900(a) as “permissive” and language that “could not lead an employee to reasonably conclude that failing to meet such aspirational guidelines would amount to a “violation.” Therefore, the appeals court affirmed the MSPB administrative judge’s denial of corrective action.

As to the second “rule” in dispute, Rule 900(b), the parties agreed and the appeals court held that the MSPB administrative judge failed to specifically analyze it separate from Rule 900(a). Therefore, the appeals court remanded the determination on whether the employee’s report of an alleged violation of Rule 900(b) could qualify as a protected disclosure to the MSPB administrative judge for such analysis.

Read the full case: Flynn v. Securities and Exchange Commission.


This case law update was written by James Garay Heelan, Associate Attorney, Shaw Bransford & Roth, PC.

For thirty years, Shaw Bransford & Roth P.C. has provided superior representation on a wide range of federal employment law issues, from representing federal employees nationwide in administrative investigations, disciplinary and performance actions, and Bivens lawsuits, to handling security clearance adjudications and employment discrimination cases.






Posted in Case Law Update

Tags: whistleblower


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