The ARB recently ruled that an employer advancing an after-acquired evidence defense in an AIR 21 whistleblower case must prove the defense by clear and convincing evidence.  Clemmons v. Ameristar Airways, Inc., ARB No. 12-105, ALJ No. 2004-AIR-011 (ARB Nov. 25, 2013).  This is the same standard that applies to an employer’s burden of showing, if and when an employee establishes a prima facie case, that it would have made the termination decision regardless of the protected activity.

Background

Ameristar Airways (the Company) hired Thomas Clemmons as Director of Operations in charge of pilots’ scheduling and training.  Disagreeing with the Ameristar President over the pilots’ proposed schedule, he sent an e-mail to the pilots explaining his dissatisfaction and allegedly mocking Ameristar’s management.  In the e-mail, Clemmons said he wanted to leave the Company soon and offered to assist pilots with their resignations by providing support for unemployment claims and supplying personnel records and letters of recommendation.  The Company terminated Clemmons’ employment, but did not learn of the e-mail until two months after the termination.

Clemmons alleged that he was discharged for complaining about air safety issues in violation of the whistleblower protection provision in AIR 21.  An ALJ at the U.S. Department of Labor Department determined that the termination violated AIR 21.  The Company appealed, and the ARB affirmed the ALJ’s decision on both the merits and damages, which included an award of full back pay.  Ameristar then appealed to the U.S. Court of Appeals for the Fifth Circuit.  The Fifth Circuit affirmed on the merits, but remanded for reconsideration of the proper amount of back pay in light of the after-acquired evidence of employee wrongdoing—Clemmons’ above-referenced e-mail.  The Fifth Circuit instructed the ALJ to consider whether the back pay award should be limited to the date when the Company became aware of the e-mail.  On remand, the ALJ determined that the back pay period should not be reduced because the Company “failed to establish by clear and convincing evidence that had it known of the e-mail at the time of his discharge, [it] would have fired Clemmons because of the e-mail alone.”  The Company then appealed once again to the ARB.

Ruling

The ARB affirmed the ALJ’s decision, rejecting the Company’s arguments that the ALJ erred in applying the clear-and-convincing burden of proof.  In doing so, the ARB emphasized that the AIR 21 whistleblower provision states that the “clear-and-convincing” burden of proof applies to the question of whether the claimant is entitled to relief and concluded that it therefore followed that the standard should apply to an application of the after-acquired evidence doctrine.  In addition, the ARB rejected the Company’s argument that the “ALJ’s decision subverts the fundamental principle of the after-acquired evidence doctrine” on the grounds that the e-mail constituted “unpardonable wrongdoing.”  The ARB stated that the Company’s “hyperbolic description” of the e-mail as “perhaps the most disloyal and destructive e-mail in the annals of American business” was insufficient to prove that the same termination decision would have been made on the basis of the e-mail alone.

Takeaway

This ruling is noteworthy because a number of prominent whistleblower statutes, including Section 806 of SOX, are based on the AIR 21 framework, and there are numerous situations where employers attempt to demonstrate in litigation that evidence acquired after litigation ensues would have ultimately led to the complainant’s termination.  Though the employer must meet a high burden, this decision should not dissuade employers from advancing this powerful defense.  But, when doing so, employers need to develop a solid and compelling record showing that the misconduct at issue would have warranted termination.