Employment Law Daily Nursing home manager not protected by whistleblower law may still advance public policy discharge claim
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Wednesday, July 18, 2018

Nursing home manager not protected by whistleblower law may still advance public policy discharge claim

By Marjorie Johnson, J.D.

A nursing home administrator who was disciplined and terminated following her written complaint concerning violations of state staffing regulations couldn’t pursue a claim under the Pennsylvania Whistleblower Law since the employer was not a “public body” and her allegations concerned an act of “wrongdoing” rather than “waste.” However, she plausibly alleged a common law claim of wrongful discharge in violation of public policy by asserting that she was given an order that would have required her to violate state regulations and terminated when she failed to comply. Thus, a federal district court in Pennsylvania granted in part and denied in part the employer’s motion to dismiss (Adams v. HCF Management, July 12, 2018, Fischer, N.).

Complaints about understaffing. The employee, who served as the nursing home administrator of a long-term care facility, claimed that her supervisor continually pressured her to increase the number of patients cared for at the facility despite a lack of adequate staff to meet Pennsylvania regulatory requirements. She expressed specific concerns regarding her fear that the facility was under-staffed and should not take any additional patient referrals. She also informed her supervisor in writing that she believed the facility had failed to meet the staffing requirements for the previous weekend.

In response, her supervisor gave her a disciplinary write-up and placed her on a performance improvement plan (PIP) that required her to maintain an unrealistic average number of residents for the next 30 days. Several days later, he informed her that she had failed to meet her goals and could either resign or be terminated. About two weeks later, she was terminated. She subsequently brought this lawsuit asserting that her employer violated the Pennsylvania Whistleblower Law and wrongfully terminated her in violation of public policy.

Pennsylvania Whistleblower Law. The employee failed to state a viable claim under the state’s whistleblower law, which prohibits retaliation against an employee for reporting “an instance of wrongdoing or waste by a public body or an instance of waste by any other employer as defined in this act.” The court found that the employer was not a “public body” within the meaning of the statute and her allegations concerned an act of “wrongdoing” rather than “waste.”

“Wrongdoing,” not “waste.” The statute defined “wrongdoing” as a non-minimal and non-technical violation of “a federal or State statute or regulation.” Since the employee alleged that her employer violated state regulations governing appropriate staff levels, her complaint fell squarely within this definition. However, it did not fit within the meaning of “waste,” which the statute defined as an employer’s “conduct or omissions which result in substantial abuse, misuse, destruction or loss of funds or resources belonging to or derived from Commonwealth or political subdivision sources.”

The court rejected the employee’s assertion that because statutory and regulatory compliance is a condition of Medicaid payment, payments for services rendered during a period of non-compliance automatically represented “waste.” She offered no support for this proposition and caselaw from other courts indicated that such allegations should be treated as wrongdoing. Moreover, even if the misconduct could somehow be construed as waste, she was required to allege that the waste was “substantial,” and courts have held that a single occurrence of misconduct involving a small amount of funds is generally insufficient.

Employer wasn’t a “public body.” Because the whistleblower law only protected reports of wrongdoing that concern “public bodies,” the employee could only prevail if she could show that her employer was a public body within the meaning of the statute, which she failed to do. Significantly, a recent amendment to the statute had expanded its definition of “employers” to include entities that receive money from a public body “to perform work or provide services relative to the performance of work for the provision of services to a public body.”

The “very purpose of the amendment” was to extend whistleblower liability to employees of private companies “that are performing services for public bodies with public monies.” Here, the employer was a private corporation that received “money” through the Medicaid program for “services” provided. Thus, it appeared to fall squarely within the current statute’s definition of an “employer” rather than a “public body.” Accordingly, since it could only be liable under the whistleblower law for allegations of waste, and the employee’s reports concerned wrongdoing, her statutory claim was dismissed.

Public policy claim advances. However, the employee’s common law claim that her discharge violated public policy was viable. She plausibly asserted that her supervisor ordered her to bring more patients into the facility, even though it was already violating state regulations concerning minimum nursing staffing requirements due to an ongoing staff shortage. Moreover, the directive came immediately after she informed her supervisor that the facility had failed to comply with the staffing regulations on the previous weekend. When she cautioned him in writing that additional referrals without a staff increase would cause additional violations, he issued her a PIP that required her to increase referrals to an even higher level or be fired.

According to the employee, management consistently pushed her to accept as many new patients as possible throughout her tenure, despite her frequently expressed concerns over whether those additional patients would cause the facility to violate staffing regulations. Accordingly, she sufficiently alleged that she was given an order that would have required her to violate state regulations and was then threatened with termination—and ultimately terminated—when she failed to comply. At this early stage in the proceedings, this was enough to support a wrongful discharge claim under the public policy exception.

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