Ignorance Can Be Bliss for Employers Facing Retaliation Claims

Contributed by Jon Hoag

The Director for one of ITT Technical Institute’s campuses reported what he believed to be irregularities that violated the Institute’s Participation Agreement with the U.S. Department of Education. He made these reports to his direct supervisor and the Director of Compliance. At approximately the same time, this Director’s campus came under scrutiny because it received low scores during an internal audit. In addition, several complaints were made about the Director’s conduct and management style.

Several ITT Vice-Presidents and the CEO discussed the Director’s performance and decided to terminate the Director’s employment.  The Director sued alleging that he was terminated in retaliation for engaging in conduct covered by the False Claims Act.  The Seventh Circuit assumed that the Director’s reports of irregularities were covered by the False Claims Act, but ruled that his retaliation claim still failed because he could not prove that he was terminated because of making reports under the False Claims Act.

The Seventh Circuit reiterated that in retaliation cases the decision-makers must have knowledge of the employee engaging in the protected activity in order for the employee to prove the termination was caused by engaging in protected activity.  The evidence showed that the decision-makers were never informed about the Director’s complaints, nor did they otherwise have any knowledge of the Director engaging in protected activity.  The Court refused to impute knowledge of protected activity merely because lower level supervisors in the organization had knowledge of such conduct.

Inasmuch as retaliation cases are on the rise, employers might be well served by keeping the decision-makers “in the dark” about certain types of protected activity.  There are obvious practical limitations with this type of strategy, but employers should certainly balance the pros and cons of how information about protected activity is disseminated.