Good news for employers—you have due process rights too. So ruled the court in Business Communications, Inc. v. U.S. Dept. of Education  (8th Cir. 12/2/13). 

The Federal Government awarded Business Communications, Inc. (BCI) contracts to install cables in two school districts. The money for the project was provided by the American Recovery and Reinvestment Act (“ARRA” a/k/a the “Stimulus”), which requires contractors to pay employees a “prevailing wage.”   ARRA also has a “whistleblower” provision that protects employees from retaliation because the employee discloses a violation of law, rule or regulation relating to an agency contract funded with stimulus money. After a BCI employee complained to the company that he was being paid less than the prevailing wage, the employee was fired. BCI denied the termination was related to the employee’s wage complaint.

ARRA has its own procedure for the investigation and adjudication of “whistleblower” claims.   The agency’s Office of Inspector General (OIG) has 180 days to investigate the complaint. If the OIG finds the complaint is actionable, a report is forwarded to the head of the agency overseeing the contract (Department of Education in this case), the complainant, and the employer. The agency head then has a non-extendable period of 30 days to determine whether there is sufficient basis to conclude reprisal has occurred.   If the head of the agency finds in favor of the employee, the potential remedies include reinstatement, back pay, compensatory damages, and attorney’s fees. 

The statute imposes a fairly low burden of proof on the employee. The complainant must prove the disclosure of information was “a contributing factor” in the reprisal. This burden may be satisfied with evidence showing the employer knew of the disclosure and took adverse action within a reasonably short time period thereafter.   The employer is entitled to rebut the complainant’s evidence, but the standard of proof is much higher than the employee’s. The employer must demonstrate by clear and convincing evidence it would have taken the same action even in the absence of the employee’s disclosure.   In the event of an adverse finding, a party has the right to judicial review, but the review process does not allow for the admission of any new evidence not part of the proceedings below.

In the BCI case, the OIG interviewed many witnesses who provided conflicting evidence about the employer’s motive. The investigator determined the witnesses favoring the employee’s side were more credible and issued a report recommending a finding in favor of the employee. The OIG provided a report to the employer, but with witness names redacted. Almost two weeks later, the OIG provided a new copy of the report with summaries of some of the witness interviews (those who signed releases).   The OIG then gave the employer seven days to respond to this new report.    The employer asked for an extension of time to respond, which the agency refused.

Not surprisingly, the Secretary of Education supported the OIG’s findings, and concluded the employer had failed to present clear and convincing evidence that the termination was not retaliatory. The employer was ordered to reinstate the employee with back pay.   All of which occurred without providing the employer an opportunity to be heard or to cross-examine adverse witnesses.

On judicial review, the Court ruled that the Department of Education’s procedures violated BCI’s right to due process by failing to provide any kind of hearing at which it could confront and cross-examine witnesses.  Notably, the DOE acknowledged that ARRA provided no mechanism for a hearing, either before or after the secretary made a decision on the merits of the case.   Nonetheless, the agency claimed BCI was provided adequate due process. First, DOE claimed BCI would have the opportunity to present defenses in the DOE’s court action to enforce its order.   The Court easily rejected that argument, because “[d]ue process cannot be conditioned on requiring BCI to violate an order, exposing itself to statutory sanctions”. Second, DOE claimed BCI had adequate opportunity to be heard by seeking review in the Court of Appeals.   Judicial review is not itself sufficient for due process, the Court concluded, because the employer does not have the right on review to present new evidence or cross-examine witnesses. 

That a federal law would grant rights to employees without commensurate protections for employers to defend themselves should be surprising,   But, even though most federal and state employment laws are not so one-sided as ARRA’s whistle-blower protections, employers too often are subject to unfair and arbitrary administrative enforcement of employment laws.  Most employers don’t have the resources or the inclination to resist administrative overreach like occurred in this case.  That is why a ruling like BCI is not only refreshing, but is an important check on unbridled administrative discretion.