On January 5, 2016, the New Jersey Supreme Court is scheduled to hear oral argument in a matter suggesting that section 301(a) of the Labor Management Relations Act of 1947 (“LMRA”) (which creates a federal cause of action for the breach of a private sector collective bargaining agreement) and the National Labor Relations Act (“NLRA”) (which governs private-sector labor relations) preempt claims brought by a putative whistleblower under the New Jersey Conscientious Employee Protection Act, N.J. Stat. § 34:19-1 (“CEPA”).

CEPA is a New Jersey statute that prohibits any retaliatory action against an employer because the employee discloses, or threatens to disclose to a supervisor or to a public entity any activity, policy or practice of the employer that is a violation of a law, or a rule or regulation. CEPA is one of the strongest whistleblower protection laws in the nation – accordingly, many perceive this piece of legislation as being extremely “employee friendly.” This perception, coupled with the development of case law and the potential award of back pay, front pay, pain and suffering damages, punitive damages, costs and attorneys’ fees steadily increases the volume of CEPA claims filed each year.

In Salvatore Puglia v. Elk Pipeline, Inc., 437 N.J. Super. 466, 100 A.3d 191 (App.Div., 2014), cert. granted, 220 N.J. 573 (N.J., Feb. 3, 2015), Elk Pipeline, Inc. (“Elk”) employed Salvatore Puglia (“Puglia”) as a laborer on a public works sewer reconstruction project located in the City of Camden. As a member of the International Association of Machinists and Aerospace Workers, Puglia’s employment was subject to a collective bargaining agreement (“CBA”), negotiated between Elk and the union. In January 2010, Puglia noticed that his hourly rate was improperly reduced below the prevailing wage and complained to Elk’s management regarding the reduction. Eventually, Puglia’s rate was restored to its original level; however, he alleges that he was subsequently laid off from the project because he complained about the discrepancy in his wages. On January 2013, Puglia filed a complaint alleging, amongst other things, that he suffered unlawful retaliation in violation of CEPA for complaining about these discrepancies.

After the completion of discovery, Elk moved for summary judgment arguing that Puglia’s CEPA claim was actually a wage claim preempted by section 301(a) of the LMRA and the NLRA. The lower court found that Puglia’s CEPA claim was indeed preempted by federal labor law because deciding his claims on the merits inherently required interpretation of the parties’ CBA, which specifically addressed union members’ wages, pay rates, overtime, seniority and lay-offs.

On appeal, Puglia argued that the lower court erroneously dismissed his complaint through its conclusion that federal law preempted his CEPA claim. In affirming the lower court’s decision, the Appellate Division found that Puglia’s claims were preempted by federal law because: (i) Puglia’s deposition testimony exposed his reliance on rights provided by the CBA and betrayed “his attempt to rebrand the contract contention into a CEPA claim”; (ii) “[b]y maintaining he was wrongfully laid off and should have continued working because he had seniority, [he] inherently invokes interpretation of the CBA”; and (iii) his retaliatory discharge claim was grounded on a violation of Puglia’s seniority status, as defined in the parties’ CBA, thus invoking provisions of the NLRA. Accordingly, the Appellate Division concluded that Plaintiff’s CEPA claim was properly dismissed as being preempted under the LMRA and NLRA.

On February 3, 2015, the New Jersey Supreme Court granted plaintiff’s petition for writ of certiorari. Oral argument is tentatively scheduled on the matter for January 5, 2016.

Apart from Puglia, various other New Jersey courts have recently reached similar conclusions where unionized employee brings a CEPA whistleblower claim against their employers. See, Sheridan v. Mondelez Global LLC, 2015 N.J. Super. Unpub. LEXIS 2369 (App.Div., Oct. 13, 2015); O’Donnell v. Nightlife, 2014 N.J. Super. Unpub. LEXIS 873 (App.Div.), cert. denied, 2014 N.J. LEXIS 1061 (Sept. 9, 2014); Tywine Smalls v. South Jersey Behavioral Health Resources, et al., CAM-L-3053-13 (N.J. Super., Oct. 2, 2015) (J. Ragonese).  Accordingly, New Jersey employers are eager to see how the state’s highest court addresses this preemption issue.

Takeaways for Employers

Employers of non-unionized employees can best protect themselves from whistleblower claims and limit potential liability by: (i) adopting and including a whistleblower policy in your employee handbook; (ii) obtaining acknowledgments from employees that they read and understood the substance of the whistleblower policy; (iii) adopting internal policies and procedures to handle complaints of retaliation; (iv) documenting the investigation of the alleged wrongdoing; and (v) maintaining records to demonstrate that there was a valid reason for an adverse employment action (such as demotion, termination and the like). After being notified of a retaliation claim, employers are urged to proceed with caution and consult with legal counsel.

Employers utilizing a unionized workforce should follow the advice above, but are also advised to contact their labor counsel to ensure that the whistleblower policy does not impact or violate employee rights under Section 7 of the National Labor Relations Act.