Pennsylvania Supreme Court Decision Upholds Damages for Emotional Distress for Whistleblower

In a unanimous decision strongly supporting whistleblowers and recognizing the public interest that they serve, the Pennsylvania Supreme Court confirmed that an employee terminated for reporting suspicious activities by a government sub-contractor could recover non-economic damages – essentially, damages for emotional distress – in addition to economic damages for loss of employment. Given the extreme personal difficulties that whistleblowers face for reporting fraudulent conduct, this is a welcome ruling permitting compensation for at least some of those consequences.

In Bailets v. Pennsylvania Turnpike Commission, 2018 Pa.LEXIS 1498 (Pa. 2018), released on March 28, 2018, the Pennsylvania Supreme Court upheld the trial court’s determination that an employee of the Pennsylvania Turnpike Commission (“PTC”) who was terminated for reporting suspected fraudulent conduct by a PTC contractor was entitled to an award of $1.6 million for economic damages and an additional $1.6 million for “harm to his reputation, humiliation, and mental anguish.” Id. at *8.

The decision is notable for two reasons:

(1) it confirmed that damages for emotional distress are available to successful litigants under the Pennsylvania Whistleblower Law; and

(2) it rejected PTC’s argument that the amount of noneconomic damages was excessive.  This blog will focus on the significance of the first point.

The Factual Background

The whistleblower, Ralph Bailets, was the Manager of Financial Systems and Reporting at PTC. In the three years prior to his termination in 2008, Bailets reported a number of internal complaints about the performance of one of PTC’s contractors, including absenteeism of the contractor’s consultants, testing failures, and the refusal of some of the consultants to provide necessary information to PTC employees. On November 20, 2008, PTC informed Bailets that it was eliminating his position for budgetary reasons.

Bailets filed an action for unlawful retaliation under the Pennsylvania Whistleblower Law. 43 P.S. §§ 1421-1428. In pertinent part, the statute provides that

“No employer may discharge, threaten or otherwise discriminate or retaliate against an employee regarding the employee’s compensation, terms, conditions, location or privileges of employment because the employee or a person acting on behalf of the employee makes a good faith report or is about to report, verbally or in writing, to the employer or appropriate authority an instance of wrongdoing or waste.” 43 P.S. § 1423(a).2.

Notably, although the Whistleblower Law applies only to employees of a “public body,” that term is broadly defined to include, in addition to state and local government, any other body “which is funded in any amount by or through Commonwealth or political subdivision authority or a member or employee of that body.” See Riggio v. Burns, 711 A.2d 497, 500 (Pa. Super. 1998) (en banc) (receipt of government funds made hospital a “public body” under the Whistleblower Law).

The Court’s Holding

The court relied on its earlier opinion, O’Rourke v. Dep’t of Corrections, 778 A.2d 1194 (Pa. 2001), for the proposition that the Whistleblower Law is intended to provide remediation to whistleblowers and therefore should be liberally construed.

The court extended the reasoning in O’Rourke that a whistleblower must be put “in no worse a position for having exposed the wrongdoing[.]” Trial Ct. Op. at 22, citing O’Rourke, 778 A.2d at 1202, holding that:

“[w]ithout compensation for harm to his reputation, humiliation and mental anguish, Bailets would be in a far worse position for having reported the wrongdoing.” Bailets, 2018 Pa. LEXIS 1498 at *8. “Given the overriding purpose of the Law and our determination a whistleblower must be put in no worse a position for having reported the wrongdoing, we cannot view the phrase “actual damages” as excluding damages for such items of loss as humiliation, embarrassment and mental anguish because if no recovery for such items of loss are available, a whistleblower cannot be made whole.” Id.

The court also found similar holdings from other jurisdictions with similar whistleblower protection laws to be persuasive, citing, for example,  Robertson County v. Wymola, 17 S.W.3d 334, 347 (Tex. Ct. App. 2000) (actual damages under whistleblower law include damages for mental anguish). Bailets, 2018 Pa. LEXIS 1498 at *9.

The Court’s emphasis on the importance of making a whistleblower whole was backed by its acceptance of the trial court’s generous award of damages for reputational and emotional harm, constituting significant victories for whistleblowers in the Commonwealth.

Whistleblowers can find themselves isolated, ridiculed, attacked by colleagues, blacklisted in their industry and faced with severe financial and social consequences. Hopefully the ruling will also cause employers to hesitate before embarking on retaliatory employment actions, realizing that they cannot count on simply having to pay lost wages.

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