Iowa Supreme Court expands exception to at-will employment

By: Fran Haas on August 7th, 2013

On Friday, the Iowa Supreme Court issued a sharply-divided opinion that expands the scope of whistleblower claims in Iowa. In Dorshkind v. Oak Park Place of Dubuque II, L.L.C., Plaintiff argued that she was wrongfully terminated in violation of public policy when she lodged an internal complaint with her employer about forged records. The forged records were required for the employer, an assisted living center, to maintain a dementia-specific certified  program in Iowa. Plaintiff reported the alleged forgery to another employee. Following an investigation, the employer terminated Plaintiff’s employment because of “malicious statements regarding forging of documents.” Plaintiff filed a wrongful discharge claim. At trial, the jury awarded $178,500 in compensatory damages and $178,500 in punitive damages.

On appeal, the Court found there was a clearly defined and well-recognized public policy in Iowa to protect Plaintiff’s internal complaint. The Court relied heavily on administrative rules promulgated by Iowa’s Elder Affairs Department, which require personnel employed by a dementia-certified assisted living center to receive dementia-specific training and education. In a more controversial part of the opinion, the Court’s held Plaintiff’s termination undermined public policy, reasoning that  her “internal report” of “what she believed were two coworkers forging state-mandated training documents pertaining to the care of dementia patients.
. . advances a clear public policy.” The Court held that Plaintiff’s termination “punish[ed] her for reporting conduct jeopardizing the health, safety, and welfare of dementia patients” and had a chilling effect on other
employees who reported similar workplace illegalities.

The Court paid special attention to the “internal” nature of the plaintiff’s complaint. The Court held that “whether the employee makes the complaint internally or externally does not change the public-policy considerations of our state,” and that firing an employee who lodges an internal complaint may still undermine public policy. The Court concluded that it was sensible to assume an employee would first lodge an internal complaint before turning the complaint over to a governmental agency, because “[b]y first bringing the problem to the attention of the employer without outside intervention, the matter can be handled quickly and in a less costly manner.” The Court also ruled that Plaintiff was not entitled a punitive damages award because at the time Plaintiff’s termination occurred, the Court had not recognized administrative rules as a source of public policy.

Justice Cady concurred specially, clarifying that the tort of wrongful discharge does not protect employees who lodge internal complaints over an employer’s legitimate business practices—only internal complaints over
violations of statutes and regulations. Justice Cady also wrote that public policy underlying elder care in Iowa “is important enough that it implies protection for internal whistleblowing” and that operators of assisted living facilities must be prepared to “embrace internal complaints of regulatory or statutory violations.”

Justices Mansfield, Waterman, and Zager dissented on the issue of liability. Justice Mansfield expressed concern that “any time a worker tells a coworker about an alleged violation of law related to health, safety, or
welfare, the employer is at risk of litigation if the employer subsequently terminates that worker’s employment.” Justice Mansfield pointed out that “there are myriad laws and regulations relating to ‘health, safety, and welfare,” that range “from the serious to the trivial.”  Justice Mansfield recognized that an “employee still must prove the complaint was the reason for the discharge,” but because “questions of causation are often disputed and difficult to disprove,” he noted that businesses “may be reluctant to replace one employee with another person, whom it believes will do a better job, out of fear of litigation.”  “This,” Justice Mansfield wrote, “will be a new cost of doing business in Iowa.”

The practical effect of Dorshkind’s holding has yet to be seen. However, employers may reasonably expect to see an increase in whistleblower claims arising out of internal complaints that implicate any type of health or safety issue. Employers may also expect confusion over whether a plaintiff must engage in a protected activity to bring a wrongful discharge claim. Previously, an employee needed to engage in the activity protected by the public policy at issue, such as exercising a right to file a worker’s compensation claim, in order to have a viable wrongful discharge claim.  Dorshkind muddies the water on this particular point.

[Disclosure: Nyemaster Goode attorney Ryan Koopmans represented the Iowa Association of Business and Industry  as amicus curiae in this case.]

Iowa Supreme Court Strips Live Nude Dancing Theaters of Regulation by Local Ordinances

By: Fran Haas on July 30th, 2012

On July 27, 2012, the Iowa Supreme Court issued Mall Real Estate, LLC v. City of Hamburg, which held Iowa’s obscenity statute preempted the enforcement of a local ordinance designed to regulate a strip club. The strip club, Shotgun Geniez, qualified as a “theater” for live performances under Iowa Code section 725.5, which exempts theaters from the statewide ban on nudity. Shotgun Geniez’s live performances consisted of clothed, nude, and semi-nude dancing of an erotic variety, including lap dancing and pole dancing. The City of Hamburg passed an ordinance with the stated purpose of regulating sexually oriented business “to promote the health, safety, morals, and general welfare” of Hamburg, and “prevent the deleterious secondary effects of sexually oriented businesses.” The ordinance would have required theaters like Shotgun Geniez to obtain sexually oriented business licenses. The ordinance strictly regulated the manner in which licensed facilities could operated their business. Among other restrictions, it prohibited the sale or consumption of alcohol on the premises, prohibited tipping the performers, and imposed specific rules on the lay-out of the stage and seating area. The ordinance provided that any violation of the ordinance would result in a revocation of the license.

The operator of Shotgun Geniez challenged the enforceability of the ordinance, arguing that it was preempted by Iowa’s obscenity law. The Iowa District Court sided with the City of Hamburg and held the ordinance was enforceable. The Iowa Supreme Court reversed and held that Iowa law preempted the ordinance. Iowa code section 725.11 provides that “the sole and only regulation of obscene materials shall be under the provisions” of Iowa Coe chapter 725. The Iowa Supreme Court interpreted the term “obscene materials” to include nude and semi-nude dancing. The Iowa Supreme Court reasoned that because Iowa law expressly preempted the regulation of the same activity Hamburg’s ordinance sought to regulate—nude and semi-nude dancing—Hamburg’s ordinance was void. The Iowa Supreme Court remanded the case to the District Court with instructions to enter an order that prohibited Hamburg from enforcing the ordinance against Shotgun Geniez. The opinion did not touch on zoning ordinances applicable to strip clubs, which are subject to a different analysis.

Justices Cady and Waterman dissented. Justice Cady disagreed that nude erotic dances constituted “obscene material” under Iowa Code section 725.11 because all the other enumerated “materials” under that statute were physical or tangible materials and unlike a live dance. In his dissent, Justice Waterman urged the application of the federal First Amendment analysis and stated that expressive conduct like live nude dancing was “a far cry from the heart of the First Amendment protection for political speech and debate.” Justice Mansfield took no part in the decision.

Plaintiffs Appeal Race Discrimination Case to Iowa Supreme Court

By: Fran Haas on May 18th, 2012

On Wednesday, the class of plaintiffs in Pippen v. Iowa appealed the Iowa district court’s dismissal of their “implicit bias” race discrimination claims against the State of Iowa.  A summary of the district court’s decision is here.

This case has received national attention for its focus on implicit bias, and the Iowa Supreme Court proceedings will be watched closely.  Stay tuned for further updates.

Iowa Supreme Court Holds Third Party Records That Relate to an Investigation By a Licensing Board May Be Subject to Disclosure Under the Iowa Open Records Act

By: Fran Haas on March 9th, 2012

In Broadlawns Medical Center v. Des Moines Register and Tribune Company, the Iowa Supreme Court considered whether records in possession of third parties, which contain information under consideration by a licensing board in an investigation, should be shielded from public disclosure. This issue arose in conjunction with an investigation by the Iowa Board of Pharmacy. The Board requested records from a pharmacist, which he provided. The pharmacist also performed his own internal audit of the pharmacy because, in his own words, he wanted “immediate answers” to determine “[i]f there was action that needed to be taken.” After completing the internal audit, the pharmacist provided an unsolicited copy of the audit to the Board.

The Des Moines Register sought a copy of the audit pursuant to the Iowa Open Records Act. The pharmacist refused to produce the audit pursuant to Iowa Code section 272C.6(4), which provides that investigative files maintained by licensing boards are “privileged and confidential” and not subject to “legal compulsion for their release.” The District Court agreed with the pharmacist and held the statute barred release of the audit.

On appeal, the Iowa Supreme Court weighed the competing interests behind disclosure of the audit: “On the one hand, the mere fact that a copy of the document is possessed by a third party should not be determinative of the privilege issue if the privilege is to have any substance. On the other hand, the providing of information to a licensing body or peer review committee should not transform otherwise discoverable information into privileged material.” To determine if the audit was privileged, the Iowa Supreme Court focused on the purpose in creating the audit, which it identified as the pharmacist’s interest in “getting to the bottom of a troublesome situation as rapidly as possible.” The Iowa Supreme Court held that because the pharmacist’s purpose in creating the document was unrelated to the Board’s investigation, it was not privileged. The Iowa Supreme Court remanded the case on this basis and also directed the District Court to consider an attorney fee award for the Des Moines Register under Iowa Code section 22.10.

The Iowa Supreme Court also considered the application of certain exceptions to Iowa Code section 22.7(61), which provides materials may be withheld from the public if they are part of a closed session under Iowa’s Open Meetings Law. The pharmacist contended that the audit fell within the protection of closed session materials pursuant to Iowa Code section 21.5(c), which relates to strategy discussions with counsel for litigated matters, and Iowa Code section 21.5(i), which relates to evaluations of professional competency. The Iowa Supreme Court concluded these exceptions did not apply because the audit was neither a discussion with counsel nor an “evaluation” of professional competency. The Iowa Supreme Court also declined to enjoin disclosure of the audit under Iowa Code section 22.8 because there was no clear and convincing evidence that disclosure was “clearly not in the public interest.”

Iowa Supreme Court Affirms Workers’ Compensation Commissioner’s Award of Benefits in a Battle of the Experts

By: Fran Haas on December 16th, 2011

In Cedar Rapids Community School District v. Pease, a workers’ compensation case, the Iowa Supreme Court focused on two issues: (1) whether the medical causation of Plaintiff’s ankle and lower back injury was work-related; and (2) whether Plaintiff’s physical injury aggravated her depression. As is often the case, the parties’ experts had conflicting opinions over these issues. The Commissioner credited Plaintiff’s expert witnesses over the employer’s expert witnesses and awarded benefits to the employee. The Iowa Court of Appeals reversed on the grounds that the Commissioner’s decision to credit Plaintiff’s experts over the employer’s experts was not supported by substantial evidence. The Iowa Supreme Court reversed the Court of Appeals and affirmed the Commissioner’s decision.

Among the employer’s chief complaints was that the Commissioner had relied on Plaintiff’s expert witnesses despite a surveillance video of Plaintiff that appeared to directly contradict Plaintiff’s testimony and undermine her credibility and medical history, which Plaintiff’s experts had relied on to reach their opinions. The video, which appeared to depict Plaintiff performing tasks inconsistent with her claimed disabilities, was approximately forty minutes in length and spanned a two-year period.

The Court held the video did not undermine Plaintiff’s experts’ opinions and questioned the overall helpfulness of this type of surveillance video, because although it appeared to impeach Plaintiff’s credibility somewhat, it was fragmented and was missing large gaps of relevant time. Further, the Court held substantial evidence showed the experts formed their opinions independent of matters related to the surveillance video, such as their own independent evaluations and her medical records. The Court also found persuasive the fact that at least one of the expert’s opinions was consistent with the opinions of two other medical professionals. The Court held that this evidence showed that Plaintiff’s expert witness opinions were supported by substantial evidence despite the surveillance video and affirmed the Commissioner’s decision to credit their opinions over the opinions of the employer’s experts.

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