The ARB recently ruled that an employer advancing an after-acquired evidence defense in an AIR 21 whistleblower case must prove the defense by clear and convincing evidence.  Clemmons v. Ameristar Airways, Inc., ARB No. 12-105, ALJ No. 2004-AIR-011 (ARB Nov. 25, 2013).  This is the same standard that applies to an employer’s burden of showing, if and when an employee establishes a prima facie case, that it would have made the termination decision regardless of the protected activity.

Background

Ameristar Airways (the Company) hired Thomas Clemmons as Director of Operations in charge of pilots’ scheduling and training.  Disagreeing with the Ameristar President over the pilots’ proposed schedule, he sent an e-mail to the pilots explaining his dissatisfaction and allegedly mocking Ameristar’s management.  In the e-mail, Clemmons said he wanted to leave the Company soon and offered to assist pilots with their resignations by providing support for unemployment claims and supplying personnel records and letters of recommendation.  The Company terminated Clemmons’ employment, but did not learn of the e-mail until two months after the termination.

Clemmons alleged that he was discharged for complaining about air safety issues in violation of the whistleblower protection provision in AIR 21.  An ALJ at the U.S. Department of Labor Department determined that the termination violated AIR 21.  The Company appealed, and the ARB affirmed the ALJ’s decision on both the merits and damages, which included an award of full back pay.  Ameristar then appealed to the U.S. Court of Appeals for the Fifth Circuit.  The Fifth Circuit affirmed on the merits, but remanded for reconsideration of the proper amount of back pay in light of the after-acquired evidence of employee wrongdoing—Clemmons’ above-referenced e-mail.  The Fifth Circuit instructed the ALJ to consider whether the back pay award should be limited to the date when the Company became aware of the e-mail.  On remand, the ALJ determined that the back pay period should not be reduced because the Company “failed to establish by clear and convincing evidence that had it known of the e-mail at the time of his discharge, [it] would have fired Clemmons because of the e-mail alone.”  The Company then appealed once again to the ARB.

Ruling

The ARB affirmed the ALJ’s decision, rejecting the Company’s arguments that the ALJ erred in applying the clear-and-convincing burden of proof.  In doing so, the ARB emphasized that the AIR 21 whistleblower provision states that the “clear-and-convincing” burden of proof applies to the question of whether the claimant is entitled to relief and concluded that it therefore followed that the standard should apply to an application of the after-acquired evidence doctrine.  In addition, the ARB rejected the Company’s argument that the “ALJ’s decision subverts the fundamental principle of the after-acquired evidence doctrine” on the grounds that the e-mail constituted “unpardonable wrongdoing.”  The ARB stated that the Company’s “hyperbolic description” of the e-mail as “perhaps the most disloyal and destructive e-mail in the annals of American business” was insufficient to prove that the same termination decision would have been made on the basis of the e-mail alone.

Takeaway

This ruling is noteworthy because a number of prominent whistleblower statutes, including Section 806 of SOX, are based on the AIR 21 framework, and there are numerous situations where employers attempt to demonstrate in litigation that evidence acquired after litigation ensues would have ultimately led to the complainant’s termination.  Though the employer must meet a high burden, this decision should not dissuade employers from advancing this powerful defense.  But, when doing so, employers need to develop a solid and compelling record showing that the misconduct at issue would have warranted termination.

Photo of Steven J. Pearlman Steven J. Pearlman

Steven J. Pearlman is a partner in the Labor & Employment Law Department, where he is Head of the Restrictive Covenants, Trade Secrets & Unfair Competition Group and Co-Head of the Whistleblowing & Retaliation Group.

Employment, Restrictive Covenant & Trade Secret, and Whistleblower…

Steven J. Pearlman is a partner in the Labor & Employment Law Department, where he is Head of the Restrictive Covenants, Trade Secrets & Unfair Competition Group and Co-Head of the Whistleblowing & Retaliation Group.

Employment, Restrictive Covenant & Trade Secret, and Whistleblower Practice. Steven’s national practice focuses on defending companies in federal and state courts and in arbitration fora against the full spectrum of employment-related claims, including claims of executives; restrictive covenant violations; employee raiding; theft of trade secrets; whistleblower retaliation under the Sarbanes-Oxley Act, the Dodd-Frank Act and similar state laws; and wage-and-hour violations, including class, collective and PAGA actions.

Steven has successfully handled trials in multiple jurisdictions; prevailed in seeking and defending against applications for temporary restraining orders and preliminary injunctions; defended one of the largest Illinois-only class actions in the history of the federal courts in Illinois (over 90k putative class members); and prevailed following his oral arguments before federal and state appellate courts. He brings his litigation experience (beginning in 1998) to bear in counseling clients to minimize risk and avoid or prepare for success in litigation.

Investigations. Reporting to boards of directors, their audit committees, CEOs and in-house counsel, Steven conducts sensitive investigations and has the unusual experience of testifying in federal court in connection with investigations. His investigations have involved complaints of sexual harassment involving C-suite officers; systemic violations of employment laws and company policies; and fraud, compliance failures and unethical conduct.

Thought Leadership and Accolades. Steven was named Lawyer of the Year for Chicago Labor & Employment Litigation in the 2023 edition of The Best Lawyers in America. He is a Fellow of the College of Labor and Employment Lawyers. Chambers has reported:

  • Steven is “one of the best in the country and has a lot of experience”;
  • Steven is as an “outstanding lawyer” who is “very sharp and very responsive,” a “strong advocate,” and an “expert in his field”;
  • He is thoughtful, attentive and demonstrates an acute understanding of matters top of mind for business-minded general counsel; and
  • “He is someone who can navigate the twists and turns of litigation without difficulty.”

Steven was 1 of 12 individuals selected by Compliance Week as a “Top Mind.” Earlier in his career, he was 1 of 5 U.S. lawyers selected by Law360 as a ”Rising Star Under 40” in the area of employment law and 1 of “40 Illinois Attorneys Under Forty to Watch” selected by Law Bulletin Publishing Company. Steven is a U.S. Library of Congress Burton Award Winner for “Distinguished Legal Writing.”

Steven was appointed to Law360’s Employment Editorial Advisory Board and selected as a Contributor to Forbes.com. He has appeared on Bloomberg News (television and radio) and Yahoo! Finance, and is often quoted in leading publications such as The Wall Street Journal. The U.S. Chamber of Commerce has engaged Steven to serve as lead counsel on amicus briefs to the U.S. Supreme Court and federal circuit courts of appeal.

In 2024, Steven received the Excellence in Pro Bono Service Award from the United States District Court for the Northern District of Illinois and the Chicago Chapter of the Federal Bar Association.

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Photo of Allison Martin Allison Martin

Allison Martin is a senior counsel in the Labor & Employment Law Department. Allison represents employers in a wide range of employment litigation matters, including employment discrimination and harassment lawsuits arising under Title VII and similar state and local statutes, retaliation claims, and…

Allison Martin is a senior counsel in the Labor & Employment Law Department. Allison represents employers in a wide range of employment litigation matters, including employment discrimination and harassment lawsuits arising under Title VII and similar state and local statutes, retaliation claims, and wage-and-hour claims. She represents employers in federal and state courts, arbitration tribunals, and before the EEOC and the New York City Commission on Human Rights. Allison has extensive experience litigating both single plaintiff and class action lawsuits.

Allison also counsels clients on a broad range of employment law matters, including investigations, employment policies and procedures, and employee terminations and discipline. She also has experience conducting high-profile internal investigations on behalf of employers.

Allison previously served as a federal law clerk in the U.S. District Court for the Southern District of New York.

At Seton Hall University School of Law, Allison was an Articles Editor for the Seton Hall Law Review. Allison also  interned for Chief Judge Garrett E. Brown (Ret.) of the U.S. District Court for the District of New Jersey while in law school.

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