- ALJ Applies Villanueva Factors, Finds Overseas Employee’s Whistleblower Claim “Territorial”
- March 13, 2013
- Law Firm: Proskauer Rose LLP - New York Office
In Dos Santos v. Delta Airlines, Inc., 2012-AIR-20 (ALJ Jan. 11, 2013), an Administrative Law Judge (ALJ) of the U.S. Department of Labor (DOL) examined whether the facts alleged by the complainant required a territorial or extraterritorial application of one of the whistleblowing statutes enforced by the DOL. This blog posting summarizes the ALJ’s decision and analyzes the impact for multinational employers.
Jose Dos Santos (“Dos Santos” or “Complainant”), a U.S. citizen working for Delta Airlines (“Delta” or “Respondent”) as an aircraft maintenance technician at Charles de Gaulle airport in Paris, France, filed a complaint with the Occupational Safety and Health Administration (“OSHA”) under the Whistleblower Provision of the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (“AIR”), 49 U.S.C. § 42121. Specifically, Dos Santos claimed that he was subject to a hostile work environment and denied promotions in retaliation for having informed his employer and the Federal Aviation Administration (“FAA”) that his supervisor, Greg Crandall, falsified safety clearance documents.
OSHA dismissed the complaint on the grounds that the Whistleblower Provision did not apply extraterritorially and that the facts alleged therein required such application. Dos Santos objected to OSHA’s ruling and requested a hearing before an ALJ. Delta moved to dismiss Dos Santos’ complaint before the ALJ, arguing that the alleged facts required an extraterritorial application of a whistleblower statute limited in scope to the United States. As set forth more fully below, the ALJ denied Delta’s motion.
Governing Legal Standards
In its analysis, the ALJ began with the Supreme Court decision in Morrison v. National Australian Bank, Ltd., 130 S. Ct. 2869 (2010), which applied a “two-step test” to determine (1) whether Section 10(b) of the Securities Exchange Act of 1934 (“SEA”) reached extraterritorial claims and, if not, (2) whether the facts alleged in the complaint require an impermissible extraterritorial application. The Supreme Court held that, because the SEA did not give a “clear indication of an extraterritorial application, it has none.”
Moreover, the Supreme Court determined that the allegations made by “foreign plaintiffs” against a “foreign issuer” based on securities transactions in “foreign countries” went beyond the territorial “focus of congressional concern” in enacting the statute (i.e., transactions in securities listed on domestic exchanges, and domestic transactions in other securities). In making this determination, Morrison considered the location of the purchase and sale of the securities, also known as the “transactional test.” As the ALJ noted, post-Morrison, courts and agencies have struggled to apply this securities-centric test to other contexts.
The ALJ then turned to Villanueva v. Core Labs. NV, Arb. Case No. 09-108 (ARB Dec. 22, 2011), in which the Administrative Review Board (“ARB”) had applied Morrison to the primary whistleblower protection provision of the Sarbanes-Oxley Act (i.e., Section 806), 18 U.S.C.A. § 1514A. In short, the ARB in Villanueva applied the two-part test in reverse order, holding that Section 806 does not enjoy extraterritorial application only after first determining that the alleged facts required such an application.
In the instant case, the ALJ stressed that Villanueva refrained from a “decisive bright-line test” for determining whether the facts alleged by the complainant required extraterritorial application of SOX. Rather, as the ALJ described, Villanueva “dual-layered” the second step of the Morrison test, requiring a court to (1) “identify the ‘primary focus’ of the statute in general” and, “unless the subject complaint plainly falls outside that basic focus,” (2) “the court should also identify the ‘additional focus’” of the particular whistleblower protection provision of the statute.
After identifying both focuses, the ALJ wrote, Villanueva asks the court to consider “the labor aspects presented in the case,” including (i) “the location of the protected activity,” (ii) “the location of the job and the company the complainant is fired from,” (iii) “the location of the retaliatory act,” and (iv) “the nationality of the laws allegedly violated that the complainant has been fired for reporting.”
In Villaneuva, because “the fraudulent activity being reported” was the “driving force of the case,” the ARB denied the complaint without having fully considered the multi-factor test. In the instant case, however, the ALJ took the opportunity to weigh and apply each of the factors.
As in Villanueva, the ALJ started with whether the facts alleged by Dos Santos required extraterritorial application of the Whistleblower Provision. Accordingly, the ALJ first assessed the focus of AIR - “to ensure the safety of the air traveling public by strengthening the United States’ aviation system” - and that of its Whistleblower Provision - “detection of aviation safety hazards and airline non-compliance with FAA safety laws, rules and regulations.” The ALJ then turned to whether the complaint’s “labor elements” placed it within the foci of AIR and its Whistleblower Provision, assessing the Villanueva factors to find that, “other than the location of the employee’s position,” “each key element” of the complaint demonstrated “significant interaction” with the U.S. aviation system.
Location of Protected Activity and Underlying Violation
The ALJ found that the alleged misconduct concerned domestic aviation safety goals, citing multiple internal complaints regarding the supervisor’s alleged falsification of FAA documents to improperly clear aircraft, as well as an external complaint to the FAA’s Aviation Safety Hotline.
Although the ALJ noted that some of the recipients of these communications were located in Europe, several others, including the FAA and Delta’s Safety and Compliance Department, were stationed in the United States. And, although the alleged misconduct that prompted Complainant to lodge these complaints - the supervisor’s falsification of aircraft release forms - occurred in France, the ALJ reemphasized that the alleged misconduct “plainly implicates” U.S. aviation law.
Additionally, the ALJ wrote, by “operating aircraft without proper certificates of airworthiness,” the supervisor’s alleged actions violated 14 C.F.R. § 135.413, and created a potential safety hazard for any Americans flying onboard the aircraft as well as those anywhere near the path of the aircraft after it had entered U.S. airspace when returning from France.
Thus, the ALJ concluded that both the “misconduct that prompted Complainant’s communications and the recipients of those communications evidence that Complainant’s protected activity is directly associated with the domestic aviation regulatory system.”
Location of Retaliatory Actions
The ALJ also found it convincing that Delta officials based in the United States allegedly made retaliatory decisions to deny his desired promotion. The ALJ also noted that, while Dos Santos alleged that Delta managers and employees in France harassed and otherwise retaliated against him, he repeatedly notified Delta management officials both in France and in the United States about the harassment.
According to the ALJ, therefore, Dos Santos alleged several adverse actions, which, to varying degrees, occurred (or were permitted to occur) by Delta officials in the United States. In sum, “[a]dverse employment actions taken by management officials of an American airline against an employee that provides information about a Federal aviation safety law violation are just the sort of retaliatory adverse actions that Congress sought to protect airline employees from suffering when it passed [the Whistleblower Provision].”
Location of Employer and Employee
The ALJ also noted that, although Dos Santos was stationed in France during the period of time relevant to his complaint, he was at all times in an “exclusive employment relationship” with an American airline headquartered in Atlanta, Georgia. According to the ALJ, “neither the location of the employee’s job, nor the location of the employer, is conclusive of the territoriality of this complaint,” because AIR is “not chiefly a labor law.” Rather, in contrast to Title VII of the Civil Rights Act of 1964 (“Title VII”), the ALJ underscored that AIR is “not principally focused on regulating labor relationships, standards or conditions.”
Consequently, that AIR’s regulation of employment relationships is a “secondary means for achieving the statute’s primary ends [i.e., domestic aviation safety],” the physical locations of the employee and the employer “are relevant, but not determinative, factors.” Accordingly, the ALJ concluded that, “while it is relevant that Complainant worked and observed violations of Federal Aviation Administration safety laws and regulations at an overseas location, it is even more relevant that Complainant works for, and reported the legal failings of, a major American air carrier that is a key participant in the American aviation system.”
Mindful of AIR’s purpose of safeguarding the U.S. aviation system, the ALJ ultimately held that the “circumstances of the complaint place it within the scope of claims that Congress intended to enforce.” As the ALJ described it, the complaint concerned an employee of a “U.S.-based air carrier,” “subject to “FAA regulations,” “who reported to the FAA and company officials that his manager violated Federal aviation safety laws” by fraudulently clearing aircraft as safe for air travel. Because the ALJ found that that the alleged facts did not require extraterritorial application of the Whistleblower Provision, it did not assess whether the provision extends to such claims.
For multinational employers, this decision illustrates the fact-based inquiry that will be applied in these cases. With a “case-by case” approach, multinational employers can continue to expect the unexpected as to which mix of domestic and foreign elements will qualify as territorial or extraterritorial under DOL-enforced whistleblower statutes. Indeed, although the ALJ noted here that “virtually all of the key elements of Complainant’s complaint demonstrate a substantial connection with the United States’ domestic aviation system,” it also recognized that Dos Santos had worked overseas and had complained of underlying misconduct physically occurring in that country - not insignificant facts.
 The ALJ also rejected Respondent’s argument that Complainant’s “terms and conditions of employment” were in France, stating that, to the extent that the “terms and conditions” of an individual’s employment relationship with his or her employer have a defined location, it is unclear . . . why the physical location of an employee’s job determines their location.” To the contrary, the ALJ maintained that “[o]ne might reasonably argue that the location of an employee’s work is itself a term and condition of an individual’s employment agreement, along with salary, benefits, hours, promotions, etc.”