Whistleblowing and Retaliatory Discharge

US Pharm. 2013;38(3):52-53.

Most pharmacists are “at-will” employees, meaning they can be discharged from their job at the will of the employer for any reason or no reason at all. There is, however, at least one prominent exclusion from the at-will policy, often called the public policy exception. This means that an employee cannot be terminated for a reason that defies a well-established public policy embodied in a state or federal law. Most often this involves whistleblowing and retaliatory discharge (i.e., the punishment of an employee for engaging in a protected activity). Some examples will help explain these employment doctrines.

Case 1: Short-Filling Prescriptions or Working Off-the-Clock?

In a case from California, a pharmacist was fired by his large chain store employer after 13 years for allegedly working excessive overtime “off-the-clock.”¹ He would often come in before his shift was supposed to start and stay later than he should have. This activity violated established company policy, and he had been warned not to do so on previous occasions.

Over the course of his employment, the pharmacist complained several times that others in the organization were “short-filling” prescriptions for Medicare and Medicaid patients. If the store had only enough medications to partially fill prescriptions, they would supply the amount on hand, bill the proper agency for the full amount called for, and issue IOUs to patients for the remaining amounts. This activity, he alleged, violates the procedures required in the participation agreements and the rules against fraud, waste, and abuse contained in those agreements and operational policies.

After being fired, the pharmacist filed a whistleblower lawsuit claiming his termination came only after he complained that the company engaged in illegal activities. The employer claimed the pharmacist was terminated for excessive off-the-clock overtime work even after he was given a final warning against doing so. Following a jury trial, the pharmacist was awarded $1.24 million for compensatory and punitive damages.

Case 2: Illegal Conditions or Lapsed License?

In another case, a pharmacist was employed for several years by a large chain store.² At the time of the incidents leading up to this lawsuit, he was managing the pharmacy in a store located in downtown Washington, DC. The store was remodeled, and the pharmacy was relocated to a glass-enclosed portion of the building. Soon thereafter, the pharmacist and other employees began complaining that the temperature in the pharmacy was excessively high and uncontrolled. The pharmacist contacted his immediate managers with his observation that some drugs were becoming adulterated in the markedly raised temperatures. Although the supervisors repeatedly told him they were working on the problem, after 7 months no action had been taken. The pharmacist contacted a vice president of the corporation and told him that he was going to report the incident to an executive-level employee at the FDA.

That evening, management from the corporation did an inventory review of the pharmacy and marked stock worth $250,000 for reclamation or destruction. The audit allegedly also showed that some drugs, including controlled substances, were missing. The organization contacted the local police and an investigation was instituted. On the day that the pharmacist was questioned by the police, he was fired.

The company claimed that during this investigation, it learned that the pharmacist’s license had lapsed and that this was the real basis for his termination. In his lawsuit against the chain store, the pharmacist claimed his discharge was for complaining about the temperature predicament in the pharmacy and his threat to alert the FDA concerning adulterated drugs. He also claimed that the lapsed license issue was a mere pretext because other pharmacists in the chain also had licenses that had lapsed and were not terminated from their employment. He also asserted that his direct supervisor had known about his lapsed license for several months before these incidents and that the licensure problem was a mere technicality that was easily detected.

The trial court had dismissed the pharmacist’s lawsuit on the basis that there were no claims that he was forced to work under illegal conditions or face termination. The court of appeals reversed, citing FDA regulations specifying the temperature, humidity, and light conditions under which drugs must be stored.³ Violations of regulations that are designed to protect the public from being exposed to adulterated drugs can be punished by criminal sanctions.⁴

Accordingly, the court of appeals reinstated the lawsuit. It reasoned that the regulations were the kind of rules that the public policy exception to the at-will employment doctrine was designed to support.

Case 3: Fraudulent Prescriptions or Customer Complaints?

A different outcome was achieved in a case where a pharmacist claimed he was forced to fill
what he believed were illegal prescriptions or risk being fired.⁵ The pharmacy claimed that the pharmacist was terminated for repeated customer complaints against him. The Utah Supreme Court held that the law prohibits pharmacists only from knowingly filling fraudulent prescriptions. Furthermore, state law only protects at-will employees from retaliatory discharge as a matter of public policy where the employee actually reports claims of illegal activities to public authorities and governing agencies.

In this case, the pharmacist could not show that he was fired for refusing to fill what he knew to be a fraudulent prescription or that he had reported a criminal practice to any governmental authority. Thus, there was no public policy exception at play and his termination was not retaliatory or a pretext to punish whistleblowing.

Analysis

These cases taken together show the parameters of the laws relating to the termination of at-will employed pharmacists in response to claims of retaliation, whistleblowing, or pretext. The public policy exception to the at-will employment doctrine requires, at a minimum, the reporting of, or a threat to report, an illegal act or acts of an employer to a governmental agency.

Note that the courts in the first two cases took a more “liberal” view of the public policy exception to the at-will employment doctrine. There, the pharmacists did not actually report illegal activities to anyone outside the corporate structure. The activities—fraudulent billing of Medicare and Medicaid in the first case and dispensing adulterated drugs in the second—are well established as illegal under federal laws. Thus, the public policy exception was established, so the second requirement, actually reporting the illegal activities to authorities, was not deemed necessary.

The Utah Supreme Court took the more “conservative” view, finding that the public policy exception to at-will employment requires evidence of both an illegal activity and an actual report of it to official governmental authorities, as opposed to internal corporate complaints.

Note also that in all three cases, the employer did present evidence to support the claims that the pharmacists were discharged for good reason. Working extra hours without pay might seem a bit trumped up. Nevertheless, the company had a policy against the practice and did attempt to enforce the policy as a means of controlling its workforce needs. Terminating a pharmacist for letting his license lapse is probably a much more significant reason to support termination. In that case, however, the company had other pharmacists whose licenses also had lapsed. None of them were terminated during the period that the licenses were being reinstated. Thus, the complaining pharmacist was treated differently from other noncomplaining pharmacists in the same situation.

In the last case, the pharmacist had far more difficulty producing evidence that he was either forced to perform illegal acts, was treated differently from other pharmacists, or had taken initial steps toward reporting his claimed illegal activities. The reason given for his termination, customer com-plaints, made far more sense in light of all the evidence.

REFERENCES

1 . Mitri v Walgreen Co, (Slip Op No 1:10-cv-00538-AWI-SKO, August 8, 2011), (ED Cal).
2. Liberatore v Melville Corp, 168 F3d 1326 (DC Cir, 1999).
3. 21 CFR § 211.142(b).
4. 21 CFR § 201.1(b).
5. Ryan v Dan’s Food Stores, Inc, 972 P2d 395 (Utah, 1998).

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