Can an employer prevent a Section 11(c) whistleblower from getting double damages in a settlement agreement and release of a related claim? Maybe.

In a recent decision in the Eastern District of New York, Walsh v. Community Health Center of Richmond, Inc., et al., 21-CV-3094 (ARR)(TAM), the court held that OSHA has the right to pursue individual damages for a Complainant under Section 11(c) even though a prior federal action brought by the Complainant against her employer raising the same whistleblower allegations under New York Labor Law (“NYLL”) § 740, which protects employee-whistleblower, was dismissed with prejudice. The Complainant sued her employer directly in the prior federal lawsuit alleging, among other things, that her termination violated OSHA’s General Duty Clause. During the course of the litigation, the Complainant filed a voluntary stipulation dismissing her NYLL § 740 claims with prejudice. It should be noted that the court there recognized that Section 11(c) of OSHA does not have a private right of action.

Following that prior lawsuit, the Secretary of Labor commenced the instant action alleging the employer violated Section 11(c) and sought front pay, back pay, compensatory, and punitive damages to be paid to the Complainant along with injunctive relief. In denying the employer’s motion to dismiss the victim-specific relief for the Complainant, the court rejected the employer’s argument that res judicata and the doctrine of claim preclusion barred the Complainant from receiving any individual relief. In doing so, the court held that the Secretary of Labor and the Complainant are not in privity.

It remains to be seen whether the employer will appeal the decision. However, employers should be aware that the decision permits OSHA to pursue Section 11(c) claims directly for the benefit of the Complainant regardless of whether those claims were adjudicated or settled with a full release of claims in a private lawsuit. As the decision expressly finds there is no privity between the Complainant and the Secretary of Labor, it should make no difference whether the Complainant accepted a settlement in the prior lawsuit or a pre-litigation recovery, thus, potentially creating the possibility of “double dipping.” Employers may want to consider including in any settlement agreement and release with an employee under these circumstances a provision whereby the employee assigns to the employer any right the employee may have to receive any monetary award from any other proceeding alleging retaliation based upon whistleblower status.

While the Secretary of Labor may contend that such a provision in a release is not lawful or enforceable, given the Secretary’s exclusive right to pursue claims against employers under Section 11(c), employees and employers also have a legitimate right to decide in a settlement agreement to a finite amount of damages which will cover all potential claims relating to alleged whistleblower activity.

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