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F I S C A L I M P A C T R E P O R T

SPONSOR Beffort

ORIGINAL DATE

LAST UPDATED

1/21/2008

HB

SHORT TITLE

Whistleblower Protection Act

SB 132

ANALYST Moser

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY08

FY09

FY10 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

$0.1

$0.1

$0.1 Recurring General

fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Attorney General’s Office (AGO)

State Personnel Office (SPO)

Department of Corrections

NM Department of Transportation (NMDOT)

NM Municipal League

NM Association of Counties

SUMMARY

Synopsis of Bill

The AGO notes that Senate Bill 132 reinstates those protections previously held

by public

employees under federal law, 42 USC Section 1983. In 2006, the US Supreme Court withdrew

this protection by holding that public employees are not protected under Section 1983 when

they take action "pursuant to their official duties" (Garcetti v. Ceballos, 126 S.Ct. 1951).

Because of this decision public employees are not protected against retaliation for reporting

government corruption. The AGO indicates that such protection will not be afforded employees

unless a bill like SB132 is enacted.

Senate Bill 132 –

Page 2

Senate Bill 132 prohibits retaliation by public employers against public employees who take

action or object to or refuse to participate in a matter regarding what is, or what they believe in

good faith is, an “unlawful or improper act."

“Public employer" is defined to include state agencies and commissions; political subdivisions

of the state; and every office or officer of any of those entities.

A “retaliatory action" by a public employer or officer means the discharge, suspension,

demotion or disciplining of, or threatening or taking any discriminatory or adverse employment

action against a public employee in the terms and conditions of his or her employment.

Protected activities of the employee include disclosing or threatening to disclose, providing

information or testifying regarding, or objecting or refusing to participate in an activity, policy

or practice that is, or what the employee in good faith believes is an unlawful or improper act.

An “unlawful or improper act" is defined as a practice, procedure, action or failure to act on the

part of a public employer or officer that (1) violates or is a suspected violation of a federal law

or regulation, state law or administrative rule, or a law of any political subdivision; (2)

constitutes malfeasance in public office; or (3) is of a public concern or results or would result

in a specific and substantial danger to public health and safety.

The bill provides that actions under the act may be brought in any court of competent

jurisdiction within three years from the date of the alleged retaliation. Public employers or

officers can raise affirmative defenses under the act, such as that disciplinary action was

warranted due to misconduct, poor job performance or reductions in the workforce. The

remedies provided in the act are not exclusive, and do not preclude civil or criminal actions

against an employee who files a false claim under the act. The remedies within this bill are

taken from the "Fraud Against Taxpayers Act", Section 44-9-11, NMSA 1978.

FISCAL IMPLICATIONS

While there is no direct appropriation contained within this bill, there exists a significant

potential for fiscal impact. The AGO states if any government employer violates the Act, its Risk

Management representative(s) will be required to defend the suit, with the possibility existing to

pay a settlement/judgment. Possible remedies include:

•

actual damages,

•

reinstatement with the same seniority status that the employee would have had but for the

violation,

•

two times the amount of back pay with interest on the back pay

•

compensation for any special damage sustained as a result of the violation.

•

litigation costs and reasonable attorney fees of the employee.

The NMDOT indicates that Senate Bill 132 provides employees with a second, independent

avenue of redress, and could require public employers or officers to defend their disciplinary

actions, or charges of discrimination and retaliation, both administratively and in court under two

separate processes. If this is the case, additional costs would be borne by the public employer.

Additionally, NMDOT indicates that damages available to employees would be expanded under

the proposed act. A public employer or officer that violated the act would be liable to the

Senate Bill 132 –

Page 3

employee for all relief needed to make the employee “whole," including actual damages,

reinstatement of employment status, two times the amount of back pay plus interest, special

damages, litigation costs and attorney fees. Depending upon the number of new lawsuits, this

could have a significant impact upon the budgets of public entities, including the NMDOT.

The NM Association of Counties in its opposition to the bill states that “the penalties prescribed

in the bill are extreme and, perhaps, unconstitutional. Under federal and current state law,

punitive damages cannot be assessed against a public entity. Under this bill, a public employer

not only pays actual damages but would be required to pay “two times the amount of back pay

with interest on the back pay."

SIGNIFICANT ISSUES

As noted the AGO notes that Senate Bill 132 reinstates protections previously held by public

employees under federal law, 42 USC Section 1983. In 2006, the US Supreme Court withdrew

this protection by holding that public employees are not protected under Section 1983 when they

take action "pursuant to their official duties" (Garcetti v. Ceballos, 126 S.Ct. 1951). As a result,

public employees are no longer protected against retaliation for reporting government corruption,

and will not be so protected unless a bill like this is enacted.

Concern exists with public employers that such an anti-retaliation law may provide some public

employees, who are who are being disciplined for poor performance or other job related issues,

with an opportunity to “shield" this behavior behind a false claim. Agencies indicate that it may

be very difficult for the employer to prove that employee’s refusal to perform some duty related

to the employer’s policy or practice was based on the employee’s good faith belief that the policy

or practice was illegal or improper. The fact that the law does not preclude the state agency from

seeking civil damages or criminal sanctions against an employee who files a false claim may

give state agencies some protection in this regard. However, many state agencies would

probably be hesitant to file any “false claim" actions against one of its current employees, for

fear that this would create more problems arising from the employee or that the employee would

then file a new retaliation lawsuit based on the “false claim" action. Further, the state agencies

would still have had to expend the time and resources responding to and defending against the

employee’s false claims

The Association of Counties strongly opposes this bill and indicates that the bill will

substantially penalize a public entity if the entity takes an adverse employment action against an

employee who refuses to participate in an activity or discloses an activity of the public employer

so long as the employee believes in good faith that the employer’s policy or action constitutes an

unlawful or improper act. Claims under this act will be extremely difficult to defend; the burden

gets shifted to the employer to show that the employee’s actions were not in good faith. This

seems to reverse the customary legal burden on a plaintiff, and places the burden on the public

employer defendant.

TECHNICAL ISSUES

The NMDOT offers the following technical concerns:

•

“The definition of “unlawful or improper" is vague, particularly with respect to Section E

(3), which provides: “Unlawful or improper act" means a practice, procedure, action or

Senate Bill 132 –

Page 4

failure to act on the part of a public employer that: … (3) is of public concern or…." An

“improper" failure to act on a matter of “public concern" is a very broad notion and

provides very little guidance to public agencies or officers as to when such a failure would

rise to the level of liability under this act.

•

The definition of “good faith" is also vague. As written, this bill allows employees to bring

a lawsuit and subject the state to litigation on the mere belief that the public employer or

officer has done something “improper."

•

The proposed bill does not require minimal threshold evidence for an employee to bring

such an action. And, because a lawsuit is authorized to proceed on this basis, the employee

may make accusations that in another context would be defamatory but will be privileged if

brought under this Act. Although Section 3(D) attempts to protect employers from false

claims, the state must initiate a separate lawsuit and prove lack of “good faith" in order to

prevail. This is a very high and costly burden for public employers and officers to

overcome."

ALTERNATIVES

The following are suggested amendments to Senate Bill 132:

•

To reduce frivolous claims and lawsuits, amend SB 132 to provide that in the event the

defendant public agency or officer prevails, or if the complaint is found to be frivolous or

not in good faith, the public employer or officer may recover litigation costs and attorney

fees. It should not require a separate lawsuit to be initiated for a public employer or officer

to recover these costs.

•

Amend SB 132 to exclude actions based upon alleged improper disciplinary actions, as

there is currently an adequate remedy at law through the State Personnel Act and the

appeals process from those administrative decisions.

•

Amend SB132 to require at least some evidence of unlawful or improper conduct to

constitute a “good faith" belief that such conduct has occurred. Requiring a good faith

belief to be based upon only whatever facts may be available to the public employee is an

undefined minimal threshold.

GM/bb