Micallef v. Harrah's Ricon Casino & Resort (agency decision, July 5, 2018)

Plain-English summary

Patricia Micallef alleged that Harrah's Rincon Casino and Resort violated Sarbanes-Oxley by firing her after she reported a work injury, fire hazards near oxygen tanks, and alleged misappropriation of employee tips. The Board considered whether those disclosures were protected by the statute. It agreed with the ALJ that Sarbanes-Oxley does not cover reports of every allegedly illegal act and requires an objectively reasonable belief that the conduct falls within the fraud, securities, SEC-rule, or shareholder-fraud categories named in the law. Micallef presented no evidence supporting such a belief for her injury, safety, or tip complaints. The Board therefore affirmed summary decision for Harrah's and dismissed the complaint.

Decision snapshot

• Cited authorities: 18 U.S.C. § 1514A; 29 C.F.R. § 18.40(d); 29 C.F.R. § 18.54(c)
• Outcome: Summary decision for Harrah's affirmed; complaint dismissed.
• Key point: A Sarbanes-Oxley complainant must link the reported conduct to an enumerated fraud or securities category through an objectively reasonable belief.

Full text (DOL official public release)

U.S. Department of Labor Administrative Review Board
200 Constitution Avenue, N.W.
Washington, D.C. 20210

  In the Matter of:

  PATRICIA MICALLEF,                                      ARB CASE NO. 16-095

                  COMPLAINANT,                            ALJ CASE NO. 2015-SOX-025

         v.                                               DATE: July 5, 2018

  HARRAH’S RINCON CASINO & RESORT,
  HCAL, LLC, and CAESAR’S
  ENTERTAINMENT CORPORATION,

                  RESPONDENTS.


  BEFORE:         THE ADMINISTRATIVE REVIEW BOARD

  Appearances:

  For the Complainant:
         Patricia Micallef, pro se, La Jolla, California

  For the Respondents:
         Maria C. Roberts, Esq. and Ryan Blackstone-Gardner, Esq.; Johnson Greene &
         Roberts, San Diego, California

  Before: Joanne Royce, Administrative Appeals Judge; and Leonard C. Howie III,
  Administrative Appeals Judge



                              FINAL DECISION AND ORDER

          Patricia Micallef filed a complaint with the United States Department of Labor alleging
  that her employer, Harrah’s Rincon Casino and Resort, violated the employee protection
  provisions of Section 806 of the Corporate and Criminal Fraud Accountability Act of 2002 of

USDOL/OALJ REPORTER PAGE 1
 the Sarbanes-Oxley Act (SOX) 1 when it fired her in October 2012 after she failed to contact
the company or return to work. Harrah’s filed a motion for summary decision seeking
dismissal of the complaint. 2 An Administrative Law Judge (ALJ) dismissed Micallef’s
complaint concluding that Micallef failed to allege specific facts or present evidence to show
her objectively reasonable belief that her disclosures related to the protected categories of law
enumerated in SOX. We affirm.

                                          BACKGROUND

          Micallef became a table games dealer for Harrah’s 3 in November 2006. The
  following year, Harrah’s implemented a credit-hour program in which employees could
  earn additional paid time off for perfect attendance, volunteerism, and overtime. Exhibit
  4. In September 2009, Micallef was elected to a Toke Committee responsible for counting
  gratuities for all shifts of table dealers and delivering the money to the casino cage, which
  reported these earnings to the payroll department. On September 16, 2010, Micallef sent
  an email to members of the Employee Action Committee in which she discussed employee
  concerns about Harrah’s incentive program. Micallef also alleges that in or around
  September 2010 she raised concerns with managers about misappropriation of employee
  tips.

          In November 2010 she took an extended leave of absence. Nearly a year later,
  Micallef reported to Harrah’s that she had suffered injuries to her hand while working as a
  dealer and filed a workers’ compensation claim. She was released to return to work as of
  February 21, 2012, and submitted an accommodation assessment form that ruled out her
  return to work as a dealer due to restrictions on her ability to grip or grasp and limitation
  of repetitive motion. In the next few months, Harrah’s and Micallef tried to find an
  alternative open position for which she qualified.

          On August 27, 2012, Peggy Keers, vice-president for human resources, advised
  Micallef that if she did not contact Harrah’s by September 15, 2012, the company would
  assume that she had decided not to continue with finding a suitable alternative position.
  On September 27, 2012, Harrah’s sent Micallef a letter terminating her employment; she
  did not respond.


  1
          18 U.S.C.A. § 1514A (Thomson/West 2016). The SOX’s implementing regulations
  are at 29 C.F.R. Part 1980 (2016).
  2
          See 29 C.F.R. § 18.72 (2016).
  3
          Harrah’s is located on tribal land owned by the Rincon Band of Luiseno Indians, a
  federally recognized sovereign tribe. On January 6, 2016, the ALJ properly dismissed the
  Rincon Band as a party. See Stroud v. Mohegan Tribal Gaming Auth., ARB Nos. 13-079, 14-
  013; ALJ Nos. 2013-CFP-003, 2103-ACA-003 (ARB Nov. 26, 2014).

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 Micallef filed a complaint with the Department of Labor’s Occupational Safety and
Health Administration (OSHA) on October 18, 2012, alleging that Harrah’s violated the
SOX by terminating her employment because she reported: (1) a work injury; (2)
occupational health and safety concerns, such as fire hazards near oxygen tanks and (3)
misappropriation of tips owed to employees. OSHA dismissed the complaint on June 30,
2015, and Micallef requested an ALJ hearing. 4 In response, Harrah’s filed a motion for
summary decision to which Micallef responded. On September 9, 2016, the ALJ granted
Harrah’s motion and dismissed Micallef’s complaint.

                          JURISDICTION AND STANDARD OF REVIEW

         The Secretary of Labor has delegated authority to decide this matter to the
  Administrative Review Board (ARB). 5 The ARB reviews an ALJ’s recommended decision
  granting summary decision de novo. 6 The same standard that the ALJ applies in initially
  evaluating a motion for summary decision governs our review. 7

           An ALJ may issue a summary decision if the pleadings, affidavits, and other
  evidence show that there is no genuine issue as to any material fact and the moving party
  is entitled to prevail as a matter of law. 8 In deciding such a motion, the evidence is viewed
  in the light most favorable to the non-moving party; the evidence is not weighed to
  determine the truth of the matters asserted. 9 Only if the record is “devoid of evidence that
  could reasonably be construed to support” the non-moving party’s claim should a motion
  for summary decision preclude an evidentiary hearing. 10


  4
         CX 12.
  5
         See Secretary’s Order No. 02-2012 (Delegation of Authority and Assignment of
  Responsibility to the Administrative Review Board), 77 Fed. Reg. 69,378-69, 380 (Nov. 16,
  2012).
  6
        Mehan v. Delta Air Lines, ARB No. 03-070, ALJ No. 2003-AIR-004, slip op. at 2
  (ARB Feb. 24, 2005).
  7
        Honardoost v. Peco Energy Co., ARB No. 01-030, ALJ 2000-ERA-036, slip op. at 4
  (ARB Mar. 25, 2003).
  8
        29 C.F.R § 18.40(d); Franchini v. Argonne Nat’l Lab., ARB No. 13-081, ALJ No.
  2009-ERA-014, slip op. at 10 (ARB Sept. 28, 2015) (citations omitted).
  9
         Franchini, ARB No. 13-081, slip op. at10 (citations omitted); Henderson v. Wheeling
  & Lake Erie Ry., ARB No. 11-013, ALJ No. 2010-FRS-012, slip op. at 9 (ARB Oct. 26, 2012).
  10
         See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986).

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 DISCUSSION

          The SOX’s employee protection provision prohibits covered employers and
  individuals from retaliating against employees for providing information or assisting in
  investigations related to certain fraudulent acts. That provision provides in relevant part
  that no covered employer may discharge, demote, suspend, threaten, harass, or in any other
  manner discriminate against an employee in the terms and conditions of employment
  because of any lawful act done by the employee–

                  (1) to provide information, cause information to be provided,
                  or otherwise assist in an investigation regarding any conduct
                  which the employee reasonably believes constitutes a
                  violation of section 1341 [mail fraud], 1343 [wire, radio, TV
                  fraud], 1344 [bank fraud], or 1348 [securities fraud], any rule
                  or regulation of the Securities and Exchange Commission,
                  or any provision of Federal law relating to fraud against
                  shareholders . . . .[11]

          To prevail on a complaint, an employee must prove by a preponderance of the
  evidence that (1) she engaged in activity or conduct that section 1514A protects; (2) her
  employer took unfavorable personnel action against her; and (3) the protected activity was
  a contributing factor in the adverse personnel action. 12

           The only issue on appeal is whether Micallef demonstrated in her complaint and
  opposition that she engaged in conduct the SOX protects. After reviewing the evidence in
  the light most favorable to Micallef, we agree with the ALJ’s conclusion that Micallef
  failed to present sufficient evidence that she reasonably believed her disclosures comprised
  protected activity under SOX.

          Initially, the ALJ addressed Harrah’s argument that SOX did not apply to HCAL
  because it is a privately held limited liability company in Nevada and acted exclusively
  under a management agreement with the Rincon Band in operating the casino. The ALJ
  denied summary decision on this point because Harrah’s failed to provide evidence
  supporting its assertion, and the Rincon Band could not confer sovereign immunity on a
  private party of its choosing. 13


  11
         18 U.S.C.A. § 1514A.
  12
        Klopfenstein v. PCC Flow Techs. Holdings, Inc., ARB Nos. 07-021, 07-022; ALJ No.
  2004-SOX-011, slip op. at 3-4, 6 (ARB Aug. 31, 2009).
  13
          Neither Harrah’s nor Micallef raised any objection to the ALJ’s rulings on jurisdiction
  over the named parties, or lack thereof. We need not address the issue.

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 On appeal Micallef argued that her complaints about the distribution of employees’
tips in the workplace were “directly related to fraud.” She asserted that the “intentional act
of misappropriating tips from dealers is not legal and is a form of embezzlement,
‘skimming’ as referred by the FBI.” 14

          The ALJ acknowledged that Micallef’s complaints about Harrah’s tip policy might
  have “some relevance” to its financial state; however, he ultimately found that she failed
  to present evidence that, they “relate[d] to any of the categories of fraud or securities
  violations” listed in the SOX. As the ALJ explained “SOX does not protect [an employee]
  from retaliation for reporting ‘illegal’ activities of any kind;” instead, a complainant must
  allege and support a reasonable belief that her disclosures relate to one of the enumerated
  categories of fraud or securities violation under the SOX. 15 Order at 6-7.

          We agree with the ALJ that SOX protection does not extend to (1) Micallef’s work
  injury for which she received compensation, (2) her complaints about fire hazards near
  oxygen tanks, or (3) her dispute with Harrah’s over the distribution of employee tips.
  While Micallef asserted repeatedly that her actions were related to fraud and therefore
  SOX-protected, we agree with the ALJ that “[n]owhere in her Opposition [to Harrah’s
  Motion for Summary Decision] is there any suggestion of any objectively reasonable
  belief” that supports her theory.


                                         CONCLUSION

          Micallef failed to present evidence that could reasonably be construed to support
  her claim that she engaged in protected activity. Therefore, Harrah’s is entitled to summary




  14
         Complainant’s Brief at 14.
  15
          The ALJ cited the “definitely and specifically” language of Van Asdale v. Int'l Game
  Tech, 577 F.3d 989, 996-97 (9th Cir. 2009) for the extent to which a complainant’s
  communications must relate to one of the listed categories of fraud or securities violations
  under the SOX. The ARB has since rejected this standard and held that a complainant need
  have only a reasonable belief that the complained-of conduct constitutes a violation of
  securities law, and that the belief is objectively reasonable “for an individual in [the
  employee’s] circumstances having his training and experience.” Sylvester v. Parexel Int’l,
  LLC, ARB No. 07-123, ALJ Nos. 2007-SOX-039, -042; slip op. at 14 (ARB May 25, 2011).
  We uphold the ALJ’s finding that Micallef’s evidence failed to support “any suggestion of any
  objectively reasonable belief” that her disclosures were covered under SOX. Order at 7.

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 decision as a matter of law. Accordingly, we AFFIRM the ALJ’s decision and DISMISS
Micallef’s complaint. 16

         SO ORDERED.


                                        JOANNE ROYCE
                                        Administrative Appeals Judge


                                        LEONARD C. HOWIE III
                                        Administrative Appeals Judge




  16
          Micallef submitted six exhibits to the ARB after filing her appeal and asked that her
  case be remanded to the ALJ. We reject Micallef’s submission of these exhibits because she
  failed to show that the new evidence “was not readily available prior to the closing of the
  record.” 29 C.F.R. § 18.54(c) (2017); Kumar v. Nihaki Sys., Inc., ARB No. 11-025, ALJ No.
  2010-LCA-035, slip op. at 3 n.2 (ARB May 9, 2012).

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