Walsh v. Wahlert, 17-0202

• Decision Date: 15 June 2018
• Docket Number: No. 17-0202,17-0202
• Citation: 913 N.W.2d 517
• Parties: Joseph WALSH, Appellant, v. Teresa WAHLERT and the State of Iowa, Appellees.
• Court: Iowa Supreme Court

913 N.W.2d 517

Joseph WALSH, Appellant,

v.Teresa WAHLERT and the State of Iowa, Appellees.

No. 17-0202

Supreme Court of Iowa.

Filed June 15, 2018

Megan Flynn and Michael J. Carroll of Coppola, McConville, Coppola, Carroll, Hockenberg & Scalise, P.C., West Des Moines, for appellant.

Thomas J. Miller, Attorney General, Jeffrey Thompson, Solicitor General, and Jeffrey C. Peterzalek, Assistant Attorney General, for appellees.

APPEL, Justice.

In this case, we consider wrongful-termination-of-employment and failure-to-hire claims brought by Joseph Walsh, a former chief administrative law judge of the Unemployment Insurance Appeals Bureau in Iowa Workforce Development (IWD), against the then-IWD director Teresa Wahlert and against the State. Walsh brought two claims. First, Walsh alleged retaliation under the whistleblower protection provisions of Iowa Code section 70A.28 (2014). The thrust of Walsh’s whistleblower claim was that he was fired because he reached out to other government officials in an attempt to prevent the IWD director and the State from unlawfully converting his position from a merit into a nonmerit position. Walsh further alleged the defendants continued to retaliate against him when he sought other positions in state government. Walsh’s second claim alleged a common law tort of wrongful termination in violation of public policy based upon the same conduct.

The defendants moved for summary judgment, which the district court granted. The district court reasoned that Walsh could not bring a claim under Iowa Code section 70A.28 because he had failed to exhaust the administrative remedies available to merit employees under Iowa Code section 8A.415. The district court also granted summary judgment on the common law public policy claim for the same reason.

Walsh appealed. For the reasons expressed below, we affirm in part and reverse in part the judgment of the district court and remand the case to the district court for further proceedings.

I. Factual and Procedural Background.

A. Factual Overview.

1. Employment of Walsh by IWD. Walsh was appointed by Governor Chet Culver to the position of Deputy Director of IWD, a nonmerit position which Walsh held from 2007 until early in January 2011. Effective January 7, 2011, Walsh became chief administrative law judge of IWD, a merit position under Iowa Code chapter 8A. As chief administrative law judge, he reported directly to the director of IWD. Governor Terry Branstad appointed Wahlert as director effective January 15, 2011.

2. Walsh notified of reclassification of position of chief administrative law judge as confidential nonmerit employee. About two years after Wahlert’s appointment, in January 2013, the department of administrative services (DAS) sent a memorandum to all department directors regarding a change in the definition of a "confidential employee" not subject to merit employment. DAS identified the position of chief administrative law judge as a confidential employee under the new definition. On April 5, Jon Nelson, the human resources manager of IWD, delivered a letter to Walsh stating that his position would no longer be covered by the merit system. The letter advised Walsh that if he believed his position did not meet the definition of confidential employee under the new administrative rule, he could appeal the determination.

Walsh met with Nelson. Walsh claims he informed Nelson that it was a violation of the Social Security Act and guidance of the United States Department of Labor (DOL) for a chief administrative law judge to be classified as a nonmerit employee. Walsh also asserts he provided documentation to Nelson. According to Walsh, Nelson agreed to put the whole matter "on hold" while he did some further research. Specifically, Walsh states that Nelson assured him that his status would not change without his knowledge. Walsh then left on vacation and returned on April 21, one day after the appeal deadline, believing the matter was placed on hold by Nelson. Upon his return, Walsh states that Nelson informed him on several occasions that DAS was still reviewing the matter. Nonetheless, Walsh asserts that Nelson informed him on May 21 that Walsh was no longer a merit employee and that his new status became effective when he was on vacation.

3. Walsh’s contact with United States Department of Labor and subsequent IWD review of reclassification. Walsh claims he contacted the DOL regional office in Chicago on May 22, 2013, and was informed that any administrative law judge, whether managerial or not, must be a merit employee. Walsh maintains he opened an official "complaint" with the DOL on that date.

Walsh informed Wahlert that he had contacted the DOL and that DAS had made a serious legal error. Walsh subsequently met with Wahlert and explained in detail what he saw as an error, along with the potential federal DOL consequences. Wahlert, who was not a lawyer, directed Walsh to contact Ryan Lamb, general counsel for DAS, to discuss the matter.

Walsh asserts he met with Lamb on May 31. According to Walsh, Lamb stated that he had relied upon Wahlert’s representation that Walsh did not spend much time deciding cases and that his position was "mostly managerial." Walsh advised Lamb that this was not the case. Walsh further asserts that Lamb told him the change in classification was not his legal decision but was Wahlert’s policy decision. Lamb agreed to contact DOL to get further information and reassess the situation.

Walsh asserts that he talked with Lamb on the phone on June 11. According to Walsh, Lamb informed him that it was not legal and/or allowable under federal DOL guidelines to make the chief administrative law judge a nonmerit employee as long as the person in the position heard cases.

4. Change in job description of chief administrative law judge by IWD results in more Walsh complaints. Shortly after the June 11 conversation between Walsh and Lamb, Wahlert called Walsh into her office for a meeting with her and Nelson. At the meeting, Wahlert provided Walsh with a new job description that required Walsh to cease hearing cases. According to Walsh, Wahlert directed him to review the new job description, think about it, and give her his input.

On June 12, Walsh emailed Wahlert, expressing discomfort with the proposed change. Wahlert responded by email declaring the new job description in effect. Walsh replied that he was processing several cases and that it was impossible for him to begin working under the new job description in the midst of deciding multiple cases. Wahlert responded that Walsh could complete the cases.

Walsh emailed complaints to the office of Governor Branstad, the DOL, and members of the IWD board on June 13. Walsh sent a second email to DOL and contacted a state senator and a state representative regarding his concerns. A week later, on June 20, Wahlert sent Walsh a letter rescinding efforts to make his position nonmerit.

5. IWD terminates Walsh through layoff. On July 15, Walsh received a letter advising him that he had been laid off. According to Walsh, IWD staff escorted him out of the office. The layoff plan that was sent to DAS characterized the layoff as a reduction in force due to a budget shortfall. Walsh claims that prior to July 15, neither Wahlert nor any person in the IWD’s financial management bureau had informed him of any budget issue. Walsh asserts that the bureau was, in fact, under budget.

6. Posttermination employment . After his termination, Walsh asserts that he attempted to mitigate his damages by seeking other employment with the State. Walsh claims that Wahlert interfered with his effort to become employed at the Iowa Division of Workers’ Compensation because he filed complaints against her with a state agency. On January 16, 2014, Walsh accepted the position of Deputy Workers’ Compensation Commissioner in the Division of Workers’ Compensation within IWD. Wahlert approved an authorization permitting Walsh to receive an advanced appointment rate.

B. Administrative and District Court Challenges.

1. Administrative proceedings before the Iowa Public Employment Relations Board. After his termination, Walsh filed a noncontract grievance and then an appeal to the Iowa Public Employment Relations Board (PERB) regarding his July 15 layoff. Walsh, however, voluntarily dismissed the appeal prior to a PERB hearing.

2. Petition filed in district court. On April 3, Walsh filed the petition in this matter in district court. He originally claimed that the defendants terminated his employment in violation of Iowa Code section 70A.28. In January 2015, Walsh filed an unresisted motion for leave to amend the petition to state a common law claim for wrongful termination in violation of public policy and to request reinstatement as part of the relief requested.

3. District court ruling on motion for summary judgment. The defendants filed a motion for summary judgment. Among other things, the defendants argued that Walsh, as a merit employee, failed to exhaust administrative remedies with PERB under Iowa Code section 8A.415 and Iowa Administrative Code rules 11—61.1 and .2. With respect to the common law claim, defendants similarly asserted that Walsh’s exclusive remedy existed under Iowa Code chapter 8A and that Walsh was not entitled to bring a common law claim outside the statutory framework. The defendants also argued that wrongful-termination claims in violation of public policy are available only for at-will employees.

Walsh resisted. He claimed that the remedy provided in Iowa Code section 70A.28 was available to merit system employees. Walsh argued that exhaustion of remedies with PERB was not required for a claim brought under section 70A.28.

Walsh further asserted that he was entitled to bring a common law claim for retaliatory discharge outside of Iowa Code section 70A.28 and without exhausting administrative remedies in Iowa Code chapter 8A. In order to bring such a common law claim for violation of public policy, Walsh...