It's All a Matter of Degree: Fourth Circuit Upholds Four-Year Front Pay Award and Tuition Reimbursement

4 minute read | June.18.2016

*This post was drafted with contribution from Ashley Gambone, law clerk.

Affirming a SOX victory for an employee, the Fourth Circuit in a 2-1 decision in Gunther v. Deltek upheld a Department of Labor award of four-years of front pay to a former financial analyst of a software firm and also affirmed an award of tuition reimbursement for a four-year, full time, college degree program.  The Fourth Circuit’s Gunther decision discusses the standards for proving or disproving a causal connection in SOX cases, for meeting the after-acquired evidence standard to cut off damages, and for proving entitlement to front pay and other damages under SOX.

Gunther filed a SOX claim at the Department of Labor alleging that she experienced negative treatment from coworkers and supervisors and was ultimately terminated for reporting that Deltek employees were claiming meritless billing disputes with a vendor to hide internal budget shortcomings, in violation of SOX.  Deltek denied any wrongdoing and contended that Gunther was legitimately terminated for aggressive and disruptive behavior.  After a 12-day hearing, an ALJ sided with Gunther and awarded four years in front pay of $300,352 and tuition reimbursement of $30,000. The ARB affirmed the ALJ’s decision, and Deltek appealed to the Fourth Circuit.

Deltek argued that the ALJ incorrectly found a causal link between Gunther’s letter of complaint and her termination.  The Fourth Circuit, noting that there is a highly deferential standard of review of ALJ factual findings, held that the ALJ’s findings were sufficiently supported. Although Deltek argued that Gunther’s termination was based on her aggressive and disruptive behavior during a meeting with Deltek’s human resource department and in-house counsel, the ALJ had determined after hearing from the witnesses that these reasons were pretextual, and Deltek could not show the kind of “exceptional circumstances” that would allow the court to set aside the ALJ’s finding of pretext, as affirmed by the ARB.

Deltek also urged the Fourth Circuit to overturn the damages assessment, arguing that the ALJ erred in failing to apply the after-acquired evidence doctrine despite evidence that Gunther sent documents to her personal email, secretly recorded meetings, and made derogatory comments.  Based upon these acts Deltek argued it would have terminated Gunther’s employment regardless of whistleblowing. The Fourth Circuit rejected this argument, noting that Deltek had no explicit policy about recording meetings and the ALJ had found that Gunther’s negative comments were too petty to result in termination. Further, the documents Gunther emailed herself pertained specifically to her claim and she arguably did so based on the instructions of the General Counsel to collect evidence supporting her complaint. In light of these factual findings by the ALJ and affirmed by the ARB, the Fourth Circuit held that there was no reversible error.

Finally, Deltek challenged the ALJ’s award of four years of front pay and tuition reimbursement benefits as elements of Gunther’s damages, arguing that there was no evidence that Gunther’s lack of college degree would impact her ability to gain similar employment as a financial analyst, particularly given the fact that Deltek itself had hired her for this position without a college degree. The Fourth Circuit held that Gunther’s inability to be promoted to a financial position with her previous employer and her challenge finding a similar position after her termination from Deltek was sufficient evidence for the ALJ to find that her lack of college degree negatively impacted her employability and to justify the four-year front pay and tuition reimbursement as a make-whole remedy.

Judge Agee, dissenting, accused the majority of employing such a deferential standard of review that it amounted to rubber stamping the ALJ’s decision and, as a result, the majority did not adequately review the analysis the ALJ undertook to find causation between Gunther’s protected activity and termination. He also disagreed with the four years’ front pay and tuition reimbursement, which he considered “rankly speculative and not substantially supported by the record.”

Although the Fourth Circuit in Gunther v. Deltek affirmed liability and a generous front pay award to an employee under SOX, it is important to recognize that the court was not reviewing the case de novo.  Although arguably an employee-friendly decision, employers may be able to successfully distinguish Gunther from cases that reach the court in a different procedural posture going forward.