By: Ty Hyderally, Esq. and Francine Foner, Esq.

The New Jersey Supreme Court recently held in a unanimous opinion that a New Jersey State Police officer who alleged that he was terminated for his refusal to destroy documents set forth sufficient facts to support an objectively reasonable belief that such activity would be fraudulent or criminal, under the Conscientious Employee Protection Act (CEPA), N.J.S.A. § 34:19-3(c)(2). Chiofalo v. State, 2019 N.J. LEXIS 914, *30-31. In reaching its decision, the Court considered the distinction between the section of CEPA covering whistleblowing of “fraudulent or criminal” activity (N.J.S.A. § 34:19-3(c)(2)) and the sections of CEPA covering whistleblowing relating to violations of a specific “statute, regulation, rule, or clear mandate of public policy.” (N.J.S.A. § 34:19-3(c)(1) and (3)). In the latter type of whistleblowing claim, an employee is required to identify a law, rule, regulation or clear mandate of public policy relating to the whistleblowing activity to avoid dismissal of the claim. However, the Court observed that a somewhat different standard applies to CEPA’s provision covering refusal to participate in “fraudulent or criminal” activity. As the Court opined: “[w]e acknowledge that ‘criminal’ or ‘fraudulent’ activity is often apparent and commonly recognizable. That distinguishes such claims from CEPA’s references in sections (c)(1) and (3) to violations of a more general ‘law, or a rule or regulation promulgated pursuant to law’ or of ‘a clear mandate of public policy,’ which can be more obscure.” Id. at *29-30. The Court further acknowledged that “there certainly are areas where conduct is so obviously criminal that one need not pinpoint a Title 2C provision to avoid dismissal of a CEPA claim.” Id. at 30

Despite this, the Court then went on to inconsistently state: “[h]owever, even in those areas [i.e., where the conduct is obviously criminal], if a defendant questions the source of law relied on by the plaintiff, that source should be provided by the plaintiff.” Id. at *30-31. However, in Chiofalo, the defendant never questioned the source of law relied upon by Plaintiff. Rather, as the Court observed “the parties appeared to take for granted …, that refusal to participate in the destruction of documents would support a CEPA claim.” Id. at *31-32. Therefore, the Court did not consider whether or not Officer Chiofalo had provided an adequate source of law for his belief that it was illegal to destroy the documents at issue. Further, although the Court referenced the Criminal statutes of Title 2C, it did not hold that a source of law for criminal or fraudulent activity would be limited to a particular statute or regulation, as opposed to common law. Thus, presumably a plaintiff could satisfy the “source of law” requirement for activity reasonably believed to be fraudulent by pointing to common law definitions of fraud, as well as codified laws governing fraudulent activities.

The Court also affirmed the Appellate Divisions decision that Plaintiff’s statement to his superior that he properly recorded his vacation time “unlike others,” was “simply too amorphous to constitute ‘whistleblowing’” of fraudulent timekeeping under CEPA.

Thus, the decision in Chiofalo protects CEPA claims relating to criminal or fraudulent activity from dismissal for failure to initially identify a source of law in Plaintiff’s complaint.  However, as the Supreme Court observed: “the better practice … surely is to identify the statutory or other basis for claiming objected-to behavior is criminal or fraudulent.” Id. at 29.

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