Litigation

TAX ISSUES SATISFY PUBLIC POLICY REQUIREMENT FOR ILLINOIS RETALIATORY CLAIM

By Mark P. Loftus, Esq.

The United States Court of Appeals for the Seventh Circuit recently weighed in on the "public policy" element Illinois retaliatory discharge plaintiffs must show. In Benders v. Bellows and Bellows, the plaintiff filed a three count complaint in federal court after her termination from the defendant law firm. The third count of her complaint alleged she was terminated in retaliation for threatening to report a dispute about her employement status to the IRS. The trial court granted the defendant's motion for summary judgment and Benders appealed.

The underlying facts involve a romantic relationship gone sour between the plaintiff[the office administrator] and one of the principals at the firm. In December of 2003, some months prior to plaintiff's termination, her status was changed from employee to independent contractor, pursuant to a discussion she had with a name partner at the firm. Benders claimed the change was only termporary and, after a short period of time, she was to regain her employment status. In any event, from that date until her discharge, her checks listed her as an "independent contractor".

In April of 2004, after receiving another paycheck noting her independent contractor status, plaintiff contacted Joel Bellows and reminded him that she wanted to refinance her home and needed her paystub to reflect her status as an employee. Several days later, after being informed that no change would be made, Benders advised the firm she intended to file a complaint with the IRS regarding her employment classification. Shortly thereafter, she was told to leave the firm.

In discussing the retaliatory count, the Court first noted that plaintiff was obligated to prove: 1) that she was discharged; 2) in retaliation for her activities and 3) in violation of a clear public policy. That public policy prong is not satisfied if only private interests are at stake. Defendant argued that Benders status as an employee or independent contractor involved only plaintiff's economic interests, and therefore, she couldn't show any violation of a public policy. The Court however, disagreed. The opinion notes that the federal laws classifying personnel as employee or independent contractors concern more than one employee's bank account. Those laws affect tax revenues collected by the federal government - and tax revenues are indeed a public concern. The trial court's order granting summary judgment on Count III was reversed.

Full post as published by Illinois Lawyer Blog on February 28, 2008 (boomark / email).