GEORGE D'ANNUNZIO,
Plaintiff-Appellant,
and
GEORGE D'ANNUNZIO, D.C.,
PROFESSIONAL ASSOCIATION,
v.
PRUDENTIAL INSURANCE COMPANY
OF AMERICA, PRUDENTIAL PROPERTY
AND CASUALTY INSURANCE COMPANY
OF NEW JERSEY, ART RYAN, ROGER
DESJADON, FRANKLIN BAGGETT, TONY
LoCASTRO, LINDA FRAISTAT, FRANK
HRUSKA and KATHY SAVVAS,
Defendants-Respondents,
and
TOM MOONEY and FIRST MANAGED CARE
OPTIONS,
Defendants.
______________________________________________________
Before Judges A.A. Rodríguez, C.S. Fisher and Yannotti.
On appeal from the Superior Court of New Jersey, Law Division, Middlesex County,
Docket No. MID-L-9342-00.
William O. Crutchlow argued the cause for appellants (Eichen Levinson, attorneys; Mr. Curtchlow,
on the brief).
J. Michael Riordan argued the cause for respondents (Bressler, Amery & Ross, attorneys;
Mr. Riordan and Paul Castronovo, on the brief).
The opinion of the court was delivered by
FISHER, J.A.D.
The Court added to this list of holdings, all of which were inspired
by the broad purposes of CEPA, by determining in Higgins that CEPA permits
a claim against an employer where an employee reports the misconduct of co-employees.
158 N.J. at 421. The Court further explained CEPA's overarching intent to provide
broad protection to workers who report unlawful activities in the workplace by referring,
in Higgins, to Governor Kean's statement when he signed the original CEPA bill
into law:
It is most unfortunate -- but, nonetheless true -- that conscientious employees have
been subjected to firing, demotion or suspension for calling attention to illegal activity
on the part of his or her employer. It is just as unfortunate
that illegal activities have not been brought to light because of the deep-seated
fear on the part of an employee that his or her livelihood will
be taken away without recourse.
[158 N.J. at 420 (quoting Office of the Governor, News Release at 1
(Sept. 8, 1986)).]
In considering the scope of N.J.S.A. 34:19-2(b) against this backdrop, we conclude that
the term "employee" should not be diluted by the Pukowsky test because many
of the Pukowsky factors have no relevance when compared to CEPA's purposes. In
addition, we observe that Pukowsky's test is not in harmony with the simple
definition provided by the Legislature in N.J.S.A. 34:19-2(b), particularly when a consideration of
that definition is illuminated by the goals the Legislature sought to vindicate in
enacting CEPA. That is, when considering the need for protecting employees from retaliation
when they engage in the important activity of blowing the whistle on illegal
activities in the workplace, it seems readily apparent that many of the Pukowsky
factors should be disregarded, particularly those factors that relate only to the terms
of compensation.
Take for example a worker, whose function is to sweep the floors of
a drug manufacturer's plant, and who witnesses a foreman instruct other workers to
dump buckets of potentially harmful materials into substances from which edible products are
made. Is it likely that the Legislature intended that this worker should not
be entitled to CEPA's protections merely because the drug manufacturer reported its weekly
payments to that worker on an IRS 1099 form instead of a W-2?
When considering the primary goals of CEPA, is it likely that the Legislature
meant to exclude from CEPA's protection such a worker because sweeping the floors
is not "an integral part" of the employer's business, or because the employer
has chosen not to allow that worker to accrue retirement benefits, or because
the drug manufacturer does not pay social security taxes on behalf of that
worker? Should it matter that the sweeper only works part-time? We can find
nothing in CEPA's provisions, or in the reasons that generated its enactment, that
would suggest the Legislature meant to create an environment that would chill such
workers, whose terms of employment are marked by such features, from reporting unlawful
activities in the workplace.
The Pukowsky factors we alluded to in the above example, if applied, would
conflict with the legislative intent by unduly limiting the class of workers who
may rely upon the protections of CEPA.
See footnote 3
In its wisdom, the Legislature defined
the scope of those workers entitled to CEPA's protections not by reference to
the mode and manner of compensation but by requiring only proof that the
worker "performs services for and under the control and direction of an employer."
N.J.S.A. 34:19-2(b). We conclude that this broad description of protected workers should not
be narrowed by judicially appending a test that excludes those who would be
defined, at common law, as independent contractors, or by appending other discordant and
disqualifying aspects of the worker's relationship to the employer that have no bearing
on the "control and direction" requirement contained in N.J.S.A. 34:19-2(b). As a result,
we hold that independent contractors are not necessarily excluded and that only the
first ("the employer's right to control the means and manner of the worker's
performance"), second ("the kind of occupation -- supervised or unsupervised") fourth ("who furnishes
the equipment and workplace") and seventh ("the manner of termination of the work
relationship") factors contained in Pukowsky, supra, 312 N.J. Super. at 182-83, have relevance,
and we conclude that those factors provide an appropriate guide for identifying those
workers who fit CEPA's definition of "employee."
Our holding is particularly compelled by CEPA's primary purpose, which is to encourage
workers to voice concerns about the unlawful activities of employers and co-workers. CEPA
exhibits no particular interest in regulating the terms of the employer-worker relationship, except
to preclude retaliation, when the worker acts in the interests of the health,
safety and welfare of the public. Cf., Lisa J. Bernt, Wrongful Discharge of
Independent Contractors: A Source-Derivative Approach To Deciding Who May Bring A Claim For
Violation of Public Policy, 19 Yale L. & Pol'y Rev. 39, 40 (2000);
Lewis L. Maltby & David C. Yamada, Beyond "Economic Realities": The Case For
Amending Federal Employment Discrimination Laws to Include Independent Contractors,
38 B.C. L. Rev.
239, 259 (1997).
It is also important to recognize a recent, growing trend in the marketplace.
In recent years, American companies have chosen to include in their workforce large
numbers of workers, who either are independent contractors or are not given the
benefits normally associated with what is normally considered to be employment. See, e.g.,
Vizcaino v. Microsoft Corp.,
97 F.3d 1187, 1189-90 (9th Cir. 1996), adhered to
on rehearing en banc,
120 F.3d 1006 (9th Cir. 1997), cert. denied,
522 U.S. 1098,
118 S. Ct. 899,
139 L. Ed.2d 884 (1998). As
a general matter, it may be true that this approach has been adopted
in order to allow "greater flexibility in staffing levels" by permitting a company's
workforce to "expand when labor needs are high, and shrink rapidly -- with
minimal legal and economic consequences -- when needs drop." Katherine M. Forster, Note,
Strategic Reform of Contingent Work,
74 S. Cal. L. Rev. 541, 542 (2001).
See also Andrea H. Brustein, Comment, Casual Workers and Employee Benefits: Staying Ahead
of the Curve, 7 U. Pa. J. Lab. & Emp. L. 695 (2005);
Kevin J. Doyle, Comment, The Shifting Legal Landscape of Contingent Employment: A Proposal
to Reform Work,
33 Seton Hall L. Rev. 641 (2003). Beyond market considerations,
it is conceivable that unscrupulous employers might also adopt this hiring approach to
limit their exposure to lawsuits by reducing the number of persons who, because
of the employer's withholding of benefits or other badges of "employment," would not
be eligible to assert statutory claims. The adoption of the Pukowsky test for
CEPA purposes would have the consequence of permitting employers to unilaterally reduce the
number of their workers entitled to CEPA's benefits. Such employers could simply engage
temporary workers or independent contractors, or decline to provide workers with the types
of benefits that the Pukowsky court found relevant in defining what it means
to be an "employee." Although the Legislature may not have contemplated this growing
phenomenon in employment trends when it enacted CEPA, we believe that CEPA was
intended to provide benefits to a broad class of workers, as demonstrated in
the decisions of our Supreme Court. See Higgins, supra,
158 N.J. 421 (CEPA
protects a worker who reports the misconduct of employees); Mehlman, supra, 153 N.J.
at 188-90 (CEPA protects a worker who reports an employer practice that violates
a foreign country's public policy); Barratt, supra, 144 N.J. at 128-30 (CEPA protects
a worker who reports the illegal act of a minority partner of an
entity that had not been formed). We, thus, garner from the current realities
of the marketplace an additional reason for applying a broader interpretation of N.J.S.A.
34:19-2(b) than the application of Pukowsky's test would allow.
By the same token, in rejecting the adoption of a test that would
exclude all independent contractors, all temporary workers, and all workers who are not
permitted the employment benefits mentioned in the Pukowsky test, we recognize that CEPA
was not intended to provide protection for all individuals with a working relationship
with an employer, but only those vulnerable to retaliation. That is, some workers
are contractually positioned in a way that frees them from the fear of
termination or other forms of retaliation, and have no critical need for CEPA's
protections. See, e.g., Casamasino v. City of Jersey City,
304 N.J. Super. 226,
241-42 (App. Div. 1997) (holding that a tenured tax assessor was not entitled
to pursue a CEPA action because he could only be removed from office
by the Director of the Division of Taxation), revd on other grounds,
158 N.J. 333 (1999),
See footnote 4
cross-appeal dismissed as improvidently granted,
162 N.J. 123 (1999). As
our Supreme Court has said, CEPA "seeks to overcome the victimization of employees
and to protect those who are especially vulnerable in the workplace from the
improper and unlawful exercise of authority of employers." Abbamont, supra, 138 N.J. at
418.
In setting parameters for the scope of "employee" in light of CEPA's overarching
concerns, we not only find relevant the first, second and fourth Pukowsky factors
because they closely relate to the "control and direction" requirement of N.J.S.A. 34:19-2(b),
but we also conclude that the seventh Pukowsky factor ("the manner of termination
of the work relationship") also has some bearing on a worker's inclusion within
CEPA's definition of "employee." In this sense, we conclude that the level of
"control and direction" required by CEPA includes a consideration of whether the employer
had the ability to terminate the worker's relationship in a manner similar to
the termination of an at-will employee. In this case, it is not disputed
that plaintiff's contract allowed PRUPAC to terminate him for any or no reason
on sixty days' notice; in that regard, his relationship with PRUPAC was hardly
different from that of an at-will employee. See LePore v. National Tool and
Mfg. Co.,
115 N.J. 226, 227 (1989) (holding that a union employee protected
by a collective bargaining agreement was in no different position than an at-will
employee and could similarly maintain an action for wrongful discharge for reporting workplace
safety violations).
Accordingly, we hold that our courts are obligated to broadly and liberally apply
the "control and direction" test prescribed in N.J.S.A. 34:19-2(b), in the sense outlined
above, when determining whether a worker may maintain a CEPA action, and that
our courts are not bound by the employee/independent contractor test, which was set
forth in Pukowsky, urged by PRUPAC, and applied by the trial judge.
-- Review[] all claims that are presented by the case manager for medical
appropriate-ness.
-- Discuss with the treating provider the treatment plan as well as alternatives
to be in compliance with the CarePaths set forth [in the AICRA regulations].
-- Participate in the development, modification and monitoring of care guidelines.
-- Participate in ongoing Peer Review including review of cases and discussion of
findings and make recommendations with case managers and providers.
-- Participat[e] in Data Analysis with emphasis on utilization of healthcare resources and
indicators of quality.
-- Provide in house coverage or be reasonably available by telephone to answer
questions or speak with providers.
-- . . . be oriented to the Principles and Procedures of Utilization
Management, Case Management, URAC Standards, Peer Review and NJ PIP CarePaths.
-- . . . maintain CME's as they pertain to his/her specialty, as
well as Case Management, Utilization Management, Quality Management and Peer Review.
-- . . . be trained [by PRUPAC] in the Clinical Review Criteria,
inclusive of the NJ PIP Reform CarePaths, and . . . assess and
assist in the development of new criteria as needed[,] . . . review
the Clinical Review Criteria on a yearly basis (or sooner should a question
arise), and make changes according to the accepted practice of the specialty.
-- . . . be a participant in the Utilization Management Committee, Quality
Management Committee, and any other committee that would require medical director attention.
-- Review all cases in which a clinical determination to certify cannot be
made by first level non-physician clinical review-ers.
The record also contains evidence of PRUPAC's control of plaintiff's daily activities. In
this regard, PRUPAC directed plaintiff to perform or adhere to the following guidelines:
1. Check the medical director log. ([T]he case managers will identify the claims and
the issues that need to be addressed). Locate the case manager and discuss
the claims, document any issues on the referral form and sign off.
2. Once the case managers issues are resolved, the team leaders will have a
log with old PIP Claims that need to be reviewed. Again, the process
would be to have the case worker provide the medical director with the
claim and a form that includes recommendations, resolution.
3. All IME issues will be reviewed by the medical director for referral and
sign off[.] (An IME referral form will be attached to each file that
will be presented).
4. New PIP Reform processes will be discussed.
5. Policies and Procedures will be developed by the Medical Director and final sign
off from the legal department.
6. Clinical Guidelines will be reviewed by the medical director, initially as well as
yearly.
7. All denials will be made by the medical director with signature and comments
on the referral form.
8. Contacts with the treating providers should they have questions in reference to the
denials made.
Once ensconced in the PIP Department, plaintiff was assigned his own cubicle, which
exhibited an identifying name plate. PRUPAC provided him with all the supplies that
he needed to do his job, such as a computer, a private telephone
line, filing cabinets, an e-mail address, a mailbox, and supplies. PRUPAC further controlled
plaintiff's performance in this regard by rejecting his request for an assistant, explaining
that this was an expense PRUPAC was unwilling to assume. In addition, plaintiff
was precluded from forwarding e-mails received at PRUPAC to his home office or
taking files home.
Evidence in the record also indicated that PRUPAC trained plaintiff on how to
use the computer system, the program for recording billable time, the plan for
implementing AICRA, the nurse case management system, and other PRUPAC policies and guidelines.
In corresponding with treating physicians, PRUPAC required that plaintiff use its form letters;
any deviation required pre-approval from plaintiff's superiors. All letters and faxes created by
plaintiff while performing his services were on PRUPAC letterhead and identified him as
chiropractic medical director, for the obvious reason that these communications were sent on
PRUPAC's behalf.
PRUPAC's ability to control plaintiff's performance was further suggested by plaintiff's assertions that
PRUPAC pressured him to meet its expected approval rate for treatment requests of
seventy-five to eighty percent. While PRUPAC denied this, LoCastro did admit at his
deposition that he expected seventy-five to eighty percent of requests to be approved
-- an expectation he conveyed to the medical directors:
And I was happy to see [the statistics when] we were in line
with where the industry was [seventy-five to eighty percent approval rate], which was
what the anticipation was. So when I had someone who was denying a
majority [of requests] that would cause a concern to me because that wasn't
the intent, that wasn't the inherent nature of the system.
Further, Savvas stated at her deposition that nurse managers stopped referring files to
plaintiff because "he seemed to be denying most of the tests." She conveyed
this to Fraistat, who asked her to "run numbers" on plaintiff's approval and
denial rates.
Additionally, plaintiff alleged he "was repeatedly told and controlled on how to perform
every aspect" of his job. For example, he said Fraistat told him to
limit his review and recommendation to chiropractic issues, as he was not qualified
to review or comment on any other matters. Plaintiff told her that he
could not do that because he had to review all relevant information before
making a recommendation. According to plaintiff, Fraistat took offense and told him that
"if she played plaintiff's attorney, she would 'chew [him] up.'" Fraistat denied telling
plaintiff to limit his review to chiropractic matters but admitted telling him to
limit his written recommendations to chiropractic matters, as other matters were "outside his
scope of license." Fraistat also told plaintiff that his recommendations were too long
and had to be limited to five lines or less. Plaintiff said he
was unable to limit himself to a certain number of written lines because
he had to adequately explain and justify his recommendations.
Fraistat also said that plaintiff improperly accused physicians of fraud in his written
recommendations. When, in August 2000, plaintiff refused to abide by Fraistat's orders in
this regard, she and Savvas had an "official counseling session" with him. According
to a memo she wrote to plaintiff's "personnel file," Fraistat told plaintiff "that
he was to do as I told him, that he was only to
discuss or document or comment on chiro care ..... PERIOD ... that is
what his role at Prudential was to be and that his documentation was
to be 5 lines or less." Fraistat further insisted that if plaintiff could
not follow those orders, "it could lead" to her recommendation of his termination.
When plaintiff continued to review and comment on files as he saw fit,
Fraistat recommended that Hruska, her immediate supervisor, begin interviewing other chiropractors for plaintiff's
position and that PRUPAC invoke the termination clause in plaintiff's contract once a
replacement was chosen. She also informed Hruska that nurse managers had stopped referring
files to plaintiff because he denied most requests. Hruska forwarded this information to
LoCastro, Hruska's direct supervisor, and said: "It would appear to be a 'will
versus skill' issue for [plaintiff]. He has the skill to do what we
need" but he "apparently [does] not [have] the will in spite of what
I consider more than ample opportunity to change." As a further result, LoCastro,
Hruska, Fraistat, Savvas and plaintiff met on September 6, 2000, during which plaintiff
was confronted with his refusal to grant more treatment requests and his refusal
to abide by Fraistat's orders.
Pursuant to a memo that LoCastro wrote documenting what occurred at the September
6, 2000 meeting, LoCastro told plaintiff that in order to continue as PRUPAC's
chiropractic medical director, he had to agree to work more closely with the
nurse managers and apologize to them; to work with providers in agreeing on
requested treatments; to identify "high volume chiropractors and consider meeting with them"; to
work more closely with the Special Investigations and Litigations Unit concerning fraud cases;
to provide training on chiropractic medicine to the Investigations and Litigations Unit; and
to modify his hours to better suit PRUPAC's needs.
The next day, September 7, 2000, two nurse managers told Savvas that plaintiff
had told them that, during the meeting, Fraistat tried to get him fired
but that LoCastro was on his side and was going to transfer him
to the Investigations Unit. Savvas reported this to Fraistat, who immediately called LoCastro
to tell him. Shortly after Fraistat spoke to LoCastro, she called plaintiff and
Savvas into her office and told plaintiff his contract was terminated because, according
to LoCastro,
he was like going outside the scope of what we thought a person
should be doing in that capacity. Like Prudential was really adamant on proper
forms and documents and letters and he was out there creating things on
his own that were falling outside the scope of our structured environment. Basically,
he was not following any of the instruction that was given to him
by management about, you know, what we expected in that capacity. Those were
the gists of it. He wasn't interacting well with the nurses, who he
had to interact with. What happened was he became ineffective because nurses were
reluctant to go to him with cases.
[Emphasis added.]
After telling plaintiff that his contract would be terminated, Fraistat then escorted him
to his cubicle, waited while he gathered his belongings, and escorted him out
of the building. According to plaintiff, that was the same way in which
PRUPAC severed its relationship with its employees.
Footnote: 1
In addition, plaintiff claimed that defendant First Managed Care Options (FMCO), a company
that contracted with PRUPAC to provide independent medical examinations for PRUPAC insureds, and
Tom Mooney, FMCO's chief executive officer, tortiously interfered with his contract with PRUPAC.
Plaintiff later voluntarily dismissed with prejudice his claims against FMCO and Mooney.
Footnote: 2
Arthur Conan Doyle, Silver Blaze (1892).
Footnote: 3
We thus find inaccurate the prediction in DaBronzo v. Roche Vitamins, Inc.,
232 F. Supp.2d 306 (D.N.J. 2002) that N.J.S.A. 34:19-2(b) would not be construed
by New Jersey courts so as to include independent contractors. We note, also,
that DaBronzo cited a few decisions of other state courts which have excluded
independent contractors from the benefits of their whistle-blowing statutes. Although the opinions of
courts of sister states may often provide guidance in resolving issues arising in
our own State, we are not persuaded by these authorities. For example, DaBronzo
cited Chilingirian v. City of Fraser,
504 N.W.2d 1 (Mich. App. 1993), where
the court held that an attorney who performed services for the city was
an independent contractor not entitled to the benefits of Michigan's whistle-blowing statute, which
defined "employee" as "a person who performs a service for wages or other
remuneration under a contract of hire, written or oral, express or implied," MCL
15.361(a). Chilingiran is enlightening only to the extent it recognized that this definition
would permit a finding that a person fitting the common law concept of
independent contractor could also fall within this definition of employee.
504 N.W 2d at
2. In addition, we are not persuaded by the unexplained dictum in Stephens
v. Prudential Ins. Co. of Am.,
717 N.Y.S.2d 144, 145 (App. Div. 2000)
that New York's definition of employee in its whistle-blowing statute did not include
the plaintiff because he "was clearly an independent contractor, not respondent's employee." We
also will not follow McClure v. American Family Mut. Ins. Co.,
29 F.
Supp.2d 1046, 1061 (D. Minn. 1998), affd,
223 F.3d 845 (8th Cir.
1998) because its holding was based upon a definition of "employee" in Minnesota's
whistle-blowing statute that expressly excluded independent contractors. See Minn. Stat. § 181.931(2) ("'Employee' means
a person who performs services for hire in Minnesota for an employer. Employee
does not include an independent contractor.").
Footnote: 4
The Supreme Court reversed, determining that plaintiff was a de facto officer who
had not attained tenure. 158 N.J. at 351.
Footnote: 5
AICRA limits insurance coverage for automobile accident injuries to treatments that are "medically
necessary." N.J.S.A. 39:6A-1.1. A treatment is medically necessary if it "is consistent with
the clinically supported symptoms . . . [and] is the most appropriate level
of service." N.J.A.C. 11:3-4.2. AICRA defines a medical director as a licensed doctor
who reviews pre-approval requests and determines whether the requested treatment is medically necessary.
N.J.A.C. 11:3-4.7(c)(1). Only a licensed medical doctor may deny coverage of a treatment
as not medically necessary. N.J.A.C. 11:3-4.7(c)(4).
A-