Internal complaints of illegal acts are protected
CATHERINE Zulfer was employed by Playboy Enterprises, Inc. for about thirty years in various accounting positions. During the last eighteen months of her employment, Zulfer served as Playboy’s Senior Vice President and Corporate Controller and reported directly to Playboy’s Chief Financial Officer (CFO).
In October 2010, the CFO allegedly instructed Zulfer to prepare one million dollars in discretionary bonuses for several corporate executives without approval by Playboy’s Board of Directors. The CEO and CFO were purportedly to receive the vast majority of this sum
Zulfer says the Board always had to approve discretionary bonuses. She believed that paying the bonuses without Board approval would be dishonest to shareholders and violate company policy and accounting rules. Zulfer said she was also concerned that the CEO and CFO were attempting to embezzle Playboy assets. Therefore, Zulfer refused to follow the CFO’s instructions.
After she again refused the same demand from the CFO in January 2011, Zulfer reported to Playboy’s General Counsel and outside SEC counsel the CFO’s requests that she prepare the bonuses without Board approval. Almost immediately after this, the CFO allegedly began to retaliate against Zulfer by ostracizing her, excluding her from meetings and discussions, withholding crucial information she needed to carry out her duties, and eliminating her accounting staff. Then, the CFO announced a plan to rid the company of older employees. Zulfer, who was 56 years old, was terminated by Playboy on December 31, 2011 in a “layoff.”
Zulfer filed a case against Playboy, alleging retaliation and age discrimination. She contends that the “layoff” was a pretext for retaliation. Her position was not eliminated, but instead given to one of her subordinates. Additionally, Playboy treated her differently than any other executive who had been laid off from the company, maneuvering to eliminate the 62-week severance pay she was entitled per company policy. Playboy denied all of Zulfer’s allegations.
Employees have the right to refuse to perform work that violates the law. Employees who lawfully exercise their rights, either by refusing to violate the law or reporting violations, are protected under whistleblower and anti-retaliation laws.
Whistleblowing involves employees who provide information to a law enforcement agency because they reasonably believe that there is a violation or non-compliance with the law. If an employee suffers an adverse employment action such as a termination or demotion because of their whistleblowing activities, they may have a claim for retaliation. California’s anti-retaliation law protecting whistleblowers was recently expanded to apply to employees who complain within a company about unlawful practices. It also now applies to cases where the employee truly believed the conduct they complained about was unlawful, even if it was not.
Employees who suffer such a retaliation may be entitled to compensatory damages for lost earnings, emotional distress, attorneys’ fees and punitive damages against the employer.
In the above case against Playboy, the jury returned a verdict in favor of Ms. Zulfer. The jury found that Zulfer was illegally fired in retaliation for reporting alleged fraud within the company, in violation of federal whistleblower laws. The jury also determined that Playboy discriminated against Zulfer on the basis of age when she was fired as part of the company’s plan to reduce costs by firing older employees. The jury awarded Ms. Zulfer a total of $6 million in damages.
Since the jury also found that Playboy was “guilty of malice, fraud or oppression” in its illegal termination of Ms. Zulfer, she is also entitled to additional punitive damages. The case was reportedly resolved before the panel could consider punitive damages that might have increased the $6 million award.
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The Law Offices of C. Joe Sayas, Jr. welcomes inquiries about this topic. All inquiries are confidential and at no-cost. Atty. Sayas’ Law Office is located at 500 N. Brand Blvd. Suite 980, Glendale, CA 91203. You can contact the office at (818) 291-0088 or visit www.joesayaslaw.com.
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C. Joe Sayas, Jr., Esq. is trial attorney who has obtained several million dollar recoveries for his clients against employers and insurance companies. He has been selected as a Super Lawyer by the Los Angeles Magazine, featured in the cover of Los Angeles Daily Journal’s Verdicts and Settlements, and is a member of the Million Dollar-Advocates Forum.
