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Seventh Circuit Affirms Summary Judgment Ruling Against Illinois Employee Who Refused to Participate in Sale of Product Banned in New York

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A recent Seventh Circuit decision interpreting Illinois law affirmed the district court’s ruling that an employee’s refusal to engage in activity illegal in New York, but not in Illinois, was neither protected under the Illinois Whistleblower Act (“IWA”) nor under a common-law retaliatory discharge theory.

In Perez v. Staples Contract & Commercial, LLC, Perez, a sales representative with a documented history of poor performance, worked on an account that involved the sale of laundry detergent in New York.    The supplier recommended a product, but later warned that its sale in New York was illegal due to its chemical makeup.  Perez advised his supervisor that he did not feel comfortable selling an illegal product, and his supervisor told him he would “take care of it.”  Perez was terminated a few months later for poor sales production.

Perez then sued, alleging various claims including: (1) retaliation under the IWA; and (2) common-law retaliatory discharge.  The district court ruled that the New York regulation prohibiting the sale of products containing the chemical did not trigger an IWA retaliatory discharge claim.  Rather, such a claim arises only when a “clearly established policy of Illinois” is at issue.  Further, the district court found no genuine issue of material fact as to whether Perez had participated in any protected activity under the IWA, as well as insufficient evidence of retaliatory motive to defeat summary judgment.

The Seventh Circuit affirmed the district court’s summary judgment ruling, holding that Perez did not engage in a protected activity.  First, under the IWA, “an employer may not retaliate against an employee for refusing to participate in an activity that would result in a violation of a State or federal law, rule, or regulation.”  740 ILCS 174/20.  There are two aspects to such a claim: (1) the refusal to participate; and (2) the violation of a statute, rule, or regulation.  There was no dispute that the detergent’s sale in New York violated a New York state regulation.  However, Perez’s whistleblower claim did not involve “Illinois” law, as required by the use of the term “State” in the IWA, which refers to Illinois, not any other state such as New York.  Since the sale of the product did not violate Illinois law, Perez’s actions were not protected.

Second, Illinois common law prohibits an employer from terminating an employee if the termination violates a clear mandate of public policy.  A clear mandate is something that “strikes at the heart of a citizen’s social rights, duties, and responsibilities.”  Palmateer v. Int’l Harvester Co., 421 N.E.2d 876, 878-79 (Ill. 1981).  Perez argued that Illinois environmental law also regulates the sale of detergents, so it is a matter of public policy in Illinois.  However, the Seventh Circuit rejected this contention, because “there is no analog to the New York regulation within the Illinois statutory and regulatory regime.”  Consequently, Perez’s termination did not violate a clear mandate of public policy, because refusing to violate New York environmental law “did not implicate any interest related to ‘a social duty or responsibility’ or the ‘health and welfare’ of Illinois citizens.”  And, the Seventh Circuit noted, that even if the district court’s reasoning was not correct, there was still insufficient evidence to support an inference of a retaliatory motive given that Perez had a track record of failing to meet performance expectations.

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