Tex. Supreme Court interprets Whistleblower Act definition of “law” including “rule adopted under a statute or ordinance.”

University of Houston v Barth, NO. 12-0358 (Tex. June 14, 2013)

This is a Texas Whistleblower case where the Texas Supreme Court, for the first time, interpreted part of the Act noting that a “law” includes a “rule adopted under a statute or ordinance.”  This is significant for cities and local government entities since many adopt personnel policies and other internal administrative rules by ordinance or their enabling legislation, which could potentially subject them to the Act.

In 1999 Barth reported to the University’s chief financial officer, internal auditor and general counsel that his college’s dean allegedly engaged in questionable accounting practices,   mishandled funds, and entered into improper contracts relating to the University. Later that same year, Barth was denied certain travel funds, his evaluation was lower, and his merit raise was lower. The internal auditor determined the Dean Stutts did not violate the penal code, but did violate University policy and the state civil laws on contracting by not following proper channels when having certain contracts approved. Barth then sued the University under the Texas Whistleblower Act and the jury found for Barth. The award went up and down the appellate ladder, even obtaining a prior remand from the Texas Supreme Court.

Upon return to the Supreme Court, the Court was asked to determine whether the administrative policies in the University are “rule[s] adopted under a statute or ordinance.” The Court held they were not since they were not enacted by the Board of Regents or pursuant to the Education Code. The Court then held that while Barth testified he believed they were laws, he failed to establish the objective prong of “good faith” given he was an experienced former practicing attorney and served on the faculty senate. Finally, the Court held Barth did not have an objective good-faith belief he was reporting state law violations to an appropriate law enforcement authority since none of the four people he reported to either make the laws or prosecute violators.  While the auditor can “investigate” that was merely an “inquiry” into malfeasance and does not equate to regulating or enforcing violations.

One of the main important things to take away from this case is if a city adopts a personnel policy pursuant to majority action or resolution, it’s an internal policy not subject to the “law” definition.  If it’s by ordinance, it could equate to a “law” under the Act and reports to the city manager might count as a report to an appropriate law enforcement authority.

If you would like to read this opinion click here.

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