Iowa Court: Contract Workers May Sue for Wrongful Discharge

Two former Iowa Workforce Development judges may sue the agency for wrongful discharge after the Iowa Supreme Court made significant rulings in their cases on June 15 that could have broad implications for other state workers.

Susan Ackerman sued in January 2015, making eight allegations including retaliation, defamation, emotional stress, breach of contract and wrongful discharge. She appealed to the Supreme Court after a judge dismissed the wrongful discharge allegation. The judge concluded that state employees under contract have avenues to address their grievances through the contract and cannot seek monetary damages in a lawsuit.

But the state’s highest court ruled for the first time in Iowa that workers under contract have the same right to file a lawsuit as any other worker.

The court said nothing in Iowa law says a contractual employee surrenders the right to bring a claim for wrongful conduct.

“It’s a good decision for employees in Iowa,” said Ackerman’s attorney Wes Graham. He said Ackerman is relieved that after years of legal battles she’ll get her allegations against the state before a jury.

Ackerman, an American Federation of State, County and Municipal Employees union member, worked as a judge hearing unemployment appeals cases for 15 years.

After Teresa Wahlert was appointed director of the IWD by Gov. Terry Branstad in 2011, Ackerman and other judges said they were subjected to political pressure to decide cases in favor of businesses over workers.

After Ackerman and other judges testified at an Iowa Senate Government Oversight Committee hearing in August 2014 about the problems at the agency, she began receiving poor work performance ratings. She was fired in January 2015 after the agency accused her of insurance fraud. A judge dropped the charges, however, finding Ackerman was subjected to retaliatory vindictive treatment by the state.

Joseph Walsh, who led the agency’s unemployment appeals bureau, filed a whistleblower lawsuit in April 2014. He was fired after he opposed efforts by Branstad and Wahlert to make his job a political appointment, switching it from a merit position, which had job protections, to non-merit, which allowed them to fire him for any reason. Walsh notified the U.S. Department of Labor that the state was violating laws requiring judges to be insulated from political pressure. He was laid off by the agency, which claimed it was because of budgetary issues. He sued for retaliation. His lawsuit was dismissed by a judge who said Walsh should pursue his complaints through administrative channels.

The Supreme Court reversed the judge, clarifying that state employee whistleblowers have a right to sue in court or pursue an administrative remedy regardless of whether they’re merit or non-merit employees.

Walsh’s attorney Megan Flynn said the ruling has broad implications for workers who believe they have been wronged by their employer.

“Some employees may feel the district court is a better place for light to be shed on their claims,” Flynn said.

Walsh’s lawsuit now goes back to district court for a jury trial.

A spokesman for the Iowa attorney general’s office declined comment except to say that the attorneys representing the state in the cases were analyzing the decisions.

The Supreme Court upheld the dismissal in a third case filed against IWD by a long-time unemployment hearing judge.

Marlon Mormann filed a lawsuit in May 2015 alleging age discrimination after a promotion he applied for was filled with a younger staffer. Wahlert later acknowledged that she had expressed concerns that Mormann was nearing retirement. His lawsuit was dismissed by a judge who said he waited too long to file it. The Supreme Court agreed.