Decision benefits whistleblower in Cal State L.A. suit. (Up Front).

A whistleblower suit against California State University, Los Angeles got a boost when a three-judge panel ruled that a former employee could sue for "constructive discharge" in retaliation for discovering what she believed to be fraud at the school.

The ruling is a victory for Lillian Colores, who has alleged that money earmarked for a seismic retrofitting project on the campus was being used to remodel the office of CSULA President James Rosser.

Colores claimed she was "harassed," "humiliated" and demoted after making the allegations, which she said aggravated an existing medical condition and forced her to take disability retirement in November 1998. She sued the university in 1999.

University officials deny that Rosser used state funds to remodel his office. Rosser did ant return calls.

Though proving constructive discharge remains difficult, according to employment attorneys, the panel's decision points up the increased protections afforded whistleblowers in recent years.

While recent scandals have focused on corporate wrongdoing, the increased attention to whistleblower claims is likely to filter over to public employees, said George Preonas, a partner in the L.A. office of Seyfarth Shaw.

"It heightens the possibility that public employees are going to be more assertive in raising issues," he said. "I think what we're seeing is a recognition or a belief on the part of all employees that they need not be fearful of stepping up, regardless of who they work for."

Under California's labor code, public employees have the same rights as private employees to file whistleblower cases.

In a whistleblower case, the employee does not have to prove the allegations are true, said Tony Oncidi, an employment partner at Proskauer Rose LLP who has followed the Colores case.

"You just have to have a reasonable belief that what you were whistle-blowing about was actually happening," Oncidi said. "You have to have a reason and some objective evidence that you believe there was a violation of public policy. And that's what she is asserting here."

Expenditures questioned

Colores began working for CSULA in 1977 as a receptionist, working her way up to director of procurement, contracts and support services in 1983.

In spring of 1997, the suit says, construction company employees working on a seismic retrofit "had begun to complain that (Rosser's personal assistant) had been making unauthorized and extra-contractual directives to its personnel" as part of the remodel work in the president's office.

Colores' suit claims that because she was aware of the alleged inappropriate expenditures, the vice president of administration and finance, Steven Garcia, began openly discussing the university's plans of terminating her and stripped her of many of her responsibilities.

"We know for a fact, that is not correct," said Clara Potes-Fellow, a spokeswoman for the CSU system. "During 1996 and 1997, the entire administration building of Cal State L.A. was retrofitted using money from a grant received by the university. At the same time, the office of the president was remodeled. It was done that way because it made good business sense to do all the construction work at one time. The university, with non-state funds, paid for the portion that was the remodeling work."

Potes-Fellow said $172,000 of the $200,000 remodeling project came from a private university foundation. The remaining money was state funds earmarked for retrofitting work on the president's office, she said.

Colores, who was diagnosed in 1986 with fybromyalgia, a medical condition similar to Chronic Fatigue Syndrome that is aggravated by stress, alleges that as part of the retaliation she was given a workload that exceeded four hours a day, the maximum time she was allowed to work under doctor's orders.

The stress at CSULA made her so ill she had to take disability retirement in November 1998, the ruling says.

Potes-Fellow said Colores' responsibilities were reduced in order for her to work four hours a day and still get a full salary.

Threshold of proof

Most wrongful or constructive discharge claims appear in sexual harassment or discrimination suits, but they have periodically shown up in whistleblower cases, Oncidi said.

Constructive discharge claims are difficult because the employee has to convince a jury not only that he felt forced to quit, but that any other employee would have quit under similar conditions, said Greg Gochanour, supervisory trial attorney at the Equal Employment Opportunity Commission, which is not involved in this case.

The appellate panel found that "no reasonable employee would want to stay at the university under the conditions described in plaintiff's evidence."

The panel's decision said Rosser assured Colores job security "if plaintiff remained silent about alleged misconduct, and thus did not get him in trouble." The decision said "given the evidence suggesting Rosser's alleged misuse of university funds, a jury could reasonably conclude that Rosser's remark was a veiled threat."

Rosser and Garcia were named in Colores' original lawsuit, which included claims of discrimination, harassment, emotional distress, defamation and constructive discharge. All the claims were thrown out at the trial court level. Only the constructive dismissal claim was reinstated by the panel.

The two university officials are not named as defendants in the constructive discharge claim, which Oncidi said typically cannot be brought against individuals.

CSULA has filed a petition to have the case re-heard, according to Christine Helwick, general counsel of the California State University system. She said the university also could appeal to the California Supreme Court.

If those efforts are rejected, the case goes to trial, said Joe DiVincenzo, a partner at Remer DiVincenzo & Griffith PC representing Colores. DiVincenzo declined to comment about the case, saying only that it is an "ongoing matter."

CSULA argues its case on the technical grounds that Colores was never truly fired, and in fact can have her job back, because she took disability leave. As a result, she cannot claim she was wrongfully discharged, Helwick said. Helwick also said Colores had some performance issues.