December 22, 2025|Franchise Frontlines
December 22, 2025 | U.S. District Court, District of Columbia | Published Opinion
Executive Summary
In a published decision, Judge Randolph D. Moss of the District of Columbia denied a prime contractor’s motion for summary judgment in a whistleblower retaliation action brought under the National Defense Authorization Act. The plaintiff, who worked on a federal project through multiple layers of subcontracting, alleged that he was removed from the project in retaliation for reporting misconduct. The defendant argued that the statute permits claims only against a worker’s direct employer. The plaintiff contended that liability extended to any contractor in the chain. The court rejected both positions, holding that the statute does not support an unlimited theory of liability but also may reach conduct by entities other than a formal employer where the challenged action is functionally equivalent to an adverse employment action.
Relevant Background
The plaintiff performed services on a FEMA project through a multi-tier contracting structure. A prime contractor engaged a subcontractor, which in turn retained another entity that employed the plaintiff. The plaintiff’s role involved providing specialized training services on the project, and his work was directed in part by personnel associated with the prime contractor and the agency.
During the course of the engagement, the plaintiff raised concerns regarding alleged mismanagement and irregularities in the project. Shortly thereafter, he was informed that he was being removed from the assignment. The parties disputed the source and nature of that decision, with the defendant maintaining that the underlying contract had been terminated by the agency and that it merely relayed that decision, while the plaintiff characterized the removal as retaliatory conduct attributable to the prime contractor.
After exhausting administrative remedies, the plaintiff filed suit under the NDAA’s whistleblower protection provisions. The defendant moved for summary judgment, arguing that the claim failed as a matter of law because the plaintiff was not its employee.
Decision
The court began with the statutory text, which prohibits retaliation against “an employee of a contractor [or] subcontractor” in connection with certain protected disclosures. The court concluded that the statute most naturally contemplates claims brought against an entity with authority comparable to that of an employer, noting that actions such as discharge or demotion are typically undertaken by an employer or a similarly situated entity.
At the same time, the court declined to adopt the defendant’s narrower position that only a direct employer may be liable. The court emphasized that the statute does not expressly limit liability to the plaintiff’s formal employer and recognized that modern federal contracting structures often involve multiple layers of entities with overlapping roles. In that context, the court explained that a rigid application of traditional employment tests may not fully capture the realities of how authority is exercised within such arrangements.
The court further observed that the appropriate analytical framework remained unsettled. Although the defendant relied on a traditional economic realities test for determining employment status, the court noted that alternative doctrines, including joint employer principles, might also be relevant. The court also suggested that the statute could potentially reach conduct by an entity that is not a formal employer but nonetheless exercises sufficient authority to take action that is functionally equivalent to an adverse employment decision, such as removing a worker from a project.
Applying these principles, the court concluded that the defendant had not carried its burden at summary judgment. The record contained unresolved factual disputes regarding the nature of the plaintiff’s relationship with the defendant and the extent of the defendant’s role in the decision to remove him from the project. The court also found that the parties had not adequately addressed the applicable legal framework, leaving open questions as to whether the defendant’s conduct fell within the statute’s scope. For these reasons, the court denied summary judgment without prejudice and invited further development of both the factual record and the governing legal analysis.
Looking Forward
This decision highlights the challenges courts face in applying traditional employment concepts to modern, multi-layered business relationships. In systems where multiple entities participate in delivering a single service—whether through government contracting, franchising, or other distributed models—the question of who exercises meaningful authority over workers may not align neatly with formal contractual relationships.
For franchisors and similarly structured organizations, the opinion underscores that liability analysis may extend beyond formal employment relationships where an entity has the practical ability to affect a worker’s continued participation in a system. Actions such as removing an individual from a project, revoking access, or otherwise limiting a worker’s ability to perform services may be scrutinized as potential functional equivalents of adverse employment actions, depending on the surrounding facts.
At the same time, the court did not adopt an expansive theory of liability. To the contrary, it rejected the notion that any contractor in a chain may be sued regardless of its relationship to the plaintiff. Instead, the decision reflects a fact-intensive inquiry that considers both the nature of the authority exercised and the structure of the underlying relationship.
The opinion also signals that existing doctrinal frameworks—such as traditional economic realities tests or joint employer analyses—may not fully resolve these issues in every case. As courts continue to confront increasingly complex operational structures, further refinement of these standards may emerge, particularly in contexts where authority is distributed across multiple entities.
Ultimately, the decision serves as a reminder that legal risk in multi-entity systems is often driven less by formal labels and more by how authority is exercised in practice. Maintaining clear boundaries regarding decision-making authority, particularly with respect to personnel and operational control, remains an important consideration in managing that risk.
This article is based solely on the opinion of the Court in this matter. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the Court’s opinion in this case.
Thomas O’Connell is a Partner at Buchalter LLP and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
This communication is not intended to create, and does not create, an attorney-client relationship or any other legal relationship. No statement herein constitutes legal advice, nor should it be relied upon or interpreted as such. This communication is for general informational purposes only and is not a substitute for legal counsel. Readers should not act or refrain from acting based on any information provided without seeking appropriate legal advice specific to their situation. For more information, visit www.buchalter.com.
