Federal Whistleblower Protection Requirements

From: Staffing

Introduction

Whistleblowing occurs when an employee brings the wrongdoing of an employer to the attention of the proper authorities. Wrongdoing encompasses any dangerous, illegal, or unethical activity or practice engaged in by an organization or its employees. Whistleblowing may also involve bringing concerns to light about misconduct within an organization or within an independent structure associated with the organization.

The underlying purpose of whistleblower protection laws is to allow employees to report and testify about employer actions that are illegal, unhealthy, or violate public policy. For example, employees or their representative have a right to request an inspection of a workplace if they believe there is a violation of a safety or health standard, if there is any danger that threatens physical harm, or if an imminent danger exists. Anyone with knowledge of a workplace safety or health hazard may complain, and the Occupational Safety and Health Administration (OSHA) will investigate the issues reported.

Additionally, with the passage of the economic stimulus bill, the American Recovery and Reinvestment Act of 2009 (ARRA), robust whistleblower protections have been enacted to ensure that employees of private contractors and state and local governments can disclose waste, fraud, gross mismanagement, or a violation of law related to stimulus funds.

Federal Law

OSHA’s Antidiscrimination Provisions

The Occupational Safety and Health Act (OSH Act) provides protections for whistleblowing employees. Section 11(c) prohibits an employer from terminating, discriminating, or retaliating against an employee who exercises any OSH Act guaranteed right. OSHA’s regulations broadly construe both the scope of protected conduct and the scope of prohibited retaliation. For example, the scope of § 11(c) contains protections for complaints employees file with OSHA, communicate to any other governmental entity, and made only to the employer. The only qualifier is that complaints must involve work-related safety or health concerns.

Additionally, the scope of prohibited retaliation covers termination and any other negative change in the conditions or privileges of employment, including the following:

• Wage and hour reductions.
• Raise denials.
• Reduced overtime opportunities.
• Negative evaluations.
• Job transfers.

Further, employers are subject to liability where an employee’s complaint was within the realm of protected conduct and the complaint provided the employer a substantial reason (that is, not necessarily the only reason) to motivate the employer’s discriminatory action.

A discriminatory action may include any of the following:

• Firing or laying off.
• Assigning to undesirable shifts.
• Blacklisting or demoting.
• Denying overtime or promotion.
• Disciplining.
• Denial of benefits.
• Failure to hire or rehire.
• Intimidation.
• Making threats.
• Transferring.
• Reassigning work.
• Reducing pay or hours.

An employee who received retaliatory treatment as a result of exercising a protected right must file a discrimination complaint within 30 days of the alleged violation. Whistleblower complaints under any statute may be filed orally or in writing, and in any language. Additionally, OSHA accepts electronically-filed complaints on its (Whistleblower Protection Program website). OSHA ordinarily will conduct an investigation in response to the complaint and will provide notice of its determination to the complainant within 90 days. If the agency determines the complaint is well founded, it usually will attempt to resolve the matter by negotiating a settlement, which may include reinstatement and backpay. If the agency decides to pursue litigation, the courts are empowered to enjoin further violations by the employer and to order any other appropriate relief. The scope of appropriate relief encompasses a broad assortment of remedies, including ordering the rehiring of a terminated employee or the reinstatement of a demoted employee, with backpay and interest. At least one federal appeals court has said that OSHA may also seek compensatory and punitive damages in an appropriate case at no cost to the employee.

Other Corresponding Laws

Congressional acts also provide whistleblower protections. These acts protect employee reports of unsafe conditions associated with the regulatory goals of the individual acts.

OSHA-administered laws with whistleblower protections include the following:

• The Affordable Care Act.
• The Asbestos Hazard Emergency Response Act.
• The Clean Air Act.
• The Comprehensive Environmental Response, Compensation, and Liability Act.
• The Consumer Financial Protection Act.
• The Consumer Product Safety Improvement Act.
• The Energy Reorganization Act.
• The FDA Food Safety Modernization Act.
• The Federal Railroad Safety Act.
• The Federal Water Pollution Control Act.
• The International Safe Container Act.
• The National Transit Systems Security Act.
• The Pipeline Safety Improvement Act.
• The Safe Drinking Water Act.
• The Sarbanes-Oxley Act and Dodd-Frank Act.
• The Seaman’s Protection Act.
• The Solid Waste Disposal Act.
• The Surface Transportation Assistance Act.
• The Toxic Substances Control Act.
• The Wendell H. Ford Aviation Investment and Reform Act for the 21^st Century.

As with § 11(c) complaints, if an OSHA investigation determines an employer acted against an employee because of conduct protected by these statutes, the agency will attempt to resolve the matter by negotiating with the employer to restore employment, recover lost wages and benefits, or to collect other damages. Should OSHA be unable to negotiate a settlement, OSHA may take the employer to court seeking similar remedies by court order and at no expense to the employee.

The U.S. Code (U.S.C.) contains a significant number of other federal whistleblower statutes, the majority of which only apply to federal employees facing reprisals for reporting violations by government agencies or employees. However, employees of civilian defense contractors are afforded special whistleblower protections for reporting any contract-related violation to the government.

Protected Activities

The protected activities of employees typically include the following:

• Complaining about an employer’s violation of law.
• Initiating a proceeding under or for the enforcement of applicable statutes and regulations.
• Testifying in a proceeding regarding the enforcement of federal or applicable state statutes and regulations.
• Assisting or participating in any proceeding or in any other action to carry out the purposes of statutes and regulations.

Protected Employees

Those Who Report Unlawful Activities

Whistleblower statutes protect employees who report employer violations or suspected violations of federal or state statutes or regulations. To be entitled to whistleblower protection on this basis, an employee must demonstrate the following:

• The employee or the employee’s agent reported a violation of a federal or applicable state law or regulation.
• The violation was reported to a governmental body, law enforcement official, or the employer.
• The employee acted in good faith in reporting the violation.

Most state whistleblower statutes are limited in scope and application. Such statutes only provide an employee protection where an employer’s violation contravenes public interest. For instance, courts have repeatedly held that whistleblower statutes do not apply when employees have reported violations of purely internal management policies and standards, rather than the reporting of imminent danger on the employer’s premises.

Those Who Participate in an Investigation or Hearing

Whistleblower statutes protect employees who are requested by a public body or office to participate in an investigation, hearing, or inquiry.

Note: Employers may not take any adverse employment action against employees for their participation.

Those Who Refuse to Follow an Unlawful Order

Whistleblower statutes protect employees who refuse to follow orders they believe to be unlawful.

To be entitled to whistleblower protection on this basis, employees must show the following:

• The employer ordered the employee to perform the action.
• The employee genuinely believed the ordered action to be prohibited by a federal or applicable state law or regulation.
• The employee had factual basis to support that belief.
• The employee refused to obey the employer’s order and informed the employer that the refusal was based on the belief that the order was unlawful.

Those Who Report Health Care Services Violations

Whistleblower statutes protect employees who report a situation regarding the quality of health care services provided. Whistleblowers may report a violation of federal law, state law, or professionally recognized standard of a health care facility, organization, or provider. Such violations place the public at risk and should be reported.

To be entitled to whistleblower protection on this basis, an employee must demonstrate the following:

• The employee reported a situation in which the quality of health care services provided by a health care facility, organization, or provider violated either a state or federal law or a professionally recognized national clinical or ethical standard.
• The employee acted in good faith in making the report.
• The employee in good faith believed the violation potentially placed the public at risk.

Note: Employers should be aware that numerous states have implemented more concise and stringent regulations and protections for health care service whistleblowers.

Federal Defense Contractor

The federal defense contractor whistleblower statute protects against reprisal for whistleblowing any employee of a civilian contractor awarded a contract by one of the following agencies:

• The U.S. Department of Defense.
• The U.S. Department of the Army, Navy, or Air Force.
• The U.S. Coast Guard.
• The National Aeronautics and Space Administration (NASA).
• The U.S. Department of Energy.

Protection Provided

Federal Defense Contractor Whistleblower Statute

The federal defense contractor whistleblower statute prohibits the discharge or demotion of a protected employee and any other form of discrimination against the employee as reprisal for making a protected disclosure. The statute prohibits an employer from taking any adverse employment action against a protected employee if that action is motivated by the employee’s protected conduct.

In addition to not being able to discharge or demote an employee because the employee has reported illegal activity, employers may not take any of the following actions against the employee with regard to pay or terms, conditions, location, or privileges of employment:

• Discipline.
• Threaten.
• Penalize.
• Discriminate.

Employees who believe they have been subjected to a prohibited reprisal may file a complaint with the Inspector General of the agency that awarded the contract. The inspector will investigate the complaints, except those determined to be frivolous. If the Inspector General determines the complaint merits further investigation, the inspector will notify the employee, contractor, and the head of the contracting agency. Within 30 days of the release of the inspector’s findings, the employee and contractor may submit a written response to the head of the agency and at any time the agency may request additional investigative work be performed. Based on the Inspector General’s report, the head of the agency is responsible for determining whether the contractor subjected the employee to a prohibited reprisal.

If the agency head determines that a prohibited reprisal occurred, the head of the agency may take one or more of the following actions:

• Order the contractor to take affirmative action to abate the reprisal.
• Order the contractor to reinstate the person to the position that the person held before the reprisal, with compensation (including backpay), employment benefits, and other terms and conditions of employment that would apply to the person in that position if the reprisal had not been taken.
• Order the contractor to pay the employee an amount equal to the aggregate amount of all costs and expenses (including attorneys’ fees) that were reasonably incurred by the employee for bringing the complaint regarding the reprisal.

Should a contractor fail to comply with an order, the head of the agency will request that the Department of Justice file an action in court for enforcement of the order. In any such action, the court may grant appropriate relief, including injunctive relief and compensatory and exemplary damages. Within 60 days after the issuance of the order, any person adversely affected may appeal.

The Federal False Claims Act

The federal False Claims Act (FCA), located at 31 U.S.C. §§ 3729 et seq., provides for liability for triple damages and a penalty from $5,500 to $11,000 per claim for anyone who knowingly submits or causes the submission of a false or fraudulent claim to the United States.

The federal FCA also includes a whistleblower provision. Under the provision, a private person with knowledge of a false claim may bring a civil action on behalf of the U.S. government to recover funds it has paid as a result of that false claim (a qui tam action). However, a qui tam action must be brought in the name of the government and the government may elect to intervene and proceed with the action within 60 days after it receives the complaint, material evidence, and information. The court will dismiss an action or claim, unless opposed by the government, if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed:

• In a federal criminal, civil, or administrative hearing in which the government or its agent is a party.
• In a congressional, Government Accountability Office, or other federal report, hearing, audit, or investigation.
• From the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information. An original source is an individual who either:
  • Prior to a public disclosure, has voluntarily disclosed to the government the information on which allegations or transactions in a claim are based.
  • Has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and who has voluntarily provided the information to the government before filing an action.

If the government chooses to participate, then the government assumes responsibility for all of the expenses associated with the lawsuit. If the lawsuit is ultimately successful, the court may award the whistleblower who initially brought the suit between 15 and 25 percent of the proceeds of the action or settlement of the claim. Regardless of whether the government participates, the court may reduce the whistleblower’s share of the proceeds if it finds that the whistleblower planned and initiated the false claim violation. If the whistleblower is convicted of criminal conduct related to their role in the preparation or submission of the false claim, the whistleblower will be dismissed from the civil action without receiving any portion of the proceeds.

The federal FCA also contains a provision that protects a whistleblower from retaliation by an employer. The whistleblower protection applies to any employee who is discharged, demoted, suspended, threatened, harassed, or discriminated against because of the employee’s lawful conduct in furtherance of a false claim action. In such a case, the employee may bring an action in the appropriate federal district court and, if the employee prevails, is entitled to reinstatement with the same seniority status, two times the amount of backpay, interest on the backpay, and compensation for any special damages as a result of the retaliation, such as litigation costs and reasonable attorneys’ fees. A civil action for retaliation must be brought within three years after the retaliation occurred.

Environmental Acts

Various environmental acts provide protection from discharge or other discriminatory actions by employers in retaliation for employees’ good-faith complaints about safety and health hazards in the workplace.

The following acts cover all private-sector employees:

• The Clean Air Act.
• The Comprehensive Environmental Response, Compensation, and Liability Act.
• The Consumer Product Safety Improvement Act.
• The Energy Reorganization Act.
• The FDA Food Safety Modernization Act.
• The Federal Water Pollution Control Act.
• The International Safe Container Act.
• The Pipeline Safety Improvement Act.
• Safe Drinking Water Act.
• The Solid Waste Disposal Act.
• The Toxic Substances Control Act.

These acts prohibit employers from discharging or otherwise discriminating against employees in retaliation for their disclosure to the employer or to the appropriate federal agency of safety and health hazards. They also protect employees who participate in formal government proceedings in connection with health and safety hazards.

Under these acts, employees have the right to refuse to work in hazardous or unsafe conditions. The acts specifically exclude from protection the disclosure of hazards deliberately caused by the employee and they do not protect frivolous complaints.

Employees who believe they have been discriminated against in violation of the protections offered by these acts may file a complaint with the Department of Labor’s Wage and Hour Division within 30 days of the alleged violation.

Additional Stipulations

Under the following environmental statutes and the Energy Reorganization Act (ERA), it is unlawful for an employer covered by those laws to discharge or otherwise retaliate against any employee with respect to the employee’s compensation, terms, conditions, or privileges of employment because the employee, or any person acting pursuant to the employee’s request, engaged in certain protected activities:

• The Clean Air Act.
• The Comprehensive Environmental Response, Compensation, and Liability Act.
• The Federal Water Pollution Control Act.
• Safe Drinking Water Act.
• Section 211 of the ERA.
• The Solid Waste Disposal Act.
• The Toxic Substances Control Act.

Similarly, it is unlawful for an employer to intimidate, threaten, restrain, coerce, blacklist, discharge, discipline, or in any other manner retaliate against any employee because the employee has:

• Commenced or caused to be commenced, or is about to commence or cause to be commenced, a proceeding under one of the aforementioned six environmental statutes or a proceeding for the administration or enforcement of any requirement imposed under these statutes.
• Testified or is about to testify in any such proceeding.
• Assisted or participated, or is about to assist or participate, in any manner in such a proceeding or in any other action to carry out the purposes of such statutes.

With respect to the ERA, it is a violation for an employer to take the previously discussed adverse actions against an employee for:

• Notifying the employer of an alleged violation of the ERA or the Atomic Energy Act (AEA).
• Refusing to engage in any practice made unlawful by the ERA or AEA if the employee has identified the alleged illegality to the employer.
• Testifying or is about to testify before Congress or at any federal or state proceeding regarding any provision (or proposed provision) of either statute.

When filing a complaint under one of the environmental statutes, no particular form of complaint is required. However, an employee must allege — either orally or in writing and as supplemented by follow-up interviews — that they meet all of the following stipulations:

• Engaged in a protected activity.
• The employer knew or suspected that the employee engaged in the protected activity.
• The employee suffered an adverse action.
• The circumstances were sufficient to raise the inference that the protected activity was a motivating factor in the adverse action.

However, under the ERA an employee must show that the protected activity was “a contributing factor” in the adverse action alleged in the complaint. The employer can rebut this claim by showing by “clear and convincing evidence” that it would have taken the same adverse action absent the protected activity.

Note: Every employer subject to the ERA must post Your Rights Under the Energy Reorganization Act, which is a notice regarding the employee’s whistleblower rights.

The Sarbanes-Oxley Act of 2002

In response to numerous accounting scandals, President Bush signed into law the Sarbanes-Oxley Act of 2002 (SOX). The SOX imposes immediate obligations on public corporations to authenticate financial statements with the intent of restoring investor confidence in the aftermath of corruption. While the SOX mandates numerous changes to financial reporting and grants the U.S. Securities and Exchange Commission (SEC) new powers, important whistleblower protections are also a factor in supporting this new era of disclosure.

SOX protections will improve the accuracy and reliability of corporate disclosures by requiring key corporate officers and directors to endeavor in playing a larger role in the financial operations of their corporations. It is mandatory that public accounting firms observe SOX regulations.

Accounting firms affected include, but are not limited to, the following:

• Proprietorships.
• Partnerships.
• Incorporated associations.
• Corporations.
• Limited liability companies and partnerships.
• Other legal entities engaged in the practice of public accounting or preparing or issuing audit reports.

Moreover, any violation of a SOX rule or regulation equates a violation of the Securities Exchange Act of 1934 and violators will be subject to the same penalties — to the same extent — as for a violation of the Securities Exchange Act.

Audit Committee

An audit committee is a committee established by and amongst the board of directors of a corporation for the purpose of overseeing accounting and financial reporting processes and audits of the financial statements. If no such committee exists, the entire board of directors will fulfill the role.

Importantly, members of the audit committee must be independent and cannot accept any compensatory fee from the corporation or be an affiliated person of the corporation or any subsidiary.

The audit committee is directly responsible for the appointment, compensation, and oversight of the work of any accounting firm employed by that corporation to prepare or issue an audit report or related work, and each accounting firm must directly report to the audit committee.

Whistleblower Protections

Audit committees must also establish procedures for the following:

• Receipt, retention, and treatment of complaints received by the corporation regarding accounting, internal accounting controls, or auditing matters.
• Handling a whistleblowing employee’s confidential, anonymous submissions regarding questionable accounting or auditing matters of the organization.

Whistleblower Protection for Employees

No publicly traded company, officer, employee, contractor, or agent of such company may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because the employee lawfully:

• Provided information or assisted in an investigation regarding any misconduct that the employee reasonably believed to constitute a SOX or SEC regulation or any provision of federal law relating to fraud, when the information or assistance is provided to or the investigation is conducted by a federal regulatory or law enforcement agency, any member or committee of Congress, or a person with supervisory authority over the employee.
• Filed, testified, participated in, or assisted in a proceeding relating to an alleged violation.

Additionally, no predispute arbitration agreement is valid or enforceable if the agreement requires arbitration of a dispute arising under the SOX whistleblower protections.

Employees who incur discrimination may seek relief by filing a complaint with the Secretary of Labor. Such relief must be sought no later than 180 days after the date of the violation.

If the secretary fails to issue a final decision within 180 days of the filing without showing that the delay is due to the employee’s bad faith, the employee may bring an action for review in district court. Prevailing employees may be granted all relief necessary to make the employee whole; for example, reinstatement with the same seniority status the employee would have had but for the discrimination, backpay (with interest), and compensation for any special damages, including litigation costs, expert witness fees, and reasonable attorneys’ fees. Additionally, whistleblowers that bring a private action in federal court following the secretary’s failure to issue a final decision within 180 days have a statutory right to a jury trial.

Retaliation Against Informants

Whoever knowingly and with the intent to retaliate takes any action harmful to a person — including interference with the lawful employment or livelihood of the person — for providing any truthful information relating to the commission or possible commission of any federal offense to a law enforcement officer, will be fined, imprisoned up to 10 years, or both.

Dodd-Frank Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) significantly strengthened the whistleblower provisions contained in the Sarbanes-Oxley Act (SOX). The Dodd-Frank Act also established new protections for employees reporting certain alleged violations of law to the U.S. Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), or the Consumer Financial Protection Bureau (CFPB).

The amendments to SOX incorporated into the Dodd-Frank Act include the following:

• Providing protections for employees of nationally recognized statistical rating organizations or their officers, employees, contractors, subcontractors, and agents.
• Waivers and predispute arbitration agreements unenforceable. The Dodd-Frank Act includes a provision rendering unenforceable the waiver of any SOX rights and remedies by any agreement, policy, or condition of employment, including by a predispute arbitration agreement. The act specifies that no predispute arbitration agreement is valid or enforceable if the agreement requires arbitration of a dispute arising under the SOX whistleblower program protections.
• Expansion of SOX statute of limitations from 90 days to 180 days. The Dodd-Frank Act also increases the amount of time under SOX in which a whistleblower can file a complaint of retaliation with the Occupational Safety and Health Administration (OSHA) from 90 days to 180 days from the date of a violation or from the date on which the employee becomes aware of a violation.
• Right to a jury trial. Whistleblowers that bring a private action in federal court following the Department of Labor’s failure to issue a final decision within 180 days now have a statutory right to a jury trial.

Securities Exchange Commission

The Dodd-Frank Act also established two Securities Exchange Commission (SEC) whistleblower programs to protect employees reporting alleged violations of the Commodity Exchange Act and the various consumer financial protection laws. A whistleblower who gives information to the SEC’s whistleblower program about a violation of securities law can thereafter assert any claim of retaliation by their employer directly in federal court, bypassing SOX’s administrative proceedings before OSHA. Additionally, SEC whistleblowers have 6 to 10 years to bring retaliation claims against employers in federal court.

To be protected from retaliation under the new SEC whistleblower program, a whistleblower must do one of the following:

• Provide information to the SEC in accordance with the statute.
• Initiate, testify, or assist in any investigation or judicial or administrative action of the SEC based upon or related to such information.
• Make disclosures that are required or protected under SOX or SEC laws and/or regulations.

Remedies for SEC whistleblowers who bring retaliation claims include double-backpay, with interest, and a share of any government recovery against employers for providing original information about shareholder fraud.

SEC Final Rules and Reward Program

The Dodd-Frank Wall Street Reform Act also authorizes the SEC to pay rewards to individuals who provide the SEC with original information that leads to successful SEC enforcement actions and certain related actions. In passing the Dodd-Frank Act, Congress substantially expanded the agency’s authority to compensate individuals who provide the SEC with information about violations of the federal securities laws. Prior to the act, the agency’s bounty program was limited to insider trading cases and the amount of an award was capped at 10 percent of the penalties collected in the action.

On May 25, 2011, the SEC adopted rules to create a whistleblower program that rewards individuals who provide the agency with high-quality tips that lead to successful enforcement actions.

Rules Requirements

The final rules define a whistleblower as a person who provides information to the SEC relating to a possible violation of the securities laws that has occurred, is ongoing, or is about to occur. To be considered for an award, the final rules require that a whistleblower must:

1. Voluntarily provide the SEC:

In general, a whistleblower is deemed to have provided information voluntarily if the whistleblower has provided information before the government, a self-regulatory organization, or the Public Company Accounting Oversight Board asks for it directly from the whistleblower or the whistleblower’s representative.

2. With original information:

Original information must be based upon the whistleblower’s independent knowledge or independent analysis, not already known to the SEC and not derived exclusively from certain public sources.

3. That leads to the successful enforcement by the SEC of a federal court or administrative action:

A whistleblower’s information can be deemed to have led to a successful enforcement action if:

• • The information is sufficiently specific, credible, and timely to cause the commission to open a new examination or investigation, reopen a closed investigation, or open a new line inquiry in an existing examination or investigation.
  • The conduct was already under investigation when the information was submitted, and the information significantly contributed to the success of the action.
  • The whistleblower reports original information through his or her employer’s internal whistleblower, legal, or compliance procedures before or at the same time it is passed along to the commission; the employer provides the whistleblower’s information (and any subsequently-discovered information) to the commission; and the employer’s report satisfies prongs (1) or (2) above.

4. In which the SEC obtains monetary sanctions totaling more than $1 million.

The rules permit aggregation of multiple SEC cases that arise out of a common nucleus of operative facts as a single action. These may include proceedings involving the same or similar parties, factual allegations, alleged violations of the federal securities laws, or transactions or occurrences.

Exceptions

Certain people generally will not be considered for whistleblower awards under the final rules. These people include:

• People who have a pre-existing legal or contractual duty to report their information to the commission.
• Attorneys (including in-house counsel) who attempt to use information obtained from client engagements to make whistleblower claims for themselves (unless disclosure of the information is permitted under SEC rules or state bar rules).
• People who obtain the information by means or in a manner that is determined by a U.S. court to violate federal or state criminal law.
• Foreign government officials.
• Officers, directors, trustees, or partners of an entity who are informed by another person (such as by an employee) of allegations of misconduct, or who learn the information in connection with the entity’s processes for identifying, reporting and addressing possible violations of law (such as through the company hotline).
• Compliance and internal audit personnel.
• Public accountants working on SEC engagements, if the information relates to violations by the engagement client.

However, in certain circumstances, compliance and internal audit personnel as well as public accountants could become whistleblowers when:

• The whistleblower believes disclosure may prevent substantial injury to the financial interest or property of the entity or investors.
• The whistleblower believes that the entity is engaging in conduct that will impede an investigation.
• At least 120 days have elapsed since the whistleblower reported the information to their supervisor or the entity’s audit committee, chief legal officer, chief compliance officer — or at least 120 days have elapsed since the whistleblower received the information, if the whistleblower received it under circumstances indicating that these people are already aware of the information.

Certain other people — such as employees of certain agencies and people who are criminally convicted in connection with the conduct — are already excluded by Dodd-Frank. Under the final rules, the commission also will not pay culpable whistleblowers awards that are based upon either:

• The monetary sanctions that such culpable individuals themselves pay in the resulting SEC action.
• The monetary sanctions paid by entities whose liability is based substantially on conduct that the whistleblower directed, planned, or initiated.

The purpose of this provision is to prevent wrongdoers from benefitting by, in effect, blowing the whistle on themselves.

Internal Compliance Programs

The final rules do not require that employee whistleblowers report violations internally in order to qualify for an award. However, the rules strengthen incentives that had been proposed and add certain additional incentives intended to encourage employees to utilize their own company’s internal compliance programs when appropriate to do so. For instance, the rules:

• Make a whistleblower eligible for an award if the whistleblower reports internally and the company informs the SEC about the violations.
• Treat an employee as a whistleblower, under the SEC program, as of the date that employee reports the information internally — as long as the employee provides the same information to the SEC within 120 days. Through this provision, employees are able to report their information internally first while preserving their “place in line” for a possible award from the SEC.
• Provide that a whistleblower’s voluntary participation in an entity’s internal compliance and reporting systems is a factor that can increase the amount of an award, and that a whistleblower’s interference with internal compliance and reporting is a factor that can decrease the amount of an award.

Clarifying Antiretaliation Protection

Under the rules, a whistleblower who provides information to the commission is protected from employment retaliation if the whistleblower possesses a reasonable belief that the information they are providing relates to a possible securities law violation that has occurred, is ongoing, or is about to occur. In addition, the rules make it unlawful for anyone to interfere with a whistleblower’s efforts to communicate with the commission, including threatening to enforce a confidentiality agreement.

Financial Services Employees

The Dodd-Frank Act also provides protections for employees working in the consumer financial services sector. Consumer financial service employers covered by this whistleblower protection program are any that:

• Offer or provide a consumer financial product or service.
• Participate in designing, operating, or maintaining the consumer financial product or service.
• Process transactions related to the consumer financial product or service.

Such employers are prohibited from terminating or otherwise discriminating against any individual performing tasks related to the offering or provision of a consumer financial product or service because the employee or representative either has or will have taken any of the following actions:

• Provided (or caused to be provided) information, whether at the initiative of the employee or in the ordinary course of the duties of the employee, to either the employer, the Consumer Financial Protection Bureau (CFPB), or any other local, state, or federal authority or agency relating to any violation of, or act or omission that the employee reasonably believes to be a violation of, one of the laws protected by or rules promulgated by the CFPB.
• Testified in any proceeding resulting from the administration or enforcement of the act, any of the laws protected by the CFPB, or other rules promulgated by the CFPB.
• Filed or instituted, or caused to be filed or instituted, any proceeding under federal consumer financial law.
• Objected to, or refused to participate in, any activity, policy, practice, or assigned task that the employee (or other such person) reasonably believed to be in violation of any law subject to the jurisdiction of or enforced by the CFPB.

A person who believes that they were terminated or otherwise discriminated against because of one of these actions may file a complaint with the Department of Labor within 180 days of the alleged violation. Remedies for such violations include affirmative action to abate the violation, reinstatement of the employee to their prior position, backpay, compensatory damages to the employee, and, if requested by the complainant, attorney fees, any expert witness fees, and other reasonable costs. If the department finds that the complaint was frivolous or brought in bad faith, the department may direct the employee to pay to the employer a reasonable attorney fee up to $1,000.

The rights and remedies provided for consumer financial service employee whistleblowers cannot be waived, or be subject to a predispute arbitration agreement.

Consumer Product Safety Improvement Act

The Consumer Product Safety Improvement Act, located at 15 U.S.C. §§ 2051 et seq., regulates children’s product safety and consumer product safety. The act also provides protections to whistleblowers who engage in protected activity related to defective products.

Whistleblower Protections

According to the act, no manufacturer, private labeler, distributor, or retailer may discharge an employee or otherwise discriminate against an employee with respect to compensation, terms, conditions, or privileges of employment because the employee, whether at the employee’s initiative or in the ordinary course of the employee’s duties (or any person acting pursuant to a request of the employee):

• Provided, caused to be provided, or is about to provide or cause to be provided to the employer, the federal government, or the Attorney General of a state information relating to any violation of, or any act or omission the employee reasonably believes to be a violation of any provision of the act or any other act enforced by the Consumer Product Safety Commission, or any order, rule, regulation, standard, or ban under any such acts.
• Testified or is about to testify in a proceeding concerning a violation of the act.
• Assisted or participated or is about to assist or participate in a proceeding concerning a violation of the act.
• Objected to, or refused to participate in, any activity, policy, practice, or assigned task that the employee (or other such person) reasonably believed to be in violation of any provision of the act or any other act enforced by the commission, or any order, rule, regulation, standard, or ban under any such acts.

However, these whistleblower protections do not apply to an employee of a manufacturer, private labeler, distributor, or retailer who, acting without direction from such manufacturer, private labeler, distributor, or retailer (or such person’s agent), deliberately causes a violation of any requirement relating to any violation or alleged violation of any order, regulation, or consumer product safety standard under the act or any other law enforced by the commission.

Complaint Procedure

A person who believes that they have been discharged or otherwise discriminated against by any person in violation of the act may, within 180 days after the date on which the violation occurred, file (or have any person file on their behalf) a complaint with the Secretary of Labor alleging such discharge or discrimination and identifying the person responsible for such act.

Upon receipt of the complaint, the secretary will provide written notification to the person named in the complaint of all of the following:

• The filing of the complaint.
• The allegations contained in the complaint.
• The substance of evidence supporting the complaint.
• The opportunities that will be afforded to the person named in the complaint.

Within 60 days after the date of receipt of a complaint, and after affording the complainant and the person named in the complaint an opportunity to submit to the secretary a written response to the complaint and an opportunity to meet with a representative of the secretary to present statements from witnesses, the secretary will initiate an investigation and determine whether there is reasonable cause to believe that the complaint has merit. The secretary will then notify the complainant and the person alleged to have committed a violation of the secretary’s findings.

If the secretary concludes that there is reasonable cause to believe that a violation of the whistleblower protections occurred, the secretary will accompany the findings with a preliminary order providing relief. Within 30 days after the date of notification of findings, either the person alleged to have committed the violation or the complainant may file objections to the findings or preliminary order or both and request a hearing on the record.

The secretary will dismiss a complaint and will not conduct an investigation if the complainant fails to make a prima facie showing that behavior protected by the act was a contributing factor in the unfavorable personnel action alleged in the complaint. Additionally, no investigation will be conducted and no relief will be ordered if the employer demonstrates, by clear and convincing evidence, that the employer would have taken the same unfavorable personnel action in the absence of that behavior.

Within 120 days after the date of conclusion of any hearing on the record, the secretary will issue a final order providing relief or denying the complaint. At any time before issuance of a final order, a proceeding may be terminated on the basis of a settlement agreement entered into by the secretary, the complainant, and the person alleged to have committed the violation.

Remedies

If, in response to a complaint the secretary determines that a violation has occurred, the secretary will order the person who committed such violation to do the following:

• Take affirmative action to abate the violation.
• Reinstate the complainant to their former position together with compensation (including backpay) and restore the terms, conditions, and privileges associated with the complainant’s employment.
• Provide compensatory damages to the complainant.

If such an order is issued, the secretary, at the request of the complainant, will assess against the person upon whom the order is issued an amount equal to the aggregate amount of all costs and expenses (including attorneys’ fees and expert witnesses’ fees) that were reasonably incurred (as determined by the secretary) by the complainant for, or in connection with, bringing the complaint upon which the order was issued.

However, if the secretary finds that a complaint is frivolous or has been brought in bad faith, the secretary may award to the prevailing employer reasonable attorneys’ fees, not exceeding $1,000, to be paid by the complainant.

If the secretary has not issued a final decision within 210 days after the filing of the complaint, or within 90 days after receiving a written determination, the complainant may bring an action at law or equity for de novo review in the appropriate U.S. District Court with jurisdiction. The proceedings will be governed by the same legal burdens of proof as previously specified and the court will have jurisdiction to grant all relief necessary to make the employee whole, including injunctive relief and compensatory damages, including:

• Reinstatement with the same seniority status that the employee would have had, but for the discharge or discrimination.
• The amount of backpay, with interest.
• Compensation for any special damages sustained as a result of the discharge or discrimination, including litigation costs, expert witness fees, and reasonable attorney’s fees.

Note: Any person adversely affected or aggrieved by a final order may obtain review of the order.

The American Recovery and Reinvestment Act of 2009

The American Recovery and Reinvestment Act of 2009 (ARRA) was enacted to, among other purposes, preserve jobs, create jobs, promote economic recovery, and assist those most impacted by the recession. The ARRA also provides protections to state and local government and contractor whistleblowers.

According to § 1243 of the ARRA, an employee of any nonfederal employer receiving funds made available by the act may not be discharged, demoted, or otherwise discriminated against as a reprisal for disclosing to the Recovery Act Accountability and Transparency Board, an inspector general, the Comptroller General, a member of Congress, or a federal agency head — or their representatives — information that the employee reasonably believes is evidence of any of the following:

• Gross mismanagement of an executive agency contract or grant.
• Gross waste of executive agency funds.
• Substantial and specific danger to public health or safety.
• A violation of law related to an executive agency contract (including the competition for or negotiation of a contract) or grant awarded or issued to carry out the ARRA.

A nonfederal employer receiving funds made available by the ARRA is either:

• With respect to a federal contract awarded or federal grant issued to carry out the ARRA, the contractor or grantee, if the contractor or grantee is an employer.
• A state or local government if they have received funds made available by the ARRA.

Investigation of Complaints

Anyone who believes they have been subjected to a reprisal prohibited by the ARRA whistleblower protections may submit a complaint to the inspector general of the executive agency that awarded the contract or issued the grant. The inspector general will make a determination that a complaint is frivolous or submit a report of the findings within 180 days after receiving the complaint. If the inspector general is unable to complete an investigation within the 180-day period, and the complainant agrees to an extension of time, the inspector general may submit the report at the later, agreed upon time.

Unless the inspector general determines that the complaint is frivolous, the inspector general will investigate the complaint and, upon completion of the investigation, submit a report of the findings of the investigation to the complainant, their employer, the head of the federal agency that awarded the contract or issued the grant, and the board.

Remedy and Enforcement

No later than 30 days after receiving the inspector general’s report of findings, the head of the agency concerned will determine whether there is sufficient basis to conclude that the nonfederal employer has subjected the complainant to a reprisal and will either issue an order denying relief or take one or more of the following actions:

• Order the employer to take affirmative action to abate the reprisal.
• Order the employer to reinstate the complainant to the position that they held before the reprisal, together with the compensation (including backpay), employment benefits, and other terms and conditions of employment that would apply to the complainant in that position if the reprisal had not been taken.
• Order the employer to pay the complainant an amount equal to the aggregate amount of all costs and expenses (including attorneys’ fees and expert witnesses’ fees) that were reasonably incurred by the complainant for, or in connection with, bringing the complaint regarding the reprisal, as determined by the head of the agency.

If the head of an executive agency issues an order denying relief or has not issued an order within 210 days after the submission of a complaint (or in the case of an extension of time, not later than 30 days after the expiration of the extension of time) and there is no showing that such delay is due to the complainant’s bad faith, the complainant will be deemed to have exhausted all administrative remedies with respect to the complaint.

Consequently, the complainant may then bring a de novo action at law or equity against the employer to seek compensatory damages and other available relief in the appropriate district court, which will have jurisdiction over the action without regard to the amount in controversy. The action will be tried by the court with a jury at the request of either party. An inspector general determination and an agency head order denying relief is admissible in evidence in any de novo action at law or equity.

Whenever a person fails to comply with an order, the head of the agency must file an action for enforcement of the order in the applicable district court. In any such action, the court may grant appropriate relief, including injunctive relief and compensatory and exemplary damages.

Any person adversely affected or aggrieved by an order may obtain review of the order’s conformance with the ARRA, and any regulations issued to carry out the law, in an applicable court of appeals. However, petitions seeking such review must be filed within 60 days after issuance of the order by the head of the agency.

Proving a Violation of Whistleblower Laws

To prove a violation of whistleblower statutes, an employee must establish the following:

• The employee engaged in statutorily protected conduct. For example, the federal Whistleblower Protection Act of 1989 protects federal employees who claim that they have been subjected to personnel actions because of their whistleblowing activities, which extends to complaints of fraud and abuse.
• The employer took adverse employment action against the employee.
• The employer’s action was a direct result of the employee’s protected conduct.

If an employee successfully establishes that the events occurred, the employer must then articulate a legitimate nonretaliatory reason for taking the adverse employment action. If the employer does so, the employee must then show that the employer’s reason is merely a pretext for its retaliation against the employee for whistleblowing conduct.

Whistleblower Protection Act and Whistleblower Protection Enhancement Act of 2012

The Whistleblower Protection Act of 1989 (WPA) was amended by the Whistleblower Protection Act (WPEA) of 2012. The WPA provides statutory protections for federal employees who engage in whistleblowing and make a disclosure evidencing illegal or improper government activities. Under the WPA, located at 5 U.S.C. § 2302, the protections apply to most federal executive branch employees and become applicable where a personnel action is taken because of a protected disclosure made by a covered employee. Generally, whistleblower protections may be raised within one of the following four forums or proceedings:

• Employee appeals to the Merit Systems Protection Board of an agency’s adverse action against an employee, known as Chapter 77 appeals.
• Actions instituted by the Office of Special Counsel.
• Individually maintained rights of action before the Merit Systems Protection Board.
• Grievances brought by the employee under negotiated grievance procedures.

Under the WPA, an employee who refuses to obey an order that would require the employee to violate a law, rule, or regulation is protected from retaliation. The WPEA, signed into law November 2012, provides federal workers with the right to report government corruption and wrongdoing. In addition to already existing scenarios, the act protects federal employees from reprisal if they:

• Are not the first person to disclose misconduct.
• Disclose misconduct to co-workers or supervisors.
• Disclose the consequences of a policy decision.
• Whistleblow while carrying out their job duties.

Protected Disclosure

A protected disclosure under federal whistleblower protection law includes any disclosure of information that an employee, former employee, or applicant for employment reasonably believes evidences any of the following:

• Violation of any law, rule, or regulation.
• Gross mismanagement.
• Gross waste of funds.
• Abuse of authority.
• Substantial and specific danger to public health or safety.

Disclosures of such wrongdoing are covered by whistleblower protections regardless of whether they are made to the Office of the Inspector General (OIG), the Office of Special Counsel, a supervisor, member of management, or a member of Congress or congressional committee if the disclosure is not specifically prohibited by law and the information does required confidentiality in the interest of national defense or the conduct of foreign affairs.

Prohibited Personnel Practices

Federal whistleblower protection law provides legal remedies for employees or job applicants who face retaliation for making protected disclosures of fraud, waste, abuse, mismanagement, or substantial and specific danger to public safety or health.

Specifically, it is a prohibited personnel practice for federal employers to retaliate against whistleblowers by taking, failing to take, or threatening to take or not to take, a personnel action. A personnel action is any of the following:

• An appointment, promotion, disciplinary action, detail, transfer, reassignment, reinstatement, restoration, or reemployment.
• A decision concerning performance evaluations, pay, benefits, awards, education, training.
• Any other significant change in duties, responsibilities, or working conditions.

In addition, the law prohibits retaliation for the following:

• Filing an appeal, complaint, or grievance.
• Helping someone else file or testifying on their behalf.
• Cooperating with or disclosing information to the OIG.

Read more about the rights of the federal Office of Personnel Management (OPM) employees, applicants for employment, and employees of contractors who disclose fraud, waste, or abuse here.

Federal VA Accountability and Whistleblower Protection Act

The federal Department of Veterans Affairs Accountability and Whistleblower Protection Act (amends title 38 of the U.S. Code) only applies to employees of the Department of Veteran Affairs (VA). The act establishes the Office of Accountability and Whistleblower Protection to protect departmental employees who are whistleblowers and investigate complaints. The law also:

• Requires accountability of senior executives and employees.
• Reduces the of benefits for VA employees convicted of certain crimes.
• Authorizes recoupment of bonuses, awards, and relocation expenses paid to VA employees found in violation of the law.

The act modifies the available response time supervisory employees who receive notice of an adverse action because of the commission of a prohibited personnel action and grants the VA direct hiring authority for medical center directors and Veterans Integrated Service Network (VISN) directors. The act also modifies the time periods for review of adverse actions with respect to certain employees and requires training for supervisors.

Minimizing Whistleblower Complaints

Employees may be the first to witness or suspect misconduct, which may be innocent, or acts of fraud, a public danger, or some other wrongdoing. Employers must involve their employees in detecting and eliminating potential causes for whistleblowing. Listening to employees’ ethical views and clarifying the meanings and effects of fraud and other forms of malpractice may minimize whistleblower complaints. Employers should be clear that they are serious about their intolerance of all forms of wrongdoing and abuse.

Employers should take the following precautions to minimize instances of whistleblowing and to protect themselves against whistleblower claims in instances in which whistleblowing does occur:

• Make it clear that the organization is committed to eliminating fraud and abuse, whether those responsible are inside or outside of the organization.
• Notify employees about the level of severity with which issues of fraud or other wrongdoing will be treated.
• Inform employees of exactly what practices are unacceptable and encourage employees to seek clarification of questionable issues.
• Inform employees of the seriousness of raising unfounded and malicious allegations.
• Seriously assess all complaints and conduct a thorough investigation.
• Report the outcome of the investigation and any proposed action to the concerned employee.
• Respect employee confidentiality.
• Listen and respect legitimate concerns of employees about their own health or safety.
• Train supervisors to treat potential whistleblowing situations — for example, when an employee alleges that an order is illegal — with efficiency and care.
• Instruct all supervisors to refer the complaint to an ethics officer, document any conversations with the employee, and assure the employee that no retaliatory action will be taken.
• Emphasize to management and staff that it is a serious offense to attempt to deter employees from raising a legitimate concern about fraud or abuse.
• Seek the advice of counsel before taking any action, such as termination of an employee who has filed a complaint.