Blowing the Whistle: Employers Must Properly Respond to Employee Allegations of Wrongdoing
White Collar Watch (July 2017 • Vol 1, Issue 2)
The Occupational Safety and Health Administration’s ("OSHA") Whistleblower Protection Program enforces the whistleblower provisions of 22 statutes protecting employees who report violations of various federal laws. Examples of the types of conduct that these laws protect include (1) participating in safety and health activities; (2) reporting a work-related injury or fatality; or (3) reporting a statutory violation. Employers are prohibited from discriminating against their employees for exercising such rights, and the prohibited conduct is retaliation against the employee for engaging in protected whistleblowing activity.1
Similarly, under the False Claims Act, any employee who is discharged, demoted, harassed, or otherwise discriminated against because of lawful acts in furtherance of an action under the act, is entitled to all relief necessary to make the employee whole, which may include reinstatement, double back pay, and compensation for special damages like litigation costs and attorneys’ fees.2
Recent OSHA Developments and Activities
Earlier this year, OSHA issued an advisory, Recommended Practices for Anti-Retaliation Programs, for public and private sector employers covered by the 22 whistleblower protection laws that it enforces. It outlines five elements of an effective anti-retaliation program: (1) management leadership, commitment, and accountability; (2) a system for listening to and resolving employees’ concerns; (3) a system for receiving and responding to reports of retaliation; (4) anti-retaliation training; and (5) program oversight.
Employees who believe in good faith that they have been retaliated against can file a complaint with the secretary of labor to request an OSHA investigation. OSHA also reviews settlement agreements between complainants and their employers to ensure that they are knowing, voluntary, fair, and in the public interest. In August 2016, OSHA issued updated criteria to evaluate whether settlement agreements impermissibly restrict or discourage protected activity. OSHA advised that it reserves the right not to approve settlements with liquidated damages provisions.3 Also, OSHA will not approve a "gag" provision that prohibits, restricts, or discourages protected activity, such as filing a complaint with a government agency, participating in an investigation, testifying in proceedings, or otherwise providing information to the government. In addition to the OSHA criteria, criminal statutes would likely prohibit such "gag" provisions, such as the Federal Blackmail Statute, 18 U.S.C. § 873, and New Jersey’s prohibition against Compounding, N.J. STAT. ANN. § 2C:29-4.
In the past six months, OSHA has engaged in a number of whistleblower protection enforcement activities that should caution employers about how to respond to a whistleblower complaint.
Recently, in an April 2017 Sarbanes-Oxley Act ("SOX") whistleblower case, OSHA ordered Wells Fargo Bank N.A. to reinstate a whistleblower and compensate him approximately $5.4 million in back pay, compensatory damages, and attorneys’ fees. The whistleblower is a former bank manager who lost his job after reporting suspected fraudulent behavior. OSHA concluded that the former manager’s whistleblower activity was protected under SOX (one of the 22 statutes that OSHA enforces) and was a contributing factor in his termination.
Compliance Policies and Recommendations
To avoid costly enforcement actions, companies should have clear compliance policies requiring employees to report, in good faith, violations of law or policy, and companies must be prepared for whistleblower and retaliation complaints before any such complaints are received. Companies should consider using anonymous complaint and retaliation hotlines, as well as having written policies and procedures outlining the proper reporting chains for whistleblower complaints and allegations of retaliation. This will help route whistleblower and retaliation complaints to the appropriate individual(s) within a company to ensure that such allegations are handled properly.
Companies also should have clear policies in place explaining that employees will not be retaliated against for making good faith whistleblower complaints or engaging in any protected activity. Anti-retaliation training should be conducted regularly. Further, companies should have a system to protect the employment status of a whistleblower or employee who engages in any protected activity from demotion, pay decreases, or termination until the complaint is fully investigated and found to be without merit.
Once a whistleblower complaint is received, employers must carefully investigate the complaint to mitigate the risk of enforcement action. Upon receipt of such a complaint, companies should begin an investigation into the merits of the complaint. Companies should seek legal advice and, if appropriate, hire independent outside counsel to conduct the investigation.
Given OSHA’s recent focus on protecting whistleblowers and the costs that companies incur when faced with OSHA enforcement action, companies should promptly reevaluate their compliance policies and procedures for handling such protected activity.
— ©2017 BLANK ROME LLP
- States also have whistleblower protection laws. For example, the New Jersey Conscientious Employee Protection Act, N.J. STAT. ANN. §§ 34:19-1 – 34:19-8 ("CEPA"), prohibits all public and private employers from retaliating against employees who disclose, object to, or refuse to participate in certain actions that the employees reasonably believe are either illegal or in violation of public policy.
- See 31 USC § 3730(h).
- Liquidated damages are damages in a predetermined sum that the parties designate during the formation of a contract for the injured party to collect as compensation upon a specific breach.
© 2017, Blank Rome LLP. All rights reserved. Please contact Blank Rome for permission to reprint. Notice: The purpose of this update is to identify select developments that may be of interest to readers. The information contained herein is abridged and summarized from various sources, the accuracy and completeness of which cannot be assured. This update should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel.