Whistleblower Claims are Increasing – Beware!

In the past, many whistleblower claims arose out of simple revenge.  A fired or aggrieved employee seeking retribution against his employer for a termination or demotion.  Today, however, people are reporting complaints at an ever-increasing rate under a variety of laws and statutes that encourage claims.

The history of whistleblowing law is interesting. Whistleblowing started with the enactment of the False Claims Act, in 1863.  It was implemented to catch cheating defense contractors by imposing liability on companies and individuals that were defrauding the government through a system of rewarding a reporting citizen with a percentage of the recovery.  Through 1959, the United States had this one whistleblower law.  Now, there are 60 or more such state and federal laws on the books imposed by various agencies.  The Occupation Safety and Health Administration (OSHA) is the most commonly known agency enforcing whistleblower statutes, but the IRS, SEC, Commodity Futures Trading Commission, and the National Highway Traffic Safety Administration (NHTSA), also have laws on the books.

Why are claims increasing in number? There are a variety of reasons beyond employee revenge. The increasing number of regulations, increased funding of agencies, increasing number of agencies involved and a larger scope of protected areas are increasing employee awareness and willingness to report employer misconduct.  There is also an increase in financial incentives to reporting employees. For example, the Motor Vehicle Safety Whistleblower Act allows employees or contractors of a motor vehicle manufacturer, parts supplier or dealership to report violations of federal safety laws and obtain a ten to thirty percent recovery for any sanction over $1 million that the government imposes. The sheer increase increase in number of complaints has resulted in serious citations, often resulting in prosecution by the Department of Justice.

What is protected activity under whistleblower acts? The acts generally encourage reporting of illegal activities that relate to fraud and/or endanger the public.  If companies or individuals retaliate against the “whistleblower” by any of the following methods, they subject themselves to heavy sanctions: firing or laying off, blacklisting, demoting, denying overtime or promotion, disciplining, denial of benefits, failure to hire or rehire, intimidation/harassment, making threats, reassignment affecting prospects for promotion or reducing pay or hours of an employee.

How does an employer reduce its risk of a whistleblower claim? Understand the laws and regulations relating to the employer’s particular specialty, including the identification of governmental agencies that have oversight.  Comply with applicable regulations and don’t take shortcuts, adequately communicate these regulations to employees and implement compliance in the company practices.  Create a work environment which allows employees to communicate openly with their management team without fearing retribution.

If you have additional questions regarding whistleblower complaints, please contact our office.

By:  Paul A. Sheridan