Managing Whistleblower Employees

Whistleblower claims continue to increase, and employers across the country are becoming more and more likely to run into such a claim.  Damage awards for whistleblower claims often range into the millions of dollars.  Given the severity and potential crippling impact on the company such claims have, employees who “blow the whistle” and report the alleged misconduct may experience various forms of adverse action—both from management and their co-workers.  As a result, most whistleblower statutes[1] protect whistleblowers from retaliation. This article addresses best practices to manage whistleblower employees and avoid retaliation claims and additional liability.

Have Clear Anti-Retaliation Policies and Encourage Internal Reporting

Employers should consider developing clear, written guidelines on retaliation to inform their employees that the company does not tolerate unlawful retaliation against any employee who reports alleged company wrongdoing.  Setting bright line policies for employees and management will likely lead to better compliance and should prevent confusion regarding acceptable behavior and limit potential lawsuits.  Having clear, written policies in place should create trust between the employee and the company, as well as encourage employees to report issues sooner and to the appropriate party.  Employers should also provide specific detail on who an employee should report their concerns about perceived wrongdoing, and include ways for an employee to report such issues anonymously.  The following are sample anti-retaliation and complaint procedures designed to address these concerns.[2]

Whistleblower Protection.  The Company prohibits retaliation against any employee because of:

1.      The employee’s opposition to or complaint regarding a practice the employee reasonably believes to constitute employment discrimination, accounting irregularities or otherwise unlawful conduct; or

2.      The employee’s participation in an investigation, proceeding, or hearing related to the Company.

Any retaliatory adverse action because of such opposition or participation is unlawful and will not be tolerated.

Filing a Retaliation Complaint.  If you believe that you have been retaliated against in violation of this policy, you should provide a written or verbal complaint to your immediate supervisor, the Human Resources Director, or [insert additional parties] as soon as possible.  Your complaint should be as detailed as possible, including the names of individuals involved, the names of any witnesses and any documentary evidence.

All complaints of prohibited retaliation that are reported to management will be investigated.  The Company will immediately undertake and direct an effective, thorough and objective investigation of the retaliation allegations.  The investigation will be completed and a determination regarding the alleged retaliation will be made and communicated to the employee and to the person(s) accused of retaliation.

If the Company determines that an individual has suffered adverse action in retaliation for opposition to alleged employment discrimination or other alleged unlawful conduct or for participation in a proceeding related to alleged employment discrimination or other unlawful conduct, the Company will take what it considers to be immediate, effective remedial action against the person who has retaliated, including, but not limited to, termination.  The Company will also take action to deter any future retaliation.[3]

Properly Train Employees

Employers should properly train all employees on the company’s reporting procedures and anti-retaliation policies.  Training is an effective way to help ensure that management and those handling whistleblower claims understand what retaliation is and how to avoid it.  Training should address that retaliation will not be tolerated, focus on what may be considered protected activity, and highlight the different actions that are or could be considered retaliatory.  Employers should also train employees on the proper reporting procedures.

Employers should also consider training management and HR employees on the fundamentals of whistleblower law.  Having a clear understanding of the law and its requirements should help avoid inadvertently retaliating against a whistleblower.  Management and HR employees should also be trained on how to handle a whistleblower complaint.  Training should focus on remaining professional, even if the complaint is directed at the person handling the complaint, and the process of who the manager should report the complaint to once the complaint is received.

Hold Poor Performers Accountable

Employers may encounter an employee with documented performance and/or discipline issues who has also engaged in protected activity under one of the whistleblower statutes.  It is even possible that the poor performing employee engaged in protected activity to try to avoid additional discipline, or even losing his or her job.  While employers should proceed cautiously, they should not feel paralyzed by a whistleblowing employee’s activity.  Rather, employers should hold poor performers accountable and consider the following:

Has the employee engaged in protected activity? 

While courts have construed protected activity broadly,[4] if the employee has not engaged in protected activity, he or she will likely not be able to establish a retaliation claim.

Conducting the Investigation

Once an employee brings an internal whistleblower claim, the company should immediately begin an investigation to determine whether the claim has merit.  Whether the company performs the investigation internally or hires an outside investigator, the company should follow its investigation policies consistently and ensure to keep detailed documentation of all employee interviews and statements.  Employers should remind management and all employees involved in the investigation of the company’s prohibition on retaliation, and that employees who retaliate against the whistleblower will be subject to discipline.  If the employee suffered an adverse action, the employer should try to determine what led to the adverse action. 

Employers should proceed with caution when addressing the investigation’s confidentiality with the employee and his or her co-workers who may be interviewed or provide statements during the investigation.  Employers may have a policy requiring confidentiality where the investigation’s integrity is at risk,[5] (i.e. an employee may corrupt the investigation if he learns about it).  However, that policy should have a carve out provision that allows the employee to report possible violations of federal or state law to a governmental authority or for the employee to testify in government proceedings.[6] 

Employers should also ensure that the whistleblower’s identity is not disclosed to individuals about whom the whistleblower complained.[7]  This may be difficult where the employer has received notice of litigation (or upon its reasonable anticipation of litigation)[8] and is under a duty to preserve all potentially relevant documents to the whistleblower’s claim.  In this situation, employer’s counsel must issue a litigation hold letter to “key players” of the company who are likely to have relevant information about the potential litigation.[9]  Where one of the “key players” is someone the whistleblower complained about, employer’s counsel should carefully craft the litigation hold to protect the confidentiality of the whistleblower, but also in a manner that preserves all relevant information.

Handling Government Agency Investigations

If the whistleblower reports his or her claim to a government agency, the agency may begin an investigation within the company.  While the company should follow many of the same practices as they would for an internal investigation, it must also be aware of unique issues that arise during agency investigations.  Employers should contact the government agency early in the process to understand the scope of the agency investigation, who the agency will want to interview, and schedule interview times that will minimize the impact on the business. 

Employers must also be aware that they have limited control during agency investigations as compared to an internal investigation.  The agency may not permit the employer to attend employee interviews or view employee statements.[10]  Employers should advise employees of their rights and obligations prior to any interview and, in certain situations, may consider conducting follow up interviews to determine what the employee told the government agency.  We caution, however, that conducting follow-up interviews, if done, must be done in a manner that does not appear to interfere with the government investigation or seem retaliatory in nature to employees who participated.  To the extent possible, employers should consider developing strategies to limit the disclosure of sensitive information that employees may disclose during agency interviews that may impact the workforce.

Addressing Co-Worker Retaliation

One issue that may arise following either an internal or government agency investigation is that the whistleblower’s co-workers learn of the whistleblower’s claim and may inadvertently retaliate against the whistleblower.  For example, a whistleblower’s co-workers may refuse to work with or interact with the whistleblower out of fear that the whistleblower may report the co-worker.  By ostracizing the whistleblower, the co-workers may have inadvertently retaliated against the whistleblower.[11]  If the employer knew or should have known about the co-workers’ actions and failed to adequately address it, the employer may be held liable for retaliation.[12]

While having strong anti-retaliation policies and conducting training should help prevent co-worker retaliation,[13] if the company determines that an employee engaged in unlawful retaliation in violation of company policy, it should discipline the employee pursuant to the policy.  Employers should also consider using the incident as an educational opportunity where appropriate to show that they will strictly enforce the policy, which may lead to a higher rate of compliance.

Addressing Whistleblower Misconduct

With the potential to receive a significant reward for reporting corporate fraud and false claims against the Government, many whistleblowers engage in “self-help discovery” and download or remove confidential and proprietary information in violation of a confidentiality and non-disclosure agreement. It is well-established that employees may disclose their employer’s unlawful conduct to the government, even if such disclosure is in violation of the company’s confidentiality policy.[14]  However, where the employer’s alleged conduct is not unlawful and the employee violates a confidentiality policy or agreement, the employer should consider several options. 

The company should consider disciplining the employee consistent with the company’s policies and past disciplinary actions regarding similar violations.  If the company terminates the employee, and the misappropriated information is confidential or a protectable trade secret, the company may consider filing an injunction to prevent the employee from disclosing the information.  The company may also pursue breach of contract and tortious interference claims to protect its confidential information,[15] and should consider bringing a claim for disparagement to protect its reputation where the former employee is making disparaging statements about the company to third parties who are not involved in the whistleblower action.[16]  Employers should proceed with caution, however, as some courts may consider filing such a lawsuit retaliatory.[17]

When did the employee engage in protected activity?  

If the employee recently engaged in protected activity and shortly thereafter, the employer disciplines the whistleblower, a court may hold that sufficient to show retaliation.[18]  If, however, the protected activity occurred in the distant past,[19] it will be difficult for the employee to show that any adverse action is based on his or her protected activity.  Courts have further held that where the employer simply continued the disciplinary process that began well before the employee blew the whistle, the employer is not liable on a whistleblower retaliation claim.[20]

What is the legitimate business reason?

Before taking any adverse action, the employer should ensure that it has a clear, legitimate business reason for the adverse action.  Employers should document all performance, discipline, or other work-related problems to help establish a legitimate business reason for the adverse action.  Document all post-complaint communications with the whistleblower to help determine the employee’s complaints, and potentially identify any concerns about how the company handled the complaint process.  This information will likely be useful when evaluating any potential retaliation lawsuit.  Employers should also ensure that they are consistently following company policy and that taking such action is consistent with past practice before taking adverse action. 

Conclusion

As whistleblower retaliation claims increase, employers are more likely to face such complaints.  Employers should consider following the best practices to encourage internal reporting of whistleblower claims and effectively address complaints and poor performers to ensure a productive workforce and minimize liability.

 

[1] The three major statutes protecting whistleblowers are the Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 116 Stat. 745 (“SOX”); the Fraud Enforcement and Recovery Act of 2009, Pub. L. No. 111-21, 123 Stat. 1617 (‘FERA”), which strengthened the False Claims Act, 31 U.S.C. § 3729, et seq. (“FCA”); and the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (“Dodd-Frank”). 

[2] This article does not purport to state that the following samples comply with all federal, state, and local laws and regulations.  Readers should consult with counsel to ensure this or similar language complies with applicable laws.

[3] See Gregory C. Keating, Whistleblowing & Retaliation 406-07 (5th ed. 2013).

[4] For example, under SOX, employees engage in protected activity by providing information that the employee reasonably believes is a violation of federal securities law.  See 49 U.S.C. § 42121; see also 18 U.S.C. § 1514A.  Under Dodd-Frank, several federal district courts have held that, similar to SOX, the employee need only have a reasonable belief of a possible violation and provide such information to engage in protected activity.  See, e.g., Wadler v. Bio-Rad Laboratories, Inc., 141 F. Supp. 3d 1005 (N.D. Cal. 2015); see also Kramer v. Trans-Lux Corp., 2012 WL 4444820 (D. Conn. Sept. 25, 2012); Ott v. Fred Alger Management, Inc., 2012 WL 4767200 (S.D.N.Y. Sept. 27, 2012). 

[5] See Banner Health System, 362 NLRB No. 137 (June 26, 2015) (“Only if the employer determines that such a corruption of its investigation would likely occur without confidentiality is the employer then free to prohibit its employees from discussing these matters among themselves”).

[6] See, e.g., Press Release, Securities & Exchange Commission, SEC: Companies Cannot Stifle Whistleblowers in Confidentiality Agreements (Apr. 1, 2015) http://www.sec.gov/news/pressrelease/2015-54.html (last accessed Mar. 8, 2017.)

[7] See Halliburton, Inc. v. Administrative Review Board, 771 F.3d 254 (5th Cir. 2014) (affirming ARB decision finding employer’s disclosure of SEC whistleblower’s identity to his colleagues amounted to adverse action.

[8] Simple threats of litigation do not trigger the duty to preserve where they are nothing more than “an equivocal statement of discontent.”  Cache La Poudre Feeds, LLC v. Land O’Lakes, Inc., 244 F.R.D. 614, 622 (D. Colo. 2007).

[9] Zubulake v. UBS Warburg LLC, 229 F.R.D. 422 (S.D.N.Y. 2004).

[10] However, company attorneys usually can attend interviews of management employees.

[11] See Halliburton, Inc., 771 F.3d at 262.

[12] See, e.g., Noviello v. City of Boston, 398 F.3d 76 (1st Cir. 2005).

[13] See Keating, supra note 3 at 389-90.

[14] See, e.g., Grandeau v. Cancer Treatment Centers of Am., 350 F. Supp. 2d 765, 773 (N.D. Ill. 2004); Green v. Northrom Corp., 59 F. 3d 953, 962-63 (9th Cir. 1995); see also Press Release, Securities & Exchange Commission, SEC: Companies Cannot Stifle Whistleblowers in Confidentiality Agreements (Apr. 1, 2015) http://www.sec.gov/news/pressrelease/2015-54.html (last accessed Feb. 22, 2016) (hereinafter “SEC Press Release”)

[15] JDS Uniphase Corp. v. Jennings, 473 F. Supp. 2d 697 (E.D. Va. 2007) (permitting employer to bring breach of contract action where discovery of breach occurred after the company made termination decision).

[16] Head v. Kane Co., 668 F. Supp. 2d 146 (D.D.C. 2009) (holding employer may succeed on disparagement claim where employee comments made outside whistleblower action). 

[17] See Blistein, 860 F. Supp. at 268 (noting that employer taking legal action may be retaliatory conduct under FCA); but see Poffinbarger v. Priority Health, 2011 WL 6180464 (W.D. Mich. Dec. 13, 2011) (holding threat to take legal action to recover confidential information not an adverse action under FCA).

[18] See, e.g., Van Asdale v. Int’l Game Tech., 577 F.3d 989, 1003 (9th Cir. 2009) (“causation can be inferred from timing alone where an adverse employment action follows on the heels of protected activity”) (internal quotations omitted).

[19]  Courts have found temporal gaps between four (4) and seventeen (17) months insufficient to show that the adverse action is based on protected activity.  See Feldman v. Law Enforcement Assocs. Corp., 955 F. Supp. 2d 528, 553 (E.D.N.C. 2013) (gap of sixteen to seventeen months too attenuated to establish causation under SOX claim); see also Miller v. Stifel, Nicolaus & Co., 812 F. Supp. 2d 975, 988 (D. Minn. 2011) (eight-month gap between last complaint and discharge insufficient to demonstrate protected activity was a contributing factor to termination under SOX); Riddle v. First Tennessee Bank, 497 F. App’x. 588, 596 (6th Cir. 2012) (four month gap insufficient). 

[20] See, e.g., Jones v. U.S. Postal Serv., 502 F. App’x. 930, 933-34 (Fed. Cir. 2013); see also Halloum v. Intel Corp., ARB Case No. 04-068 (ARB Jan. 31, 2006) (dismissing whistleblower retaliation claim under SOX where employee had demonstrated history of performance issues).

Print Friendly and PDF