Legislation is “Home Run” for Whistleblowers
(Washington, D.C.) – The Government Accountability Project (GAP) is praising the newly passed Dodd-Frank Wall Street Reform and Consumer Protection Act (HR 4173) today for four cornerstones of strengthened accountability related to whistleblowing.
“Congress has hit a home run for whistleblowers,” declared GAP Legal Director Tom Devine. “This reform has teeth, because Congress wisely is protecting frontline witnesses who are critical to enforce it.”
The new legislation has four provisions strengthening whistleblower rights:
1.) Anti-retaliation rights for financial industry employees (Section 1057): The law has ‘best practice’ rights modeled after those in the Consumer Products Safety Improvement Act. Whistleblowers and those who refuse to violate the law have the right to a jury trial governed by modern legal burdens of proof to challenge retaliation (even if they lose a final decision at the administrative level); and along with reinstatement can receive back pay, compensatory damages and attorney fees along if they prevail. Companies cannot cancel any free speech or due process rights as a condition of employment.
2.) Expansion of whistleblower protection rights under the Sarbanes-Oxley law (Sections 922(c) and 929A): In 2002, the landmark Sarbanes-Oxley law for accountability at publicly-traded corporations created a paradigm shift for whistleblowers by giving them access to jury trials in court when they fail to obtain a timely ruling at the Department of Labor. Unfortunately, the majority of cases have been dismissed due to two procedural Achilles’ heels: a 90-day statute of limitations that has meant most whistleblowers’ rights expire before they even know about them; and loopholes exempting protection for employees of a parent company’s subsidiaries and affiliates, where corruption often occurs. The legislation also has been hampered by mandatory arbitration clauses as employment prerequisites that supersede statutory free speech rights, and uncertainty whether court access includes a jury trial. The new law modernizes SOX so that employees have 180 days to act on their rights; and strengthens it with best practice provisions that erase the parent-subsidiary/affiliate distinction; override mandatory arbitration clauses; and explicitly provide for jury trials.
3.) Bounty provision for CFTC and SEC disclosures (Sections 748 and 922): The law includes provisions providing payments to whistleblowers for disclosures of violations to the Securities and Exchange Commission (SEC), and the Commodities Future Trading Commission (CFTC). Government employees who blow the whistle also may receive awards for SEC disclosures. These incentives are modeled after a similar program at the IRS. GAP warns, however, that the IRS experience has been a dangerous exercise for whistleblowers. That agency has only delivered token compensation in practice.
4.) Additional protection for corporate and government whistleblowers making disclosures to the SEC and CFTC: In addition to rights in section 1057 for challenging violations of the new law, corporate employees who make disclosures either to the CFTC or SEC to further those agencies’ general missions have access to court to enforce anti-retaliation rights. (Sections 748 and 922)
Curiously, protection is inconsistent for government whistleblowers. Those who make disclosures to the SEC have court access. [Section 922(h)] Those who make CFTC disclosures are limited to administrative remedies under civil service law. [Section 748(h)(1)(B)(i)] Government employees making SEC disclosures join Nuclear Regulatory Commission and Department of Energy employees as the only federal government agency whistleblowers who currently have court access when harassed.
Devine commented, “This is a welcome precedent for federal whistleblowers, but the piecemeal reform only helps federal workers making disclosures to the SEC. After ten years of effort, it is time for Congress to restore consistent rights by completing the Whistleblower Protection Enhancement Act. Congress is on a roll providing accountability through free speech rights in the private sector. It is long past time to extend that accountability to the government.”
The law also clarifies that there is a three year statute of limitation for retaliation claims in the False Claims Act. 31 USC 3730(h) This specificity eliminates confusion from inconsistent precedents.
note: updated on July 23, 2010.