The New Whistleblower's Handbook

by Stephen Kohn

  • Rules 16 and 17 explain the pitfalls that an employee faces when he or she reports misconduct only internally to the bosses.

  • An excellent critique of court decisions that narrowly define protected activity is contained in the Senate Report on the Whistleblower Protection Enhancement Act, S. Rep. 112-155, pp. 4-8.

  RULE 16Yes, You Are a “Whistleblower”

  Iam not a whistleblower! I was only doing my job!”

  No one takes a job intending to become a whistleblower. Picking a career-ending fight with one’s boss is never the initial intent of an employee with legitimate concerns. No one starts cherishing the idea of being a “whistleblower.” No one courts that label.

  In almost every instance, employees tagged as “whistleblowers” started out simply doing their jobs. A truck driver tells a dispatcher that his brakes need maintenance, a teacher questions why new textbooks never arrived, an engineer refuses to certify that bolts can stand up to reasonable stress, a nurse tells a physician that the hospital failed to review an X-ray; the list is nearly endless. Before employees ever think they are whistleblowers, they usually believe they are doing a good job to help the employer follow the rules. But as one judge described it, perhaps they were doing their job “too well.”

  Instead of following a Hollywood script, where a young, idealist professional stumbles upon an evil scientific plot, these cases confront issues that arise in the typical workplace. Outside of major nationally reported scandals, the real impact of whistleblowing has been documented in numerous objective corporate-sponsored studies. A 2007 PricewaterhouseCoopers study of corporate behavior within fifty-four hundred major corporations found that professional auditors were able to uncover only 19 percent of the fraud/misconduct, while law enforcement detected only 3 percent of corporate fraud. The real heroes in uncovering fraud were ordinary employees just doing their jobs. The PricewaterhouseCoopers study credited “tipsters” or whistleblowers with uncovering 43 percent of frauds. These findings remain consistent year after year. In a 2016 report published by the Association of Certified Fraud Examiners (based on a survey opened to 41,788 certified fraud examiners), “tips were the most common” fraud “detection method by a large margin.” For companies with one hundred or more employees, “tips” were the source of 43.5% of frauds detected, as compared to 1.9% from “law enforcement.” The majority of tips come from employees. Of all the classes of workers in corporate America, whistleblowers contributed the most in protecting investors and honest corporations from fraud.

  When should an employee begin to suspect that she or he may be a whistleblower? The answer is simple: as soon as possible. Without accepting this change of status, employees cannot begin to take the crucial steps to protect their careers. In the infamous 2002 Enron corporate meltdown, the whistle-blower, Sherron Watkins, sent a “heads-up” memo to her boss, Kenneth Lay. Watkins believed she was doing the right thing by alerting her boss to accounting problems, which just so happened to be the very problems that would land Enron officials in jail and cause the company to collapse. Her boss did not appreciate these disclosures and asked the corporate attorneys what whistle-blower rights Watkins enjoyed. At the time, publicly traded companies were not covered under the federal whistleblower laws. She also was not covered under Texas law.

  Given the lack of protection, Enron’s president was given a green light to fire the whistleblower. Before Watkins even knew she was a whistleblower, the company had already labeled her as such, reviewed its legal options, and commenced a strategy to “shoot the messenger.”

  This scenario is not unique. For years the Georgia Power Company assumed that any employee who contacted its internal “hotline” was a potential litigation risk. In addition, any employee who filed a “hotline” concern had his or her concerns forwarded to in-house attorneys for their review. While the worker was manipulated into thinking he or she was doing a good job, the company feared the employee was a potential whistleblower and started to build a case that could justify disciplinary action.

  It is important for employees who raise concerns about potential misconduct in the workplace to see themselves as whistleblowers, even if they have no intention of ever dropping the dime on their employer to a government agency. Most whistleblower cases begin with a straightforward report to a supervisor concerning a potential problem. Hence, it is never too early to take steps to protect oneself from retaliation. Throughout, it is crucial to ensure that disclosures, regardless of how informally they are raised (or even if such reports are encouraged or required under company policy), are protected under law.

  A company’s attorneys will carefully review a whistleblower’s exposé and will later determine whether those disclosures constituted legally protected whistleblowing. Shouldn’t the whistleblower undergo the same type of analysis before putting one’s job at risk? Unfortunately the majority of whistleblowers do not. Most whistleblowers initially raise their concerns, without thinking they may be targeting themselves as the “skunk at the picnic.”

  Internal Whistleblowing

  The fact remains that most employees initially disclose potential misconduct before reviewing their legal rights. When employees suspect that their companies may have violated the law, they typically report the issues to their first-line supervisor. They naively expect their chain of command to be appreciative. With this assumption the employees believe that their concerns will be taken seriously and investigated accordingly. If wrongdoing is proven, they believe that their company will fix the problem immediately.

  Despite employee hopefulness, the reaction of managers is typically not to sing the employees’ praise. No one likes to be told that he made a mistake, let alone from a subordinate. No one likes to be told that she may have violated a law. Corporate or political “loyalty” is often synonymous with a culture that warns employees to “mind their own business” and in doing so not to question upper-level decisions. The PricewaterhouseCoopers study understood this cultural problem and lamented that companies have all too often instilled fear and have not given “employees the confidence to do the right thing.”

  With this background, it is not surprising that one of the first major issues in whistleblower law concerned whether or not employees who did nothing more than disclose misconduct to their immediate supervisor were protected. These cases have been hard fought and concluded with mixed results. Nearly everyone has weighed in on the argument—from regulatory agencies, to Congress, to the Supreme Court.

  Kentucky Coal Dust

  The first case that wrestled with this issue involved Frank Phillips, a miner working at the Kencar Mine in Phelps, Kentucky. The mine was plagued with harmfully “excessive coal dust” and “defective electrical wiring.” These conditions resulted in “serious problems of both health and safety” for the employees. Phillips, who operated a shuttle car at the mine, informed his foreman about these dangers. Angered, his foreman called Phillips a “troublemaker,” and on April 28, 1971, after an argument over the conditions at the mine, told Phillips that he was fired. Within days upper management approved his firing for the offense of “interfering with the operation of the mine,” “abridging the rights of management,” and “refusing to obey” an order to continue working in the hazardous conditions.

  The case was heard under the 1969 Federal Mine Health and Safety Act. This law contained one of the first federal whistleblower protection provisions and would later be used as a model for numerous other federal laws covering environmental, transportation, and nuclear whistleblowers. The 1969 act explicitly protected employees who exposed safety concerns to the government but was silent about internal complaints to management. The mine owners argued that Phillips was not covered because he never raised his concerns with a federal safety inspector, had not initiated a formal proceeding, and did not testify in any case before the Mine Health and Safety Commission. In complaining to his foreman, Phillips was merely doing his job, not blowing the whistle.

  If the mine ha
d an accident, people could have died and millions of dollars would have been lost. Even without an accident, the excessive coal dust was a bomb waiting to go off, for it had the potential to make miners extremely sick. No one accused Phillips of being a bad worker. He never “ratted out” the company to any inspectors. Philips only wanted to ensure that his foreman followed mandatory safety rules. His case was no different than that of any employee, working for any company, who simply asked his or her boss to follow the necessary rules. However, the question is: Was the complaint to his foreman protected under law?

  The legal showdown occurred before the U.S. Court of Appeals for the District of Columbia Circuit, a court with significant authority, directly under the Supreme Court. Phillips stood alone against the company, who had fired him; the Bituminous Coal Operators Association (which represented the entire coal industry); and the U.S. government. The Nixon Administration supported industry and directly opposed the miner. The Department of Interior ruled that Phillips’s firing was legal. The Department of Justice defended that ruling in court.

  A three-judge panel in Washington, DC, heard the case. Judge Malcolm Wilkey wrote the majority opinion on behalf of the court. Before being named to the federal appeals court by President Nixon, Wilkey had served for years as general counsel of the Kennecott Copper Corporation. Given his background, Wilkey was no liberal activist judge.

  After painstakingly reviewing the facts of the case, on June 20, 1974, Wilkey ruled that the “answer is clear.” Miners are protected if they report “safety violations,” if only to their foreman. There was no need for an employee to contact the government and file a formal complaint. This decision was made based on the understanding that “safety costs money” and there is always a “temptation to minimize compliance with safety regulations” in order to “shave costs.” Workers at the shop-floor level are “in the best position to observe the compliance or noncompliance with safety laws.” In addition, reliance upon federal inspections “can never be frequent or thorough enough to ensure compliance.”

  Wilkey recognized that any worker who “insist(s)” that health and safety rules be “followed” could adversely impact profits by “slowing down production.” These employee whistleblowers “are not likely to be popular” with management. However, “only if” workers are “given a realistically effective channel” to raise or communicate their concerns could the safety laws of the nation be enforced. Wilkey held that raising concerns with a supervisor was the most reasonable first step in any compliance activity, and consequently it was critical that miners such as Phillips have full “protection from reprisal” upon “making complaints” to their supervisors.

  Informing the foreman of the “possible dangers” in the mine was an “essential preliminary stage” in the notification process. It was imperative that the courts and administrative agencies responsible for ensuring compliance with the laws understand the “practicalities of the situation” the average worker faces. Without protecting the method and manner used by the typical worker to report concerns, the safety law would be rendered “completely ineffective.”

  The impact of the Phillips decision was immediate and widespread. Courts adopted the resulting logic in other whistleblower contexts. Also, Congress amended the 1969 Mine Safety Act to explicitly protect internal complaints raised by miners to their supervisors. In doing so, Congress issued a formal report adopting the Phillips decision and clarifying its intent to cover internal complaints.

  The Debate Over Internal Reporting Did Not End

  Although this ruling should have ended the debate, the battle over whether concerns raised to managers were protected under whistleblower laws had only just begun. The issue was next disputed in the area of nuclear safety. In 1984 two federal appeals courts, one in Washington State and the other in Texas, issued two diametrically opposite opinions.

  The first case concerned Robert Mackowiak, a sheet metal worker at Washington Public Power Supply System (WPPS). WPPS was a nuclear plant under construction in Richland, Washington. As a certified welding inspector, Mackowiak’s job was to review the heating, ventilation, and air-conditioning systems at WPPS; and if the work on these systems failed to meet federal specifications, he was to place a “red tag” on the improperly installed items and file a “Non-Conformance Report.”

  Mackowiak was fired because he was an “overly zealous inspector.” In other words, although he had “excellent” “qualifications” and “expertise,” and was a “good inspector,” he did his job “too well” because each time he “red tagged” an item and filed a “Non-Conformance Report,” the work on those specific systems was delayed and the costs of the project increased.

  His employer complained that Mackowiak had “attitudinal problems” and would not accept “management directives.” The U.S. Court of Appeals for the Ninth Circuit explained, “[A]t times, the inspector may come into conflict with his employer by identifying problems that might cause added expense and delay.” The bottom line was simple: “[I]nspectors must be free from the threat of retaliatory discharge for identifying safety and quality problems.” Mackowiak could not be fired simply because of his “competent and aggressive inspection work.” Mackowiak was simply doing his job, and, as acknowledged by the court, doing his job well. Guided by the logic of Phillips, the court ruled that Mackowiak was protected under the federal nuclear whistleblower laws.

  Despite the ruling of the court, employers did not get the message and continued to aggressively fight the Phillips precedent. It was abundantly apparent that if employers had the ability to fire employees for making disclosures to their supervisors, management could win the majority of whistleblower legal cases on the basis of this technicality. Under this assumption, management would have the upper hand because the vast majority of employees who exposed safety hazards or violations of law did so initially to their supervisors. If employees were fired before they made a report to the government, the company would win the case. With this, corporate lawyers saw an easy path to victory, regardless of whether such decisions made any sense whatsoever.

  Winning was paramount in the context of fighting a whistleblower case, even if the ability of workers to simply report misconduct to a supervisor was stifled. Instead of following the practical advice of PricewaterhouseCoopers by promoting internal mechanisms that would effectively provide workers with the “confidence to do the right thing,” the ground war against whistleblowers continued to be fought on the shop floor.

  Although the motive for having Phillips overturned was clear, the logic behind the corporate arguments was not. What company would not want a reasonable “heads-up” so they could fix a problem before it became a major federal case? The answer: Brown & Root/Halliburton. That company took it upon themselves to lead the corporate charge against the Phillips decision by arguing a seemingly ridiculous position. Employees who had the courtesy or good sense to report problems to their supervisors could be fired, at will, and have no protection. If an employee wanted to be protected, he or she was required to go to the government and file a complaint. In other words, under the Brown & Root/Halliburton vision of corporate compliance, the only method available to employees seeking protection under whistleblower laws was to file reports with government law enforcement agencies.

  In the same year that the Ninth Circuit decided Mackowiak, Brown & Root finally “got its way” in another appeals court, the U.S. Court of Appeals for the Fifth Circuit. Chuck Atchison, a quality control inspector at the Comanche Peak nuclear power plant construction site, had been fired for raising safety concerns to his supervisor. The Department of Labor found that Atchison was fired in retaliation for raising these concerns, and ordered his reinstatement into his position. In the case of Brown & Root v. Donovan, the Fifth Circuit became the first appeals court to reject the Phillips holding. It ruled that without direct contact with the federal regulatory agency, the Nuclear Regulatory Commission, Atchison could not be protected under the nuclear whistleblower law. Atc
hison was out of a job and out of a career simply for doing his job too well. How could he possibly be identifying and disclosing nuclear safety violations too well?

  For the next twenty years after that decision, no employee prevailed in a federal court nuclear whistleblower case within the jurisdiction of the Fifth Circuit. Essentially the ruling gutted the law. Employees are not lawyers, they do not know the intricacies of what is, or is not, “protected activity.” An employee would therefore never guess that disclosing violations to one’s employer, even within the context of a formal corporate “hotline” complaint, would not be protected.

  The DOL understood the devastating impact of the Brown & Root decision and argued vigorously against it in court after court. Congress ended the argument in 1992, amending the nuclear whistleblower law such that internal reports to management were explicitly included as protected activity under the law.

  Congress took further steps after 1992 to ensure that internal, job-related whistleblowing was protected under law. For example, the Sarbanes-Oxley Act, a landmark corporate reform law, mandated that all publicly traded companies establish internal procedures for accepting whistleblower complaints. The Act specifically protected complaints raised with supervisors in the statutory definition of protected whistleblowing. Other laws contained similar protections, including the transportation, food safety, defense-contracting, stimulus spending, consumer products safety, armed services, and airline safety whistleblower laws.

  After thirty years of legal disputes over the basic core meaning of “whistle-blowing,” it finally appeared as if the dispute over protecting internal complaints to management was over. It seemed as if the “common sense” approach of Judge Wilkey had finally prevailed. If only we were so lucky.