by Stephen Kohn
The significant impact of whistleblower disclosures to the news media is well documented in U.S. history. See Carl Bernstein and Bob Woodward, All the President’s Men, NY: Simon & Schuster, 1974.
Opposing Conduct Made Illegal Under Federal Law: Learned v. City of Bellevue, 860 F.2d 928 (9th Cir. 1988) (Title VII).
Participating in Legal or Administrative Proceedings: Pettway v. American Cast Iron, 411 F.2d 998 (5th Cir. 1969) (Title VII); Merritt v. Dillard Paper Co., 120 F.3d 1181 (11th Cir. 1999) (Title VII).
Public Interest Organization: Nunn v. Duke Power Co., 84-ERA-27, Decision and Order of Deputy Undersecretary of Labor (July 30, 1987) (Atomic Energy Act).
Quality Control Inspectors or Compliance Officials Reporting Violations: Mackowiak v. University Nuclear Systems, 735 F.2d 1159 (9th Cir. 1984); Kansas Gas & Electric v. Brock, 780 F.2d 1505 (10th Cir. 1985) (Atomic Energy Act); White v. Osage Tribal, 1995-SDW-1 (DOL ARB, 1997); Warren v. Custom Organics, 2009-STA-30 (DOL ARB, 2012).
Refusing to Accept a “Hush Money” Settlement Agreement: CL&P v. Secretary of Labor, 85 F.3d 89 (2nd Cir. 1996).
Refusing to Perform Dangerous Work: Whirlpool Corp. v. Marshall, 445 U.S. 1 (1980) (OSHA); NLRB v. Washington Aluminum Co., 370 U.S. 9 (1962) (NLRA); Gateway Coal Co. v. United Mine Workers, 414 U.S. 368 (1974).
Statements Made to Employer During Internal Investigation: Crawford v. Metropolitan Government of Nashville, 129 S.Ct. 846 (2009).
Taping: Under Department of Labor precedent, one-party taping for the purpose of gathering evidence of retaliation or violations of law (if permitted under state law). See Benjamin v. Citationshares Management, 2010-AIR-1 (DOL Administrative Review Board, Nov. 5, 2013) and Mosbaugh v. Georgia Power Co., 91-ERA-1/11 (Secretary of Labor, Nov. 20, 1995).
Testimony in Court or Deposition: Merritt v. Dillard Paper Co., 120 F.3d 1181 (11th Cir. 1997) (protected under Title VII’s antiretaliation provision); Karl v. City of Mountlake, 678 F.3d 1062 (9th Cir. 2012); Alpha Energy Savers Inc. v. Hansen, 381 F.3d 917 (9th Cir. 2004); Haddle v. Garrison, 525 U.S. 121 (1998) (under 42 U.S.C. § 1985).
Threat to Make Protected Disclosure: Macktal v. DOL, 171 F.3d 323 (5th Cir. 1999) (Atomic Energy Act); Thomas v. City of Blanchard, 548 F.3d 1317 (10th Cir. 2008) (First Amendment).
Union Safety Committee: Cotter v. Consolidated Edison, 81-ERA-6 (Department of Labor, July 7, 1987, affirmed, Consolidated Edison v. Donovan, 673 F.2d 61 (2nd Cir. 1982).
ATTORNEY DISCLOSURES
Attorneys can file retaliation suits under federal law: Van Asdale v. Int’l Game Tech., 577 F.3d 989 (9th Cir. 2009); Willy v. ARB, 423 F.3d 483 (5th Cir. 2005); Kachmar v. SunGard, 109 F.3d (3rd Cir. 1997).
17 Code of Federal Regulations Part 205 (SEC rules on attorney reporting).
Lawrence West, “Can Attorneys be Award-Seeking SEC Whistleblowers,” Harvard Law School Forum on Corporate Governance and Financial Regulation (2013); https://corpgov.law.harvard.edu/2013/06/17/can-attorneys-be-award-seeking-sec-whistleblowers/.
INSUBORDINATE CONDUCT/ILLEGAL DISCLOSURES
Protected disclosures can lose their protection and become an independent justification for disciplining an employee if the activities are illegal, insubordinate, or unjustifiable. Dunham v. Brock, 794 F.2d 1037 (5th Cir. 1986) (“abusive or profane language coupled with defiant conduct” stripped employee of protection, even though disclosure was safety related); Pettway v. American Cast Iron, 411 F.2d 998 (5th Cir. 1969) (libelous complaint filed with EEOC may be protected); Linn v. United Plant Guard, 383 U.S. 53 (1966) (applying New York Times v. Sullivan standard in evaluating protected speech under NLRA); O’Day v. McDonnell Douglas, 79 F.3d 756 (9th Cir. 1996) (engaging in protected activity “is not” a “license to flaunt company rules”).
However, courts have recognized that employees filing a protected complaint “may well engender disruption, controversy, and adverse publicity” but “nevertheless” are fully protected because “Congress has elected to protect employees who file such charges from retaliation . . . allegations of disruption and injury to close working relationships become irrelevant.” Curl v. Leroy Reavis and Iredell County, 740 F.2d 1323 (4th Cir. 1984).
See Rule 20, Cautiously Use “Self-Help” Tactics.
Rule 16: Yes, You Are a “Whistleblower”
The Senate Judiciary Committee. “The Corporate and Criminal Fraud Accountability Act of 2002,” S. Rep. No. 107-146 (May 6, 2002), pp. 4–5, 10, 20 (discussing Enron attorneys’ advice regarding firing Sherron Watkins after she blew the whistle internally to her management).
Mimi Swartz and Sherron Watkins. Power Failure: The Inside Story of the Collapse of ENRON. NY: Doubleday, 2003.
Cases discussing development of internal protection for whistleblowers: Phillips v. Interior Board of Mine Op., 500 F.2d 772 (D.C. Cir. 1974); Mackowiak v. University Nuclear Systems, 735 F.2d 1159 (9th Cir. 1984); Atchison v. Brown & Root, 82-ERA-9, Decision of Administrative Law Judge (December 1982); approved by Secretary of Labor (June 10, 1983); Brown & Root v. Donovan, 747 F.2d 1029 (5th Cir. 1984) (lead case holding internal disclosures not protected, overturned by the Fifth Circuit in Willy) (see below).
Cases decided after Brown & Root that upheld internal whistleblowing: Kansas Gas & Electric v. Brock, 780 F.2d 1505 (10th Cir. 1985); Passaic Valley Sewerage Commissioners v. DOL, 992 F.2d 474 (3rd Cir. 1993); U.S. ex rel. Yesudian v. Howard University, 153 F.3d 731 (D.C. Cir. 1998); Bechtel v. DOL, 50 F.3d 926 (11th Cir. 1995).
Secretary of Labor William Brock carefully explained the Department of Labor’s position that internal whistleblowing must be protected in Poulos v. Ambassador Fuel Oil Co. 86-Clean Air Act Case No. 1 (April 27, 1987), published at http://www.oalj.dol.gov/PUBLIC/WHISTLEBLOWER/DECISIONS/ARB_DECISIONS/CAA/86CAA01B.HTM.
Note: The Department of Labor case law cited herein is published by the DOL Office of Administrative Law Judges at http://www.oalj.dol.gov/LIBWHIST.HTM.
Statutes amended (or initially passed) that explicitly protect internal whistle-blowing to supervisors: Atomic Energy Act, 42 U.S.C. § 5851; Sarbanes-Oxley Act, 18 U.S.C. § 1514A; Consumer Product Safety Act, 15 U.S.C. § 2051; Aviation Investment and Reform Act, 49 U.S.C. § 42121; National Transit Systems Security Act, 6 U.S.C. § 1142; Railroad Safety Act, 49 U.S.C. § 20109; Surface Transportation Act, 49 U.S.C. §31105; Mine Health and Safety Act, 30 U.S.C. § 815(c); American Recovery Reinvestment Act, Public Law No. 111-5, §1553; Pipeline Safety Improvement Act, 42 U.S.C. § 60129; Dodd-Frank Act (Consumer Protection Bureau), 12 U.S.C. §5567.
Willy v. Administrative Review Board, 423 F.3d 483 (5th Cir. 2005) (after twenty years even the Fifth Circuit Court reversed itself and overturned its Brown & Root decision).
Garcetti v. Ceballos, 547 U.S. 410 (2006) (job duty whistleblowing not protected under First Amendment). After Garcetti some courts interpreted state and whistleblower statutes narrowly to exclude coverage for internal whistleblowers. See Skare v. Extendicare Health Services, 515 F.3d 836 (8th Cir. 2008); Talhelm v. ABF Freight Systems, 2010 U.S. App. LEXIS 1663 (6th Cir. 2010). However, the U.S. Congress strongly repudiated the Garcetti line of cases when it enacted the Whistleblower Protection Enhancement Act and explicitly reversed court rulings that were consistent with Garcetti. In Public Law 112-199, §§ 101 and 102, Congress used words such as “undermine,” “wrongly focused,” and “contrary to congressional intent” in describing court cases that failed to fully protect whistleblowers who raised concerns with their supervisors.
Committee on Homeland Security and Governmental Affairs, U.S. Senate. “Whistleblower Protection Enhancement Act of 2012,” pp. 4–5 (S. Rep.112-155; April 19, 2012); extensive discussion concerning internal protected activity and rejection of Garcetti rule for federal employees.
Kasten v. Saint-Gobain, 131 S. Ct. 1325 (2011); oral complaints covered.
The controversy over internal whistleblowing under the Dodd-Frank Act is explained in Berman v. Neo@Ogilvy, 801 F.3d 145 (2nd Cir. 2015) (upholding internal whistleblower prot
ection) and Asadi v. G.E. Energy (USA), L.L.C., 720 F.3d 620, 627-28 (5th Cir. 2013) (finding internal whistleblowers not protected).
The email correspondence between the Senate Banking Committee and the National Whistleblower Center related to the antiretaliation provision of the Securities and Exchange Act is available from the National Whistleblower Center, www.whistleblowers.org.
The Institute for Internal Auditors survey of auditors is known as the Global Internal Audit Common Body of Knowledge. The survey’s results were analyzed in The Politics of Internal Auditing by Patricia Miller and Larry Rittenberg, published by the IIA Research Foundation, Altamonte Springs, FL (2015). See also Rittenberg, Larry. Ethics and Pressure: Balancing the Internal Audit Profession. The IIA Research Foundation (2016).
Rule 17: Beware of “Hotlines”
The facts concerning the Quality Technology Company’s contract with TVA are set forth in Hill v. TVA, 65 F.3d 1331 (6th Cir. 1995).
The Goldstein-SAFETEAM cases are published by the U.S. Department of Labor: Goldstein v. EBASCO Contractors, Inc., 86-ERA-36, Labor Department rulings dated March 3, 1988 (Administrative Law Judge ruling), April 7, 1997 (Secretary of Labor ruling), Aug. 16, 1993 (Secretary of Labor ruling).
Corporate sponsored “think tanks” have carefully evaluated the deficiencies in internal compliance programs and have strong recommendations for improving the current systems. See Michael D. Greenberg, Perspectives of Chief Ethics and Compliance Officers on Detection and Prevention of Corporate Misdeeds: What the Policy Community Should Know (Rand Center for Corporate Ethics and Governance, 2009). A 2010 report by the corporate sponsored Ethics Resource Center entitled “Too Big to Regulate? Preventing Misconduct in the Private Sector” (ERC 2010), quoting leading complaints that programs were simply “paper tigers” and were plagued by a “lack of action and seriousness.”
The Sarbanes-Oxley law requiring publicly traded companies to establish independent employee concerns programs is codified at 15 U.S.C. § 78f(m)(4).
The Federal Sentencing Guidelines provide for sentence reductions for corporations engaged in criminal activities that have instituted an internal compliance program. U.S. Sentencing Commission Guidelines Manual, Section 8B2.1.
The Senate Judiciary Committee report on the Enron/WorldCom scandals and enhancing whistleblower protections is published as “The Corporate and Criminal Fraud Accountability Act of 2002,” Senate Report No. 107-146 (May 6, 2002).
Jaclyn Jaeger, “Report Highlights Employee Use of Hotlines,” Compliance Week (Jan. 23, 2008).
David Hess, et al., “The 2004 Amendments to the Federal Sentencing Guidelines and Their Implicit Call for a Symbiotic Integration of Business Ethics,” Vol. XI The Fordham Journal of Corporate and Financial Law 725 (2006).
The Close the Contractors Fraud Loophole Act is Public Law 110-252, Title VI, Chapter 1. This law mandates stronger controls over compliance departments in companies working under government contracts. It is implemented by Federal Acquisition Regulations, Contractor Business Ethics, Compliance Program and Disclosure Requirements, Final Rule, 73 Federal Register 67064 (Nov. 12, 2008).
Joseph D. West, et al., “Contractor Business Ethics Compliance Program & Disclosure Requirements,” West Briefing Papers Second Series (Thompson Reuters, April 2009).
Whether internal complaints to hotlines are protected is an open question, depending on the laws involved. Some laws, like the Sarbanes-Oxley Act, the Consumer Safety Act, and the Atomic Energy Act clearly protect such complaints. State laws are completely confused. For example, courts have now determined that internal complaints, which would cover complaints to compliance departments, are not protected under the Minnesota and Michigan whistleblowers laws. See Skare v. Extendicare Health Services, 515 F.3d 836 (8th Cir. 2008); Talhelm v. ABF Freight Systems, 2010 U.S. App. LEXIS 1663 (6th Cir.). As for government workers who seek protection under the First Amendment, the Supreme Court completely confused this issue. In the case of Garcetti v. Ceballos, 547 U.S. 410 (2006), the Court held that employees who make disclosures “pursuant to their professional duties” are not protected. Are reports to an internal hotline part of an employee’s “professional duties”?
Employers that create compliance programs may be subject to breach of contact lawsuits if they violate their promises to employees. Richard Moberly, “Protecting Whistleblowers by Contract,” 79 University of Colorado Law Review 975 (Fall 2008).
On June 13, 2011, the Securities and Exchange Commission published final rules implementing the Dodd-Frank whistleblower reward program. SEC Commentary and Final Rule. 76 Federal Register 34300 (June 13, 2011). These rules created strong incentives for corporations to develop independent and ethical compliance programs. Id., pp. 34317–19 (circumstances in which compliance officials can file reward claims with the SEC); pp. 34322–27 (employee can qualify for rewards based on information they provided to internal compliance programs). Based on these two rules, employees who blow the whistle on corporate fraud should seriously consider the benefits of reporting their allegations to a corporate compliance program. However, if an employee desires complete confidentiality, the anonymous reporting procedures available under the SEC’s whistleblower reward program should be utilized.
For cases protecting employees who disclose violations of corporate “internal control” programs who work in compliance programs, see Feldman v. Law Enforcement Associates, 2001 W.L. 891447 (E.D. N.C. 2001); U.S. ex rel. Schweizer v. Oce N.V., 677 F.3d 1228 (D.C. Cir. 2012).
The Foreign Corrupt Practices Act prohibits a range of conduct not directly tied to the payment of bribes to foreign officials. The most important of these concerns the obligation of publicly traded companies or “issuers” to maintain quality “internal controls” and record-keeping systems. 5 U.S.C. § 78m(b)(2). See, Jones Day Newsletter, “The Legal Obligation to Maintain Accurate Books and Records in U.S. and Non-U.S. Operations (March 2006) (“The Foreign Corrupt Practices Act is usually associated with its prohibitions against foreign bribery. The provisions of the Act relating to bookkeeping and internal controls receive less publicity but are much more likely to form the basis of a government proceeding against companies subject to the Act.”)
Rule 18: Don’t Talk to Company Lawyers
Donna Boehme, “DOJ Tells HSBC and Corporate America: Reform Your Compliance Departments,” Corporate Counsel (December 20, 2012).
_____, “Making the CCO an Independent Voice in the C-Suite,” Corporate Counsel; www.law.com/corporatecounsel/PubArticleCC.jsp?id=1202592518804&Making_the_CCO_an_Independent_Voice_in_the_CSuite.
_____, From Enron to Madoff: Why Many Corporate Compliance and Ethics Programs Are Positioned for Failure. Rand Center for Corporate Ethics and Governance (2009).
Jeffrey Eglash, et al., “Avoiding the Perils and Pitfalls of Internal Corporate Investigations: Proper Use of Upjohn Warnings,” ABA Section of Litigation Corporate Counsel CLE Seminar (ethical rules governing attorneys who work on or manage corporate compliance investigations).
Ethics Opinion 269: “Obligation of Lawyer for Corporation to Clarify Role in Internal Corporate Investigation” (DC Bar. January 1997). Available at www.dcbar.org/bar-resources/legal-ethics/opinions/opinion269.cfm.
Michael D. Greenberg, Transforming Compliance: Emerging Paradigms for Boards, Management, Compliance Officers, and Government. Rand Center for Corporate Ethics and Governance (2012).
_____, Culture, Compliance, and the C-Suite: How Executives, Boards, and Policymakers Can Better Safeguard against Misconduct at the Top. Rand Center for Corporate Ethics and Governance (2013).
_____, For Whom the Whistle Blows: Advancing Corporate Compliance and Integrity Efforts in the Era of Dodd-Frank. Rand Center for Corporate Ethics and Governance (2011).
_____, Directors as Guardians of Compliance and Ethics within the Corporate Citadel: What the Policy Community Should Know. Rand Center for Corporate Ethics and Governance (2010).
Jacelyn Jaeger, “The Importance of Splitting L
egal and Compliance,” Compliance Week (December 2011).
Stephen M. Kohn. “The SEC’s Final Whistleblower Rules & Their Impact on Internal Compliance.” West Law Publishing (October 2011).
National Whistleblower Center, Impact of Qui Tam Laws on Internal Compliance: A Report to the Securities and Exchange Commission. National Whistleblower Center (2010).
New York Rules of Professional Conduct, based on The American Bar Association (ABA) Model Rules of Professional Conduct. The Model Rules have been adopted, in whole or in part, and sometimes in variation, as the rules of professional conduct for attorneys in forty-nine states, the District of Columbia, and four of the five inhabited U.S. territories.
Rule 4.2: “Communication with Person Represented by Counsel.”
Rule 4.3: “Dealing with Unrepresented Person.” The ABA Model Rules of Professional Conduct are available at www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_professional_conduct/model_rules_of_professional_conduct_table_of_contents.html.
Society for Corporate Compliance and Ethics and Health Care Compliance Association. “Compliance Professionals Overwhelmingly Reject General Counsel Reporting Structure,” P.R. Newswire (March 11, 2013); www.prnewswire.com/news-releases/compliance-professionals-overwhelmingly-reject-general-counsel-reporting-structure-196884911.html (survey of compliance professionals finding that 88.5 percent oppose general counsel serving as chief compliance officer).
