?Employers may face higher risks from lawsuits by whistleblowers in the future.
As part of last year’s omnibus spending bill, Congress passed the Anti-Money Laundering Whistleblower Improvement Act, which increases rewards whistleblowers can receive. Whistleblowers now can personally collect 10 percent to 30 percent of any monetary sanction the government imposes over $1 million for money laundering.
“I anticipate a steady stream, if not a flood, of new claims by whistleblowers,” said Gregory Keating, an attorney with Epstein Becker Green in Boston. “The amendments are clearly intended to enhance the monetary recovery [that] whistleblowers may be entitled to,” he added. The whistleblower awards, “which are modeled on the U.S. Securities and Exchange Commission’s [SEC] wildly successful whistleblower program under the Dodd-Frank Act, can often run into the millions or tens of millions of dollars. This has galvanized the plaintiff-side whistleblower bar and caused a flood of law firms to focus their efforts on whistleblowing, which has in turn resulted in a marked uptick in tips to the government.”
A Sept. 13, 2022, policy statement from the Biden administration supported the new law, stating “Whistleblower protections are critical to promoting public accountability and integrity. If prospective whistleblowers do not expect to be protected, and instead fear job loss and further targeted punishment, they are deterred from raising concerns about misconduct, fraud, or corruption.”
Siri Nelson, executive director of the National Whistleblower Center in Washington, D.C., described the new law as “a clear reflection of public support for whistleblower protections and incentives and the broadening understanding of the value whistleblowers bring to safeguarding our democracy.”
In recent years, there has been “a growing trend at the federal and state level to broaden whistleblower rights, remedies and protections. Whistleblower protection enjoys bipartisan support in Congress,” Keating noted.
Practical Steps for Employers
In light of the new law, employers should enhance their speak-up policies, examine their investigation protocols and invest in training, “especially of front-line managers who need to recognize the pivotal role they play in properly responding to concerns raised and avoiding retaliation,” Keating said.
An employer should “weave this new law into its existing whistleblower protection provisions, its business ethics policies and training, its whistleblower hotline policies and procedures, and its policies prohibiting retaliation against whistleblowers,” said Connie Bertram, an attorney with Bertram LLP in Washington, D.C. “Employers should remain compliant with all U.S. anti-money laundering laws and stay up-to-date on sanctions levied against other countries.”
Federal law prohibits employers from retaliating against whistleblowers for reporting legal violations, such as safety hazards, discrimination, fraud or money laundering. Examples of retaliation include threats, firing, demoting, disciplining, reducing pay, or reassigning someone to a less desirable position or schedule.
“More so than ever before, now is the time for employers to double down on compliance. With expanding legal risk and stepped-up penalties/remedies, we are likely to see a continued uptick in retaliation claims,” Keating said.
“It is critical that HR consult with counsel who is well-versed in whistleblower laws before it terminates an employee who removes confidential company documents,” Bertram said. However, termination could be permissible if the whistleblower has a history of poor job performance or other misconduct that’s not related to the whistleblowing.
Be aware of any state or local laws that go beyond what federal law requires.
“States such as New York, Virginia and California have all substantially broadened protections against retaliation for whistleblowers in recent months. Employers must take note and take steps to double down on compliance,” Keating said.
Federal law allows whistleblowers to disclose trade secrets or proprietary company information if it’s necessary in reporting a violation to the government.
Employers often have the misperception that their policies concerning the confidentiality of company information prevent whistleblowers from removing confidential information and providing it to the government. Although employees do not have an unfettered right to remove confidential information because it potentially relates to whistleblowing activity, the SEC and other federal agencies have taken the position that whistleblowers have the right to disclose information relevant to reporting and investigating potential employer misconduct.
Don’t assume that someone is not a whistleblower just because identifying compliance problems is a normal part of their job. For example, individuals with auditing and compliance duties may discover unlawful conduct, such as money laundering.
“It is often challenging for HR and employers to recognize or understand that an individual is engaging in a form of protected activity or whistleblowing when they are simply flagging concerns [that] are within their job responsibilities to remediate,” Keating said. “Employers will need to pay closer attention and consider rolling out revised speak-up policies so they know when someone whose duty is to flag problems is, in fact, blowing the whistle.”
Revealing a problem can spark positive change that wouldn’t have happened otherwise.
“Whistleblower complaints present an opportunity to get compliance right, to protect the company and its stakeholders. The better the company’s compliance program, the more likely a whistleblower is to use it,” said Margaret Campbell, an attorney with Ogletree Deakins in Atlanta. “If an allegation is mistaken or false, the company’s investigation will reassure everyone concerned that all is well. If the allegation is true, the company’s prompt investigation and corrective action will demonstrate its commitment to a true culture of compliance.”
