Anti-Retaliation Group Presents Report to Congress on Importance of Whistleblowers, Part IV

We have been reviewing some of the acclaims and concerns with the False Claims Act (“FCA”) and its qui tam whistleblower provisions. More specifically, we have reviewed a 2013 report presented to Congress by the National Whistleblower Center (“NWC”), a group dedicated to advocating on behalf of employees facing retaliation after lawfully and dutifully reporting corporate fraud.

In today’s post, we examine the NWC’s findings with regard to the effect of this retaliation and reasons why it must be stopped immediately. This post will also look at several federal cases deciding these very issues and whether federal district and circuit courts are helping or hindering the plight of honest whistleblowers.

Retaliation and Anti-Discrimination Laws

In order to make a successful claim for discrimination, an employee must belong to a protected class. Historically, this included race, national origin, color, religion and sex. Employers are also not permitted to discriminate based on age, sexual orientation, marital status and genetic history. Several states have expanded the definition even further to include gender orientation or medical history, among several other breakthrough classifications.

Anti-retaliation jurisprudence is rooted in anti-discrimination case law. As such, a court must analyze a retaliation case arising with regard to a whistleblower using similar doctrine as used in an employment case involving sexual harassment or racial discrimination. This analytical framework, however, only serves as an employer defense that, since the company did not engage in retaliation based on race, gender or other protected classifications, is often successful in relieving the employer of any liability. In a Fifth Circuit  case from the 1980s, the Court concluded that a company facing fraud charges initiated by a whistleblower was within its rights to terminate the employee and did not violate any anti-discrimination or retaliation laws. It specifically held that an employee wishing to bring fraud to light must do so through the appropriate and “competent organ of government.”

Despite new protections for whistleblowers being included in the Dodd-Frank Act, on its face, the lack of remedies for an employee who has  reported fraud has continued right up to present day. In a 2013 case involving allegations of securities fraud and subsequent termination, an employee who opted to report to internal compliance personnel was subsequently fired. When he raised his retaliation claim in federal court, the court expressly held that he would only be protected under the Dodd-Frank Act’s anti-retaliation clause in the context of initiating a private, individual lawsuit under such provisions, and the protections did not extend to reports made to internal compliance officers.

Notwithstanding a study showing that nearly all banking laws fail to protect against retaliation following internal reporting, the NWC and other whistleblower proponents are hopeful that the future will bring changes to the statutory and jurisprudential framework of these cases, allowing employees to freely divulge information of fraud to their internal compliance officers without fear of demotion or termination. Much like anti-discrimination laws developed to include protection from retaliation following reporting to government officials, internal protections are undoubtedly on the horizon to strengthen and expand the scope of qui tam litigation.

How Prevalent is Retaliation?

Surprisingly, workplace retaliation for reporting fraud is much more prevalent than the public realizes. According to the NWC report, 45 percent of employees experienced some form of fraud in the workplace. Of those, 65 percent opted to report the wrongdoing – and 22 percent were terminated or demoted for doing so. The National Business Ethics Center reports that retaliation has been steadily increasing over the past several years, and now up to 30 percent of employees report having experienced adverse employment experiences as a result of reporting to internal compliance officials.

Take Preventative Measures Against Retaliation

If you have original, specific information of fraud, working with an attorney before reporting to any entity could be in your best interest. As the courts and statutes seemingly do not protect employees against retaliation based on internal reporting, you are best-served by protecting your rights before divulging damaging information about your employer.