Each year, employers face increased risk of retaliation claims from self-styled “whistleblowers.” These individuals may file lawsuits using a variety of federal laws, including Sarbanes-Oxley (SOX) and the Dodd-Frank Act, as well as similar state laws. What should employers do when they become aware of a potential whistleblower? And how can companies address a potential whistleblower’s concerns while simultaneously preventing a claim for retaliation? Here are 10 tips:
Look Out for Characteristics Unique to 'Typical' Whistleblowers
While no two whistleblowers are exactly alike, many fit a similar profile. Typical whistleblowers see issues as black versus white, with no gray area. They are often rigid in their beliefs and have a hard time accepting other points of view. They may become frustrated when required to share information, power or authority. They also feel slighted when their recommendations are rejected, and are rarely open to constructive criticism. Many have “contrarian” personalities and relish playing devil’s advocate. Some have at least a streak of paranoia. Keep a look out for employees who exhibit these traits.
Understand What Can Trigger False Whistleblower Claims
“Typical” whistleblowers may be upset by change. If a company implements a new initiative, inserts a new manager, or otherwise reduces the perceived power of the whistleblower, he or she may react by lodging an unrelated (and often meritless) whistleblower complaint. In addition, poor performers who realize their jobs may be in jeopardy often try to avoid termination by filing these complaints. While many whistleblowers raise what they perceive to be legitimate complaints, some do so in response to unwelcome changes.
Publish a Policy Offering Employees Multiple 'Open Doors' to Lodge Complaints Without Fear of Retaliation
An employer should make every employee aware that the company has an “open door” policy to hear a potential whistleblower’s complaints. The policy should be published in the employee handbook or as a stand-alone document, and should be widely distributed and acknowledged by each employee. In addition, it is preferable to have multiple avenues to accept and document the substance of those complaints, for example, directly with managers or Human Resources in person, by telephone, or in writing by electronic mail. Most importantly, employees should understand they may complain in good faith without being subjected to retaliation.
Allow Employees to Complain Anonymously and Do Not Attempt to Identify Them
To the extent possible, employees should be able to complain anonymously. Anonymity prevents a whistleblower from claiming he or she was later targeted, and ultimately retaliated against for complaining. Many larger employers have “hotline” telephone numbers or email addresses allowing anonymous complaints. Note that, other than the individual assigned to investigate, employers and managers should not attempt to identify whistleblowers who wish to remain anonymous.
Make Sure Complaints Are Funneled to a Central Location
Offering more than one avenue to complain increases the likelihood a company receives, and can investigate and address, both legitimate and unfounded complaints. However, this practice also increases the risk that a complaint may be “lost in the shuffle” and not communicated to investigators. Therefore, companies should establish a procedure and train everyone who receives complaints to funnel all complaints, regardless of the source, to a central location. These processes help flag, retain, and track complaints and conduct a consistent investigation.
Investigate and Document!
Some employers receive whistleblower complaints, but fail to take the crucial next steps of thoroughly investigating each complaint on its merits and capturing the results in writing. Failing to investigate can become a critical mistake in preventing subsequent retaliation claims. Ideally, companies should employ trained investigators to interview the potential whistleblower (provided he or she agrees not to remain anonymous), emphasize the anti-retaliation policy, review the substance of the allegations, thoroughly document findings, and ultimately determine their legitimacy. Thorough documentation can make or break the defense of a whistleblower retaliation claim. Keep in mind that it is highly probable that any investigation report, unless privileged, will become a key deposition or trial exhibit.
Cure Any Unlawful Practice or Confirm a Complained-Of Practice Is Actually Lawful
If the allegations reveal an unlawful practice, the company should take steps to remedy that practice as soon as possible. Alternatively, if the whistleblower believes a practice is unlawful, but is mistaken, confirm and document that the allegation is meritless.
Understand Even Meritless Complaints May Qualify as 'Protected Activity'
Courts continue to expand the definition of “protected activity.” This means that even if an employee’s complaint does not concern a legitimate violation of the law, the employee is still protected from retaliation if he or she had a “reasonable belief” and complained in good faith. For example, in a recent SOX-retaliation case (Murray v. UBS Securities (S.D. N.Y April 25, 2017)), the court focused “on the plaintiff’s state of mind rather than on the defendant’s conduct.”
Avoid Not Only Actual Retaliation, But Even Perceived Retaliation
Tread carefully when disciplining whistleblowers, criticizing their performance, or engaging in employment actions that could be perceived as retaliation for prior complaints. This is not to say an employer cannot discipline an employee, critique poor performance, or even terminate a whistleblower. But the employer must be prepared to offer “clear and convincing” evidence of non-retaliatory reasons for any of these adverse actions. In other words, companies must satisfy an exacting legal standard to justify discipline, negative performance reviews, demotions, or terminations by demonstrating credible reasons that are unrelated to the whistleblower’s prior complaint.
When Crafting Severance or Settlement Agreements, Do Not Attempt to Prevent Whistleblowers from Speaking to the Government or Receiving a Bounty
Finally, employers should not try to “gag” employees from speaking with government agencies or receiving a bounty. While companies can generally require whistleblowers to keep the terms of severance or settlement agreements related to retaliation claims confidential, and can ensure they waive a right to additional individual monetary recovery in most circumstances, these employees cannot be barred from participating in investigations by, or receiving a bounty from, government agencies like the Securities and Exchange Commission (SEC). Benson (Ben) E. Pope is a shareholder in Littler Mendelson's Atlanta office, and is a core member of the firm’s whistleblowing and retaliation practice group. Pope regularly provides advice to clients, and litigates matters, regarding whistleblower retaliation claims based on Sarbanes-Oxley, Dodd Frank, and other federal and state consumer protection laws. Jeanine Conley is a shareholder in the firm's Philadelphia and New York offices, and is also a member of the firm’s whistleblowing and retaliation practice group. Conley has handled a number of litigation matters based on Sarbanes-Oxley, the False Claims Act and Dodd Frank along with other whistleblower laws and speaks extensively on the subject.