Whistleblowers: More Protection Than You Think

If you remember Edward Snowden, you might think that being a whistleblower is not a good thing.

Snowden revealed a secret U.S. surveillance program that allegedly spied on U.S. citizens. After his revelations were made public, Snowden applied for political asylum in more than a dozen countries, seeking safety from espionage charges in the United States. I doubt many would want to be in his shoes.

But in many, even most cases, “whistleblower laws” make allegations of organizational wrongdoing a protected activity, sometimes a profitable one. An area that is especially widespread involves the Dodd-Frank financial reform law. The law offers hefty rewards to those reporting securities law violations. It creates a scenario that businesses cannot afford to ignore.

A definite argument can be made for such legislation. Dodd-Frank, for example, was written following the disastrous banking and Wall Street collapse of 2007-2008. Workplace safety laws frequently follow disastrous accidents where workers are hurt or injured. There is almost always a legitimate concern behind such legislation.

What I question are some reward mechanisms in many of the whistleblower laws. Dodd-Frank allows for whistleblowers to receive up to 30 percent of the penalties collected if they total more than $1 million. That seems likely to guarantee motivations of personal benefit rather than legitimate concern. Not surprisingly, lawyers are lining up to encourage employees to blow the whistle if they suspect violations. It’s an understatement to say that some of the results can become “creative.”

These laws are clearly something businesses need to beware of. The best general advice I have is this: If you’re involved in a whistleblower allegation case, do things right and do them right away.

Obviously, you need to become familiar with the laws and be in compliance, starting with those that are immediately relevant to your industry. But before employees allege a problem, you should establish an environment where they feel comfortable, even obliged to come to you first. Work with them; do not marginalize them or dismiss their concerns. The only reason they would have to go outside—become a whistleblower—is if they cannot trust or communicate with you. Be aware—even if you do these things, you could still be in for an unpleasant ride, but if you follow these steps, you will be in a stronger position.

I have a client with an employee who reported the company regarding a safety concern to the Occupational Safety and Health Administration (OSHA). The company weathered an examination and was exonerated. The next year, this same employee reported the company to the Department of Labor on a prevailing wage complaint. Again, the company passed an examination of the allegation and was exonerated.

This employee felt he had whistleblower protection and continued to poison the relationship between other employees and management. He, in fact, did not have that protection. I extricated him, but it was a very delicate situation because of this history.

In our society today, there is often a “jackpot” mentality. This means that many people consider becoming a whistleblower and gaining the opportunity to sue somebody—someone with money—as the way to wealth. Laws that include hefty rewards for whistleblowers play right into this mentality. A small army of lawyers is out there to provide support. Owners and managers are wise to know the laws and operate with these dangers in mind.

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