Source: https://shermanhoward.com/category/whistleblower/
Timestamp: 2019-04-24 07:10:04+00:00

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The U.S. Supreme Court today endorsed a narrow definition of the term “whistleblower” in the context of the Dodd-Frank Act. Specifically, the Court ruled in Digital Realty Trust Inc. v. Paul Somers that whistleblowers qualify for the special relief provided under Dodd-Frank only if they take their allegations to the U.S. Securities and Exchange Commission (SEC). They may also take their allegations to the employer or supervisor, but Dodd-Frank relief only goes to those who inform the SEC.
The Sarbanes-Oxley Act continues to protect a broader category of people – including people who complain only to their employers. This ruling only limits claimants under Dodd-Frank.
When most people think of employment law problems arising from the use of social media, they envision irresponsible employees taking to the internet to rant about their employer. However, a recent case out of Oregon shows that employers can cause just as much trouble as their employees when they decide to overshare online. A company that was sued by a former employee and lost is facing a new retaliation lawsuit nearly thirteen years after the employment relationship ended because its CEO decided to take up blogging. This blog, which was widely publicized on the CEO’s LinkedIn account, identified the former employee by name and lambasted what the CEO called “fake whistleblowing.” Now, a jury gets to decide whether the blog amounts to “dissemination of a negative employment reference” which would “deter a reasonable employee from engaging in protected activity.” And because this is the internet, it doesn’t matter that the CEO ultimately redacted the former employee’s name from his posts, as there likely will always be “an ‘internet presence’ associated with the material” that was published on the blog. In other words, when we’re talking about the internet, there are no take-backs.
Imagine a corporate code of ethics that stated explicitly the company would not punish any employee for providing company information to the SEC, OFCCP, EEOC or NLRB. Imagine that every waiver agreement included the provision that the former employee could still volunteer company documents to the SEC and vie for a Dodd-Frank whistleblower bounty even though the employee had waived all claims. These are recent hot enforcement topics for government agencies, and this is where corporate compliance programs were headed, until Election Day.
DJ Trump has frequently stated that he intends to undo the Dodd-Frank Act. It isn’t clear what that would mean. The details of Dodd-Frank are now built into the culture of many financial institutions, and it will take a generation of corporate managers to really get back to an older style of business as usual. However, DJ’s antipathy toward regulation might at least slow the advance of executive-branch regulation. Corporate codes of ethics will still be necessary to create hoped-for defenses under federal sentencing guidelines and they will remain the love children of business ethics gurus, but the grip of fear that the code might actually aid government regulators has eased.
Yesterday the SEC entered a cease and desist agreement with BlueLinx Holdings, fining the company $265,000.00 for including unlawful confidentiality and waiver provisions in its severance agreements. BlueLinx used a variety of severance agreements or letters with its departing employees. Most of these prohibited the employee from sharing the company’s confidential information with third parties. But, in response to SEC’s 2011 rule prohibiting public companies from stopping employees from whistleblowing to the SEC, BlueLinx changed its agreements to allow employees to file charges with government agencies including the SEC. The amended agreements provided, however, that the employee waives any right to monetary recovery arising out of any charges filed with any government agencies. The amended agreements also required an employee to notify the BlueLinx legal department prior to making any disclosures of confidential information. Whoopsie!
According to the SEC, BlueLinx broke the law in at least three ways. First, by requiring potential SEC whistleblowers to notify the BlueLinx legal department prior to taking issues to the SEC, BlueLinx forced employees to choose between self-identifying as a whistleblower or potentially forfeiting the severance benefit. Second, by requiring employees to forgo monetary awards for whistleblowing to the SEC, BlueLinx directly interfered with the statutory incentives created to encourage whistleblowing under Dodd-Frank and under SEC Rule 21F-17 ( https://www.law.cornell.edu/cfr/text/17/240.21F-2 ). Third, BlueLinx’s use of sweeping confidentiality covenants sans proper carve-outs for protected whistleblowing activity defeated the very purpose of the whistleblower laws.
While this specific action applies only to SEC-regulated companies, we can certainly expect the NLRB, EEOC, OSHA, and others to take the same position with respect to such provisions, and some have already done so. So, if you haven’t revisited your severance agreements to address these three issues, now’s the time.
Like most employment statutes, the Fair Labor Standards Act (“FLSA”) prohibits retaliation against employees who file complaints. The Supreme Court ruled in 2011 that this protection even extends to oral complaints at work. Recently, the Ninth Circuit decided that even a management employee in HR could assert retaliation based on a report she filed at work. Rosenfield v. Globaltranz Enterprises, Inc., No. 13-15292 (9th Cir. Dec. 14, 2015).
In this case, an HR Director was fired five days after submitting an internal report about the company’s FLSA non-compliance issues. The Court acknowledged that the plaintiff’s role as a manager was relevant to determining whether her FLSA-related conduct rose to the level that a reasonable employer would regard it as asserting a “complaint” under the statute, rather than just making a report required by her job. Thus, some normal management reporting might not necessarily be protected. In this case, the Director did not have responsibility for FLSA compliance, but she had regularly brought up FLSA problems, which frustrated her boss and led to her termination. These circumstances persuaded the Court that she could bring a retaliation claim based on her internal complaint. The Court’s analysis is troubling because arguably it could be expanded broadly to whistleblower claims by in-house counsel, compliance officers, financial officers, risk managers, and more, and the standard provided by the Court does little to allow employers to predict possible liability.
You’re a subcontractor with employees at your customer’s worksite. The customer orders you to remove an employee from the project. In fact, the customer emails you that the employee’s repeated safety complaints are killing them and they want him gone immediately. In the inevitable whistleblower suit, can you be liable if your contract gives the customer the right to have you remove workers?
In a recent case, a plaintiff alleged the Department of Energy and a general contractor had asked his employer (a subcontractor) to remove him from a nuclear remediation project, because he challenged their plans to address nuclear safety issues. Discovery produced an email with the request and the reason in writing. The supervisor sued under the whistleblower protections in the Energy Reorganization Act and, in due course, removed the action to federal court. The Ninth Circuit Court addressed the case only on a motion for summary judgment, but ruled there had to be a trial: the broad contract language giving the customer the right to ask for employees to be reassigned might be contrary to public policy. Tamosaitis v. URS Inc., No. 12-35924 (9th Cir. Nov. 7, 2013). But, what kind of trial? The Court also held that plaintiffs have a constitutional right to a jury trial on ERA whistleblower claims.
Bottom line? A customer’s request can set you up for a lawsuit (with a jury). You need robust customer-management skills.
In Santoro v. Accenture Federal Services, LLC, No. 12-2561 (4th Cir. May 5, 2014), an employee brought ADEA, FMLA and ERISA claims against a former employer. The employer moved to compel arbitration, and the employee opposed the motion, citing the Dodd-Frank Act – even though the employee had no claim under the Dodd-Frank Act (“DFA”). The DFA provides whistleblower protection for employees reporting illegal or fraudulent activity and states, in part, that “[n]o predispute arbitration agreement shall be valid or enforceable, if the agreement requires arbitration of a dispute arising under this section.” Plaintiff argued that, in that one sentence, the DFA invalidated all arbitration agreements by publicly-traded companies, unless the arbitration provision carves-out claims under the DFA. The court acknowledged that Dodd-Frank whistleblower claims are not subject to pre-dispute arbitration, but concluded that the DFA did not make invalid all arbitration agreements that fail to mention the DFA.
Plaintiffs persist in creative attempts to escape mandatory arbitration agreements. Once again, a court stuck to its guns and held that, absent a clear congressional command, the federal policy favoring arbitration wins.
Prepare for DOL whistleblower litigation. The Supreme Court has ruled on the scope of the Sarbanes-Oxley Act whistleblower provision. According to SCOTUS, SOX allows any employee to bring a whistleblower complaint, so long as the employer does business with a publicly-traded company. At the extreme edge, as the Justices noted, this means, e.g., a company officer might have to defend against a SOX claim, brought against the officer personally, by a nanny or a gardener the officer employs – provided that the nanny or gardener engaged in protected conduct. For most of us, the ruling means that any employer might face a SOX whistleblower complaint.
Remember, SOX complaints are investigated in the first instance by the U.S. Department of Labor (“DOL”) and the investigator may order remedies, including reinstatement, at the end of the brief investigation. In such cases, the employer who disagrees with the investigator’s order has to appeal, in the first place, to the DOL’s Office of Administrative Law Judges and the Administrative Review Board. Lawson v. FMR LLC, No. 12-3 (March 4, 2014).
Under some statutes, the Occupational Safety and Health Administration (“OSHA”) may order the reinstatement of former employees as part of its conclusions after a whistleblower investigation, even while the employer’s administrative appeal is pending. OSHA is responsible for investigating claims of retaliation under numerous federal statutes, including the Occupational Safety and Health Act, the Surface Transportation Assistance Act (“STAA”), the Sarbanes-Oxley Act (“SOX”), the Federal Railroad Safety Act (“FRSA”), and the Energy Reorganization Act (“ERA”), just to name a few. Under the STAA, FRSA and SOX, for example, OSHA may order an employer to reinstate an employee and the employer must effect reinstatement even while it seeks and prepares for an administrative hearing to determine whether it in fact engaged in unlawful retaliation. A recent example of such an order came out of OSHA’s Region 5, where the agency found that the employer violated the anti-retaliation provisions of the FRSA and ordered that employer to immediately reinstate the complaining employee and to pay over $350,000 in compensatory and punitive damages. Now the employer has the employee back while the whistleblower case goes on. (http://www.osha.gov/pls/oshaweb/owadisp.show_document?p_table=NEWS_RELEASES&p_id=23769).
Employers should know the statutes that reasonably apply to their employees and their industry. When OSHA starts a retaliation investigation, the employer might want to whistle for help itself.
Can you hear the whistle blowing?
The courts continue to explain the burdens applicable to certain whistleblower statutes enforced by the U.S. Department of Labor (“DOL”). The statutes that use the procedure adopted by the Sarbanes-Oxley Act require the complainant to prove by a preponderance of the evidence that protected activity was a contributing factor to an adverse action. Then, the employer has the burden to show by clear and convincing evidence that it would have made the same decision regardless of the protected activity. In this case, the Administrative Law Judge who heard the evidence believed that the complainant could carry his burden just by raising an inference of retaliation and then showing that the employer’s stated rationale for the decision was a pretext for retaliation. Not so. The complainant’s burden is to show his prima facie case by a preponderance of the evidence. Bechtel v. ARB & Competitive Technologies Inc., No. 11-4918-ag (2nd Cir. March 5, 2013).
The stiffer requirements for a prima facie case under these DOL whistleblower statutes balances (somewhat) the harsh remedies available at even the administrative stage in these claims, but we still see the headlamp of these enforcement actions bearing down on us.

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