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Whistleblowing

It’s nearly impossible to discuss modern whistleblowing in the U.S. without mentioning the broad effect of the federal Sarbanes-Oxley Act (SOX) and the enormous accounting scandals of the late 20th and early 21st centuries. Before SOX, whistleblowing protection was intertwined with what most human resources specialists currently would think of as protection against employer retaliation. Under the Occupational Safety and Health Act (OSH Act) for example, it was illegal for employers to retaliate against employees who “blew the whistle” about a safety hazard. Also, laws like Title VII of the Civil Rights Act of 1964 (Title VII) protected an employee who provided evidence of discrimination against her employer.

State-by state comparison of 50 Employment Laws in 50 States, including whistleblowing

The SOX was enacted in 2002 as Congress’ response to corporate scandals at Enron and WorldCom. Most of the Act focuses on financial reporting and internal control requirements for publicly traded companies, but Congress also included provisions to protect insiders who report questionable accounting practices. The enactment of SOX opened the way for a deluge of filings to the U.S. Department of Labor (DOL) from individuals claiming that they suffered retaliation for reporting financial hijinks. Some analysts predict that the whistleblower law’s effect on 21st century business practices will rival the effect that the civil rights laws had in the 20th century.

The good news for private employers is that the SOX applies only to public companies. Of course, private employers are usually subject to other laws that prohibit retaliation for engaging in lawful conduct, such as the prohibitions against retaliation for filing claims of race, sex, or other protected-class discrimination or exercising Family and Medical Leave Act (FMLA) rights. Private employers also might find themselves in hot water over a state whistleblower law.

Whistleblower retaliation complaints are relatively easy to initiate under the SOX. The DOL has delegated enforcement authority over the Act’s whistleblowing provisions to the Occupational Safety and Health Administration (OSHA). Persons filing claims must begin by filing complaints with OSHA, which has the authority to investigate and rule on the complaints. Claims must be made within 90 days of the alleged discriminatory action and may be made against individual company employees and agents as well as the company itself. The agency then has 60 days to determine if reasonable cause exists for the allegations, which means finding that “protected behavior or conduct was a contributing factor in the unfavorable personnel action alleged in the complaint.”

Audit your policies and practices on retaliation avoidance with the Employment Practices Self-Audit Workbook

OSHA’s claim decisions may be appealed within the agency for a hearing by an administrative law judge. The agency’s final decision may be appealed in federal court.

Under the SOX’s regulations, the employee’s task is to first establish a prima facie retaliation case, which is similar to the burden under Title VII. The employee must show that she engaged in a protected activity or conduct, the employer “actually or constructively” knew about the protected activity, the employee suffered an unfavorable personnel action such as a discharge, demotion, or reduced pay, and the circumstances “were sufficient to raise the inference that the protected activity was a contributing factor in the unfavorable action.” At that point, the burden shifts to the employer not merely to articulate a nondiscriminatory reason for its conduct, as under Title VII, but to prove “by clear and convincing evidence . . . that it would have taken the same unfavorable personnel action in the absence of the [employee's] protected behavior or conduct.”

It’s important to note that there is currently a bill in Congress called the Whistleblower Protection Enhancement Act of 2007 (HR 985). The Act in its original form is designed to protect all whistleblowers working for the federal government or companies that contract with the federal government from any waste, fraud, or abuse. The bill has been passed in the House of Representatives, but has stalled in the Senate.

HR Guide to Employment Law: A practical compliance reference manual covering 14 topics, including discrimination