- What is whistleblower retaliation?
- What whistleblower protection is offered under the False Claims Act?
- What job protection is offered for SEC and CFTC whistleblowers?
- What whistleblower job protection is offered under state laws?
- What are some examples of whistleblower retaliation cases under the False Claims Act?
- What are some examples of SEC cases involving whistleblower retaliation?
Whistleblowers often face workplace retaliation for reporting their concerns, whether to their supervisors, through internal compliance systems or to government regulators. Whistleblower retaliation can take many forms — demotion, being fired or sidelined, unwarranted disciplinary actions, a loss of pay or hours, being blackballed so the whistleblower cannot find another job, etc.
Congress recognized that whistleblowers need job protection because many face retaliation, so whistleblower laws provide recourse for those who face whistleblower retaliation.
The False Claims Act and the Dodd-Frank Act provide whistleblower protection and allow whistleblowers to seek compensation when workplace retaliation occurs.
The False Claims Act, which prohibits fraud against the government, includes an anti-retaliation provision for whistleblowers who file qui tam lawsuits or are considering filing a qui tam lawsuit.
Whistleblowers who report wrongdoing to the Securities Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) are covered under the whistleblower job protections of the Dodd-Frank Act. In addition, the SEC has taken strong steps to protect whistleblowers who suffer job retaliation because of company confidentiality agreements.
Individuals who are retaliated against because they support or pursue a “qui tam” lawsuit are protected under Section (h) of the federal False Claims Act.
The False Claims Act protects employees as well as contractors and agents against employer retaliation. Those who take lawful steps to investigate or bring a False Claims Act action are covered. The law says that “if that employee, contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment,” then that individual can seek compensation.
If there is job or work-related retaliation, whistleblowers are entitled “to all relief necessary to make the employee . . . whole,” according to the False Claims Act. This can include reinstatement, two times the amount of back pay, interest on back pay, reimbursement of litigation costs and reasonable attorneys’ fees and compensation for special damages.
The Dodd-Frank Act prohibits employers from firing, demoting, suspending, threatening, harassing or discriminating against any individuals who provide information to the SEC or CFTC or assist the SEC or CFTC in an investigation.
However, SEC whistleblowers must first report the securities law violations to the SEC before they suffer job retaliation or else they are not covered by Dodd-Frank’s anti-retaliation provisions. This was decided by the Supreme Court in what’s known as the “Digital Realty” case.
Whistleblowers who suffer from job retaliation are entitled to reinstatement, back pay and any other damages that occurred.
The SEC has said employers may not require employees to sign employment agreements and severance agreements that discourage or impede employees from contacting the SEC with concerns. It also has said requiring employees and former employees to sign confidentiality agreements imposing pre-notification requirements before contacting the SEC is a violation of SEC rules.
Rule 21F-17 prohibits companies from taking any action to impede whistleblowers from reporting possible securities violations to the SEC. Many companies have been fined for violating that rule.
The rule states that “[n]o person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confdentiality agreement . . . with respect to such communications.”
The CFTC has similar rules. The agency can bring an action against an employer who retaliates against a whistleblower, even if the whistleblower doesn’t qualify for a reward.
Even when the agencies takes enforcement actions against entities for job retaliation, SEC and CFTC whistleblowers can sue employers for damages caused by job retaliation.
Many state false claims laws with whistleblower reward provisions also provide whistleblower protection with regard to jobs.
For instance, the California False Claims Act states whistleblowers are entitled to job protection if any “employee, contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of his or her employment.”
Under California law, whistleblowers who are retaliated against are entitled to reinstatement with the same seniority status, two times the amount of back pay as well as interest on the back pay, compensation for any special damages and where appropriate, punitive damages. The company that violated the law also must pay the whistleblower’s litigation costs and attorneys’ fees.
Other states offer similar protection, but it varies and depends on the each whistleblower’s circumstances. For legal advice on how to protect yourself if you are a whistleblower or if you are considering filing a whistleblower lawsuit, consult with an attorney.
The False Claims Act provides protection from retaliation for efforts to stop violations of the False Claims Act. Retaliation claims are often part of a whistleblower’s case under the False Claims Act, but they can also be brought separately. Here are two examples of cases that illustrate some of the ways these issues can arise.
Thompson v. Quorum Health Resources LLC – A federal appeals court upheld a jury’s determination that Quorum’s decision to fire whistleblower Mark Thompson was due to the qui tam complaint Thompson filed against the hospital management company regarding a contract with a Kentucky hospital. Quorum argued that it fired Thompson because he had failed to comply with the company’s code of conduct that required employees to report fraud concerns to the company. The court held that the jury was entitled to conclude from the evidence presented that that was not the real reason Quorum fired Thompson.. Although the government decided not to join Thompson’s qui tam case, he was still protected by the False Claims Act. The lower court awarded Thompson nearly $1 million.
Hill v. Booz Allen Hamilton Inc. – Surendrani Hill sued her employer, Booz Allen Hamilton, for retaliating against her for conducting an extensive investigation into an Air Force contractor’s billings to the government for possible fraud. The contractor was cleaning up environmentally sensitive sites at an Air Force base on Guam, and Hill’s job was to provide oversight of key documents for the cleanup under a Booz Allen contract with the Air Force. Booz Allen put her on probation because of “unprofessional and disrespectful behavior toward a contractor,” among several reasons, and later fired her. Booz Allen argued that it did not retaliate because it was unaware that Hill was engaged in efforts to stop fraud against the government. But the court held that a jury could conclude that Booz-Allen did have notice. Although Hill did not file a qui tam lawsuit, the court observed that “the case law is clear that a retaliation claim can be maintained even if no FCA [False Claims Act] action is ultimately successful or even filed.”
HomeStreet Inc., a Seattle-based financial services company, paid a $500,000 penalty to settle charges that it conducted improper hedge accounting and later took steps to impede potential whistleblowers. The SEC said HomeStreet tried to determine the identity of a presumed whistleblower after the SEC requested documents related to hedge accounting from the company, suggesting to one individual considered to be a whistleblower that the terms of an indemnification agreement could allow HomeStreet to deny payment for legal costs during the SEC’s investigation. The SEC also penalized HomeStreet for requiring former employees to sign severance agreements waiving potential whistleblower awards or risk losing their severance payments and other post-employment benefits.
After learning that that an employee had reported potential violations to the SEC, Paradigm Capital Management, an Albany, N.Y.-based hedge fund advisory firm, removed him from his head trader position, tasked him with investigating the conduct he reported to the SEC, changed his job function from head trader to a full-time compliance assistant and stripped him of his supervisory responsibilities. The SEC fined Paradigm Capital Management, an Albany, N.Y.-based hedge fund advisory firm, and its owner $2.2 million for engaging in prohibited principal transactions and retaliating against the employee.
If you are considering become a whistleblower, please consult with an experienced whistleblower attorney to be sure you are protecting your rights. Phillips & Cohen offers free, confidential consultations. Contact us.