Wednesday, August 5, 2015

Whistleblowers Summit hears about the uneven web of whistleblower protections

“Every federal sector EEO retaliation claim is also a Whistleblower Protection Act claim.” Audience members asked me to repeat this conclusion twice during a presentation to the Whistleblowers Summit here in Washington, DC, last Friday. My former colleague, Lindsey Williams, whistleblower Matthew Fogg and I presented The Uneven Web of Whistleblower Protections to attenders at the Gold Room of the Rayburn House Office Building.
We provided the citations to provisions of the Whistleblower Protection Act (WPA) that protect federal employees when they disclose violations of the Civil Rights Act, or participate in EEO proceedings. The mixed case statute, 5 U.S.C. § 7702, allows victims of retaliation to raise their EEO and WPA claims in federal district court, even if they never cited the WPA in their EEO proceedings.

Congress has passed 90 laws protecting different groups of whistleblowers, but has still left some big gaping holes in our web of protections. Here are some of the laws and holes that we presented.

Section 11(c) of the Occupational Safety and Health Act (OSH Act) remains one of the weakest laws on the books. Although 1,729 workers complained about retaliation last year, OSHA took enforcement action in only 23 (not counting settlements). The other 1,706 whistleblowers would have no right to pursue their claims with an administrative hearing or court action under federal law. This gaping hole was the subject of my letter to Scientific American in 2010.

In health care, the Affordable Care Act created a whistleblower protection for those who raise concerns about compliance with Title I (the insurance mandate) but not for any of the patient protection or quality care provisions. So, if you blow the whistle on insurance companies not making all the money they are entitled to – you are protected. If you blow the whistle on hospital shortcomings that are actually killing patients – you have no specific protection under federal law (although you would have protection if you are raising concerns about Medicare or Medicaid fraud).

Food poisoning kills between 3,000 and 5,000 Americans every year, and in 2010, Congress passed the Food Safety Modernization Act which protects workers when they raise food safety issues enforced by the Food and Drug Administration. However, lawfully prescribed medications kill between 60,000 and 100,000 Americans every year, and Congress has not created the same type of protection for the employees of Big Parma. It is a most uneven web.

Lindsey Williams explained the protections that workers have under the National Labor Relations Act (NLRA). When workers act in concert to raise concerns about wages, hours, or terms and conditions of work, they are protected from retaliation, even if they have no union at all. She described a recent NLRB General Counsel’s memorandum listing the types of restraints some employers put in personnel policies or non-disclosure agreements. If the policies could reasonably lead workers to believe that they could be fired for protected concerted activity, then those policies are unlawful.
For example, it is now unlawful for employers to have policies that say:
  • “Never publish or disclose [the Employer's] or another's confidential or other proprietary information.”
  • “Never publish or report on conversations that are meant to be private or internal to [the Employer].”
  • Employees are prohibited from “[d]isclosing ... details about the [Employer].”
  • “Sharing of [overheard conversations at the work site] with your coworkers, the public, or anyone outside is strictly prohibited.”

Workers are protected when they seek to act in concert to raise safety and other workplace issues – to the boss, to each other, or to the media. The time limit to file charges with the NLRB is 6 months.

Matthew Fogg shared some reflections on his experience blowing the whistle on race discrimination in the U.S. Marshal’s Office. We agreed that women and minorities are disproportionately represented among the victims of whistleblower retaliation. Our materials provide case law supporting the contention that women and minority whistleblowers are protected for deviating from the stereotype of being submissive. The right to assert compliance concerns is not a privilege limited to white men.

In the end, we had more material than we could present in one hour. Our full materials are available at:

Tuesday, August 4, 2015

Fifth Circuit reinstates SOX whistleblower claim

In a unanimous panel decision last Friday, the Fifth Circuit U.S. Court of Appeals reinstated Kevin Wallace’s SOX whistleblower claim and returned his case to the district court’s docket.
Wallace worked for the petroleum company Tesoro as Vice President of Pricing and Commercial Analysis. He discovered structural flaws in Tesoro’s accounting system that garbled important financial results used by management, the Board of Directors, and Tesoro’s public filings. Wallace confirmed his findings with internal experts and reported them to his direct supervisor, Claude Moreau, SVP Marketing, Tracy Jackson, Head of internal audit, and Steven Grapstein, head of the audit committee of Tesoro’s Board of Directors. On March 12, 2010, Wallace noted, in a certification required by Tesoro’s Code of Business Conduct, that he was being retaliated against. He was fired within hours of the certification.
Wallace filed an OSHA complaint under the Sarbanes-Oxley Act (SOX). After waiting the required time, he filed his retaliation lawsuit in federal court in San Antonio, Texas. After much procedural wrangling, Tesoro asked the court to dismiss Wallace’s lawsuit because it raised facts that had not been presented to OSHA. The court granted that request and dismissed.
In reversing, the Court of Appeals said that Wallace adequately explained how he believed Tesoro’s practices violated rules of the Securities and Exchange Commission (SEC). Specifically, the Court held that, “Tesoro has not shown that it disclosed all of the taxes Wallace alleges were improperly recorded.”
The Court made a particularly helpful holding for whistleblowers, finding that they are protected while “providing information about potential fraud or assisting in a nascent fraud investigation[.]” Those whistleblowers are protected even though they “might not know who is making the false representations or what that person is obtaining by the fraud[.]” This is comparable to protecting employees who are collecting information about possible fraud, “before they have put all the pieces of the puzzle together.” Quoting, U.S. ex rel. Yesudian v. Howard University, 153 F.3d 731, 739-40 (D.C. Cir. 1998). The Fifth Circuit adds, “Leaving those employees unprotected would have grave consequences for the statutory scheme of employee protection[.]” In Wallace, the Court respected that whistleblowers serve an important public function by uncovering frauds, and they must be protected from their first step to their last.
To deter frauds, Congress required companies to implement their own compliance programs, disclosure hotlines, internal controls and certifications. Wallace contended that that these programs are “proceedings” to enforce SOX, and his participation in them should be protected under SOX’s participation clause. 18 U.S.C. § 1514A(a)(2). The Court declined to decide that question because, “It would not have been obvious to the district court, at the time, that ‘proceeding’ was so defined.” Presumably, that issue should now be obvious to future courts, and whistleblowers today should be able to cite this decision for support.
Through SOX, Congress seeks to change the culture of public corporations so that employees will feel encouraged to raise compliance concerns, instead of afraid to do so. Congress is mindful that employee tips are the most commons means ofdetecting frauds. More and more American companies are getting the message and consciously changing their cultures to encourage employee reports. The decision in Kevin Wallace’s case should encourage other companies to take their compliance responsibilities more seriously.
The undersigned was counsel for Mr. Wallace on appeal, co-counseling with San Antonio attorneys Christopher McKinney and Alex Katzman. The U.S. Department of Labor, Office of the Solicitor of Labor, participated with an amicus brief asking the Fifth Circuit to reverse.
The case is Wallace v. Tesoro Corp., No. 13-51010 (5th Cir. 7-31-2015).