Whistleblower Law Blog

GAO Report Reveals Lack of Oversight in DOL Whistleblower Protection Program

March 04, 2009

A report released by the Government Accountability Office (“GAO”) reveals that the Department of Labor’s (“DOL”) Occupational Safety and Health Administration (“OSHA”) lacks adequate resources for processing whistleblower complaints.  As a result, many whistleblower complaints are not investigated, while others fail to be recorded in OSHA’s database.  According to GAO auditors, nearly half of the whistleblower investigators lack the necessary equipment to meet the needs of their jobs such as a portable printer or laptop computer.  Additionally, the majority of whistleblower investigators have reported that they need more training to effectively address cases under some of the more complex federal statutes such as the Sarbanes-Oxley Act. 

To address the existing problems with the administration of the whistleblower program, GAO encourages DOL to take the following actions: 

• Establish a mechanism to ensure that the data in OSHA’s management information system is accurate; 
• Revise OSHA’s audit directive to clarify the criteria that regions must use in conducting focused and comprehensive audits;
• Develop interim audit milestones to ensure that audits are completed within specified time frames;
• Establish minimum standards for equipment and computer software that investigators need to conduct their jobs; and
• Improve the method in which the ARB tracks its appeals by directing the ARB to conduct routine, systematic and independent reviews of its case tracking system.

All recommendations are currently being considered by DOL.

Department of Labor Issues Landmark Decision in Favor of Sarbanes-Oxley Whistleblowers

March 04, 2009

On February 27, 2009, the United States Department of Labor’s Administrative Review Board (“ARB”) affirmed the Administrative Law Judge’s (“ALJ”) opinion in Kalkunte v. DVI Financial Services, Inc., where the ALJ held that a privately-held company acting as a contractor, subcontractor, or agent of a publicly traded company can be held liable for violation of the whistleblower provisions of the Sarbanes-Oxley Act (“SOX”).  SOX, also known as the Corporate and Criminal Fraud Accountability Act of 2002, was enacted to ensure that employees who report corporate fraud can do so without fear of employer retaliation. The Kalkunte decision is significant because it defines the scope of liability under SOX and because it is the first time that the ARB has affirmed an ALJ decision in favor of a SOX plaintiff.

In Kalkunte the complainant Sheila Kalkunte, a former Associate General Counsel of DVI Financial Services, Inc. (“DVI”), alleged that she was retaliated against for disclosing information to audit committee members and outside counsel about senior management’s alleged misrepresentation of statistical data in violation of securities laws.  In addition, Kalkunte alleged that DVI, a publicly traded company and AP Services, LLC (“AP”), a privately-held company were both liable for retaliation under Section 806 of SOX.  In its defense, AP argued that privately-held companies are not required to adhere to SOX.

In affirming the ALJ’s decision, the ARB held that a company cannot escape liability for violating the whistleblower provisions of SOX merely because it is not registered under the Securities and Exchange Act or required to file reports under the same act. 

The ARB awarded Kalkunte lost wages and compensatory damages based on its finding that there was substantial evidence supporting the ALJ’s ruling that both DVI and AP retaliated against Kalkunte because of her whisleblowing activity.

R. Scott Oswald and Nicholas Woodfield, Principals at The Employment Law Group® law firm (www.employmentlawgroup.com), represented Ms. Kalkunte and can be reached at 202-331-2883.

New Bill Extends Whistleblower Protections to Congressional Whistleblowers

March 02, 2009

Senator Charles Grassley (R-Iowa) introduced S.458, the False Claims Act Clarification Act of 2009, which would extend whistleblower protections to employees in the legislative branch who disclose information about reasonably perceived violations of any law, rule, or regulation.  The bill also amends the False Claims Act (“FCA”) by:

• clarifying the definition of “claim” to include any request or demand for money or property whether or not the United States has title to the money or property;
• expanding protected conduct to include disclosures made to officers, employees, and agents of the United States; and
• extending the statute of limitations for filing a retaliation claim from 6 to 10 years.

For information about The Employment Law Group® law firm’s Whistleblower Practice under the False Claims Act, click here.

OSHA Orders Southern Air to Pay $400,000 to Airline Whistleblower

March 02, 2009

The U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) has ordered Southern Air, Inc. to pay more than $400,000 in lost wages, back pay, damages, and attorney fees to a flight crew member who alleged that he was terminated after raising concerns to management about inadequate rest breaks and work hours in excess of those permitted under the Federal Aviation Administration rules.  After its investigation, OSHA determined that Southern Air violated the whistleblower provisions of the Wendell H. Ford Aviation Investment and Reform Act (AIR21) when it terminated the flight crew member for raising legitimate safety concerns about the working conditions at Southern Air.  OSHA’s order is significant because it reminds employers that there is no tolerance for retaliation against employees who raise legitimate health and safety concerns.  For information about The Employment Law Group® law firm’s Airline Whistleblower Practice, click here.

The Employment Law Group® Law Firm Will Speak At Annual Whistleblower Symposium

March 02, 2009

Jason Zuckerman, a Principal at The Employment Law Group® law firm will speak at the Annual Whistleblower Symposium in Atlanta, GA.  The conference, which is scheduled to take place on March 4, 2009, will provide practical tips to employers and employees for successfully litigating whistleblower retaliation claims under the Sarbanes-Oxley Act.  To register for this event, click here. 

The Employment Law Group® Law Firm Is a Moderator for Webcast on New Whistleblower Protections

March 02, 2009

Jason Zuckerman, a Principal at The Employment Law Group® law firm will speak at March 17, 2009 webcast CLE titled, “New Whistleblower Protection:  The McCaskill Amendment to the Economic Stimulus Bill.”  The webcast will provide an overview of the recently-passed whistleblower protection provision in the Economic Stimulus Bill and its effect on whistleblower law and litigation.  In particular, the program will address the following questions:

• Will the whistleblower protections for employees of government contractors receiving stimulus funds apply to internal disclosures?
• Will contractor employees be able to recover compensatory damages in a jury trial?
• What is the scope of protected disclosures?
• Is the burden of proof favorable to employees?
• What defenses are available to employers to avoid liability?
• Will prevailing plaintiffs be entitled to attorney fees and litigation costs?
• Will the McCaskill Amendment preempt other statutory and common law remedies available to employees of government contractors?
• Will the new law result in an upsurge in whistleblower litigation?
• How will the McCaskill Amendment affect the interpretation of similar whistleblower protection laws?
• Does the new law completely eviscerate the “duty speech” defense and does the “duty speech” defense apply to other statutory whistleblower claims?
• What changes to other whistleblower laws are likely to be enacted by this Congress?
• What steps can employers take to avoid whistleblower retaliation claims?

For more information about this event click here.

OSHA Finds Retaliation in Railroad Whistleblower Case

February 23, 2009

The U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) has ordered Union Pacific Railroad Company to reassign, reimburse, and pay compensatory damages to a former employee who alleged that he was retaliated against for requesting a lookout while performing work on adjacent railroad tracks.  After investigating the whistleblower complaint, OSHA concluded that Union Pacific violated the whistleblower provisions of the Federal Rail Safety Act (FRSA) when it eliminated the welder position and forced the employee to increase his daily commute by 131 miles.  The take away point for this case is that the whistleblower provisions of the FRSA prohibit all forms of retaliation, including the elimination of an employment position merely because an employee voices a safety concern.  The Employment Law Group® law firm routinely represents employees in whistleblower retaliation actions.  For more information about the FRSA and The Employment Law Group® law firm’s Transportation Whistleblower Practice, click here.

UBS to Pay $780 Million to Settle Tax Fraud Allegations

February 20, 2009

UBS has agreed to pay $780 million to settle allegations that it helped thousands of U.S. taxpayers defraud the Internal Revenue Service (“IRS”).  According to reports by the Department of Justice, UBS concealed billions of American dollars in accounts held overseas despite requirements to report IRS income and other identifying information for its U.S. clients to the IRS.  The U.S. Securities and Exchange Commission (“SEC”) also filed a complaint against the financial firm, alleging that UBS violated SEC rules by acting as an unregistered broker-dealer and investment advisor to thousands of U.S. citizens.  The settlement agreement includes payment for disgorgement, interest, penalties and restitution for unpaid taxes.  Other terms of the agreement include disclosure of the names of U.S. clients with UBS accounts.

This settlement is significant because it allows the U.S. government to pierce the veil of the Swiss bank secrecy and reminds companies that the penalties for participating in tax evasion schemes are severe.

Congress Enacts Robust Whistleblower Protections to Prevent Fraud in Stimulus Spending

February 15, 2009

The economic stimulus bill passed by Congress on February 12, 2009 includes robust whistleblower protections to ensure that employees of private contractors and state and local governments can disclose waste, fraud, gross mismanagement or a violation of law related to stimulus funds.  This article summarizes the key provisions of Senator McCaskill’s (D-Mo.) whistleblower protection amendment to the stimulus bill (“McCaskill Amendment”).

Covered Employers

The McCaskill Amendment applies to private contractors, state and local governments, and other non-Federal employers that receive a contract, grant or other payment appropriated or made available by the stimulus bill.

Broad Scope of Protected Conduct

Protected conduct includes a disclosure to a person with supervisory authority over the employee, a State or Federal regulatory or law enforcement agency, a member of Congress, a court or grant jury, the head of a Federal agency, or an inspector general information that the employee reasonably believes evidences:

• Gross mismanagement of an agency contract or grant relating to stimulus funds;
• A gross waste of stimulus funds;
• A substantial and specific danger to public health or safety related to the implementation or use of stimulus funds;
• An abuse of authority related to the implementation or use of stimulus funds; or
• A violation of a law, rule, or regulation that governs an agency contract or grant related to stimulus funds.

Significantly, internal disclosures are protected, which is a substantial expansion of two current analogous whistleblower protection laws protecting contractors, both of which do not expressly cover internal disclosures.  See 10 U.S.C. § 2409; 41 U.S.C. § 265.  The McCaskill Amendment specifically protects so-called “duty speech” whistleblowing, i.e., disclosures made by employees in the ordinary course of performing their job duties. Courts will likely apply a standard of objective reasonableness from analogous whistleblower protection laws, such as Section 806 of the Sarbanes-Oxley Act, 18 U.S.C. § 1514A, which evaluates the reasonableness of a belief based on the knowledge available to a reasonable person in the same factual circumstances with the same training and experience as the aggrieved employee.

Prohibited Acts of Retaliation

The McCaskill Amendment prohibits a broad range of retaliatory employment actions, including termination, demotion, or any other discriminatory act, which includes any act that would dissuade a reasonable person from engaging in protected conduct.   See Burlington N. & Santa Fe R.R. Co. v. White, 548 U.S. 53 (2006).

Employee-Favorable Burden of Proof

To prevail in a whistleblower action under the McCaskill Amendment, an employee need not show that the protected conduct was a significant or motivating factor in the reprisal, but instead must merely prove that the protected conduct was a “contributing factor” to the reprisal.  The Amendment specifically clarifies that an employee can meet the “contributing factor” standard through temporal proximity or by demonstrating that the decision-maker knew of the protected disclosure.  An employer can avoid liability by demonstrating by “clear and convincing evidence,” a high evidentiary burden, that it would have taken the same action in the absence of the employee engaging in protected conduct.

Remedies

A prevailing employee is entitled to “make whole” relief, which includes: (1) reinstatement; (2) back pay; (3) compensatory damages; and (4) attorneys’ fees and litigation costs.  Where an agency files an action in federal court to enforce an order of relief for a prevailing employee, the court may also award exemplary damages.

Administrative Exhaustion Requirement and Right to a Jury Trial

Actions brought under the whistleblower provisions of the McCaskill amendment must be filed with the appropriate inspector general.  Unless the inspector general determines that the action is frivolous, does not relate to covered funds, or has been resolved in another Federal or State administrative proceeding, the inspector general must conduct an investigation and make a determination on the merits of the whistleblower retaliation claim no later than 180 days after receipt of the complaint. Within 30 days of receiving an inspector general’s investigative findings, the head of the agency shall determine whether there has been a violation, in which event the agency head can award a complainant reinstatement, back pay, compensatory damages, and attorney fees.  If an agency head has denied relief in whole or in part or has failed to issue a decision within 210 days of the filing of a complaint, the complainant can bring a de novo action in federal court, which shall be tried by a jury at the request of either party.  The McCaskill Amendment expressly clarifies that predispute arbitration agreements do not apply to claims brought under the Amendment.

Alternative Remedies

In addition to the relief available under the McCaskill Amendment, employees of government contractors have other options to remedy whistleblower retaliation.  The retaliation provision of the False Claims Act, 31 U.S.C. § 3730 (h), prohibits retaliation against an employee who has taken actions “in furtherance of” an FCA enforcement action, including initiating an FCA action, investigating a potential FCA action and testifying in an FCA action.  At least twenty-four states have adopted laws similar to the FCA, nearly all of which include an analogous retaliation provision.  Unlike the McCaskill Amendment, the retaliation provision of the FCA does not require administrative exhaustion.  Employees of contractors and of state governments may also have claims under state whistleblower protection statutes, but some of those statutes do not protect internal whistleblowing.  In addition, employees of private contractors may have a claim of common law wrongful discharge in violation of public policy, a tort remedy that provides access to a jury trial and punitive damages.  When evaluating a whistleblower retaliation claim arising from an employee’s disclosure about fraud on the government, it is critical to consider whether the employee also has a qui tam action and to preserve the employee’s ability to pursue a qui tam, which may entail avoiding public disclosure of the fraud.  In sum, the McCaskill Amendment provides a critical safeguard against fraudulent spending of stimulus funds.

 

Federal Court Allows Whistleblower to Proceed With Lawsuit Against Vartan National Bank

February 12, 2009

On January 9, 2009, a district court in Pennsylvania decided that Frank Fato, a former executive of Vartan National Bank (VNB), can proceed with his whistleblower lawsuit against VNB in federal court.  In his complaint, the former executive alleges that VNB violated the whistleblower protection provisions of the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), when the company terminated his employment for allegedly disclosing information about the general counsel’s purported interference with VNB’s corporate management.  VNB moved to dismiss the case, arguing that Fato did not have a cognizable claim because he did not allege “plausible facts which demonstrate that a majority of the Board members knew of [his] disclosures to the OCC representative prior to terminating his employment.”  The district court rejected VNB’s argument, concluding that under Section 1831j of the FIRREA, an employee need not provide direct evidence of an employer’s knowledge, but instead need only provide circumstantial evidence that the employer knew about the employee’s disclosure before taking an adverse personnel action.  Finding that at least one VNB board member expressly knew of Fato’s disclosure to the OCC and that there was a three-week gap between Fato’s disclosure and his termination, the court determined that one can reasonably conclude that the disclosure was a “contributing factor” in the adverse employment action.  Accordingly, the court denied VNB’s motion to dismiss.

This case is significant because it rejects the notion that employees need direct evidence to satisfy their prima facie case of retaliation against employers.  To satisfy the “contributory factor” test, an employee need only provide circumstantial evidence, i.e., evidence that demonstrates that the official taking the adverse personnel action against the employee knew of the employee’s protected disclosure and that the personnel action occurred within a time such that a reasonable person could conclude that the disclosure was a contributing factor in the personnel action. 

The order in Fato v. Vartan National Bank, No. 1:07-cv-1291 (M.D. Pa. 2009) is available here.  For more information on The Employment Law Group® law firm’s Whistleblower Practice, click here.