IN THE COURTS AND ON CAPITOL HILL, whistleblowing has been a hotly debated topic as federal agencies continue to wrestle with corporations over how to define whistleblowing protection rules and Congress investigates allegations of whistleblower retaliation.
The recent developments are the latest chapters in a long-running public debate about how inclusive whistleblower protections should be. Traditionally, federal workers have enjoyed more of these protections than private-sector employees. However, the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act of 2010 both extended some protections into the private sector.
Dodd-Frank, in particular, extends protections to private-sector employees reporting on fraud in financial services companies under a whistleblower program that is administered by the Securities and Exchange Commission (SEC). Dodd-Frank defines a whistleblower as an individual who provides “information relating to a violation of the securities laws to the [SEC], in a manner established, by rule or regulation, by the [SEC].”
When the SEC established this program in 2011, the rules it issued did not require an employee to report violations to the SEC to be afforded protections. Such an employee could simply report internally, to their own company, as long as the disclosures about potential violations were consistent with the standards set out by the Sarbanes-Oxley Act. This is sometimes referred to as the “expansive” definition of whistleblower protection because it covers both internal and SEC reporting, and it has subsequently been adopted by certain district courts.
But in July 2013, the U.S. Court of Appeals for the Fifth Circuit rejected this expansive definition. In Asadi v. G.E. Energy, the court ruled that Dodd-Frank “expressly and unambiguously requires that an individual provide information to the SEC.” Given this, an employee who only reports internally would not be covered by whistleblower protections, according to the ruling.
This year, the SEC defended its expansive definition, in the form of a 30-page amicus brief. The SEC submitted the brief in February for a case pending before the U.S. Court of Appeals for the Second Circuit, which takes up the question of whistleblower protection. “Today’s [brief] makes clear that under SEC rules, whistleblowers are entitled to protection regardless of whether they report wrongdoing to their employer or the commission,” said Sean McKessy, chief of the Office of the Whistleblower, when the brief was filed.
In the brief, the SEC’s lawyers argued that in designing the rules for the whistleblower program, the agency wanted to encourage employees to report internally at their companies. “The commission’s final rules were carefully calibrated to achieve this objective by providing ‘strong incentives’ for individuals in appropriate circumstances to report internally,” the brief said. These incentives include the possibility that whistleblowers who report internally may be able to receive a share of the penalty paid by the company. In addition, employees who report internally first, then to the SEC, may also get a bonus under SEC rules.
As the SEC continues to defend its whistleblower protection rules in the courts, some members of Congress are investigating incidents of retaliation against whistleblowers outside the financial services sector. And some lawmakers are expressing concern that, despite protections, the current system continues to be stacked against whistleblowers.
“Life after you’ve blown the whistle isn’t easy,” said Sen. Claire McCaskill (D-MO) at a March Senate Homeland Security and Government Affairs subcommittee hearing she chaired on whistleblower retaliation at the Hanford Nuclear Reservation. Hanford, created as part of the government’s atomic bomb project in the 1940s, now houses millions of gallons of radioactive waste from decades of plutonium production in aging underground tanks.
The Senate hearing involved two former employees at URS, one of the major contractors at the site for the U.S. Department of Energy (DOE). Donna Busche, URS’ environmental and nuclear safety manager, had repeatedly raised safety concerns with the facility and was dismissed by the company in February. Walter Tamosaitis, the other employee who had raised safety concerns, was dismissed in October 2013. URS officials say that the firings were unrelated to the safety complaints.
Since Busche and Tamosaitis were not invited to testify at the hearing itself, McCaskill held a public roundtable with the two employees before the official hearing began. At the roundtable, Bushe said that she and Tamosaitis had no forum for their concerns “other than to adjudicate it in court for six or seven years.”
At the hearing itself, the ranking minority member of the subcommittee, Sen. Ron Johnson (R-WI), said DOE offers a lot of “bureaucratic gobblygook” when it comes to whistleblower reporting procedures. He said it was still unclear exactly who at DOE a whistleblower could contact to safely voice safety concerns.
McCaskill argued that if a whistleblower goes to court, he or she is at a great disadvantage because the individual’s ability to pay legal fees is usually much more limited than the organization he or she is fighting.
“There is a real uneven playing field as it relates to having a case of this nature adjudicated. I know how expensive it can be to get to a court of law, especially if one side has a lot of resources and the other has zip,” explained McCaskill.
She also expressed concern that in a whistleblower case like the Hanford one, legal proceedings can go on for years. If the whistleblower works for a federal contractor, ultimately the U.S. taxpayer foots the legal bills. “This doesn’t seem fair to me, the way this is currently situated,” she said.
Going forward, McCaskill said her panel, the Subcommittee on Contracting and Financial Oversight, would continue to monitor the Hanford whistleblower case to see how long it takes to adjudicate and how costly it becomes to the taxpayer. “We’re going to ask a lot of questions around that,” McCaskill said.