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Federal government contractors have long been aware of the temptation available to their employees to forego internal reporting of potential wrongdoing in favor of trying to strike it rich under a whistleblower action under the Federal False Claims Act. Recent changes to the Federal False Claims Act have contributed to increased recoveries under the Act, including an all-time record of more than $9 billion recovered in the Federal government’s recently concluded 2012 fiscal year.   Federal government contracting, however, covers a minority of the roughly 150 million employed persons in the United States. More notable is the recent massive expansion of the scope of whistleblower incentives and protections through other legislative changes, so as to cover a large swath of the American workforce. For instance, the Secretary of the Department of Labor has authorized the Occupational Safety and Health Administration to investigate whistleblower claims brought not only under the Occupational Safety and Health Act, but also under 20 other Federal statutes.  Other changes include the 2006 Amendments to the IRS Whistleblower Program, part of the Tax Relief and Healthcare Act of 2006, which eliminated the $10 million cap on whistleblower awards under the Act; amendments to the Internal Revenue Code requiring the IRS to give whistleblowers a minimum of 15% and a maximum of 30% of the collected proceeds resulting from any action addressing under payment of taxes or violations of the tax laws brought to the IRS’ attention.

Under the 2010 Dodd-Frank Act, whistleblowers who provide the FCC with original information that leads to a successful enforcement action in which monetary sanctions exceed $1 million will receive an award of not less than 10% and not more than 30% of the monetary sanction.  In August 2012, the FCC issued its first award under the Whistleblower Bounty Program. The award was $50,000, or 30% of the amount collected by the FCC, the maximum allowed. The FCC thus far has not required whistleblowers to report internally at their companies before going to the FCC, although not doing so may reduce awards.  Nor do whistleblowers even need to be employees to report potential violations.  The Dodd-Frank Act also provides for a private cause of action for a whistleblower alleging retaliation by his or her employer.

Similar amendments have been made to the Federal False Claims Act, the Fraud Enforcement and Recovery Act, and the Affordable Care Act.  The 2009 American Recovery and Reinvestment Act expanded the range of potential defendants in whistleblower retaliation actions to include private companies receiving stimulus funding.  Contractors and subcontractors that have received state funds are also subject to potential liability under state versions of the False Claims Act.

Companies should recognize that the class of the potential whistleblowers, and the incentives provided to them to report alleged wrong doing to the government, has undergone a massive expansion in the last several years.

Efforts to avoid whistleblower retaliation claims include:  establishing an employee-concerns program or ombudsperson program in which employees can raise concerns and have assurance that their concerns will be investigated.  It can also help alert management of alleged violations early on, thereby providing an opportunity to intervene and prevent further damage. The ombudsperson or employee-concerns manager should report directly to senior management.  The program may also provide options for employees to raise concerns anonymously.  Additionally, managers and supervisors should be trained on how to handle employee concerns, and how to instill a corporate culture in which employees raise concerns without fear of reprisal. All employees should be put on notice, through training and/or the employee handbook, that if they harass or discriminate against another employee for raising a concern, they will be subject to disciplinary action.

Some statutes provide that relief may not be awarded if the employer demonstrates “clear and convincing” evidence that the employer would have taken the same unfavorable personnel action in the absence of the employee’s protected conduct. To meet this “clear and convincing” standard, it is critical to have thorough unambiguous evidence demonstrating that the same unfavorable personnel action would have been taken in the absence of the employee’s protected conduct. OSHA Regulations provide that it will not conduct an investigation where the employer demonstrates 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 notwithstanding the prima fascia showing of the employee. Management should investigate allegations of retaliation promptly.  The Department of Labor construes employee status broadly. Therefore an employee of a contractor can sometimes bring a retaliation claim against both the contractor “his or her direct employer” and/or the entity employing the contractor. Measures should be taken to ensure that contractors maintain a work environment in which workers feel comfortable raising safety concerns. These measures include: 1) requiring contractors to train their managers concerning whistleblower protections; 2) requiring contractors to investigate claims of retaliation; and, 3) requiring contractors to adopt an anti-retaliation policy.

Employers may be subject to whistleblower investigations despite taking these proactive measures. In those circumstances, employers should be familiar with OSHA’s Whistleblower Protection Regulations. A copy of our whitepaper entitled “Defending Against OSHA Whistleblower Investigations” can be obtained by emailing Joseph Spitzzeri at [email protected].