A continuation of our recent coverage (here and here) on ethics and compliance trends to watch in 2014, we’re taking a deeper look at whistleblowing and retaliation trends today.
#3: Whistleblowing and Retaliation: Both on the Rise
Though the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd Frank) was passed three years ago, the definition of “whistleblower” under the law is still working its way through the courts. An appeals court ruling in 2013 (Asadi vs. GE Energy) reversed earlier rulings and narrowed the court’s interpretation of who is entitled to “whistleblower” protection. This and other related rulings could discourage employees from bypassing their company’s internal reporting channels to go directly to the government. But if the court ruling is reversed, more employees may instead be encouraged to “go external,” making them eligible for lucrative bounties, and potentially undermining our in-house efforts to address wrongdoing.
In a related development, we’ve seen the rewards for external reporting continue to increase. In October, the SEC announced that it had given a $14 million award to a single (anonymous) whistleblower whose information led to an enforcement action by the commission.
These trends bear watching, but it is important to remember that Dodd Frank isn’t the only government language incentivizing whistleblowers to report outside their organization. Protections under the False Claims Act (FCA) and other industry-specific safeguards also offer rewards for external reporting. In November 2013 we saw a jaw-dropping $167.7 million award – one of the largest whistleblower awards in U.S. history – given in a pharmaceutical case under the FCA. It will be divided among an unspecified number of whistleblowers in three states.
Regardless of how the legal landscape shakes out, from a practical perspective, employers should ask themselves what they can do to both help insulate their organizations from whistleblower claims, as well as continue to encourage early, internal reporting.
Key steps for organizations to take include:
- Continue to communicate to employees about their duty to speak up, but also take the time to explain and de-mystify how the reporting process works.
- Assure employees that the company will follow up on their concerns and will enforce a policy of no tolerance for retaliation.
- Publish sanitized examples of reports and the company’s response to demonstrate the process.
- Train managers on their role in maintaining an open culture without fear of retaliation (including monitoring for peer-to-peer retaliation).
- Create a centralized system to track and investigate claims of retaliation.
Retaliation continues to be a huge issue for organizations to address. It remains the top charge levied by the EEOC and has retaliation claims have more than doubled between 1997 and 2012. We’ve conducted our own research on how retaliation claims are handled and those findings show that 35 percent of executives or high performers are merely “coached” after they engage in retaliation, as opposed to “fired,” “penalized” or subjected to other disciplinary action. To combat this, seventy-four percent of respondents to our survey viewed training and awareness programs as most effective in minimizing retaliation claims.
Last year we encouraged organizations to be on the lookout for a new form of retaliation: whistleblower retaliation using social media. While there is no definitive study yet on how prevalent this new form of retaliation may be, we are encouraged to see a number of companies being proactive and adding language to their Codes and policies as well as creating training that addresses the topic.
A recent study conducted by the Ethics Resource Center uncovered a fascinating but puzzling connection between active social networking and retaliation. According to the study, “the more active the social networker, the more likely they are to encounter ethics risks (witness misconduct, feel pressure to compromise standards, and experience retaliation for reporting misconduct)” It appears that, not only will social networking be a vehicle for retaliation, but those using social networks may be more likely to experience retaliation.