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Your personal and professional lives will suffer. But then, doing the right thing never meant that right things would happen to you. A government contractor is overcharging your state government agency for goods and services. You know this because you once worked in the billing department of the contractor. You report this to your supervisor who terminates you shortly afterward.
Graham; and William Sanjour. Of course, all paid a high price to come forward. As CFEs, we might find it necessary to report wrongdoing, but we should proceed with caution before blowing the whistle. My review of state-level lawsuits suggests that being entitled to protection under a state whistle-blower statute and receiving that protection can be two different matters. Please consult local counsel.
Most of the state whistle-blowing laws were enacted to encourage public employees to report fraud, waste, and abuse in government agencies.
Some laws protect only public employees; others include government contractors and private-sector employees.
Most of the states also have laws covering private-sector employees. However, many of these laws protect reports involving workplace safety. They were enacted decades ago to protect employees from retaliation when reporting occupational safety issues. Public and private employees can use them, but they might not apply to all situations. Over the years, reporting in other specific situations has been protected.
Many states enacted anti-retaliation clauses for specific claims or industries. For example, Rhode Island has anti-retaliation clauses in statutes pertaining to gaming, nursing homes, health-care facilities, nonprofit hospitals, insurance fraud, health maintenance organizations; and asbestos abatement.
Anti-retaliation clauses are designed to protect public and private employees working in specific cases. Take the Texas Whistle-blower Act, for example. The employee must initiate action under the grievance or appeal process of the governmental employer before filing a lawsuit.
The employee must also report the violation in good faith, prove the retaliation is the result of the whistle-blowing, and identify the laws violated and the persons engaged in the violations. Employees can be compensated for their losses, but the entity can defend itself by asserting its actions were unrelated to the whistle-blowing. This is an affirmative defense that can be asserted by any employer. Employers using an affirmative defense will admit they took the adverse personnel action but claim the action was due to events independent of the whistle-blowing.
I stratified the lawsuits chronologically by state and selected every fourth case to obtain a random sample of 95 cases. I conducted a content analysis of each case to identify: Another 6 percent were suspended and 5 percent were transferred against their wishes.
The remaining 15 percent were given poor evaluations, demoted or harassed. Perhaps employees are reporting wrongful acts more frequently and filing more frivolous lawsuits.
Fifty-five percent lost their cases. Fourteen percent lost because they failed to prove their cases. Eleven percent failed to prove a causal connection between the alleged retaliation and the whistle-blowing. Only 22 percent won their lawsuits. Of these, 2 percent were reinstated to their old jobs and 8 percent won damage awards.
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The remaining 23 percent of the cases were remanded for a new trial. To prevail, employees will probably have to link their whistle-blowing to the retaliation. As discussed previously, the laws are very specific on how whistle-blowers must report the wrongdoing.
Failing to comply with any aspect of the law will result in a loss of protection. Six percent of the employees lost because they failed to exhaust all their internal remedies before reporting their concerns externally.
Many laws require the employee to report internally first to give the employer an opportunity to correct the matter. Internal reports can also allow the employer to conceal the unlawful activity, if they are so inclined.
Another 5 percent lost because they failed to report the act of wrongdoing correctly. Other laws require the whistle-blower to state the specific laws that were broken. The purpose of these requirements is to provide the employer with specificity so it can correct the problem. A high-level officer, working for a government defense contractor, discovered that his employer was overbilling the government, supplying defective parts, and engaging in the unauthorized use of government equipment.
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Five percent of the employees in the sample lost because they filed their lawsuits using inappropriate laws.
The court dismissed his complaint and the engineer appealed. In the meantime, Florida enacted a whistle-blower law and it covered private-sector employees. Proving public interest is easy for public-sector employees because their work involves public protection. The case of two nurses working in a private nursing home exemplifies the difficulties private-sector employees can have winning in court even when their cases appear to involve public interest. Five percent of the private-sector employees in this sample lost because they mistakenly filed charges under statutes that covered only public employees.
Not all the laws protect private-sector employees. Whistle-blowers need to make sure they are covered by the laws they use. Twenty-five percent involved public safety. Fifteen percent involved public health.
Sixteen percent involved the misappropriation of public funds. Eighteen percent involved matters of general public interest, and 11 percent involved civil rights violations. Public employees filed 60 percent of the cases in the sample, and they tended to witness the most serious violations of public policy. Public engineers reported the most serious offenses. These incidents usually involved public exposure to toxic chemicals or waste.
Public nurses also reported serious issues. Their complaints usually involved patient neglect and fatal accidents. The complaints of police officers were also very serious and usually involved internal corruption.
Damage awards were often given to whistle-blowers who reported serious public policy issues. An analyst in a California public housing authority, for example, reported that someone was leaking confidential bid information. These awards were given to whistle-blowers reporting irregularities involving public funds. Large awards were also given to whistle-blowers reporting violations of public health and safety.
These awards support the assertion that whistle-blowers are public employees attempting to resolve serious violations of public policy. The violations, summarized in Exhibit 2 above , show that 15 percent of the employees accused their employers of issuing false reports.
Fourteen percent alleged violations involving air or water quality. Ten percent alleged nepotism or self-dealing. Nine percent alleged patient abuse or neglect. Nine percent alleged discrimination or civil rights violations. Eight percent alleged miscellaneous violations and another eight percent alleged violations of state labor laws or workplace safety.
Sixty-one percent of the whistle-blowers sued using a state whistle-blower law. Twelve percent used an anti-retaliation clause in a labor law. Eight percent sued under contract law, and 5 percent sued under the U.
Constitution or other civil rights law. Five percent began by having their cases heard in a civil service or union hearing, and 2 percent sued to appeal a professional code of conduct violation. The remaining 7 percent filed under a miscellaneous law. The laws are summarized in Exhibit 3 below. Sixty-four percent of the whistle-blowers who sued using a labor or employment law lost, despite the fact that they barely blew the whistle.
An auditor, working for a New York City brokerage firm, reported that corporate officers were engaged in money laundering. He filed a complaint with the New York Stock Exchange and received compensatory damages in arbitration.
He then filed a lawsuit under a labor law to seek punitive damages. The auditor lost because punitive damages are awarded only when the perpetrator engages in a pattern of conduct aimed at the public in general.
The whistle-blowers in the sample who sued under contract law were independent contractors. They sued for breach of contract when they were terminated prior to the end of their employment contracts and lost when they failed to prove the causal link between their termination and whistle-blowing.
Be Prepared Before You Blow the Whistle
The most interesting contract law case was filed by mechanics of a chemical company. They told the Occupational Safety and Health Administration OSHA that their employer exposed the chemical plant shop to asbestos, and then they were terminated. They decided to sue for breach of contract because under contract law they only had to prove: The mechanics proved their case and were awarded compensatory damages for lost wages. Some of the whistle-blowers sued to protect their rights to free speech under the First Amendment of the U.
To prevail, these whistle-blowers had to prove the issue was a matter of public interest. The firefighter had secretly tape-recorded conversations with co-workers and jumped the chain of command.
The court held that the firefighter had carried his concerns to protect the public too far. In another First Amendment case, a Nebraska prison guard told a reporter about the serious racial problems in his prison.