If You See Something, Say Something?

Actions that constitute wire fraud, bank fraud, securities fraud, and violations of the rules or regulations of the Securities and Exchange Commission are sadly commonplace in the business world that require extensive investigations and procedures. Additionally, it is not out of the realm of reason for employees not to want illegal activity happening within their workplace. It is for this reason, and many more, that negative treatment by an employer towards an employee who assists in such investigations is illegal.

If you were fired, demoted, suspended, threated, or harassed in any way by an employer as a result of a complaint or assisting with an investigation, you may have a “whistleblower” claim. It is vital to get informed and know your rights as an Employee to ensure your legal rights are protected. Here’s a section of my book “The Employee Rights Handbook” that deals with just that.


Tattling on abuses of authority, or whistleblowing, is now protected conduct under federal and state law. The Sarbanes-Oxley Act (SOX)prohibits publicly traded companies from discharging, demoting, suspending, threatening, harassing, retaliating against, or in any other manner discriminating against their employees in the terms and conditions of employment for providing information or otherwise assisting in the investigation of conduct that they reasonably believe constitutes wire fraud, bank fraud, securities fraud, or violation of any rule or regulation of the Securities and Exchange Commission (SEC).

SOX grants employees a civil cause of action for alleged violations. Cases interpreting the law suggest that an employee’s report, complaint, or communication may be covered and the worker protected against retaliation when it describes fraudulent activity against the shareholders that had occurred or was being attempted even though such remarks don’t formally or specifically accuse the employer of acting fraudulently.

SOX protection does not apply if you work for a small private employer. Coverage becomes unsure if you work for a nonpublic subsidiary of a public company, but probably doesn’t exist when there is no evidence that the parent company is not intimately involved in the subsidiary’s employment practices.

An employee alleging retaliation for engaging in protected whistleblowing activity  must file a complaint with the Occupational Safety and Health Administration within 90 days after the alleged violation occurred. This can be done in person, or by mail, fax, or e-mail.

 STRATEGY: File a claim with OSHA immediately if you believe you were victimized by asserting your whistleblower rights. Seek competent legal advice before engaging in whistleblowing activity since the law is often unclear and each case is decided upon its own merits. An employment attorney can help you draft a letter or e-mail for you to send to prove you made a concrete, verifiable complaint that will hold up in court.

Your credibility in a SOX whistleblower case alleging unnecessary spending, waste, or other inappropriate financial practices will be enhanced if you have access to or copies of financial records or work in the controller’s office. Whether you are allowed to retain private company records to prove a claim is not always clear-cut. You must also be able to demonstrate a complaint was made for the right reasons and not because you decided to protect your job after being warned of a possible discharge due to poor performance. That is why it is necessary to consult an experienced employment attorney to discuss your rights, options and strategies.

An advantage of SOX is that the Department of Labor can order the employer to immediately reinstate you (if you were previously fired) for reporting fraud if an investigator determines “probable cause” in your favor. You also have the right to commence a private action in federal district court if the Department of Labor has not issued a final order within 180 days of the filing of the complaint with OSHA. Commentators state this is an extraordinary remedy since the employer may be required to take such action after a probable cause finding even though no formal evidentiary hearing was held allowing the company to dispute the whistleblower’s allegations.

The American Recovery and Reinvestment Act of 2009 prohibits employers, including contractors, subcontractors and others conducting business with the government or receiving stimulus funds, from retaliating against an employee who discloses information that he or she reasonably believes evidences gross mismanagement of an agency contract or grant relating to stimulus funds, a substantial and specific danger to public health related to the use of stimulus funds, or a violation of law, rule or regulation related to an agency contract, grant or award related to stimulus funds. Unlike the anti-retaliation provisions found in SOX (which protect only the reporting of fraud or violation of U.S. Securities and Exchange Commission regulations) the act applies to complaints of gross mismanagement, gross waste, or an abuse of authority. Employees who believe they have been subjected to a prohibited reprisal must submit a complaint to the appropriate inspector general of a federal agency under their domain, such as the departments of Agriculture, Commerce, Defense, Education, etc. Seek legal advice from a knowledgeable employment attorney about the unique aspects and features of this law where warranted.

Most states also recognize whistleblowing by statute. These laws typically protect employees from retaliation after they report suspected violations of laws or regulations, and provide specific remedies including reinstatement with back pay, restoration of seniority and lost fringe benefits, litigation costs, attorney fees and fines. Be aware however that not all conduct is protected. New York, for example, only protects plaintiffs who prove they were discharged in retaliation for disclosing a policy of a former employer that constituted an actual violation of the law and created a substantial and specific danger to the public health, such as the improper quality of patient care at a hospital. Thus, the New York law is designed to essentially support the rights of only health care and nursing home employees. Since the law is not broadly applied in New York, many companies have fired workers with impunity who questioned internal management systems, “blew the whistle” without properly investigating the facts, bypassed management, or tattled in bad faith. That is why it is critical to research the unique law in your state and confer with counsel before proceeding in this area.

People who work for federal agencies are also protected from being fired for whistleblowing. In one case a nurse was dismissed after reporting abuses of patients at a Veterans’ Administration medical center. She sought reinstatement and damages before a federal review panel. The panel ordered that she be reinstated and awarded her $7,500 in back pay.

The following true cases illustrate examples of firings that were found to be illegal in this area as a public policy exception to the general longstanding employment-at-will rule:

  • A quality control director was fired for his efforts to correct false and misleading food labeling by his employer.
  • A bank discharged a consumer credit manager who notified his supervisors that the employer’s loan practices violated state law.
  • A financial vice-president was fired after reporting to the company’s president his suspicions regarding the embezzlement of corporate funds.

For a full depth analysis on this topic and many more, visit http://legalstrategiespublishing.com/ to purchase “The Employee Rights Handbook” today!


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