Despite employers’ best efforts to prevent, manage and defend against retaliation and whistleblower claims, such claims continue to grow across the country. Employers also must contend with the law’s ever-evolving interpretation of which activities and parties are covered by federal and state retaliation and whistleblower laws.
A prime example of this challenging and developing area of the law for employers is the U.S. Department of Labor’s (DOL) recently released final rule outlining the Occupational Safety and Health Administration’s (OSHA) procedure for handling retaliation complaints under the Sarbanes-Oxley Act (SOX). Developed in response to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), the final rule significantly relaxes the reporting thresholds whistleblowers need to cross before triggering an OSHA retaliation investigation, thus potentially increasing the number and scope of retaliation claims employers must respond to and defend against whistleblower employees.
As many employers subject to SOX already know, both the statute and the DOL’s anti-retaliation regulations protect whistleblowing employees who complain of bank, mail, securities and wire fraud violations of any Securities and Exchange Commission (SEC) regulation and violation of any federal law “relating” to shareholder fraud. Notwithstanding employers’ widespread knowledge of SOX’s whistleblower protections, until the new final rule’s publication, employers faced a significant level of uncertainty as to how OSHA would approach and pursue whistleblower retaliation complaints. The new final rule provides key guidance on the procedural provisions OSHA has adopted. However, the new final rule also makes it easier for whistleblowers to bring retaliation complaints and provides them with greater protection from retaliation. Below are some of the new final rule’s highlights.
- Whistleblowers generally have 180 days (as mandated by Dodd-Frank) to file a retaliation complaint after the alleged retaliation occurred, or after the date when the whistleblower became aware of the alleged retaliation.
- Whistleblowers, or anyone authorized by them, may file a retaliation complaint verbally or in writing in any language. If a whistleblower makes a verbal complaint, OSHA, and not the whistleblowing employee, will transcribe the verbal complaint into writing. If a complaint is not made in English, OSHA will translate the complaint. At a broader level, the DOL’s new final rule represents an expansion of the U.S. Supreme Court’s decision in Kasten v. Saint-Gobain Performance Plastics Corp., which held that verbal complaints qualify as valid complaints under the Fair Labor Standards Act (FLSA) as long as they are sufficiently clear and detailed to put a reasonable employer on notice of a protected assertion of rights.
- Whistleblower-created documents turned over by OSHA to the targeted employer will be redacted in accordance with the Privacy Act of 1974 and “other applicable confidentiality laws.” Thus, OSHA will have some discretion as to whether certain information will be withheld from the employer due to confidentiality concerns.
- If OSHA decides there is reasonable cause to believe the allegations in a retaliation complaint, it will assess a penalty calculation that could force the employer to, among other things, pay back pay with interest and the whistleblowing attorneys’ fees, as well as preliminarily reinstate the whistleblowing employee before a final determination of the employer’s liability. That is, an employer could start paying a penalty before the agency, or a court, finds it retaliated against the whistleblowing employee in violation of SOX. If OSHA determines that preliminary reinstatement of the employee is not feasible or desirable, the agency could order the employer to provide front pay (known as economic reinstatement) to the complaining employee. Notably, even if the employer succeeds in defeating the whistleblowing employee’s retaliation complaint, under the new final rule the employer has no right to recover the costs of the economic reinstatement from the employee.
As these procedural protections illustrate, the DOL’s new final rule presents employers subject to SOX with added challenges because the rule provides whistleblowing employees: (1) greater protection from retaliation by employers; and (2) a lower standard for making an effective retaliation complaint. It also is possible that these changes are a harbinger of a DOL plan to liberalize complaint reporting requirements under other employment laws.
In any event, the DOL’s new rule serves as a poignant reminder to employers – publicly traded or not – about the importance of properly responding to whistleblower complaints. Because of the significant risk of liability, potential exposure and reputational damage in cases involving whistleblowers, employers’ failure to adopt and implement appropriate anti-retaliation and whistleblower policies and procedures can become costly mistakes. For these reasons, an audit of anti-retaliation and whistleblower policies and procedures can be invaluable in helping employers to prevent, manage and defend against retaliation and whistleblower claims.