State and federal laws -- including the Sarbanes-Oxley Act of 2002 -- protect whistleblowers from retaliation by their employers. If you take disciplinary action against an employee who complains of fraud, illegalities, or other workplace wrongdoing, you risk a lawsuit from the disciplined worker -- and possibly fines and even criminal charges brought by the government.
What Is a Whistleblower?
A whistleblower is an employee who complains of company misconduct, such as health and safety violations, shareholder fraud, or financial mismanagement. Usually, workers who don't make the initial complaint but participate in an investigation of alleged wrongdoing are also considered protected whistleblowers. A number of federal and state laws protect whistleblowers from being punished by their employers.
The Sarbanes-Oxley Act
In the wake of the Enron affair and other corporate mismanagement scandals, Congress enacted the Sarbanes-Oxley Act (named after its Congressional sponsors) to force companies to straighten up. The Act is primarily aimed at preventing shareholder fraud and financial shenanigans in publicly traded companies, but its provisions also create strong protections for whistleblowers.
Under the Act, an employee who complains that his or her employer is breaking certain federal laws, including laws relating to securities, shareholder fraud, or wire, mail, or bank fraud, is protected from retaliation. And the employee doesn't have to be right to be protected: As long as the employee has a reasonable belief that a legal violation has taken place, the employee is considered a whistleblower, even if that belief turns out to be mistaken.
An employee doesn't have to complain to a government agency to be protected. A complaint within the company -- to a supervisor, for example -- triggers the Act's whistleblower protections.
Other Federal Laws Protecting Whistleblowers
A number of federal workplace laws also protect employees who complain of illegal activity. For example, an employee who complains of discrimination or harassment is protected from retaliation by the employer. The same is true of an employee who complains of unsafe or unhealthy workplace conditions, violations of the Family and Medical Leave Act, and violations of wage and hour laws.
These laws generally don't use the term "whistleblower," but they provide the same protection: Employees cannot be fired or otherwise subjected to disciplinary action for making a complaint, whether within or outside of the company.
Additional federal laws also protect those who complain of wrongdoing in specific industries or work relationships, such as companies that contract with the federal government or deal in hazardous materials.
State Whistleblower or Retaliation Protections
Many state workplace laws also prohibit retaliation against those who complain that the law has been violated. These laws include, for example, state laws regarding family and medical leave, state wage and hour laws, state laws requiring employers to provide time off for jury duty and voting, and state antidiscrimination laws.
In addition, some states allow employees to bring lawsuits claiming that they were fired or disciplined "in violation of public policy." Generally, these claims allege that the employee was fired or disciplined for exercising a legal right or complaining about the company's illegal actions. The rules for bringing such claims vary widely from state to state.
Some states allow employees to bring a violation of public policy claim only if they complain to government officials, while others allow an employee who makes an internal complaint to sue. Some states allow employees to sue only if the law that was allegedly violated contains an explicit antiretaliation or whistleblower provision, while other states allow employees to bring a claim based on any violation of laws or regulations -- or based on actions that are unethical even if they are not explicitly illegal. And some states don't recognize public policy claims at all.
Avoiding Whistleblower Claims
Whistleblower lawsuits can be very damaging to a company's reputation and pocketbook. Happily, you can go a long way towards preventing whistleblower claims by following a few simple steps:
- Don't blame the messenger. It's not always easy to treat complaining employees with respect, particularly if they are alleging misconduct that is disturbing. You may not want to believe that illegal activity is going on in your company. But taking your frustration out on the employee who raises the issue will lead to trouble. Instead, treat the complaint as an opportunity to make any changes necessary to bring your workplace back in line.
- Adopt a complaint policy. The Sarbanes-Oxley Act imposes specific complaint-handling requirements on publicly traded companies. Even if you don't have to follow these rules, you should have a complaint policy -- and make sure that your employees understand how to use it. Emphasize that you will not retaliate against those who make complaints. (You can find a sample complaint policy -- as well as policies on dozens of other workplace issues -- in Create Your Own Employee Handbook , by Lisa Guerin and Amy DelPo (Nolo).)
- Investigate complaints. Once you receive a complaint of wrongdoing, investigate it thoroughly and take action to correct misconduct. If you don't investigate complaints, your employees will be discouraged from making them in the first place -- and may decide to take their concerns directly to government agencies or lawyers. For tips on conducting a sound investigation, see the checklist Investigate a Workplace Complaint.
- Think twice before disciplining a whistleblower for unrelated conduct. Sometimes, an employee who blows the whistle is genuinely deserving of discipline on other grounds. For example, an employee who has performance problems may merit a written warning, even if he or she has recently complained of illegal conduct. However, you should be very careful before taking this type of action. Consider consulting with a lawyer before deciding what to do, particularly if you don't have documentation showing that the employee's problems predated the employee's complaint.