In response to the disagreement amongst courts regarding the scope of Dodd-Frank’s employment retaliation protections, on August 4, 2015, the SEC issued an “interpretive rule” clarifying that individuals who have not reported alleged misconduct to the SEC may nevertheless qualify as “whistleblowers”.
New York’s First Department: Harassment Claims Not Barred By Whistleblower Claim
As reported by New York Law Journal reporter Ben Bedell, the New York’s Appellate Division, First Department recently held that employees could file suit against their former employer for both sexual harassment and violation of New York’s whistleblower protection law even though the statute bars employees from seeking remedies available under any other law.
WSJ: Whistleblowers Claim That SEC Bounty Program Lacks Transparency
On May 25, 2015, the Wall Street Journal published an article (subscription required) reporting that tipsters have found it difficult to collect financial awards from the SEC after filing whistleblower claims.
Petition Urges DOL To Target Contractual Clauses Discouraging Whistleblowing
The Government Accountability Project (GAP) and Zuckerman Law recently petitioned the U.S. Department of Labor (“DOL”) to issue rules and guidance prohibiting “de facto” gag clauses in settlement and severance agreements that dissuade whistleblowers from engaging in protected activities.
SEC Announces Enforcement Action Regarding Employee Confidentiality Agreement
On April 1, the Securities and Exchange Commission (SEC) announced its first settlement of an enforcement action under the SEC’s Rule 21F-17, which prohibits any person from taking “any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement … with respect to such communications.” The SEC’s announcement comes on the heels of prior comments by Sean McKessy, Chief of the SEC’s Office of the Whistleblower, cautioning both in-house and outside counsel who draft confidentiality agreements and company policies that the SEC will actively pursue remedies against companies and attorneys who promulgate or draft policies that the SEC might view as chilling employees’ abilities to communicate with the SEC about potential securities-law violations.
NY Whistleblower Bounty Program On The Horizon?
NY Attorney General Eric Schneiderman recently announced his plans to propose legislation that would create a whistleblower incentive program at the state level. The proposal, titled the Financial Frauds Whistleblower Act, would provide monetary awards to eligible individuals who report original information about illegal activity in the banking, insurance, and financial services industries. The Financial Frauds Whistleblower Act also would enhance anti-retaliation protection for employees who report suspicious or illegal activity. Additionally, the proposal provides for confidentiality for whistleblowers.
Consumer Financial Product Whistleblower Complaints Up Dramatically, SOX Complaints (with OSHA) Down
Since the enactment of Dodd-Frank in 2010, the number of whistleblower complaints filed under the Consumer Financial Protection Act (“CFPA”) has risen significantly while the number of SOX complaints filed with OSHA has largely declined. According to data provided by OSHA, the total number of whistleblower complaints has generally increased over the past ten years. This overall trend is not surprising in light of the greater publicity around whistleblowers in the wake of the passage of Dodd-Frank, employee-favorable rulings by the DOL, and pro-employee rulings by many courts.
New York Times: Bounty Programs Incentivize Wrongdoers to Collect
We have seen a number of substantial whistleblower awards make headlines this year, but a recent article on nytimes.com discusses the potential downsides of government-sponsored bounty programs: rewarding whistleblowers by paying them millions of dollars for information may lead to perverse incentives by allowing wrongdoers to win significant sums of money with little government accountability for the awards.
New York Times Discusses the Growth of Whistleblower Programs
As federal agencies dole out record-breaking awards to tipsters (such as the SEC’s recent $30 million award), whistleblower programs remain a topic of public interest. Earlier this month, The New York Times published an article about the growth of the whistleblower programs operated by the S.E.C., Justice Department, and I.R.S, which financially incentivize the reporting of misconduct.
Highlights of SEC’s 2014 Annual Report
On November 17, 2014, the Securities and Exchange Commission’s Office of the Whistleblower (“OWB”) released its fourth Annual Report on the Dodd-Frank Whistleblower Program to Congress, which details information on OWB’s activities and bounty payouts for the fiscal year, as described in our posts on the 2012 and 2013 Annual Reports.
In its 2014 report, the SEC highlights that since the inception of the whistleblower program in 2011, the Commission has granted awards to a total of fourteen whistleblowers, and nine of these awards were issued in 2014. The SEC also stressed that the magnitude of the award payments was “record-breaking” in 2014 in that it authorized an award of more than $30 million in September 2014. In addition, the SEC pointed out that it brought its first enforcement action against an employer for retaliating against a whistleblower under Dodd-Frank’s anti-retaliation provision.