Wednesday, March 04, 2009

Stimulus Protects Some Whistleblowers

In addition to tax cuts and spending for jobs, the recently signed $787 billion stimulus law provides federal protections for employee whistleblowers at institutions receiving federal stimulus funds.

Stimulus Accountability. Several lawmakers think one of the best ways to achieve accountability for the institutions and corporations receiving stimulus funds is to give whistleblowers a remedy in case they get fired or demoted or otherwise discriminated against for reporting fraud, abuse, or waste in how these institutions actually spend the stimulus funds.

Remedies. Under the American Recovery and Reinvestment Act, workers who have been terminated in retaliation for their reports may recover monetary damages, reinstatement to their jobs, compensatory damages, emotional distress, back pay, benefits, attorneys' fees, expert witness fees, and costs.

Responsibilities. The stimulus law also requires employers receiving federal stimulus funds to post notices to employees of their rights under this law. It imposes strict time-lines for the government to investigate reports of abuse, and it allows workers to get their case to court fairly quickly after exhausting their administrative remedies by filing a charge with the SEC.

Federal employees not protected. Interestingly, this part of the law doesn't protect federal employees. It only applies to employees of state and local governments and private companies, who are employed by entities receiving federal funds from the stimulus. The failure to protect federal employees generated and continues to generate much controversy. Some experts opine that federal employees could witness a bulk of the fraud, abuse, or waste in agencies receiving funds.

Companies urged to proceed with caution. The fascinating thing about these whistleblower cases is that a jury can find retaliation, even if it finds that the company engaged in no fraud, abuse, or waste to begin with. If the company handles a report wrong and retaliates against a worker who has made a good faith report, the company can be liable for the retaliation even if they were not engaged in wrongdoing before. It is essential for companies to know how to spot and handle claims that might be interpreted as retaliation. Their managers and supervisors must receive adequate training, so that when they receive a worker complaint, they know the appropriate steps to take with the worker and what they should to do to report it up the chain of command and investigate.

In my legal opinion, this law signals a serious shift in employee rights.

It guarantees a jury trial and voids mandatory arbitration provisions. Many workers across this country have lost their right to a jury trial over the past several years. Instead they are required to have an arbitrator decide their case when their employers impose mandatory arbitration provisions as a condition of employment. Arbitrations can be too costly for workers even to initiate, often costing thousands to the employee even to file, versus the court filing fee of $350.

In my opinion, the right to a jury trial in this stimulus law is as important as the right to recover money, if not more. It helps to enforce the stimulus law by offering legal protection to employees who help enforce the law by exposing fraud or abuse.

I predict this law will result in significant litigation over the next few years. It will be interesting to see when the first case is filed, which I expect to occur sometime at the end of this year or early 2010.

Will the case arise when a whistleblower blows the lid off of a massive fraud on the government and taxpayers in spending the stimulus funds?

Or will it come up to define the phrase "or otherwise discriminated against." It is clear that retaliatory firing or demotion is illegal, but how will the courts interpret "or otherwise discriminated against"? Would it include involuntary transfer to another position as prohibited, for example? These are the kinds of phrases that can be litigated for several years, as all the courts across the country apply their own interpretations.

These workers may be the first line of defense in protecting taxpayer money.

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1 comment:

  1. I thought you might be interested in this letter written by Army Corps of Engineers whistleblower Bunny Greenhouse, who was retaliated against after she testified to Congress last week. Ms. Greenhouse is calling on all Americans to support whistleblower protection for federal employees. To read her letter go to