‘Extraordinary’ Expansion of Whistle-Blower Rights Proposed

Bill would prohibit waiver of whistle-blowers’ protections

By Allen Smith, J.D. Mar 16, 2016
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Employer “gag tactics” aimed at silencing whistle-blowers at financial institutions are becoming more common, according to Shanna Devine, legislative director of the Government Accountability Project in Washington, D.C., which supports a bill to prohibit the waiver of whistle-blower rights. The Government Accountability Project is a whistle-blower protection and advocacy organization in the United States.

“If we strengthen and empower whistle-blowers in the financial industry, we can do a better job of holding Wall Street accountable,” stated Sen. Tammy Baldwin, D-Wis., sponsor of the bill, when it was introduced on Feb. 25.

However, the bill would afford an “extraordinary” broadening of whistle-blowing protections, according to Phil Berkowitz, an attorney with Littler in New York City.

Proposed Prohibitions

Berkowitz said that the proposed legislation would prohibit employers from:

  • Enforcing any agreement that would waive any individual’s right under the law. This would include a ban on trying to impose pre-dispute mandatory arbitration agreements on employees and applicants that would waive their right to bring suit under the law or recover “bounties” as a whistle-blower.
  • Requiring applicants or employees to agree that they are not entitled to receive any monetary award from the Securities and Exchange Commission (SEC), including a whistle-blower bounty.
  • Requiring applicants, employees or former employees to disclose whether they intend to communicate with SEC staff about a possible violation of commodities laws.
  • Conditioning any individual’s right to receive any contractual or employment-related benefit on a representation that they have not communicated with, or provided documents or other information to, the SEC.
  • Trying to discipline attorneys or other licensed professionals for engaging in activity protected by the bill.
  • Otherwise engaging in any discrimination that would “chill the exercise of activity” protected by the bill.


The bill goes beyond banning so-called gag provisions.

For the first time, employees of all banks, regardless of whether they are publicly traded, would be able to sue for damages as a result of being retaliated against as whistle-blowers and get double back pay and interest plus attorney fees, Berkowitz said. Currently, only employees of Federal Deposit Insurance Corp.-insured and publicly traded banks can sue as whistle-blowers, he noted.

The bill would pay whistle-blowers up to 30 percent of any financial settlement, Greg Keating, an attorney with Choate, Hall & Stewart in Boston, said. That is similar to a bounty already available to those covered by the Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act). The Dodd-Frank Act created a bounty program within the SEC to encourage people to report securities violations.

Other Provisions

“It also expands how much time whistle-blowers have to file their information from 60 to 90 days,” Keating added.

“This bill should send a strong message to employers that now is the time to take action and ensure that they are fully committed to a culture of compliance and transparency,” he said.

In fact, the bill would require the education and training of employees on their rights and remedies under the law, Berkowitz remarked.

Devine told SHRM Online that the bill also would:

  • Clarify that employees are protected under Dodd-Frank regardless of whether they make disclosures to the SEC or internally.
  • Nullify the SEC’s discretion to deny whistle-blower awards due to reasonable delays in filing a disclosure. Delays of mere weeks sometimes have resulted in disqualification even though whistle-blowers needed this time to find competent counsel and prepare successful disclosures, sometimes at extreme risk to their families.
  • Amend the evidentiary standards for anti-retaliation cases so that a whistle-blower need only show that his or her protected behavior was a contributing factor leading to an adverse employment action.
  • Provide that an employer has to show by “clear and convincing evidence” that it would have taken the same action absent the protected behavior.

Devine said the bill “sends the message to employers that Congress is keeping pace with increasing tactics to silence whistle-blowers.”

However, Berkowitz said it would be “amazing if the bill gets passed. I don’t know if Congress passes anything these days.” The bill would need bipartisan support to clear the Republican-controlled House and Senate, and as of yet does not have any Republican co-sponsors.

Allen Smith, J.D., is the manager of workplace law content for SHRM. Follow him @SHRMlegaleditor.

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