How to Protect Your Business Against Whistleblower Litigation

You work to protect yourself and your company from workers comp, discrimination and sexual harassment lawsuits. But legal experts say there’s a new wave of lawsuits hitting small business owners across the country.

Retaliation and whistleblower claims are among the fastest growing type of litigation being brought against employers today, according to Eric Savage, shareholder at Littler Menelson P.C. law firm.  Whistleblower statutes, found in bills such as Dodd-Frank and the Consumer Protection and Information Act, prohibit employees from being terminated or discriminated against for stepping up and reporting safety or quality assurance concerns to employers or government.

“A series of corporate misdeeds including Enron and WorldCom in the 2000s and then the Madoffs of the world, provided a lot of public interest in whistleblowing,” Savage said. “There is a perception that there is a wrong to be righted here. [Whistleblower statutes] shift the burden of truth, so that the employer has to prove that they would have taken the same action if the plaintiff hadn’t filed a whistleblower claim.”

These statutes also do not require whistleblowers to first report incidents to their employer, meaning they can go straight to the Securities and Exchange Commission, for example, Savage said.

A whistleblower suit differs from a discrimination case for one main reason, he said, that being the issue is not whether or not the small business actually did anything illegal. It is instead a question of whether the employee believes that it did something illegal, and how the small business or company reacted after the employee filed a report.

Bounties are also in place for certain federal whistleblower statutes, Savage said, which encourage employees to step forward and report misdeeds. According to the Department of Labor, there are 21 federal statutes that OSHA enforces to protect whistleblowers, should they come forward.

In order to protect your business in case you find yourself in a whistleblower suit, Savage said documentation is key. Involve human resources in any and all decisions involving an employee who makes a whistleblower claim. Problems in employee performance should also be well-documented, he said.

“This just puts a huge emphasis for the employer to do training and compliance, and to have a good corporate culture and citizenship,” Savage said.

Also, let your employees know that coming forward to report an internal issue is not a “crime,” he said. Appropriate policies, hotlines and other necessary avenues should be established within your corporate culture, so that workers do have an outlet within your business to report issues.

The NFIB recently held a Webinar on whistleblower litigation entitled “For Whom the Whistle Blows: Understanding and Avoiding Employee Whistleblowing Claims,” which can be accessed here . For more information from the DOL on whistleblowing click here.