Originally published in Mondaq
Part III: Tailored free speech and evidentiary standards should be explicitly incorporated into whistleblower legislation to ensure that whistleblowers are not chilled from making vital disclosures
Any state considering a new or updated whistleblower law should consider certain basic principles underlying successful anti-retaliation laws, namely, whistleblower protection laws should adequately address the threat of retaliatory lawsuits and legal tactics and prohibit restrictive non-disclosure agreements that prevent or “chill” employee disclosures of violations of law. In enacting whistleblower laws, many states make the mistake of simply applying existing laws on free speech and ignoring the impact that retaliatory lawsuits, such as libel suits, have on whistleblowers. In order to make sure that whistleblowers are not chilled from making disclosures of violations of law and threats to public safety, tailored laws are essential for any whistleblower program to be successful.
First, nations considering enacting or modifying whistleblower laws should include the standard set forth in the United States court case Pettway v. American Cast Iron Co. in their statutory scheme to protect whistleblowers from retaliatory libel suits. This case held that a complaint filed confidentially with the appropriate government agency cannot be the basis of a libel suit or the basis for an adverse employment action even if the complaint contains “maliciously libelous statements.” Importantly, however, the court drew a distinction between information provided only to the government, and information provided to the general public. Through such a legal scheme, whistleblowers will not be deterred by retaliatory lawsuits based on information provided to the proper authorities, and at the same time, corporations and individuals will avoid being publicly slandered by reckless allegations.
Second, in order to further safeguard whistleblowers from retaliatory libel suits, whistleblower laws should include provisions to protect certain public disclosures of wrongdoing. This can be simply accomplished by incorporating the standards set forth in the U.S. Supreme Court case New York Times v. Sullivan into any new law. Under this standard, a libel action would only be permitted against a whistleblower whose information was of public concern or whose allegations concerned misconduct by public officials if the plaintiff in the case could prove “actual malice” underlying the public disclosure. Whether a whistleblower’s disclosure is unfounded, standing alone, would not be the basis for litigation. In this way, whistleblowers cannot be silenced or bankrupted by litigation on the “accuracy” of their allegations. As explained by the Court in this case, this high standard is necessary to preserve basic principles of freedom of speech and democratic debate:
A rule compelling the critic of official conduct to guarantee the truth of all his factual assertions-and to do so on pain of libel judgments virtually unlimited in amount-leads to a comparable ‘self-censorship’ [. . .] Under such a rule, would-be critics of official conduct may be deterred from voicing their criticism, even though it is believed to be true and even though it is in fact true, because of doubt whether it can be proved in court or fear of the expense of having to do so. They tend to make only statements which ‘steer far wider of the unlawful zone’ [.] [which] dampens the vigor and limits the variety of public debate.
Third, overly restrictive non-disclosure agreements (“NDAs’) prohibiting any type of whistleblower disclosure, in any form, to relevant authorities, should be strictly prohibited. Companies widely utilize NDAs to intimidate whistleblowers and experience shows that even if not enforceable in court, NDAs have a chilling effect on most employees who sign such agreements. Whistleblowers do not want to risk the possibility of a counterclaim filed by their employer. Without strict sanctions against using these types of agreements, under a cost-benefit analysis, it is in a company’s best interest to widely utilize illegal NDAs to stop or intimidate whistleblowing.
For this reason, the United States Securities and Exchange Commission and the United States Nuclear Regulatory Commission prohibit restrictive NDAs (and similar confidentiality clauses) and consider them to be a significant regulatory violation triggering potential liability, including large fines or even debarment. Therefore, nations considering implementing whistleblower laws, even ones primarily focused on prohibiting retaliation, should include the following in drafting national whistleblower legislation:
- The definition from the SEC of what constitutes an illegal NDA, including from the following cases: In the Matter of BlueLinx Holdings Inc and In the Matter of KBR, Inc. Note that the SEC’s definition of an illegal NDA does not prevent companies from protecting trade secrets or other confidential business information. Rather, it prevents companies from restricting employees or former employees from raising allegations of criminal misconduct, regulatory or environmental violations, or threats to the public safety with law enforcement agencies.
- Prohibitions against illegal NDAs in any agreements executed on behalf of a company, including employment agreements, severance agreements, and settlement agreements.
- Provisions making illegal NDAs a regulatory violation, allowing whistleblowers to report such violations, and subjecting the company that required the NDA to sanctions. In this way, employees can challenge NDAs without having to personally risk violating the NDA to alert the government as to the illegal nature of an NDA.
- A requirement that companies that are found to have employed illegal NDAs inform their employees that those NDAs are void and unenforceable.
- Provisions designating illegal NDAs as adverse employment actions, in turn, permitting employees to file whistleblower lawsuits to have their NDAs voided and collect damages that may have resulted from the NDAs.
- Provisions explicitly adopting the standard given under the Macktal v. Brown and Root whistleblower decision if the illegal NDA is included in a settlement agreement. This should including the following remedy given in Macktal v. Brown and Root: the settlement agreement is held to be void, but the whistleblower is permitted to keep any settlement monies paid.
Relatedly, other evidentiary standards should be tailored to ensure that whistleblowers’ speech is not chilled. Laws should be drafted or modified to include the following procedural safeguards to prevent the use of abusive litigation tactics against whistleblowers:
- All communications between a whistleblower and a government whistleblower office are confidential and privileged indefinitely in the same way attorney-client communications are privileged.
- Any whistleblower providing information to a law enforcement agency will have their identity protected, at a minimum, to the same extent as under the laws of the relevant state on protecting confidential informants.
- If the government releases a whistleblower’s information to the public (or permits such information to be made publicly available or available to any target of the whistleblower’s allegations), by permission of the whistleblower, or on accident, the whistleblower is immunized from any liability based on the government’s release of information. Additionally, any retaliation resulting from such a disclosure should be considered an obstruction of justice.
- Prior to the release of any information provided by a whistleblower, in addition to providing the whistleblower with notice that such information may be released, the whistleblower must be given a reasonable amount of time to seek a protective order or other injunctive relief from a court. Any legal proceeding in which a whistleblower seeks a protective order should be permitted to be filed as a John or Jane Doe matter. The proceeding would be strictly between the government and the whistleblower, and limited to whether or not there is a lawful reason that compels the disclosure of the information, and whether protections need to be judicially ordered in order to protect the whistleblower’s rights to confidentiality and/or protect the whistleblower from retaliation.
The current international movement to increase whistleblower protections, exemplified by the EU Whistleblower Directive and efforts underway in the United Kingdom to improve its whistleblower law, must incorporate basic safeguards to ensure that whistleblowers are not subjected to retaliation simply by reporting information to the appropriate government officials. Additionally, well-established rules preventing abusive libel lawsuits and overly restrictive nondisclosure agreements must be followed in order to protect whistleblowers from abusive lawsuits and the chilling effect on speech triggered by these processes.