The Goldstein-SAFETEAM cases are published by the U.S. Department of Labor:
- Goldstein v. EBASCO Contractors, Inc., 86-ERA-36, Labor Department rulings dated Mar. 3, 1988 (Administrative Law Judge ruling), Apr. 7, 1997 (Secretary of Labor ruling), Aug. 16, 1993 (Secretary of Labor ruling).
Whether auditors, compliance officials or employees whose duties require them to perform compliance functions are protected against retaliation remains a controversial topic. However the two decisions issued by the Supreme Court demonstrate that without specific statutory coverage, internal disclosures by these classes of employees may be unprotected.
See Supreme Court decisions finding internal whistleblowing not protected under the Dodd-Frank Act and First Amendment:
However, a wealth of cases decided before Digital and Garcetti explained the fact that whistleblowers often used internal reporting processes and should deserve protection:
Statutes amended (or initially passed) that explicitly protect internal whistleblowing to supervisors:
- Atomic Energy Act, 42 U.S.C. § 5851
- Sarbanes-Oxley Act, 18 U.S.C. § 1514A
- Consumer Product Safety Act, 15 U.S.C. § 2051
- Aviation Investment and Reform Act, 49 U.S.C. § 42121
- National Transit Systems Security Act, 6 U.S.C. § 1142
- Railroad Safety Act, 49 U.S.C. § 20109
- Surface Transportation Act, 49 U.S.C. §31105;
- Mine Health and Safety Act, 30 U.S.C. § 815(c)
- American Recovery Reinvestment Act, Public Law No. 111-5, §1553
- Pipeline Safety Improvement Act, 42 U.S.C. § 60129
- Dodd-Frank Act (Consumer Protection Bureau), 12 U.S.C. §5567
- Taxpayer First Act, AML Whistleblower Act
After Garcetti some courts interpreted state and whistleblower statutes narrowly to exclude coverage for internal whistleblowers:
- Skare v. Extendicare Health Services, 515 F.3d 836 (8th Cir. 2008)
- Talhelm v. ABF Freight Systems, 2010 U.S. App. LEXIS 1663 (6th Cir. 2010)
However, the U.S. Congress strongly repudiated the Garcetti line of cases when it enacted the Whistleblower Protection Enhancement Act and explicitly reversed court rulings that were consistent with Garcetti.
In Public Law 112-199, §§ 101 and 102, Congress used words such as “undermine,” “wrongly focused,” and “contrary to congressional intent” in describing court cases that failed to fully protect whistleblowers who raised concerns with their supervisors.
Committee on Homeland Security and Governmental Affairs, U.S. Senate, “Whistleblower Protection Enhancement Act of 2012,” pp. 4–5 (S. Rep.112-155, Apr. 19, 2012); extensive discussion concerning internal protected activity and rejection of Garcetti rule for federal employees.
Corporate-sponsored “think tanks” have carefully evaluated the deficiencies in internal compliance programs and have strong recommendations for improving the current systems, see:
- Michael D. Greenberg, Perspectives of Chief Ethics and Compliance Officers on Detection and Prevention of Corporate Misdeeds: What the Policy Community Should Know (Rand Center for Corporate Ethics and Governance, 2009).
A 2010 report by the corporate-sponsored Ethics Resource Center titled “Too Big to Regulate? Preventing Misconduct in the Private Sector” (ERC 2010), quoting leading complaints that programs were simply “paper tigers” and were plagued by a “lack of action and seriousness.”
The Sarbanes-Oxley law requiring publicly traded companies to establish independent employee concerns programs is codified at:
- 15 U.S.C. § 78f(m)(4). SOX protects internal employee disclosures pursuant to its statutory terms.
The Federal Sentencing Guidelines provide for sentence reductions for corporations engaged in criminal activities that have instituted an internal compliance program. U.S. Sentencing Commission Guidelines Manual, Section 8B2.1. These guidelines do not provide specific protections for employees.
- David Hess et al., “The 2004 Amendments to the Federal Sentencing Guidelines and Their Implicit Call for a Symbiotic Integration of Business Ethics,” XI Fordham Journal of Corporate and Financial Law 725 (2006)
The Close the Contractors Fraud Loophole Act is Public Law 110-252, Title VI, Chapter 1. This law mandates stronger controls over compliance departments in companies working under government contracts. It is implemented by Federal Acquisition Regulations, Contractor Business Ethics, Compliance Program and Disclosure Requirements, Final Rule, 73 Federal Register 67064 (Nov. 12, 2008).
Whether internal complaints to hotlines are protected is an open question, depending on the laws involved. Some laws, like the Sarbanes-Oxley Act, the Consumer Safety Act, and the Atomic Energy Act clearly protect such complaints. State laws are completely confused. For example, courts have now determined that internal complaints, which would cover complaints to compliance departments, are not protected under the Minnesota and Michigan whistleblowers laws.
- Skare v. Extendicare Health Services, 515 F.3d 836 (8th Cir. 2008)
- Talhelm v. ABF Freight Systems, 2010 U.S. App. LEXIS 1663 (6th Cir.)
Employers that create compliance programs may be subject to breach of contract lawsuits if they violate their promises to employees:
- Richard Moberly, “Protecting Whistleblowers by Contract,” 79 University of Colorado Law Review 975 (Fall 2008)
On June 13, 2011, the Securities and Exchange Commission published final rules implementing the Dodd-Frank whistleblower reward programz:
- SEC Commentary and Final Rule, 76 Federal Register 34300 (June 13, 2011).
These rules created strong incentives for corporations to develop independent and ethical compliance programs. Id., pp. 34317–19 (circumstances in which compliance officials can file reward claims with the SEC); pp. 34322–27 (employee can qualify for rewards based on information they provided to internal compliance programs). However, pursuant to the Supreme Court’s precedent in Digital, Dodd-Frank does not protect internal whistleblowers from retaliation.
The False Claims Act should be interpreted as protecting internal disclosures, see:
- U.S. ex rel. Schweizer v. Oce N.V., 677 F.3d 1228 (D.C. Cir. 2012).
The Foreign Corrupt Practices Act prohibits a range of conduct not directly tied to the payment of bribes to foreign officials. The most important of these concerns the obligation of publicly traded companies or “issuers” to maintain quality “internal controls” and record-keeping systems:
- Jones Day Newsletter, “The Legal Obligation to Maintain Accurate Books and Records in U.S. and Non-U.S. Operations” (Mar. 2006)
“The Foreign Corrupt Practices Act is usually associated with its prohibitions against foreign bribery. The provisions of the Act relating to bookkeeping and internal controls receive less publicity but are much more likely to form the basis of a government proceeding against companies subject to the Act.”