1 THE AMERICAN LAW INSTITUTE Continuing Legal Education Whistleblower Litigation Under SOX and Dodd-Frank: Key Issues for Employers and Employees August 5, 2014 Video Webcast Whistleblower Litigation By Debra S. Katz David J. Marshall Katz, Marshall & Banks, LLP Washington, D.C. Debra S. Katz and David J. Marshall are founding partner with Katz, Marshall & Banks, LLP, a civil rights firm based in Washington, D.C., that specializes in the representation of plaintiffs in employment law, whistleblower, civil rights and civil liberties matters. Copyright 2014, Debra S. Katz and David J. Marshall, Katz, Marshall & Banks, LLP, Washington, D.C.
2 Table of Contents 1 I. OSHA-ADMINISTERED WHISTLEBLOWER PROTECTIONS: AN OVERVIEW... 1 A. CONSUMER AND INVESTOR PROTECTION WHISTLEBLOWER PROVISIONS... 1 B. ENVIRONMENTAL AND NUCLEAR SAFETY WHISTLEBLOWER PROVISIONS.... 2 C. TRANSPORTATION INDUSTRY WHISTLEBLOWER PROVISIONS.... 5 II. SARBANES-OXLEY WHISTLEBLOWER PROTECTION... 7 A. INTRODUCTION... 7 B. COVERED EMPLOYERS... 8 C. COVERED EMPLOYEES... 14 D. PROTECTED ACTIVITY... 14 E. PROHIBITED RETALIATION... 30 F. THE LITIGATION PROCESS... 33 G. AVAILABLE REMEDIES... 40 III. THE DODD-FRANK ACT... 48 A. COMMODITY FUTURES TRADING COMMISSION WHISTLEBLOWER INCENTIVE PROGRAM... 48 B. SECURITIES AND EXCHANGE COMMISSION (SEC) WHISTLEBLOWER INCENTIVE PROGRAM AND ANTI- RETALIATION PROVISIONS... 51 C. WHISTLEBLOWER PROTECTIONS FOR FINANCIAL SERVICES EMPLOYEES... 55 IV. OTHER CONSUMER AND INVESTOR PROTECTION WHISTLEBLOWER PROVISIONS... 57 A. THE AFFORDABLE CARE ACT, 29 U.S.C. 218C... 57 B. THE CONSUMER PRODUCT SAFETY IMPROVEMENT ACT, 15 U.S.C. 2087... 63 C. FDA FOOD SAFETY MODERNIZATION ACT WHISTLEBLOWER PROTECTIONS... 67 V. GOVERNMENT CONTRACTOR WHISTLEBLOWER PROTECTIONS... 70 A. DEFENSE CONTRACTOR WHISTLEBLOWER PROTECTIONS, 10 U.S.C. 2409... 70 B. GOVERNMENT CONTRACTOR AND SUBCONTRACTOR PILOT PROGRAM, 41 U.S.C. 4712... 72 VI. FALSE CLAIMS ACT WHISTLEBLOWER PROTECTIONS... 72 A. QUI TAM SUITS... 72 B. ANTI-RETALIATION PROVISION... 75 VII. AMERICAN RECOVERY AND REINVESTMENT ACT WHISTLEBLOWER PROTECTIONS. 81 A. COVERED ENTITIES... 81 B. PROTECTED ACTIVITY... 81 C. PROHIBITED RETALIATION... 82 D. PROVING RETALIATION... 82 E. LITIGATION PROCESS AND AVAILABLE REMEDIES... 82 F. NO PROSPECTIVE WAIVER OF CLAIMS... 83 1 Internal Pagination ii
3 I. OSHA-ADMINISTERED WHISTLEBLOWER PROTECTIONS: AN OVERVIEW The Occupational Health and Safety Administration ( OSHA ) is charged with enforcing twenty-one nuclear, environmental, health, and consumer protection statutes. The past few years have indicated a sea change with respect to the aggressiveness with which OSHA is investigating, pursuing, and enforcing many of these provisions. This change extends up through the Department of Labor s Administrative Review Board ( ARB ), the body charged with final administrative review of the findings of OSHA, in the first instance, and the Administrative Law Judge ( ALJ ), who acts as the first level of review. Many but not all of the statutes provide for judicial review of the ARB decision in the appropriate United States Court of Appeals. This paper first outlines the statutory framework, coverage, and protections of the statutes enforced by OSHA. Following that, in Section II, it discusses recent developments in whistleblower law. Because many of these statutes share identical (or very similar) frameworks, and are enforced by the same governing body, the holding or rationale of a case decided under one statute is likely to be applicable to cases arising under many of the other statutes as well. Finally, in Section III, it discusses the current revitalization of OSHA, with a focus on its 2011 updated manual, which increased protections for whistleblowers. A. Consumer and Investor Protection Whistleblower Provisions 2 OSHA enforces the whistleblower protection provisions of five consumer and investor protection laws: the Affordable Care Act, 29 U.S.C. 218C ( ACA ); the Consumer Financial Protection Act, 12 U.S.C. 5567 ( CFPA ); the Consumer Product Safety Improvement Act, 15 U.S.C. 2087 ( CPSI ); Food Safety Modernization Act, 21 U.S.C. 399d ( FSMA ); and the Sarbanes-Oxley Act, 18 U.S.C. 1514A ( SOX ). These statutes require a complainant to show that her protected activity was a contributing factor in the adverse personnel action and provide an aggrieved party with potential remedies of reinstatement to his or her former position with back pay, compensatory damages, and special damages sustained as a result of the discharge or discrimination, including litigation costs, expert witness fees, and reasonable attorneys fees. A brief overview of each statute is as follows: Affordable Care Act, 29 U.S.C. 218C ( ACA ): Protects employees who report violations of any provision of title I of the ACA, including but not limited to discrimination based on an individual s receipt of health insurance subsidies, the denial of coverage based on a preexisting condition, or an insurer s failure to rebate a portion of an excess premium. An employee must file a complaint with OSHA within 180 days. Enforcement procedures and judicial review are provided for in 29 2 Several of the new and more commonly-litigated consumer and investor protection whistleblower statutes are described in greater detail herein. 1
4 U.S.C. 2087, the whistleblower protections of the Consumer Product Safety Consumer Act. Consumer Financial Protection Act, 12 U.S.C. 5567 ( CFPA ): Employees are protected for blowing the whistle on reasonably perceived violations of any provision of the Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act or any other provision of law that is subject to the jurisdiction of the Bureau of Consumer Financial Protection, or any rule, order, standard, or prohibition prescribed by the Bureau. An employee must file a complaint with OSHA within 180 days. Covered employees include any individuals performing tasks related to the offering or provision of a consumer financial product or service. Consumer Product Safety Improvement Act, 15 U.S.C. 2087 ( CPSIA ): Protects employees who report to their employer, the federal government, or a state attorney general reasonably perceived violations of any statute or regulation within the jurisdiction of the Consumer Safety Product Safety Commission. CPSIA covers employees of consumer product manufacturers, importers, distributors, retailers, and private labelers. An employee must file a complaint with OSHA within 180 days. FDA Food Safety Modernization Act, 21 U.S.C. 399d ( FSMA ): Protects employees of food manufacturers, distributors, packers, and transporters from reporting a violation of the Food, Drug, and Cosmetic Act, or a regulation promulgated under the Act. Employees are also protected from retaliation for refusing to participate in a practice that violates the Act. An employee must file a complaint with OSHA within 180 days. The whistleblower protections created by Section 402 broadly apply to employees of any entity engaged in the manufacture, processing, packing, transporting, distribution, reception, holding, or importation of food. 402(a). Sarbanes-Oxley Act, 18 U.S.C. 1514A ( SOX ): Protects employees of certain companies who report alleged mail, wire, bank or securities fraud; violations of the SEC rules and regulations; or violation of federal laws related to fraud against shareholders. The Act covers employees of publicly traded companies and their subsidiaries, as well as employees of nationally-recognized statistical rating organizations. An employee must file a complaint with OSHA within 180 days. B. Environmental and Nuclear Safety Whistleblower Provisions. OSHA enforces seven environmental and nuclear safety laws: Section 11(c) of the Occupational Safety and Health Act ( OSHA ); the Asbestos Hazard Emergency Response Act ( AHERA ); the Clean Air Act ( CAA ); the Comprehensive Environmental Response, 2
5 Compensation and Liability Act ( CERCLA ); the Energy Reorganization Act ( ERA ), Federal Water Pollution Control Act ( FWPCA ); the Solid Waste Disposal Act ( SWDA ); the Safe Drinking Water Act ( SDWA ); and the Toxic Substances Control Act ( TSCA ). Under the first six environmental statutes listed below CAA, CERCLA, FWPCA, SWDA, SDWA, and TSCA the complainant must show that her protected activity was a motivating factor in the respondents adverse action. Under the ERA, however, the complainant is required to show only that it was a contributing factor. If a complainant successfully establishes that her protected activity was a motivating factor, under the statutes that require such a showing, an employer may avoid liability by demonstrating by a preponderance of the evidence that it would have taken the same personnel action in the absence of the employee s protected activity. In contrast, under the ERA, an employer must demonstrate it would have taken the same action by clear and convincing evidence. The ERA uses the statutory framework of the Wendell H. Ford Aviation Investment and Reform Act for the 21st Century ( AIR21 ), 49 U.S.C. 42121, and is more consistent with the other whistleblower statutes discussed in this document. Potential relief includes reinstatement of the complainant to his or her former position, together with the compensation (including back pay), terms, conditions and privileges of the complainant s employment; compensatory damages; costs and expenses (including attorneys fees) reasonably incurred in connection with the filing of the complaint; and, under the TSCA and SDWA, exemplary damages, where appropriate. A brief overview of each statute is as follows: The Clean Air Act of 1977 ( CAA ), 42 U.S.C. 7622: The Clean Air Act is a comprehensive statute establishing standards for air quality, acceptable pollutants, and related reporting and inspection procedures. The specific provisions of the statute are exhaustive, but whistleblower cases are most often brought when a company misrepresents its emissions levels or fails to comply with reporting and cleanup standards. An employer may not retaliate against an employee who reports any misreporting or noncompliance by the employer. The employee must file a complaint with OSHA within 30 days. The Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. 9610 ( CERCLA ): CERCLA provides for liability, compensation, and emergency response for hazardous substances that have been released or are threatening to be released into the environment. Employees are protected if they have provided information to the local or federal government, have filed a complaint about their employer under the Act, or have participated in any CERCLA proceeding for example by testifying or aiding in an investigation against her or his employer. An employee must file a complaint with OSHA within 30 days. The Federal Water Pollution Control Act of 1972, 33 U.S.C. 1367 ( FWPCA ): Prohibits the release of hazardous levels of pollution into any waters that constitute a 3