OSHA Finds Retaliation in Railroad Whistleblower Case

The U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) has ordered Union Pacific Railroad Company to reassign, reimburse, and pay compensatory damages to a former employee who alleged that he was retaliated against for requesting a lookout while performing work on adjacent railroad tracks.  After investigating the whistleblower complaint, OSHA concluded that Union Pacific violated the whistleblower provisions of the Federal Rail Safety Act (FRSA) when it eliminated the welder position and forced the employee to increase his daily commute by 131 miles.  The take away point for this case is that the whistleblower provisions of the FRSA prohibit all forms of retaliation, including the elimination of an employment position merely because an employee voices a safety concern.  The Employment Law Group® law firm routinely represents employees in whistleblower retaliation actions.  For more information about the FRSA and The Employment Law Group® law firm’s Transportation Whistleblower Practice, click here.

UBS to Pay $780 Million to Settle Tax Fraud Allegations

UBS has agreed to pay $780 million to settle allegations that it helped thousands of U.S. taxpayers defraud the Internal Revenue Service (“IRS”).  According to reports by the Department of Justice, UBS concealed billions of American dollars in accounts held overseas despite requirements to report IRS income and other identifying information for its U.S. clients to the IRS.  The U.S. Securities and Exchange Commission (“SEC”) also filed a complaint against the financial firm, alleging that UBS violated SEC rules by acting as an unregistered broker-dealer and investment advisor to thousands of U.S. citizens.  The settlement agreement includes payment for disgorgement, interest, penalties and restitution for unpaid taxes.  Other terms of the agreement include disclosure of the names of U.S. clients with UBS accounts.

This settlement is significant because it allows the U.S. government to pierce the veil of the Swiss bank secrecy and reminds companies that the penalties for participating in tax evasion schemes are severe.

Congress Enacts Robust Whistleblower Protections to Prevent Fraud in Stimulus Spending

Introduction

The economic stimulus bill passed by Congress on February 12, 2009 includes robust whistleblower protections to ensure that employees of private contractors and state and local governments can disclose waste, fraud, gross mismanagement or a violation of law related to stimulus funds.  This article summarizes the key provisions of Senator McCaskill’s (D-Mo.) whistleblower protection amendment to the stimulus bill (“McCaskill Amendment”).

Covered Employers

The McCaskill Amendment applies to private contractors, state and local governments, and other non-Federal employers that receive a contract, grant or other payment appropriated or made available by the stimulus bill.

Broad Scope of Protected Conduct

Protected conduct includes a disclosure to a person with supervisory authority over the employee, a State or Federal regulatory or law enforcement agency, a member of Congress, a court or grant jury, the head of a Federal agency, or an inspector general information that the employee reasonably believes evidences:

  • Gross mismanagement of an agency contract or grant relating to stimulus funds;  
  • A gross waste of stimulus funds;
  • A substantial and specific danger to public health or safety related to the implementation or use of stimulus funds;
  • An abuse of authority related to the implementation or use of stimulus funds; or
  • A violation of a law, rule, or regulation that governs an agency contract or grant related to stimulus funds.

Significantly, internal disclosures are protected, which is a substantial expansion of two current analogous whistleblower protection laws protecting contractors, both of which do not expressly cover internal disclosures.  See 10 U.S.C. § 2409; 41 U.S.C. § 265.  The McCaskill Amendment specifically protects so-called “duty speech” whistleblowing, i.e., disclosures made by employees in the ordinary course of performing their job duties. Courts will likely apply a standard of objective reasonableness from analogous whistleblower protection laws, such as Section 806 of the Sarbanes-Oxley Act, 18 U.S.C. § 1514A, which evaluates the reasonableness of a belief based on the knowledge available to a reasonable person in the same factual circumstances with the same training and experience as the aggrieved employee.

Prohibited Acts of Retaliation

The McCaskill Amendment prohibits a broad range of retaliatory employment actions, including termination, demotion, or any other discriminatory act, which includes any act that would dissuade a reasonable person from engaging in protected conduct.   See Burlington N. & Santa Fe R.R. Co. v. White, 548 U.S. 53 (2006).

Employee-Favorable Burden of Proof

To prevail in a whistleblower action under the McCaskill Amendment, an employee need not show that the protected conduct was a significant or motivating factor in the reprisal, but instead must merely prove that the protected conduct was a “contributing factor” to the reprisal.  The Amendment specifically clarifies that an employee can meet the “contributing factor” standard through temporal proximity or by demonstrating that the decision-maker knew of the protected disclosure.  An employer can avoid liability by demonstrating by “clear and convincing evidence,” a high evidentiary burden, that it would have taken the same action in the absence of the employee engaging in protected conduct.   

Remedies

A prevailing employee is entitled to “make whole” relief, which includes: (1) reinstatement; (2) back pay; (3) compensatory damages; and (4) attorneys’ fees and litigation costs.  Where an agency files an action in federal court to enforce an order of relief for a prevailing employee, the court may also award exemplary damages.

Administrative Exhaustion Requirement and Right to a Jury Trial

Actions brought under the whistleblower provisions of the McCaskill amendment must be filed with the appropriate inspector general.  Unless the inspector general determines that the action is frivolous, does not relate to covered funds, or has been resolved in another Federal or State administrative proceeding, the inspector general must conduct an investigation and make a determination on the merits of the whistleblower retaliation claim no later than 180 days after receipt of the complaint. Within 30 days of receiving an inspector general’s investigative findings, the head of the agency shall determine whether there has been a violation, in which event the agency head can award a complainant reinstatement, back pay, compensatory damages, and attorney fees.  If an agency head has denied relief in whole or in part or has failed to issue a decision within 210 days of the filing of a complaint, the complainant can bring a de novo action in federal court, which shall be tried by a jury at the request of either party.  The McCaskill Amendment expressly clarifies that predispute arbitration agreements do not apply to claims brought under the Amendment. 

Alternative Remedies

In addition to the relief available under the McCaskill Amendment, employees of government contractors have other options to remedy whistleblower retaliation.  The retaliation provision of the False Claims Act, 31 U.S.C. § 3730 (h), prohibits retaliation against an employee who has taken actions “in furtherance of” an FCA enforcement action, including initiating an FCA action, investigating a potential FCA action and testifying in an FCA action.  At least twenty-four states have adopted laws similar to the FCA, nearly all of which include an analogous retaliation provision.  Unlike the McCaskill Amendment, the retaliation provision of the FCA does not require administrative exhaustion.  Employees of contractors and of state governments may also have claims under state whistleblower protection statutes, but some of those statutes do not protect internal whistleblowing.  In addition, employees of private contractors may have a claim of common law wrongful discharge in violation of public policy, a tort remedy that provides access to a jury trial and punitive damages.  When evaluating a whistleblower retaliation claim arising from an employee’s disclosure about fraud on the government, it is critical to consider whether the employee also has a qui tam action and to preserve the employee’s ability to pursue a qui tam, which may entail avoiding public disclosure of the fraud.  In sum, the McCaskill Amendment provides a critical safeguard against fraudulent spending of stimulus funds. 

Federal Court Allows Whistleblower to Proceed With Lawsuit Against Vartan National Bank

On January 9, 2009, a district court in Pennsylvania decided that Frank Fato, a former executive of Vartan National Bank (VNB), can proceed with his whistleblower lawsuit against VNB in federal court.  In his complaint, the former executive alleges that VNB violated the whistleblower protection provisions of the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), when the company terminated his employment for allegedly disclosing information about the general counsel’s purported interference with VNB’s corporate management.  VNB moved to dismiss the case, arguing that Fato did not have a cognizable claim because he did not allege “plausible facts which demonstrate that a majority of the Board members knew of [his] disclosures to the OCC representative prior to terminating his employment.”  The district court rejected VNB’s argument, concluding that under Section 1831j of the FIRREA, an employee need not provide direct evidence of an employer’s knowledge, but instead need only provide circumstantial evidence that the employer knew about the employee’s disclosure before taking an adverse personnel action.  Finding that at least one VNB board member expressly knew of Fato’s disclosure to the OCC and that there was a three-week gap between Fato’s disclosure and his termination, the court determined that one can reasonably conclude that the disclosure was a “contributing factor” in the adverse employment action.  Accordingly, the court denied VNB’s motion to dismiss.

This case is significant because it rejects the notion that employees need direct evidence to satisfy their prima facie case of retaliation against employers.  To satisfy the “contributory factor” test, an employee need only provide circumstantial evidence, i.e., evidence that demonstrates that the official taking the adverse personnel action against the employee knew of the employee’s protected disclosure and that the personnel action occurred within a time such that a reasonable person could conclude that the disclosure was a contributing factor in the personnel action. 

The order in Fato v. Vartan National Bank, No. 1:07-cv-1291 (M.D. Pa. 2009) is available here.  For more information on The Employment Law Group® law firm’s Whistleblower Practice, click here.

The Harrisburg Patriot-News Commends Whistleblower Protection Amendments in Stimulus Bill

An editorial in today’s Harrisburg Patriot-News commends the Platts-Van Hollen amendment to the stimulus bill which strengthens federal whistleblower protections for employees who report government fraud, waste and abuse.  The editorial states:

One provision that should stay in stimulus bill is that protecting those who report waste, fraud

Monday, February 2, 2009 

There is much to grumble about in the 680-page stimulus package the House passed last week. The spirit of bipartisanship that President Obama tried to bring to the process appears to have been tossed aside by the House leadership, which ended up including numerous questionable projects in the bill and then limiting debate to a few hours before the vote on H.R. 1. One of the few parts of the stimulus legislation that is hard to argue with is an amendment to protect government “whistleblowers” who report fraud and waste. That amendment, sponsored by U.S. Rep. Todd Platts, a Republican who represents York and Cumberland counties, protects any disclosure regarding waste, fraud or abuse “without restriction as to time, place, form, motive, context or prior disclosure.” The amendment also protects whistleblowers within government contractors, which is one of the key groups causing contention in discussions about inappropriate conduct in the contracts stemming from the U.S. operations in Iraq and Afghanistan. There are countless examples of government excess and fraud, but one of the more recent and egregious examples came out this fall at the Department of the Interior — the agency that oversees our parks and much of our oil and gas reserves. About a dozen Interior staff members were found to have been accepting gifts, drugs and even sexual favors from energy companies bidding for Interior Department contracts. Would the Interior scandal have come out sooner had Platt’s whistleblower provision been in place? It’s difficult to say, but the House is sending a strong message by passing this amendment to foster an environment for reporting of improper behavior. In this new era of greater open access in the executive office, it’s time to enable rank and file career civil servants to be able to do their jobs and call out their superiors when fraud is at hand. We encourage Pennsylvania Sens. Casey and Specter to follow suit and ensure this amendment is part of the Senate stimulus package.