Excerpted from Virginia Employment Law Letter and written by an attorney at the law firm of Baker & Daniels

Whistleblowing has become a hot topic. Just a few years ago, three prominent whistleblowers were named Time magazine's "person of the year." Whistleblowing occurs when an employee charges that some wrongdoing or illegal conduct occurred within the company.

This article addresses your responsibility to protect whistleblowers from retaliation. No statute spells out who within an organization is responsible for handling whistleblower complaints. But whether they're handled by your office of general counsel, HR, or another department, you need to have a procedure in place before any complaints are dropped in the box.

And at the same time you're defending yourself against whistleblowing complaints, you must ensure that the whistleblower isn't the target of negative reactions or retaliation.


False Claims Act and Sarbanes-Oxley
Employees who report wrongful conduct by their employers are protected by both federal and state laws. Two of the most prominent federal statutes providing whistleblower protection are the False Claims Act and the Sarbanes-Oxley Act.

In 1986, Congress added antiretaliation protections to the False Claims Act. Under that statute, whistleblowers are entitled to reinstatement with seniority, double back pay, interest, special damages sustained as a result of discriminatory treatment, and attorneys' fees and costs.

The Sarbanes-Oxley Act (SOX), enacted in 2002 to encourage the disclosure of corporate wrongdoing, includes protections from retaliation against someone who "blows the whistle."

SOX prohibits publicly traded companies from discharging, demoting, or harassing an employee who has provided information about or otherwise assisted in an investigation into conduct he reasonably believes constitutes a violation of Securities and Exchange Commission rules or other federal laws covering fraud against shareholders.

Potential liability under SOX is expansive. The whistleblower can pursue claims against any officer, employee, contractor, subcontractor, or agent of the company that retaliates against him. The employee is only required to show that he had reasonable concerns about company wrongdoing, reported his concerns, and was retaliated against. Retaliation can range from something as minor as a change in work shift to something as serious as termination.

If a company is found to have violated Sarbanes-Oxley, the employee may be entitled to reinstatement with back pay and interest, compensatory damages for any special harm, attorneys' fees, litigation costs, and expert witness fees. The Act also provides for criminal sanctions, which can include substantial fines and imprisonment up to 10 years.


Protecting your company
The stakes in SOX and other whistleblower litigation are high. If your company is publicly traded and subject to the Act, you should institute a number of steps to ensure compliance with the law and protect against whistleblower lawsuits:

" Employee manuals and handbooks should manifest your company's commitment to complying with the Act.

" You should investigate any employee claims of wrongful conduct.

" To protect against retaliation claims, be prepared to justify employment actions taken against possible whistleblowers.


You also should consider implementing a specific "whistleblowing" policy that:

" allows employees to speak up if they have legitimate concerns about wrongdoing;

" establishes procedures for handling whistleblower claims;

" encourages employees to raise well-founded concerns; and

" assures employees that there will be no retaliation if they report in good faith what they reasonably believe is wrongful conduct.


Bottom line
The best course of action for avoiding liability in whistleblowing cases is to investigate all employee complaints and document your investigation. Also, document the basis for taking any adverse action against employees who in good faith raise reasonable concerns about corporate fraud.


Copyright 2008 M. Lee Smith Publishers LLC. This article is an excerpt from VIRGINIA EMPLOYMENT LAW LETTER. VIRGINIA EMPLOYMENT LAW LETTER is a monthly publication provided as an educational service only to assist lay persons in recognizing potential problems in their labor and employment matters. It is not meant to be construed as legal advice. Readers in need of legal assistance should retain the services of competent counsel.