Confidentiality and Whistleblowing

I. A (BRIEF) HISTORY OF WHISTLEBLOWING IN THE LAST FIFTEEN YEARS: A. Antiretaliation Protections, B. Bounty Provisions. C. Structural Disclosure Channels II. THE CORPORATE RESPONSE. : A. Using Confidentiality Provisions, B. Results from Broad Study of Settlement Agreements—1. Brief Background on the Study, 2. The Prevalence of Confidentiality Provisions. III. GOVERNMENT COUNTERMOVES: A. SEC Rule 21F-17, B. OSHA Guidance, C. Government Contractors Companies often require confidentiality from their employees. Maintaining corporate secrets helps protect intellectual property and gives a company an edge in a competitive marketplace. The law generally supports this corporate desire for secrecy through statutes that prohibit disclosing trade secrets and by enforcing agreements requiring confidentiality from employees, even if those agreements bar employees from working for a competitor in order to keep the employees from revealing secrets. As a result, companies have utilized this legal structure aggressively to enforce trade secret laws, confidentiality agreements, and non-competition provisions. Whistleblowing can undermine confidentiality. An employee blows the whistle by revealing inside information-often organizational misconduct-to an outsider, such as a government regulator.\u27 This disclosure, by definition, contains information the corporation would rather keep secret. Even if a company intends to correct and punish the underlying misconduct internally, whistleblowing can cause significant disruption because the company has to manage increased oversight from the government, bad publicity, and heightened public scrutiny. Once the information is revealed externally, companies can have a harder time fixing the underlying problem because battle lines are drawn and positions become entrenched. Nevertheless, over the last fifteen years, the law-in particular federal law-has increasingly encouraged whistleblowing as a means of corporate oversight. Newly enacted federal statutes broadly protect whistleblowers from retaliation, require corporate structures that make whistleblowing easier, and even reward employees who reveal certain types of corporate misconduct. In short, the federal government has aggressively encouraged employees to become whistleblowers. In response, corporations have tried to mitigate potential damage by relying on broad confidentiality provisions to discourage employees from revealing insider information. As a result, uncertainty abounds when the corporate desire for confidentiality clashes with the government\u27s desire for employees to blow the whistle. This Article is about the increasing tension between these countervailing trends. Part I describes the government\u27s increased encouragement of whistleblowing during the last fifteen years. Part II demonstrates that corporations have responded to this trend by including in employment agreements broad confidentiality provisions that potentially limit the ability of employees to become whistleblowers. Finally, Part III explains recent moves by government agencies to regulate the breadth of these confidentiality provisions in order to mitigate their impact on whistleblowing. Ultimately, the Article concludes that the government\u27s ability to rely on insiders to monitor organizational behavior by blowing the whistle will depend on the government\u27s willingness to regulate the ability of an organization to protect its secrets through contract

In Memoriam–Anna Shavers

our broader community lost a wonderful law professor, a valued colleague, and a fierce advocate for justice. Anna Shavers was the Cline Williams Professor of Citizenship Law and the Associate Dean for Diversity and Inclusion at the College of Law. But she was so much more for those of us who were able to call her our friend. Anna and I became good friends over the last five years as we worked closely together when Anna was Associate Dean for Diversity and Inclusion. Of course, I have known Anna for all my eighteen years on our faculty. It was an amazing gift for me to have gotten to know and be friends with Anna through our work. Work friends are an interesting strand of friendship—we don’t travel the world together or eat out at fancy restaurants. We may share anecdotes of our families, but people don’t necessarily invite work colleagues into that inner circle of spouses, children, and soccer games. Nevertheless, over time, you get to know a person through the banalities of conferences you attend together, of shared problem-solving, and of joint frustrations in the day-to-day grind of that activity that consumes so much of our lives: work. It was through work and work experiences that I got to know Anna. More specifically, Anna and I became close because I was in a lot of meetings with her. I mean, a lot of meetings—literally hundreds. We had weekly staff and administrator meetings, weekly one-onones, all-day Zoom retreats, lengthy faculty meetings, all-college town halls, and everything in between. In many ways, it is those experiences that I think has given me some insight into Anna, her approach to her work, and her impact on others

Introduction to Nebraska Law Review, Volume 100:4

I am honored to write this brief (or, in the words of the managing editor’s admonition to me: “very brief”) introduction to Volume 100 of the Nebraska Law Review. As I write this, we are recovering from a two-year global pandemic, watching with trepidation the humanitarian crisis resulting from European armed conflict, and debating the appropriate level of government involvement in health mandates and education. In other words, the circumstances seem eerily like one hundred years ago when the first volume of this law review was published, as the country mended from the 1919–20 influenza pandemic, managed the fallout from World War I, and engaged in cultural battles debating governmental power to require school attendance and mandate the teaching of certain curricula. The more things change, the more they stay the same perhaps. Or, perhaps not. In many ways, this publication (and the College of Law itself) has changed dramatically and for the better since Volume 1. While this century-old publication has maintained its high quality, it has neither rested on its accomplishments nor simply rehashed the same tired debates. Like the University of Nebraska College of Law, its law review has continued to honor its past while also innovating, looking forward, and reflecting the very best of current legal analyses. As examples, we need look no further than this very issue of Volume 100, which contains insightful retrospectives as well as original examinations of modern legal issues from Nebraska Law alumni, faculty, and students

WHISTLEBLOWERS AND THE OBAMA PRESIDENCY: THE NATIONAL SECURITY DILEMMA

This Article explores President Obama\u27s seemingly contradictory approach to whistle blowers and the distinction he appears to draw between whistleblowing about governmental misconduct generally, which he supports, and whistleblowing in the national security context, which he appears to disdain. Part II of the Article describes the numerous moves Obama made to improve whistle blower protection through his Presidential appointments and his support of improved antiretaliation statutory measures. Additionally, this Part contrasts that support with Obama\u27s seemingly antagonistic approach to whistleblowing about national security. At least two questions arise from drawing this distinction between national security whistleblowing and other types of whistleblowing. First, where does the distinction come from? Second, does the distinction make sense? Part III answers the first question by examining why Obama might approach national security whistle blowing differently than other types of whistleblowing. In some respects, this different approach continues a long-standing separation of powers dispute between the legislative and the executive branches of the federal government. Congress desires transparency and oversight of the executive branch, which it hopes to achieve by encouraging executive branch employees to disclose information to Congress. Presidents traditionally have resisted these efforts, particularly when they involve matters over which the Constitution arguably has empowered the President with exclusive domain, such as protecting secrecy related to national security. The state of the law related to national security whistleblowers reflects this dispute in that such whistleblowers generally receive far fewer protections than other types of whistle blowers. In short, President Obama values secrecy over transparency and oversight when it comes to national security whistleblowing, and the law often reflects and supports this choice. Part IV responds to the second question - does this distinction make sense? - by analyzing whether President Obama and the current state of the law correctly balance the competing goals of secrecy and security on the one hand and transparency and oversight on the other. Although reasons certainly exist to treat national security whistleblowers differently than other whistle blowers, I argue in this Part that the law could be modified to increase transparency and oversight without a corresponding negative impact on secrecy and national security. I conclude the Article with several suggestions to re-balance the scales and to provide national security employees appropriate encouragement to blow the whistle on governmental misconduct

Confidentiality and Whistleblowing

I. A (BRIEF) HISTORY OF WHISTLEBLOWING IN THE LAST FIFTEEN YEARS: A. Antiretaliation Protections, B. Bounty Provisions. C. Structural Disclosure Channels II. THE CORPORATE RESPONSE. : A. Using Confidentiality Provisions, B. Results from Broad Study of Settlement Agreements—1. Brief Background on the Study, 2. The Prevalence of Confidentiality Provisions. III. GOVERNMENT COUNTERMOVES: A. SEC Rule 21F-17, B. OSHA Guidance, C. Government Contractors Companies often require confidentiality from their employees. Maintaining corporate secrets helps protect intellectual property and gives a company an edge in a competitive marketplace. The law generally supports this corporate desire for secrecy through statutes that prohibit disclosing trade secrets and by enforcing agreements requiring confidentiality from employees, even if those agreements bar employees from working for a competitor in order to keep the employees from revealing secrets. As a result, companies have utilized this legal structure aggressively to enforce trade secret laws, confidentiality agreements, and non-competition provisions. Whistleblowing can undermine confidentiality. An employee blows the whistle by revealing inside information-often organizational misconduct-to an outsider, such as a government regulator.\u27 This disclosure, by definition, contains information the corporation would rather keep secret. Even if a company intends to correct and punish the underlying misconduct internally, whistleblowing can cause significant disruption because the company has to manage increased oversight from the government, bad publicity, and heightened public scrutiny. Once the information is revealed externally, companies can have a harder time fixing the underlying problem because battle lines are drawn and positions become entrenched. Nevertheless, over the last fifteen years, the law-in particular federal law-has increasingly encouraged whistleblowing as a means of corporate oversight. Newly enacted federal statutes broadly protect whistleblowers from retaliation, require corporate structures that make whistleblowing easier, and even reward employees who reveal certain types of corporate misconduct. In short, the federal government has aggressively encouraged employees to become whistleblowers. In response, corporations have tried to mitigate potential damage by relying on broad confidentiality provisions to discourage employees from revealing insider information. As a result, uncertainty abounds when the corporate desire for confidentiality clashes with the government\u27s desire for employees to blow the whistle. This Article is about the increasing tension between these countervailing trends. Part I describes the government\u27s increased encouragement of whistleblowing during the last fifteen years. Part II demonstrates that corporations have responded to this trend by including in employment agreements broad confidentiality provisions that potentially limit the ability of employees to become whistleblowers. Finally, Part III explains recent moves by government agencies to regulate the breadth of these confidentiality provisions in order to mitigate their impact on whistleblowing. Ultimately, the Article concludes that the government\u27s ability to rely on insiders to monitor organizational behavior by blowing the whistle will depend on the government\u27s willingness to regulate the ability of an organization to protect its secrets through contract

Private Sector Whistleblowers: Are There Sufficient Protections?

In response to the question this hearing presents, my research indicates that whistleblowers have some legal protection, but the protection is likely insufficient. Over 30 Federal statutes protect whistleblowers and relate to a variety of topics, including workplace safety, the environment, public health, and corporate fraud. However, these statutes provide only a relatively limited amount of protection because of their ad hoc and narrow approaches. Rather than protect any employee who reports any illegal activity, Federal statutes only protect whistleblowing related to a specific topic or statute, and then only if the whistleblower works for an employer covered by the statute. Even if the right type of illegal activity is reported, the whistleblower may or may not be protected, depending on how the employee blew the whistle. Some statutes only protect employees who formally participate in enforcement proceedings, while others protect employees who affirmatively report illegal activity or who refuse to engage in misconduct. Some statutes require reports to be made externally to the government, while others protect whistleblowers who report misconduct to their supervisors. The procedural requirements for a whistleblower to file a claim are varied as well. Some laws permit whistleblowers to file claims directly in Federal court, while others require whistleblowers to file claims with an administrative agency like OSHA. Some of these statutes permit only the agency to prosecute claims on an employee’s behalf, while others permit employees to pursue their own claims. As Chairwoman Woolsey suggested, the statute of limitation for these laws vary from 30 to 300 days, which only compounds the confusion created by these multiple protections and procedures. Suffice it to say, one would never create this system from scratch. Whether a whistleblower is protected depends on the employer for which the employee works, the industry in which the employee works, the type of misconduct reported, the way in which an employee blew the whistle, and, under some statutes, the willingness of an administrative agency to enforce the law. Because of these nuances it is simply too easy for good-faith whistleblowers to fall through the gaps created by these varied requirements, a situation that fails to encourage employees to blow the whistle and fails to protect them when they do. The problems with the current system are illustrated by the Sarbanes- Oxley Act of 2002, which applies to employees of publicly traded companies who report fraud. At the time it was passed, many expected that Sarbanes-Oxley would provide the broadest most comprehensive coverage of any whistleblower provision in the world. These expectations have not been realized. Employees rarely win Sarbanes-Oxley cases. In the act’s first 3 years, only 3.6 percent of Sarbanes-Oxley whistleblowers won relief after an OSHA investigation. Only 6.5 percent of whistleblowers won appeals in front of an administrative law judge. Subsequent statistics from OSHA indicate that not a single Sarbanes-Oxley whistleblower won a claim before OSHA in fiscal year 2006 out of 159 decisions made by the Agency during that year. My empirical study of Sarbanes-Oxley outcomes highlights more general problems. First, the legal and procedural nuances I detailed earlier don’t have real bite. Employees who don’t fall squarely within the law’s narrow legal boundaries do not get protected. Under Sarbanes-Oxley, for example, ALJ determined that 95 percent of whistleblower cases failed to satisfy these boundary issues as a matter of law and dismissed those cases. Judges almost never hear the factual merits of whether retaliation occurred because an employee blew the whistle. Second, ALJs dismissed one-third of Sarbanes-Oxley cases because whistleblowers failed to satisfy the act’s 90-day statute of limitations, demonstrating that such short statute of limitation periods can have drastic consequences. Third, retaliation cases are highly fact-intensive cases that require resources, time and expertise. Requiring an administrative investigation may not efficiently utilize government resources and may unduly delay justice under that act. As an example I detailed some of the problems with OSHA’s enforcement of Sarbanes-Oxley in my written statement. As a result of these problems, rank-and-file employees likely cannot determine the protection available to them before blowing the whistle, which means that Federal law is not doing its job of encouraging employees to come forward with information about misconduct. Society cannot gain the enormous public benefits from whistleblowers who disclose health and safety issues and other corporate misconduct. To address these issues Congress should comprehensively examine the manner in which Federal law protects whistleblowers, and I have detailed specific recommendations in my written testimony

SOX and Whistleblowing: The Concerns

Yesterday, I reviewed the Whistleblowing provisions in SOX. Whether these provisions actually will reduce corporate fraud remains to be seen. Despite the Act’s strong anti-retaliation protections, during the first three years of SOX few whistleblowers actually won retaliation claims. In a recent study I completed of whistleblower claims (a draft can be found here ), only 3.6% of employees won relief through the initial administrative process that adjudicates SOX claims, and only 6.5% of whistleblowers won appeals through the process

Private Sector Whistleblowers: Are There Sufficient Protections?

In response to the question this hearing presents, my research indicates that whistleblowers have some legal protection, but the protection is likely insufficient. Over 30 Federal statutes protect whistleblowers and relate to a variety of topics, including workplace safety, the environment, public health, and corporate fraud. However, these statutes provide only a relatively limited amount of protection because of their ad hoc and narrow approaches. Rather than protect any employee who reports any illegal activity, Federal statutes only protect whistleblowing related to a specific topic or statute, and then only if the whistleblower works for an employer covered by the statute. Even if the right type of illegal activity is reported, the whistleblower may or may not be protected, depending on how the employee blew the whistle. Some statutes only protect employees who formally participate in enforcement proceedings, while others protect employees who affirmatively report illegal activity or who refuse to engage in misconduct. Some statutes require reports to be made externally to the government, while others protect whistleblowers who report misconduct to their supervisors. The procedural requirements for a whistleblower to file a claim are varied as well. Some laws permit whistleblowers to file claims directly in Federal court, while others require whistleblowers to file claims with an administrative agency like OSHA. Some of these statutes permit only the agency to prosecute claims on an employee’s behalf, while others permit employees to pursue their own claims. As Chairwoman Woolsey suggested, the statute of limitation for these laws vary from 30 to 300 days, which only compounds the confusion created by these multiple protections and procedures. Suffice it to say, one would never create this system from scratch. Whether a whistleblower is protected depends on the employer for which the employee works, the industry in which the employee works, the type of misconduct reported, the way in which an employee blew the whistle, and, under some statutes, the willingness of an administrative agency to enforce the law. Because of these nuances it is simply too easy for good-faith whistleblowers to fall through the gaps created by these varied requirements, a situation that fails to encourage employees to blow the whistle and fails to protect them when they do. The problems with the current system are illustrated by the Sarbanes- Oxley Act of 2002, which applies to employees of publicly traded companies who report fraud. At the time it was passed, many expected that Sarbanes-Oxley would provide the broadest most comprehensive coverage of any whistleblower provision in the world. These expectations have not been realized. Employees rarely win Sarbanes-Oxley cases. In the act’s first 3 years, only 3.6 percent of Sarbanes-Oxley whistleblowers won relief after an OSHA investigation. Only 6.5 percent of whistleblowers won appeals in front of an administrative law judge. Subsequent statistics from OSHA indicate that not a single Sarbanes-Oxley whistleblower won a claim before OSHA in fiscal year 2006 out of 159 decisions made by the Agency during that year. My empirical study of Sarbanes-Oxley outcomes highlights more general problems. First, the legal and procedural nuances I detailed earlier don’t have real bite. Employees who don’t fall squarely within the law’s narrow legal boundaries do not get protected. Under Sarbanes-Oxley, for example, ALJ determined that 95 percent of whistleblower cases failed to satisfy these boundary issues as a matter of law and dismissed those cases. Judges almost never hear the factual merits of whether retaliation occurred because an employee blew the whistle. Second, ALJs dismissed one-third of Sarbanes-Oxley cases because whistleblowers failed to satisfy the act’s 90-day statute of limitations, demonstrating that such short statute of limitation periods can have drastic consequences. Third, retaliation cases are highly fact-intensive cases that require resources, time and expertise. Requiring an administrative investigation may not efficiently utilize government resources and may unduly delay justice under that act. As an example I detailed some of the problems with OSHA’s enforcement of Sarbanes-Oxley in my written statement. As a result of these problems, rank-and-file employees likely cannot determine the protection available to them before blowing the whistle, which means that Federal law is not doing its job of encouraging employees to come forward with information about misconduct. Society cannot gain the enormous public benefits from whistleblowers who disclose health and safety issues and other corporate misconduct. To address these issues Congress should comprehensively examine the manner in which Federal law protects whistleblowers, and I have detailed specific recommendations in my written testimony

SOX and Whistleblowing: The Concerns

Yesterday, I reviewed the Whistleblowing provisions in SOX. Whether these provisions actually will reduce corporate fraud remains to be seen. Despite the Act’s strong anti-retaliation protections, during the first three years of SOX few whistleblowers actually won retaliation claims. In a recent study I completed of whistleblower claims (a draft can be found here ), only 3.6% of employees won relief through the initial administrative process that adjudicates SOX claims, and only 6.5% of whistleblowers won appeals through the process

SOX and Whistleblowing

Whistleblowers famously helped publicize the corporate scandals that gave rise to Sarbanes- Oxley: think Sherron Watkins at Enron and Cynthia Cooper at WorldCom—two of Time Magazine’s “Persons of the Year” for 2002. Given the importance of these employee disclosures, Congress considered it necessary to break the “corporate code of silence” that discouraged potential whistleblowers from coming forward. Indeed, SOX utilizes a unique holistic approach aimed at encouraging employees to disclose information about corporate wrongdoing