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

The Americans With Disabilities Act in Cyberspace: Applying the “Nexus” Approach to Private Internet Websites

Although the nexus approach presents the best alternative to applying the ADA to a situation not contemplated by Congress, by relying on it, this Article makes value judgments and draws conscious conclusions regarding the nature of the Internet and how (and whether) our laws should be interpreted to accommodate the Internet’s unique role in our society. For example, this Article asserts that the ADA cannot apply to all Internet websites because the statute applies only to physical places of public accommodation. A judgment regarding the essence of the Internet is, of course, imbedded in this conclusion. The Internet is something other than a physical “place.” Additionally, relying on the nexus approach recognizes that although the Internet is not a place, it provides critical communication services and accessibility to goods and services sold by places of public accommodation. Therefore, the ADA should regulate the manner in which these physical places of public accommodation use their website to communicate with the public and to permit access to their goods and services because those types of roles should qualify as having a nexus to the place of public accommoda- tion. Finally, reliance on the nexus approach to conclude that the ADA plays only a limited role with regard to private websites reflects a value judgment regarding the applicability of statutory regulation to unforeseen, yet transformative, technological advancements such as the Internet. Applying the nexus approach involves a conscious decision that Congress, not the judiciary, is in the best position to regulate the Internet because Congress can, and should, balance the needs of the Internet industry with the requirements of individuals with disabili- ties. All of these broader issues are inherently contained in any discussion of whether the ADA applies generally to Internet websites; this Article addresses them within that context. Part II of this Article provides a brief overview of the ADA’s require- ments as well as an examination of the analyses used by the court in Access Now and the NCD in arriving at contradictory conclusions regarding the ADA’s application to the Internet. Part III sets forth the nexus approach and its application to the Internet. Specifically, Part III analyzes both the ADA’s statutory language and the nature of the Internet for support regarding application of the nexus approach. The final section of Part III provides normative justifications for the application of the nexus approach rather than either of the more extreme alternatives. Finally, Part IV briefly discusses the practical require- ments for a website that may be regulated by the ADA

Unfulfilled Expectations: An Empirical Analysis of Why Sarbanes-Oxley Whistleblowers Rarely Win

Scholars praise the whistleblower protections of the Sarbanes- Oxley Act of 2002 as one of the most protective anti-retaliation provisions in the world. Yet, during its first three years, only 3.6% of Sarbanes-Oxley whistleblowers won relief through the initial administrative process that adjudicates such claims, and only 6.5% of whistleblowers won appeals through the process. This Article reports the results of an empirical study of all Department of Labor Sarbanes-Oxley determinations during this time, consisting of over 700 separate decisions from administrative investigations and hearings. The results of this detailed analysis demonstrate that administrative decision makers strictly construed, and in some cases misapplied, Sarbanes-Oxley\u27s substantive protections to the significant disadvantage of employees. These data-based findings assist in identifying the provisions and procedures of the Act that do not work as Congress intended and suggest potential remedies for these statutory and administrative deficiencies

Unfulfilled Expectations: An Empirical Analysis of Why Sarbanes-Oxley Whistleblowers Rarely Win

Scholars praise the whistleblower protections of the Sarbanes- Oxley Act of 2002 as one of the most protective anti-retaliation provisions in the world. Yet, during its first three years, only 3.6% of Sarbanes-Oxley whistleblowers won relief through the initial administrative process that adjudicates such claims, and only 6.5% of whistleblowers won appeals through the process. This Article reports the results of an empirical study of all Department of Labor Sarbanes-Oxley determinations during this time, consisting of over 700 separate decisions from administrative investigations and hearings. The results of this detailed analysis demonstrate that administrative decision makers strictly construed, and in some cases misapplied, Sarbanes-Oxley\u27s substantive protections to the significant disadvantage of employees. These data-based findings assist in identifying the provisions and procedures of the Act that do not work as Congress intended and suggest potential remedies for these statutory and administrative deficiencies