6 Steps to Minimize the Risk of Whistleblower Claims

By G. Mark Jodon

Whistleblowing in corporate America is big business.

Recently, the SEC Office of the Whistleblower issued a $30 million bounty payment to a foreign whistleblower, an award more than double the amount of any previous payment. This   payout came on the heels of a $300,000 payout to an internal compliance officer who blew the whistle on corporate wrongdoing to the government. The magnitude of these awards       underscores a fundamental shift in enforcement strategy among regulatory agencies from encouraging internal corporate compliance to policing corporate conduct by encouraging     employees to report directly to the government. The message proclaimed by government agencies to employees is simple: report misconduct outside the company in exchange for protection from retaliation, significant penalties against the company, and very lucrative financial rewards for the whistleblower. The take-away for employers is even more simple: improve your internal whistleblower response systems and your ethics and compliance programs or face the consequences.

To help construct a proactive defense against increased government enforcement efforts and would-be whistleblowers, including your company’s own compliance and audit professionals, employers should work with knowledgeable counsel to take the following critical measures:

(1) Review and analyze your company’s Ethics and Compliance Program. An outsider’s objective and expert review of the ethics and compliance program can help identify gaps and areas for improvement.

(2) Update and elevate the importance of anti-retaliation policies and procedures and re-train employees and executives at every level. Many companies still have a very weak policy generally prohibiting retaliation, and they do not train managers that potentially insignificant decisions can lead to an employee believing that he or she is the victim of retaliation. Fear of retaliation can prevent employees from coming forward internally with reports of misconduct and may increase the likelihood that they will take their concerns directly to the government.

(3) Ensure that your company has a comprehensive incident management system. Recent research shows that only 3–5% of reports of misconduct are made through a helpline. Supervisors and managers receive the vast majority of such reports directly. If the supervisors and managers receiving these reports do not properly escalate the reports, the company will never have the chance to investigate and rectify. Additionally, such failures foster the perception that it does not do any good to use the internal reporting mechanism, thereby pushing employees to report directly to the government instead of the company.

(4) Develop investigation protocols and train. Conducting effective and lawful investigations is no longer a luxury for a company; it is a necessity. A well-designed investigation system will better ensure that all important legal and compliance issues are identified, tracked, and resolved. Make sure the persons who conduct your investigations have been properly trained on how to investigate thoroughly.

(5) Review and update your company’s Code of Conduct. Code of Conduct policies are in the cross-hairs of regulatory enforcement actions, especially those policies that impose strict confidentiality requirements prohibiting the filing of charges with government agencies. Ensure that the company’s Code of Conduct adequately addresses important compliance concerns, risk areas, and cultural commitments to ethics and integrity. An effective Code should be more than just words on the page. Companies should take steps to ensure that the policies and principles in the Code are effectively communicated and implemented at all levels of the organization.

(6) Make workplace culture a priority. Employees who fear retaliation or do not trust their managers and corporate leaders to make ethical decisions are much less likely to come forward internally with reports of misconduct. Companies should work to promote an ethical workplace culture in which employees feel comfortable speaking up about potentially unlawful or unethical conduct.


About the Author
G. Mark Jodon, managing shareholder for Littler Mendelson’s Houston office, is board-certified in labor and employment law by the Texas Board of Legal Specialization. Mark advises employers on whistleblowing and retaliation issues. He can be reached at (713) 652-4739 and mjodon@littler.com.



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