'Four Signal Moments in Whistleblower Law: 1983-2013' by Geoffrey Christopher Rapp in (2013) 30
Hofstra Labor and Employment Law Journal identifies
four signal legal changes in the law governing whistleblowers between 1983 and 2013. Three of these are well known and easily identified -- the amendments to the federal False Claims Act enacted in 1986, the Sarbanes-Oxley whistleblower protection scheme enacted in 2002, and the Dodd-Frank securities fraud whistleblower bounty program enacted in 2010. Equally important may prove the Deficit Reduction Act of 2005 (actually enacted in 2006), which created an unusual carrot for state law whistleblower reward and protection reform.
After discussing the impact of each signal change, I discuss the future of whistleblowing -- with national security whistleblowing, internal corporate programs, on-line whistleblowing, and continued doctrinal development being important developments to watch.
Rapp comments
Consumer activist Ralph Nader is sometimes credited with having coined the term “Whistle Blower” in the early 1970s. In the decades since, much has changed. The term lost one space – becoming “whistleblower” – but came to occupy a new space in the public’s understanding of the best ways to root out fraud and criminality in a wide range of activities and organizations. Whistleblowers helped end a war and bring down a United States President; changed the landscape of environmental protection; exposed fraudulent practices at tobacco companies; and, in more recent memory, highlighted patterns of fraud in publicly traded companies and helped destroy one of America’s most beloved sports icons, cyclist Lance Armstrong.
The legal landscape relating to whistleblowers has changed dramatically as well. In 1983, the Supreme Court dismissively made reference to “so-called ‘whistleblowers.’” In the years since, however, the whistleblower has been elevated to a far more prominent position. A whistleblower is typically (though not exclusively) an employee of a corporation, government agency, or educational institution, who comes into possession of information on an ongoing criminal, fraudulent, unsafe or otherwise questionable practice. The whistleblower reports information or makes allegations, sometimes to external regulators, watchdog groups, or the media, and sometimes internally (though often outside of the chain of command). From the beginning of the practice we now call whistleblowing such employees have faced retaliation – the threat of which, along with other incentives, favored remaining silent. The law, thankfully, has evolved to provide both protection and positive incentives for whistleblowers.
This Article identifies four signal legal changes in the treatment of whistleblowers that have helped propel those who speak out into their current prominent role in policy discussions. The first moment was the passage of amendments, in 1986, to the Federal False Claims Act (FCA). These amendments created a structure by which whistleblowers in the federal procurement context could claim a share of recovered funds connected with fraud perpetrated against the government. Importantly, the FCA amendments gave whistleblowers increased control over litigation involving fraud against the government. In addition to helping the government recover large sums of money, the 1986 FCA amendments provided financial resources to an emerging plaintiff’s whistleblower bar. The lawyers who got rich using the newly strengthened FCA provisions became a powerful force for policy advocacy in contexts outside of the somewhat narrow purview of the FCA.
The second signal moment for whistleblower law was the passage of the Sarbanes-Oxley Act of 2002 (SOX), which, for the first time, provided seemingly uniform protections for whistleblowers who raised concerns about accounting fraud in publicly held companies. Although many scholars have deemed SOX’s whistleblowing provisions ineffective, the statute itself represented an important shift in national thinking about the best ways to uncover financial fraud. Whistleblowers, long second fiddle to private securities lawsuits, came to be recognized as an important avenue for detecting fraud.
The third signal moment was perhaps the least noticed. In a section of the Deficit Recovery Act of 2005 (DRA), the federal government deployed a rather novel carrot for stimulating state law change. The DRA gave states that enacted their own false claims acts a significant windfall in terms of their split of recoveries in federal False Claims Act cases involving joint state-federal Medicaid expenditures. As a result, in just a few short years, the number of states with such statutes rapidly increased, and state false claims acts have been a hot area of litigation in the ensuing time.
Finally, in reaction to the financial market meltdown of 2008-2009, Congress imported the FCA’s bounty model for stimulating whistleblowers to the SOX context, as a number of scholars, including myself, had argued was needed. Although Dodd-Frank’s whistleblower provision, like SOX’s before it, suffers from important limitations, it represents a major shift in direction toward empowering and incentivizing whistleblowers in the financial arena.
After discussing each of these signal moments, I speculate about the future of whistleblower law. Important questions remain to be answered. Will Congress respond to Dodd-Frank’s invitation to consider allowing securities whistleblowers, like FCA plaintiffs, to pursue an action on their own? Will companies adjust their historical reluctance to whistleblowing and begin to implement their own internal whistleblower reward systems? Will protection for whistleblowers on the federal and state level help stimulate changes in the common law’s treatment of whistleblowers, which may have lagged behind? Only time will tell, but one thing is certain: the prominence of whistleblowers, for better or for worse, is here to stay.
