First, let’s define the relevant landscape. I am talking about core whistleblower retaliation claims. I distinguish between core whistleblower retaliation claims and retaliation claims that are related to discrimination. This is because retaliation claims related to discrimination typically flow through a different law or statute.
Core whistleblower retaliation claims look like this: An employee or executive reports illegal conduct or refuses to participate in illegal conduct. Classic examples: Accounting fraud, investor fraud, medical overbilling, insurance fraud, law firm overbilling, undisclosed fees, data breaches, customer or consumer fraud, or health and safety violations. This is not an exhaustive list but it should give you a good idea of what we’re looking for. If we have to boil it down, we’re really talking about (a) fraud; (b) health / safety violations or (c) regulatory violations.
Some states provide outstanding protections and remedies for whistleblowers. California is the gold standard. But New York, New Jersey, and Illinois also have robust whistleblower protections. These jurisdictions permit whistleblowers to recover actual damages for lost earnings, compensatory damages, and punitive damages. And these jurisdictions do not cap those recoveries. So, if you have a whistleblower retaliation claim in one of these jurisdictions, the chessboard is set in your favor and you just go through the ordinary channels.
The problem is this: If you are a whistleblower and you are not in one of these jurisdictions. Suppose you are in a state that either does not have robust protections for whistleblowers. Maybe you’re in a state like Florida that does have a whistleblower retaliation statute for private-sector whistleblowers but does not permit punitive damages. Or, maybe you are in a state like Georgia, where there is no private-sector whistleblower protection. Or maybe you are in Maryland, where the appellate courts have gutted the old common law cause of action for wrongful discharge in violation of public policy. In fact, most states do not have good whistleblower protections. They protect public sector whistleblowers. They require a pre-suit administrative process. They require that the conduct at issue actually be illegal (not just a good faith belief that it was illegal). They require that the whistleblower reported externally (i.e. to a government agency). They don’t allow punitive damages. They cap compensatory damages. Or some combination of all these things. So, that probably applies to most of you who are reading this. And that leads us to the following question: What should a whistleblower do if they have been retaliated against and they are in a state that does not protect whistleblowers? The answer: Turn to common law fraud.
Weaponizing Empty Corporate Speak and Turning it Into Whistleblower Protection
All companies of a certain size have written polices and procedures. It’s part of modern corporate culture. Once a company hits 300 or 400 employees, there are bound to be handbooks, documents that govern corporate compliance, anti-retaliation policies, etc. Most of these corporate policies contain a provision like this:
Commitment to Compliance and Reporting
The Company is committed to conducting its business in full compliance with all applicable laws, rules, and regulations and to maintaining the highest standards of integrity and ethical conduct. Employees are expected to promptly report any suspected or actual violations of law, regulation, Company policy, or other misconduct, including fraud, financial irregularities, unsafe practices, or other unethical behavior.
Employees may report concerns through management, Human Resources, Compliance, or other designated reporting channels, including anonymous reporting mechanisms where available.
Non-Retaliation
The Company strictly prohibits retaliation against any individual who, in good faith:
- reports a suspected or actual violation of law, regulation, or Company policy;
- raises a compliance concern; or
- participates in or cooperates with an investigation or audit.
No employee will be subject to discharge, demotion, suspension, threats, harassment, or any other adverse action for making a good faith report or participating in an investigation.
Any act of retaliation is a serious violation of Company policy and will result in disciplinary action, up to and including termination of employment.
Companies do this for two reasons. Post Sarbanes-Oxley, publicly-traded companies are essentially required to have something like this. Federal laws require certain mandatory reporting and anti-retaliation provisions. But corporate America has gone beyond this. They have beefed up these provisions to use them as a shield in litigation. If and when they get sued for fraud, securities fraud, or investor fraud, they point to their polices and say:
We didn’t know. We’re the bosses, but we didn’t know. Whoever knew about the fraud had a duty to report. See, it’s all there in black and white. They were supposed to report and they didn’t. Don’t blame us. We put the reporting mechanisms in place. And we even promised not to retaliate. We did our best.
That is the primary motivation behind these policies. The secondary motivation: Many companies want whistleblowers to report internally so they can deem those whistleblowers traitors and get rid of them. And all of this emerged in publicly-traded companies but eventually became standard practice for large privately-held companies, too. At this point, it’s ubiquitous at companies with more than about 300 employees, or, at even smaller companies that are high-dollar enterprises.
Corporate Anti-Retaliation Polices Create Actionable Fraud
No matter your role or position in a company, you should always review all applicable policies and procedures. At sophisticated companies, you typically do not have to request these materials. They are automatically provided to you via your HR platform, or, you are provided electronic access to these materials. If you do not have access to such materials, you can request them and say that you want to make sure you are doing the best job you can do for the company, doing your work up to their standards, and complying with everything they require. But is that really why you should obtain or request these documents? No. You should obtain them as a protection against whistleblower retaliation.
Suppose you are the chief technology officer of a large, privately-held company. You learn that the company’s main product – its leading source or revenue – has several major security vulnerabilities. The company has not advised its customers or these vulnerabilities. In fact, the company has denied the existence of these vulnerabilities and claimed that its product is impervious to those specific threats. What is that? Fraud. Immediately upon uncovering this fraud, you report to the company’s chief operating officer (that is your direct reporting line). The COO chews you out. Tells you that you are wrong. You are overstating the risk. The company is working on fixes that will be rolled out in a few weeks. And that nobody can ever know about this because it would cost the company $20 million in revenue and damage its reputation. You push back. Within days, the company fires you. But you are in a jurisdiction that has no private-sector whistleblower protections.
So you turn to the handbook. The handbook contains a compliance, reporting, and anti-retaliation provision just like the one laid out above. You now have an actionable fraud claim. That gives you a private right of action. That also allows you to pursue (a) actual damages in the form of lost income; (b) compensatory damages for emotional distress, humiliation, harm to your dignity, etc. and (c) punitive damages (depending on state law governing punitive damages).
Pushing Back Against Typical Defense Strategies
Corporate defendants will surely lose their minds over this. As per tradition, they will come up with some wild arguments why a fraud claim in this context simply cannot stand. There are plenty of judges on the bench who are good friends with corporate America. And those judges will bend over backwards to get rid of a novel claim like this. But this a tough claim to shake for the following reasons:
- The false representation and the reliance are a clear 1 to 1 match. IE: Report fraud. We promise we won’t retaliate. Haha, actually, we retaliated and you’re fired. The reliance is reasonable. And the damages are clear.
- Companies will say that they didn’t intend to commit fraud. That the statement was true at the time they made it. That we cannot prove it was fraud from the outset. But that gets into state of mind, credibility, and disputed facts. That is a jury question.
Bottom line: If you are in a state with good whistleblower protections, you run that claim. If you are in a state without good whistleblower protections, run the fraud claim. The more you know.
Jonathan Pollard is the founder of Pollard PLLC. The firm focuses on high-stakes employment cases and has been recognized by Super Lawyers and Chambers & Partners. Pollard and his work have appeared in or on the New York Times, Bloomberg, PBS News Hour, Law 360, The Guardian, NPR, Inc. Magazine, and more. The firm practices nationwide. Their Florida office can be reached at 954-332-2380 and will route you to the appropriate team.