When an employee steps forward to report misconduct within the organization, that person may be providing a vital service to the organization or the public, but they are also putting themselves at risk of retaliation, from harassment to termination or further legal repercussions. This article examines the internal controls your company should establish to protect whistleblowers and looks at how companies should handle case management before, during, and after an employee blows the whistle.
Several laws set forth protections against retaliation as well as incentives for whistleblowing. Relevant whistleblowing acts include the Dodd-Frank Act, the Sarbanes-Oxley Act, the False Claims Act and France’s Sapin II anti-corruption law. International companies must also consider related laws and regulations in the countries in which they operate, as regulations differ from country to country. For instance, companies operating in Europe must be aware of EU data-protection rules as investigating whistleblower reports is most likely to involve the collection of personal data.
Before an Employee Blows the Whistle
An effective compliance program should ensure investigation of misconduct reports, and keep the complainant in the loop regarding the complaint’s status and resolution. To be effective, companies should implement a case management system that establishes a clear process for handling whistleblowing before, during and after reports occur. Any company should be able to provide to all employees, including third parties, a clear line for communicating incidents of misconduct – the most apparent of which is a whistleblower hotline.
A compliance program must also provide a mechanism for reporting allegations of misconduct up the chain of command. When a complaint is made, the chief compliance officer (CCO) must be ready to respond appropriately. If employees feel that their reports are being ignored or that nothing is being done to address the allegations, they might take their allegations to authorities or the media. Whistleblower reports to the Securities and Exchange Commission have over the past years yielded large monetary awards to whistleblowers that have uncovered fraud and corruption inside companies. The largest to date was $30 million awarded in 2014, followed by $22 million awarded in 2016.
Regarding establishing protections for whistleblowers, employees must be protected from being discharged or demoted, suspended, harassed or discriminated against. Retaliation or “pretaliation” can carry severe penalties. All the while, companies must make sure that all cases – from reporting to closure – are prudently documented.
When an Employee Blows the Whistle
When employees submit complaints about misconduct, these should be consolidated into one master system (or a case management system). This allows the compliance officer to risk rate the allegations into low or high risk to effectively pursue urgent cases. Reports should then be routed to the appropriate executives for investigation to determine what necessary action should be taken.
Should an internal complaint not be sufficiently resolved or the employee face retaliation, a whistleblower may bring their case to authorities under state or federal jurisdiction. If authorities accept the whistleblowing allegation, they may issue a litigation hold. This hold requires organizations to meet their legal responsibilities and cooperate to produce documentation.
This goes back to the need for maintaining a prudent document policy. Companies with strong case management systems in place and cooperative mentality will likely fare better when it comes to sentencing, so an automated system would be useful in ensuring thorough documentation.
Three key issues at this stage are negotiations, interviews, and communications.
- Negotiations: If your company receives a litigation hold, instruct your counsel to contact the government to initiate communications, specifically to determine the scope and terms of contemplated data production.
- Interviews: If your company is under investigation, you should interview and screen employees first to identify relevant facts. Following such an internal investigation, the government will assign outside investigators to gather interview information; this may be collected independently or from your existing interviews.
- Communications: Enforcement agencies will issue communications regarding the whistleblower’s allegations, in determination of the complaint’s merits. This gives your company an opportunity to build a case, from identifying relevant documents and interviewing employees to negotiating damages with the agency.
After a Whistleblower Investigation
After the closure of a whistleblower investigation — regardless of the outcome — it’s time to take stock. Reassess your case management program, and take the time to rebuild anywhere you find flaws in your systems and/or processes.
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