The Cost of Blowing the Whistle

For those who think that Wikileaks or other famous whistleblowing incidents will lead to mass whistleblowing, consider the costs of whistleblowing. In some circumstances, the costs can outweigh the benefits.

Whistleblowing protection is found in various state and federal statutes, including the Whistleblower Protection Act (5 USC §1211), the Occupational Safety and Health Act (29 USC §660); the False Claims Act (31 USC §3730); Title VII of the Civil Rights Act (42 USC §§2000e-2(a)(1) and 2000e-3(a)); the California Whistleblower Protection Act (Govt C §§8547-8547.12), and the California False Claims Act  (Govt C §§12650-12655).

Whistleblower protection enables insiders to expose fraud without risking their jobs and their purses. U.S. ex rel Hansen v Cargill, Inc. (ND Cal 2000) 107 F Supp 2d 1172, 1185. A whistleblower is often an employee who “is unsophisticated in the legal intricacies of fraud law, and who happens across evidence of fraud during the course of employment.” U.S. v Daniel F. Young, Inc. (ED Va 1995) 909 F Supp 1010, 1017.

There are many reasons that someone turns to whistleblowing. These reasons include an employee’s honest efforts to ensure that the employer is following the law, as well as an employee’s dissatisfaction, resentment over unfair treatment, vindictiveness, or litigiousness. Actually, a whistleblower’s motivation doesn’t really matter, as it is irrelevant to the consideration of whether his or her activity is protected; as long as the employee can voice a reasonable suspicion that a violation of a constitutional, statutory, or regulatory provision has occurred, the employee’s report to a government agency may be sufficient to create liability for the employer for retaliation.

There are certainly benefits to whistleblowing, not the least of which is the satisfaction of knowing that you are taking action against a wrong. There are also financial benefits to whistleblowing. For example, federal law provides a bounty to individuals who present the Internal Revenue Service with information leading to the collection of federal taxes. See 26 USC §7623.  There is also a “bounty” payout plan in the Dodd-Frank financial reform bill (.pdf) to reward whistleblowers, which is the subject of some of controversy.

But, as reported in Law.com’s Corporate Counsel, even whistleblowers who have met with some measure of success say that it’s not worth doing just for the money.  One whistleblower interviewed for the article explains that the amount of money received will be cut in half  “if you’re lucky,” with attorney fees and taxes taken from the top. 

There are other costs to whistleblowing, including the long wait, the investigations and press inquiries, and the stigma that can affect future job searches.

Given these costs, it is unlikely that we’ll see a dramatic increase in whistleblowing anytime soon.

On whistleblower issues — including a discussion of the relevant law and practical advice for employers to avoid whistleblower claims, go to Advising California Employers and Employees, chap 16. Also check out Wrongful Employment Termination Practice.

© The Regents of the University of California, 2011. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

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