This article covers:
What Even is Whistleblowing in the US?
Whistleblower Retaliation in the US
US Federal Whistleblowing Laws and Acts
Damages and Penalties in the US for Whistleblowing
Whistleblower Rewards in the US
Important Steps to Consider Before Whistleblowing in the US
What Even is Whistleblowing in the US?
Whistleblowing is the act of a person (usually an employee/contractor/supplier of the company), revealing information about wrongdoing within an organisation. Examples of wrongdoing include fraud, misconduct, corruption or illegal/unsafe activity. The passing on of such knowledge is called “blowing the whistle”.
There are two types of whistleblowing based on the methods used to communicate allegations or information:
- Internal whistleblowing – the reporting of wrongdoing using the channels within the organisation, such as to Senior Human Resources Officers or other higher ups
- External whistleblowing – the reporting of wrongdoing to people outside of the organisation, such as media, the police or government officials
Whistleblowers play a key role in informing and protecting consumers, communities and the general-public from harm and misconduct, sometimes revealing classified or private information.
As a result, whistleblowers often find themselves in difficult situations, risking their career and personal safety for the greater good. Consequently, there are specific laws and protections to encourage people with knowledge to come forwards, whilst safeguarding them from mistreatment, job termination and personal detriment.
In addition, companies often have their own whistleblowing policies in place, outlining how to report on misconduct or breaches of the law.
Whistleblower Retaliation in the US
Whistleblower retaliation is when an employer takes adverse action against an employee or fires an employee for blowing the whistle. Employer retaliation is one of the main consequences of whistleblowing. An adverse action is something which would negatively impact an employee and prevent them from engaging in protected whistleblower activity. Adverse actions are not always easy to recognise as they can be subtle, such as excluding an employee from training or meetings.
Whistleblower retaliation/adverse actions include:Wrongful termination
- Bullying
- Demotion
- Intimidation
- An unfair write-up or performance review
- Ostracising
- Making threats
- Denying overtime
- Denying merit-earned promotion
- Denying training or professional development opportunities
- Denying access to resources required to conduct your work
- Refusing to hire or re-hire
- Reducing pay or hours
- Reporting or threatening to report an employee to immigration authorities or the police
- Blacklisting – intentionally reducing the employee’s ability to be employed in the future
Many of the adverse actions outlined above can lead to an employee resigning because the employer has made the working conditions and environment unbearable. This type of whistleblower retaliation is known as constructive discharge. The different whistleblowing laws offer various levels of protection against employee retaliation.
US Federal Whistleblowing Laws and Acts
There are multiple whistleblowing laws and acts in the US with different provisions and protections in place.
The False Claims Act (FCA)
Beginnings:
The Federal False Claims Act (FCA) is the first US whistleblower law and is one of the most successful ways for the Government to combat fraud. It is also known as “Lincolns Law” because it was introduced during the Civil War in 1863 by President Lincoln. The Act has undergone amendments over the years. The 1986 amendments were particularly important as major changes were made, including increased protections and rewards for whistleblowers and penalties for employers. These changes were introduced to encourage employees to come forwards with information about employer violations of the law and combat fraud against the government.
The FCA whistleblower provisions:
‘Qui tam’ is the whistleblower provision of the FCA. It originates from Latin and is an abbreviation for a longer phrase meaning “Who sues on behalf of the King as well as for himself.” Put simply, qui tam means that a private citizen initiates legal action on behalf of the state.
Qui tam enables employees to blow the whistle on those committing fraudulent activity against the government and file a lawsuit on behalf of the government. If the case is successful, the government will recover their lost funds in damages and penalties. Qui tam entitles whistleblowers to receive a share of the recovered funds, protection against employer retaliation as well as recovered legal fees and costs.
It is important to note that if the US government decides not to investigate claims, the whistleblower can undertake private action and file a lawsuit independently.
Under the qui tam provision of the FCA, there are seven types of activities which can be reported by whistleblowers. These are fraudulent actions against the government and violate the law:
- False claims
- False statements
- Conspiracy
- Conversion
- False receipts
- Unlawful purchase of government property
- Reverse false claims
Whistleblower protections against employer retaliation:
Whistleblower protections against employer retaliation are key aspects of whistleblower laws. The qui tam provision of the FCA prohibits employers from retaliating or taking adverse actions against whistleblowers. An employee is entitled to file a retaliation case against the employer if reprisals occur, such as demotion, wrongful termination, harassment or discrimination. If successful, the employer will face penalties. These protections allows citizens to engage in the legal act of whistleblowing without the fear of repercussions.
Success of the qui tam whistleblower provision in combatting fraud:
The actions of whistleblowers in exposing fraud and false claims make them the key to the success of the FCA as an anti-fraud mechanism. Hundreds of qui tam whistleblower cases are filed each year, with this number continuing to grow. The efforts of whistleblowers allows the US government to recover huge amounts of money lost to fraudulent activities. In Fiscal Year 2020 alone, $1.6 billion was recovered as a direct result of whistleblower initiated cases. Whats more, 31 states have installed their own state versions of the FCA and its qui tam provision, highlighting the value of whistleblowers.
The Dodd-Frank Act
Beginnings:
The Dodd-Frank Wall Street Reform and Consumer Protection Act, known as the Dodd-Frank Act, was introduced in 2010 as a piece of legislation reforming the financial system of the US to make it safer for consumers, taxpayers and shareholders. It was established in response to the financial crisis of 2007-2008 and to build upon the Sarbanes-Oxley Act (SOX) of 2002. The DOdd-Frank Act seeks to increase accountability and transparency in securities and commodities trading, and improve financial stability and regulation. Investors are protected from corruption and illegal activities of publicly-traded companies, such as fraudulent accounting, securities fraud and fraud against company shareholders.
The Dodd-Frank Act whistleblower provisions:
The Dodd-Frank Act is not a whistleblowing act, however there are whistleblowing components as employees are extremely helpful and well-placed in bringing fraudulent activity to the attention of authorities. The Dodd-Frank Act strengthened the whistleblower programme that had been introduced by SOX, to provide greater provisions and protections for whistleblowers. Changes included:
- Broadening the types of employees covered by the whistleblower program to include the employees of a company’s subsidiaries and affiliates
- Increasing the statute of limitations to 180 days after the violation was discovered for an employee to bring forward a whistleblowing claim against their employer
- Forming a rewards programme through which whistleblowers are entitled to 10-30% of the recovered funds from a successful case
Whistleblowers are encouraged to disclose “original” information about fraudulent activities committed by their employer, in the name of economic fairness. The information must be acquired independently by the whistleblower, not from previous allegations in the media, news, reports or hearings for example. The Dodd-Frank Act created two commissions through which whistleblowers can report violations:
- The US Securities and Exchange Commission (SEC)
- The Commodity Futures Trading Commission (CFTC)
However, unlike the False Claims Act, whistleblowers are not allowed to make independent investigations under the Dodd-Frank Act. Once claims of wrongdoing have been filed by a whistleblower, it is the responsibility of the SEC or CFTC to investigate allegations. The whistleblower cannot take private action if the SEC/CFTC decide not to investigate or press sanctions.
Whistleblower protections against employer retaliation:
The Dodd-Frank Act provides substantial protections to whistleblowers through it’s whistleblower programme. Retaliation and adverse action by employers against whistleblowers is forbidden. Those who are the victims of wrongful termination and reprisals for the lawful act of disclosing violations, are entitled to file a lawsuit against their employer.
In addition, the protection of identity is crucial for employees to feel safe in whistleblowing. Therefore, under the Dodd-Frank whistleblower programme, whistleblowers are permitted to disclose information anonymously with the SEC and CFTC, through legal counsel.
Success of the Dodd-Frank Act whistleblower programme in combatting fraud:
The commendable actions of whistleblowers under the Dodd-Frank whistleblower programme are having a hugely positive impact by exposing violations; helping to enforce and prevent fraud in securities and commodities trading. This has resulted in large monetary sanctions being given by the SEC and CFTC to those committing fraudulent activities and millions received by whistleblowers as rewards for their efforts in uncovering such actions. Since the introduction of the Dodd-Frank Act and its whistleblower provisions, more than $3.7 billion has been recovered by the authorities, with whistleblowers earning in excess of $840 million. Out of the two commissions, the SEC has been particularly successful, receiving 6,900 whistleblower tips in the Financial Year of 2020 alone. These statistics show how the whistleblower programmes of the Dodd-Frank Act are very helpful in combatting fraud.
The Whistleblower Protection Act (WPA)
Beginnings:
The Whistleblower Protection Act (WPA) was introduced in 1989 to protect those that engage in protected conduct to disclose information about significant wrongdoings and violations. In 2012, the WPA was amended and the Whistleblower Protection Enhancement Act introduced (WPEA). The aim of this new Federal Law was to provide greater protection to whistleblowers, as those offered under the WPA were not seen as sufficiently adequate to protect whistleblowers from employee retaliation and adverse actions.
The WPA provisions:
The WPA outlines several types of violations which whistleblowers are allowed to report on, including:
- Any violations of laws or regulations
- Gross misconduct or mismanagement
- Abuse of authority
- Extreme waste of funds
- Reason to suspect substantial danger to public safety or health
The WPA protects whistleblowers who reasonably believe that the information they are disclosing shows violations of one of the above categories. The ‘reasonable belief’ standard is used to determine whether the whistleblowers actions qualify for protection under the law. Reasonable belief means that any rational person would have believed this evidence to exist and be truthful. Even when wrong about the allegations, if the whistleblower was thought to have reasonably believed that the information was valid, they will still be protected under the WPA.
Whistleblower protections against employer retaliation:
The WPA has high level whistleblower protections in place. It is prohibited under this law for an employer to retaliate, take action or make threats against an employee due to a protected disclosure. This protection also extends to applicants for employment. Types of protected conduct include:
- Testifying
- Cooperating with the investigation of the authorities
- Refusing to carry out actions given by an employer that would violate a law, rule or regulation
- Exercising the right to appeal or make a complaint or grievance
- Helping another person to exercise their rights in a lawful manner
If employer retaliation occurs, whistleblowers are entitled to file a complaint against their employer for violating the provisions of the WPEA. The Office of Special Counsel (OSC) is teh agency that investigates unlawful whistleblower retaliation. If the complaint is found to be true, employers will face penalties.
Under the WPEA, the statue of limitation for filing a whistleblower to file a retaliation claim against their employer is up to three years after the retaliation occurred.
Damages and Penalties in the US for Whistleblowing
Each of the laws outlined above have different penalties and damages for violations which are detailed below.
False Claims Act (FCA)
Damages are the monetary loss or the equivalent, suffered by the person who filed the lawsuit. However, damages in whistleblowing cases are slightly different compared to normal lawsuits. In whistleblowing cases under the FCA, the damages are generally not to the person who reported the violation but to the state or federal government. Employer retaliation cases are an exception, as in these situations as well as filing the lawsuit, the whistleblower also suffers the damages, such as being fired.
The FCA states that those charged with violating the law are required to pay a civil penalty of between $5,000-$10,000 in addition to three times the amount of damage.
Recently, the FCA was updated to consider inflation when determining the amount for penalties. Therefore in 2024, penalties range from $13,946 to $27,894. Moreover, a penalty must be awarded for each separate violation of the statute. In some cases, thousands of penalties are given to employers, adding up to huge charges.
The Dodd-Frank Act
Under the Dodd-Frank Act, penalties are imposed for each violation or regulations and are based on the type of violation committed. Penalties are split into 3 tiers:
- Tier 1: Maximum penalty of $7,500 for persons or $75,000 for corporate entities.
- Tier 2: Maximum penalty of $75,000 for persons or $375,000 for corporate entities. Violations include fraud, manipulation, deceit or deliberate disregard.
- Tier 3: Maximum penalty of $150,000 for persons to $725,000 for corporate entities for the same violations as Tier 2, however, the violation must have resulted in either substantial loss to others or substantial gain to the person who violated the regulation.
The Whistleblower Protection Act (WPA)
Under the WPA, penalties depend on the specific circumstances of each case. Possible penalties for those who engaged in retaliation against a whistleblower include:
- Removal from post
- Demotion
- Civil fines
- Barring from federal employment for up to 5 years
In addition, the agency who committed such actions may be required to pay the legal fees and costs of the whistleblower.
Whistleblower Rewards in the US
The possible rewards for whistleblowers vary depending on the Act/Law which the case was filed under. In some cases whistleblowers are not entitled to rewards, yet in others, whistleblowers can be awarded significant amounts. Before blowing the whistle, it is important to understand both the protection and rewards available under different laws.
The False Claims Act (FCA)
Under the FCA, if the information of illegal activity disclosed by a whistleblower results in a successful case, the whistleblower is entitled to a reward of 15-30% of the recovered funds. The violator of the law is also obliged to pay the reasonable legal fees and costs of the whistleblower.
As the guilty party must pay treble damages and civil penalties for each violation, the rewards given to whistleblowers can amount to a large sum in many cases.
The Dodd-Frank Act
Under the Dodd-Frank Act, the SEC or CFTC investigate the information alleged by the whistleblower. Once deemed valid, sanctions are given. If the accused is sanctioned for $1million or greater, the whistleblower is entitled to receive a monetary reward. The value of the reward ranges from 10-30% of the funds recovered.
Unfortunately, if the wrongdoer is issued a sanction of below $1 million, the whistleblower will not receive any monetary reward.
The Whistleblower Protection Act (WPA)
Under the WPA, after the occurrence of employer retaliation against a whistleblower has been proven, the main goal is to undo the harm caused by retaliation and restore the whistleblower and victim to their previous position. There are a number of ways to carry this out including:
- Back-pay – awarding the wages and benefits that the whistleblower lost due to retaliation
- Reinstatement to the former position
- The covering of legal fees and court costs by the employer
- Front pay and out of pocket losses – awarding wages and benefits for the time needed to find a new job and to cover the costs
- Awarding damages for the emotional toll of the retaliation
Important Steps to Consider Before Whistleblowing in the US
Figuring out the whistleblowing process can be complicated, and success of cases can vary. Therefore, it is crucial to have a full understanding before proceeding with such actions, to ensure that you are fully protected. If unsure, it is always best to seek legal advice from an experienced Whistleblower Attorney.
Here are some key steps to follow when reporting wrongdoing, to enhance the chances of a successful whistleblower or retaliation case:
- Collect Evidence: carefully gather relevant information that supports the allegation of wrongdoing, such as documents and records
- Meticulous Documentation: remember to document and maintain a record of everything involved in the process, such as all communications, responses and actions taken. Sometimes this may seem unnecessary, however, it can prove to be extremely useful if validity is questioned
- Internal Reporting: be fully informed of a company’s disclosure procedures before following these to disclose wrongdoings to the appropriate authoritative figure.
- External Reporting: report to the appropriate government agency if using the internal channels is unsuccessful
- Retaliation Protection: Make sure to be aware of the rights and protections afforded to whistleblowers in the US under various laws. Ensuring safety from retaliation is extremely important
- Legal Advice: if unsure or the situation deems necessary, get legal counsel; to provide support through the process.
- Anonymous Reporting: remember that anonymous reporting is offered by some agencies and is a way to protect identity
Learn more about US Labor Laws through our detailed guide.
Important Cautionary Note
When making this guide we have tried to make it accurate but we do not give any guarantee that the information provided is correct or up-to-date. We therefore strongly advise you seek advice from qualified professionals before acting on any information provided in this guide. We do not accept any liability for any damages or risks incurred for use of this guide.
