After nearly a week of waiting, a copy of the Thune-Nelson Motor Vehicle Safety Whistleblower Act was posted online on the Wednesday before Thanksgiving.
The law contains two substantial deviations from the one passed by Congress for the securities industry as part of the Dodd-Frank Act. It fails to offer whistleblower protections through a retaliation lawsuit and the award is discretionary rather than mandatory. Together, the combination could cause individuals with some of the best tips to forgo providing them to the U.S. Government.
Although whistleblowers are typically motivated by the opportunity to stop a wrong rather than the prospect of substantial monetary rewards, these two differences may signal to potential informants that their information will not be taken seriously and cause them to think twice about reporting information.
The proposed bill does not authorize retaliation lawsuits.
The Thune-Nelson bill provides for confidentiality protections but does not authorize the filing of a lawsuit with compensatory damages for wrongful termination. If the final bill were to pass as is, auto employees would need to rely on qualifying for protection under various state laws. There is no guarantee that they would be able to do as state laws differ and were not written with auto whistleblowers in mind.
An appropriate mechanism to handle cases of retaliation is important both to ensure that individuals feel comfortable providing the government with information and they are compensated for any wrongful treatment. The SEC has repeatedly acknowledged the importance of protecting its whistleblowers from retaliation. Absent protection from termination, some whistleblowers may choose not to come forward with information about suspected legal violations.
The IRS program, which currently lacks retaliation protections, has mentioned this shortfall in its annual report several times. Although it doesn’t appear that Congress will alter the program anytime soon, it would be better for Thune-Nelson to learn from the errors of previous programs rather than repeat their mistakes.
The bill only provides for discretionary awards.
The Thune-Nelson bill currently provides for any determination of “whether, to whom, or in what amount to make an award, shall be in the discretion of the [U.S. Department of Transportation Secretary].”
Discretionary awards have fallen out of favor recently compared to the large, mandatory awards authorized by Internal Revenue Service Code § 7623(b) and the Dodd-Frank Act. Prior to the implementation of their current whistleblower programs, both the IRS and the Securities and Exchange Commission had discretionary award programs. Neither was considered successful.
The IRS program had been around since 1867 but was largely ineffective prior to the adoption of a mandatory award. Few informants came forward because awards were completely discretionary and the program was not well publicized.
Prior to Dodd-Frank, the SEC offered a discretionary bounty for information about insider trading. Authorized by the Insider Trading and Securities Fraud Enforcement Act of 1988, the law only led to payouts for five individuals during . The total sum paid out was only $160,000. Mandatory awards were implemented to remedy the institutional failures that led information about Bernard Madoff’s ponzi scheme to be ignored.
The track record of discretionary programs hasn’t been nearly as strong as the laws requiring government agencies to distribute mandatory awards.
It also doesn’t provide for a minimum award.
The major whistleblower programs currently specify a range of monetary awards for information, typically from 10 to 30 percent. The absence of a minimum award leaves open the possibility that a successful individual could receive an award that does not fairly compensate them for the risks involved. Agency regulations could alleviate this concern, of course, but it is another area for Congress to clarify prior to adoption.
Spring 2016 Update:
The Thune-Nelson proposal was signed into law by President Obama as part of the FAST Act in December 2015. For additional information, please visit our page dedicated to auto whistleblowers.