Auto Whistleblower Law Created by FAST Act

Unfinished automobiles in a car plant

Coverage of the Fixing America’s Surface Transportation (FAST) Act this week alerted us to the fact that the legislation, signed by President Obama at the end of last year, included the Motor Vehicle Safety Whistleblower Act among its many parts. The auto whistleblower law, originally sponsored by Senators Thune and Nelson, is now law.

This section of the FAST Act authorizes rewards for whistleblowers working in the auto industry who provide information that results in monetary sanctions exceeding $1 million. We can expect that it will still take some time for the U.S. Department of Transportation to adopt regulations that implement the measures. In the case of the SEC and CFTC, they formally opened the program up to tips a year after the President signed the Dodd-Frank Act.  However, in the case of Dodd-Frank, they applied the program retroactively to all tips from the adoption of the law if they later followed certain procedures set forth by the regulators.

In the fight against vehicle defects, the provision for a whistleblower bounty is a substantial step forward. Individuals may be entitled to an award of between 10 and 30 percent of the collected proceeds from the monetary sanctions. With several automakers paying fines exceeding $1 billion in the past few years, it is a substantial incentive for an insider with evidence of defective, unrecalled vehicles to come forward.

The law requires the auto whistleblower to follow any procedures set up by the Secretary of the Department. We expect these regulations will take months as in other programs they have involved notice and a public comment period. In the meantime, we will have to wait for guidance on the best way to provide the information to NHTSA or DOT.

The law is not without its problems. It encourages individuals to report the wrongdoing internally to the company yet fails to allow them a cause of action in federal court if they face retaliation. [edit: 49 U.S.C. § 30171 appears to cover whistleblower protection – probably not as good as access to the courts but definitely an available mechanism for protection.]  It also foregoes the certainty of the Dodd-Frank and IRS whistleblower programs and leaves the payment of a reward up to the discretion of the Transportation Secretary.

Hopefully, the program setup by the U.S. Government will nevertheless be able to overcome these problems.  The FAST Act was notable even without the whistleblower incentives.  It was the first law in more than 10 years that provided long-term funding for surface transportation.  It tripled the National Highway Traffic Safety Administration (NHTSA)’s budget and raised the maximum fine for safety violations to $105 million (from $35 million).