Has the Tide Turned Against Whistleblower Retaliation in 2016?

The prevalence of retaliation by corporations against whistleblowers has been well documented. Not only does it serve to punish those who come forward, but it has a chilling effect on other employees who might speak out against wrongful conduct. Employees in these companies quickly learn that the policies protecting whistleblowers on paper offer little protection in reality.

To explore this, one need only look to Wells Fargo. Earlier this year, Wells Fargo paid $185 million to resolve an investigation into allegations it opened accounts without customers’ knowledge. After the news broke, employees who previously reported the bank’s questionable sales tactics brought forth stories of the retaliation they faced for reporting problems at the bank. Some even filed lawsuits against the bank for wrongful termination and lost.

Despite the continuing problem of retaliation, a few events in 2016 nevertheless offer hope for the future.

First, the federal government has been taking measures to fight retaliation. In the case of Wells Fargo, Congress specifically questioned whether the bank filed misleading statements with FINRA when it terminated employees for whistleblowing. The SEC has also instructed staff at its Office of Compliance Inspections and Examinations to examine the compliance of investment advisers and broker-dealers with the whistleblower provisions of the Dodd-Frank Act. These proactive examinations are in addition to its enforcement actions against companies that have retaliated against securities whistleblowers. In the most recent case, the SEC extracted a $1.4 million settlement from a company that fired an employee for internally raising concerns about a possible securities law violation.

Second, the possibility of front pay may increase the costs of corporations who decide to fire whistleblowers. In 2016, the Southern District of New York ordered $2.7 million in front pay for a SOX whistleblower in lieu of reinstatement. The court did so because the relationship had soured so significantly that reinstatement was impossible. Although this ruling was not unprecedented, it opens up businesses to greater damages for destroying a whistleblower’s career.

Third, as public opinion shifts in favor of whistleblowers, jury awards for wrongful termination may also increase. We haven’t done an in-depth analysis of awards to see whether the median award is growing, but the California state court jury award of $20 million in a whistleblower retaliation lawsuit was definitely a shot across the bow to businesses that might be considering firing a whistleblower. If a few more juries come back with big verdicts, companies may have to change their behavior for fear it will impact their bottom line.

This isn’t to say that a whistleblower can operate without concern of retaliation yet. There is a long road to go before businesses recognize either the need to comply with anti-retaliation laws or the true value of whistleblowers in their organization. But the steps taken in 2016 were important ones on the road to fewer instances of retaliation and better compensation for those who experience wrongful termination. We will have to wait and see whether these trends continue, but they definitely offer hope for the future.