Selected State Laws Protecting Whistleblowers
Florida Statutes, Chapter 448, Sections 102 and 103 cover the statutory protections afforded to whistleblowers in the Sunshine State and the remedies if such protections are violated, respectively. Employers are prohibited from taking “retaliatory personnel action”1 against an employee who has (1) “disclosed, or threatened to disclose, to any appropriate governmental agency, under oath, in writing” information about the violative conduct of their employer, (2) “provided information to, or testified before, any appropriate government agency,” etc. about the violative conduct of their employer, or (3) “objected to, or refused to participate in” any violative conduct.
Subsection (1) is particularly noteworthy since it requires that the disclosure to be made under oath and in writing, as opposed to a phone call or email to a regulator. Moreover, subsection (1) also provides an safeguard for employers, not found in subsections (2) or (3), in that subsection (1)
does not apply unless the employee has, in writing, brought the activity, policy, or practice to the attention of a supervisor or the employer and has afforded the employer a reasonable opportunity to correct the activity, policy, or practice.
An action for violation of Section 102 must be brought “within 2 years after discovering that the alleged retaliatory personnel action was taken, or within 4 years after the personnel action was taken, whichever is earlier.” (emphasis added)
Section 103 provides the following remedies available to the aggrieved employee:
- An injunction restraining continued violation of this act.
- Reinstatement of the employee to the same position held before the retaliatory personnel action, or to an equivalent position.
- Reinstatement of full fringe benefits and seniority rights.
- Compensation for lost wages, benefits, and other remuneration.
- Any other compensatory damages allowable at law.
California has its own whistleblower protection statute, Section 1102.5 of the California Labor Code. Section 1102.5 was recently updated as of January of this year (2014), to increase the protections afforded to whistleblowers.
Section 1102.5 already prevented employers from retaliating against employees who blew the whistle on reasonably-believed violations of federal and/or state law or rules/regulations set forth by governmental agencies. However, as amended, Section 1102.5 now provides these protections to whistleblowers who report reasonably-believed misconduct internally “to a person with authority over the employee, or to another employee who has authority to investigate, discover, or correct the violation or noncompliance.” Employers or individuals acting on their behalf are also prohibited from anticipatory retaliation against an employee the employer believes “may disclose information.”
Furthermore, such whistleblowers are now protected from retaliation by their employer, “or any person acting on the behalf of the employer.” Interestingly, Subsection (d) protects whistleblowers from retaliation by their present employer for blowing the whistle “in any former employment.”
Penalties for violating Section 1102.5 can be steep for employers. In addition to civil damages that may be sought by the employee, “an employer that is a corporation or limited liability company is liable for a civil penalty not exceeding ten thousand dollars ($10,000) for each violation.” Furthermore, “an employer or any other person or entity” who violates Section 1102.5, may be guilty of a misdemeanor, which could mean spending up to a year in county jail or fines of up to $1,000.c. Texas
The Texas Whistleblower Act (“TCA”) is limited in scope and effect. See Tx. Govt. Code § 554.001 et seq. As it is written, it prohibits a “state of local government” from taking any “adverse employment action against a public employee who in good faith reports a violation of law by the employing government entity or another public employee to an appropriate law enforcement authority.” Id. at § 554.002(a). An appropriate law enforcement authority has been ruled by the Texas Supreme Court not to include one’s supervisor. See Univ. of Tex. Southwestern Med. Ctr. at Dallas v. Gentilello, 398 S.W.3d 680, 684 (TX 2013) (“supervisor's purely internal authority was not law enforcement but law compliance … The bare power to urge compliance or purge noncompliance does not transform [supervisor] into an ‘appropriate law enforcement authority’ as defined in the Act”); see also, Tex. A&M University v. Moreno, 399 S.W.3d 128 (TX 2013) (holding that report to school president is insufficient, because the president is only able to enforce internal compliance).
A whistleblower’s “report” must be made to a “state or local governmental entity or to the federal government” which the employee believes in good faith is empowered to regulate, investigate or enforce such conduct. Id. at § 554.002(b). “Good faith” has been defined by the Texas Supreme Court as meaning “that (1) the employee believed that the conduct reported was a violation of law and (2) the employee's belief was reasonable in light of the employee's training and experience.” Tex. DOT v. Needham, 82 S.W.3d 314, 320 (TX 2002) (citing Wichita County v. Hart, 917 S.W.2d 779, 784 (TX 1996)). This is standard requires objective reasonability. See Gentilello, 398 S.W.3d at 683.
Whistleblowers are entitled to seek injunctive relief, actual damages, court costs and attorneys’ fees, though the statute explicitly limits pecuniary and non-pecuniary damages from $50,000-250,000, depending on the size of entity that is sued. Id. at § 554.003. The personal liability of the employing supervisor is limited to a civil penalty of $15,000, which is paid into the state treasury, if it is required at all. Id. at § 554.008.
Under the TCA, there is a very tight statute of limitations of 90 days, excluding time for grievance or appeals through the employing governmental entity, which are mandatory if they exist. Id. at §§ 554.005, 554.006. There is a rebuttable presumption that the adverse employment action was taken against the employee as a result of the employee’s report of violation of law if such action occurs 90 days or less after the whistleblower reports regarding the violation of law. Id. at § 554.004. If the adverse employment action occurs on the 91st day, it is the employee’s burden to prove that the adverse action was a result of the report. Id.d. Illinois
The Illinois Whistleblower Reward and Protection Act (“WRPA”), contained within the Illinois False Claims Act, 740 Illinois Compiled Statutes (“ILCS”) § 175/1 et seq., enacted in 1991, is similar to that of New York’s, in that it is modeled off of the Federal False Claims Act statute and provides for a reward to the whistleblower from the proceeds recovered for the fraudulent conduct. The Illinois False Claims Act requires that violations require penalties for each violation of $5,000-10,000, plus three times the damages sustained by the State as a result of the fraudulent conduct. Id. at 740 ILCS § 175/3(a)(2). The State may also recover reasonable attorneys’ fees and court costs. Id. at § 175/4(a).
A private person, acting as a whistleblower, may initiate a claim pursuant to the Illinois False Claims Act, and must file the complaint in camera, and serve it only upon the State Attorney General, which must perform a diligent investigation and determine whether to pursue the action or allow the private person to conduct the litigation. Id. at § 175/4. The whistleblower could receive a reward of 15 to 25% of proceeds recovered from the party who violated the law (the percentage could rise to 30% if the whistleblower filed the case independently, together with court costs and attorneys’ fees). Id. at § 175/4(d). The whistleblower may also recover reasonable expenses and attorneys’ fees. Id.
The WRPA provides protection from retaliation, outlining specific penalties for employers who causes adverse employment action against a whistleblower who has reported a violation of law. Id. at § 175/4(g). The employee has three years from the adverse employment action to bring such a claim for retaliation, id. at § 175/4(g)(3), and may seek reinstatement, as well as recover two times the employee’s back pay, interest on the back pay, litigation costs and attorneys’ fees, id. at § 175/4(g)(2).
The Illinois False Claims Act has been applied to cases involving securities violations. In a 2005 decision, the Illinois Supreme Court held that while a private person does not have standing to sue on behalf of the State for common law causes of action, the lower court erred in dismissing the qui tam portion of the complaint, and remanded to the lower court for further proceedings. Scachitti v. UBS Fin. Servs., 215 Ill. 2d 484, 516 (Ill. 2005). Scachitti involved a “taxpayer derivative lawsuit” by an private individual on behalf of the State of Illinois for Paine Webber’s (which became UBS) alleged overcharging in connection with advance refunding bond transactions in 1992. Id. at 489.e. New York
Presently, New York has only whistleblower protection laws covering a very specific set of individuals under a narrow set of circumstances, none of which would readily apply to a whistleblower in the securities context. However, there is presently a bill in the New York State Senate, S4362-2013, that closely mirrors the whistleblower provisions of Dodd-Frank. Given the breadth of the financial services industry in New York, this bill bears watching closely.
1 Defined by §448.102 as “the discharge, suspension, or demotion by an employer of an employee or any other adverse employment action taken by an employer against an employee in the terms and conditions of employment.”