Embroker Team May 13, 2024 7 min read

Whistleblower Retaliation: Risks Both Sides Need to Know

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What is your first thought when you hear the word “whistleblower”? Is it positive or negative? Do you think that’s a brave, or maybe a reckless person? Do you know anybody who is a whistleblower? If you are an employer, how would you react if your company had a whistleblower?

Even if you don’t know any of them, whistleblowers are around. SEC Whistleblower Advocates indicate in their statistics report that they received more than 12,200 whistleblower submissions in the fiscal year 2021. The same report also shows that whistleblowers received more than $1.1 billion in rewards in the same period.

However, when we look at the statistics from OSHA, we can notice that more than 70% of whistleblower complaints get dismissed or withdrawn. Many agencies work with whistleblowers, check the validity of their claims, and provide advice on how to proceed with the matter. That’s how you can be certain that the claim will be handled properly.

Who Is a Whistleblower?

The term “whistleblower” dates back to the 19th century, when it was primarily used in a negative context. The meaning and atmosphere around it mainly changed in the 1960s, when political activists and journalists of that time helped give whistleblowing a more positive connotation.

The meaning of the term “whistleblower,” as we know it today, most commonly refers to a person who reports unethical or illegal behavior at their workplace. Depending on the perpetrator, the whistleblower could file a claim internally or externally.

If a fellow employee or an entire team of colleagues commits misconduct, it makes sense to report it to the executive team or the company CEO. However, if the company executives are the ones committing the fraud, it’s only logical to report them externally, directly to authorities or government officials.

Whistleblowers report wrongdoings in different ways. For example, an employee can accidentally discover that the company is leaking dangerous chemicals into the nearby river and decide to report such unethical behavior to the proper authorities.

People also report when companies commit fraud, such as tax fraud, Medicaid and Medicare (or other government programs) fraud, or some other forms of defrauding the government. Authorities also encourage people to report actions threatening public security or national safety should they discover them.

Whistleblowers could also expose corruption or securities law violations, which could help authorities react swiftly and contain the damage. If they help the government or other public institutions recover stolen funds, they can expect a reward if the case turns out to be a success.

The Whistleblower Dilemma: Are the Risks Worth It?

whistleblower retaliation dilemma

Let’s face it — employers don’t like whistleblowers. If they are doing something wrong and potentially illegal, they don’t want other people to find out, especially not the authorities. That’s why whistleblowers are often perceived negatively by their employers.

More often than not, employers retaliate against the employee who blows the whistle. Whether it’s through creating a hostile work environment for that person or, through demotion, or even termination, the whistleblower could certainly experience the consequences of their actions.

Before blowing the whistle, an employee needs to evaluate the situation thoroughly and weigh the pros and cons of raising the alarm over their findings. They may feel that it is their moral obligation to report the wrongdoings they discovered, but their evidence needs to be solid to ensure they are not making a mistake by reporting their employer.

The best course of action would be to document all the evidence and talk to an experienced attorney first before deciding to speak up. An impartial, expert opinion could shed light on the whole situation and help the employee determine whether they have a strong case.

Becoming a whistleblower could inevitably affect a person’s current job and future employment. Even though there are laws that protect whistleblowers, it might not be easy to find a new job if you are marked as a disloyal employee.

Even though there is a chance that the employer won’t retaliate against the employee, the psychological pressure could become too strong over time, and the employee might decide to leave the company anyway.

Repercussions can be so severe that they could lead to the whistleblower’s financial difficulties and even bankruptcy. That emphasizes the need for the employee to assess the situation carefully before taking any action. If there is even a remote chance that the accusations won’t stick or nobody will do anything about them, the risk might be too significant.

Whistleblower Protection Laws: What Employers Need to Know

The U.S. Department of Labor is a governing organization that fulfills its mission through its agencies and offices. Five agencies under its roof enforce anti-retaliation and whistleblower protection laws along with all other employment-related laws and regulations. Let’s look at those agencies and what they do for whistleblowers:

  • Occupational Safety and Health Administration (OSHA) executes more than 20 laws that protect whistleblowers. It prohibits retaliation against employees who report matters related to the violation of law, employee safety, financial fraud, and others. Employees can file their complaints online, and OSHA officials will investigate the issue if they deem it necessary.
  • Office of Federal Contract Compliance Programs (OFCCP) protects whistleblowers from retaliation, intimidation, or harassment after reporting unlawful practices related to equal employment opportunity laws. Those practices include discrimination based on race, religion, color, national origin, sex, sexual orientation, or gender identity.
  • Wage and Hour Division (WHD) protects from retaliation for reporting wrongdoings related to The Fair Labor Standards Act (FLSA) laws. That includes issues relating to minimum wage, overtime pay, youth employment, and recordkeeping standards. Employees can also report if you make them take a lie detector test or if you break family and medical leave and youth employment laws.
  • Mine Safety and Health Administration forbids discrimination against miners, especially when reporting safety or health-related issues, such as asking for inspections or identifying and reporting hazards.
  • Veterans’ Employment and Training Service (VETS) prohibits discrimination and retaliation against employees based on their current or former military status.

Employers should familiarize themselves with these laws and ensure their executive team members and managers understand and comply with them. The best way to protect your company and yourself is to abide by the laws and respect your employees.

The key is to create a healthy work environment and encourage people to speak up if they have any concerns. If your employees come to you first before reporting their findings to government officials, you can investigate and rectify any wrongdoings. 

Whistleblower Retaliation Risks for Employers

You’re probably thinking: aren’t the employees those who should fear the risk of retaliation in the case of whistleblowing? They are, after all, the ones risking losing a lot should they decide to report their employer’s unsafe or illegal actions.

However, employers also stand to lose a lot if they retaliate against an employee who blows the whistle. The employee usually hires an attorney and files a retaliation lawsuit against the company

You can then decide to settle the case or take it to court, but you probably shouldn’t make any decisions before consulting your lawyer first. Reports indicate that settlements outside of court are not typical in whistleblower retaliation cases.

The plaintiff (your former employee) has nothing to lose and comes prepared for a lengthy litigation process. If the court rules in their favor, the damages can be expensive. The former employer (you) would potentially have to pay the back wages, lost benefits, and attorney and court fees. 

If reinstatement is impossible, you can also expect to pay the front wages and the costs of looking for a new job. The judge could also order you to reimburse the plaintiff for their pain and suffering and order you to pay punitive damages should they decide your actions were particularly damaging to your former employee.

Given that trials are public, you risk damaging your reputation should the case receive public and media attention. Depending on your line of business, you might not want to risk your reputation, as it could mean the difference between survival and going under.

How to Protect Your Company?

It may sound like a cliché, but prevention is always the best method to protect your company from liability. Respecting your employees and doing everything by the law significantly decreases the need for whistleblowing in the first place. You should also always remember it’s illegal to retaliate against employees and do your best to prevent retaliation in the workplace.

When your company grows and hires more employees, it will inevitably become more challenging to keep everything under control. Someone on your staff could be doing something unlawful behind your back, which could trigger another person to step out and report their findings to authorities.

The culprits could then retaliate against the whistleblower. Maybe subconsciously, even your behavior towards that person would change, as much as you wouldn’t want that to happen. If the whistleblower feels the negative consequences of their actions, they have every right to sue the responsible individuals and your company for retaliation.

Even if you didn’t retaliate against your employee, you’d still have to defend the lawsuit directed at your business. That’s when a robust insurance policy would come in handy. The coverage that would best respond to this kind of claim is the employment practices liability insurance (EPLI).

EPLI responds to employee claims of discrimination at the place of work, invasion of privacy, wrongful termination, and employer retaliation, among other things. The policy would kick in when you notify your insurer about the claim. They would provide advice on how to handle the case and set you up with legal representation.

Your EPLI policy would cover your legal costs and court fees, potential settlement, and court-awarded damages, whether you win the case or lose. Note that your policy wouldn’t cover your business if the committed acts were illegal.

If you’d like to learn more about EPLI coverage, feel free to reach out to one of our experienced brokers. If you are ready to get your quote online, you can start by signing up to Embroker’s digital platform.

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