Department of Justice Guidance on Companies’ Claim of Inability to Pay Criminal Fines

The Department of Justice Criminal Division has clarified its policy on the Department’s assessment of a company’s claim that it cannot afford to pay a criminal fine in a memorandum issued on October 8, 2019.  Criminal Division department head Brian Benczkowski had previewed the memorandum during a speech in September.

While the DOJ already permitted corporate defendants to seek reduction of criminal fines, the Benczkowski memo sets forth more specific guidelines on the factors that will support a claim for fine reduction, signaling efforts to make the criminal fine assessment procedures more transparent.  The Benczkowski memo is particularly useful, considering the Federal Sentencing Guidelines on corporate criminal fines can be confusing and vague.  The defense often has difficulty determining what facts it must demonstrate to establish a company’s inability to pay.

The Federal Sentencing Guidelines permit reduction of criminal fines if a company is unable to pay the fine, even on installment (aka, a corporate poverty claim).  Before asserting an inability to pay, the company and the government must agree on what the fine should be under the law, notwithstanding the company’s finances.  Then, companies seeking to establish an inability to pay must complete an 11-question questionnaire on the company’s finances, including assets and liabilities, current and anticipated cash flow, and working capital needs.

Criminal Division attorneys use the responses when applying the statutory sentencing factors (18 U.S.C. § 3572(a) & (b)), the Federal Sentencing Guidelines (U.S.S.G. § 8C2.2 & 8C3.3), and the Justice Manual’s principles on consideration of collateral consequences in corporate criminal cases.  Footnote four of the Benczkowski memo confirms that Criminal Division attorneys may adjust a proposed fine based on a significant adverse collateral consequence, even if that consequence might not threaten the organization’s viability.  Significantly, the Benczkowski memo identifies adverse collateral consequences deemed relevant and irrelevant to the assessment of a company’s inability to pay claim.

Relevant collateral consequences include the company’s ability to fund pension obligations or provide the amount of capital, maintenance, or equipment required by law or regulation.  Additionally, Criminal Division attorneys may consider whether the proposed monetary penalty is likely to cause layoffs, product shortages, or significantly disrupt competition in a market.

Collateral consequences generally deemed irrelevant include adverse impacts on growth, future opportunities, planned or future product lines, future dividends, unvested or future executive compensation or bonuses, and planned or future hiring or retention.

While Criminal Division attorneys have significant discretion to reduce a company’s criminal fine or monetary penalty, it is subject to certain limitations.  The Benczkowski memo mirrors the language of both the statutory sentencing factors and Federal Sentencing Guidelines in checking this discretion.  Attorneys may only recommend an adjustment to the monetary penalty to the extent necessary to avoid (1) threatening the continued viability of the organization and/or (2) impairing the organization’s ability to make restitution to victims.

Benczkowski explained that the clarified guidelines are meant to promote transparency and incentivize corporate compliance. Generally, members of the defense bar have acknowledged the DOJ’s movement toward transparency and welcomed the new guidance.  If a company receives a reduction in fines, the reasons for granting it will likely be in the settlement, offering other companies insight into what may qualify as a “significant collateral consequence” for the purposes of fine reduction.  Ultimately, the Benczkowski memo and the DOJ policy contained therein signals a new era of cooperation, providing relief to companies facing financial ruin in the face of steep criminal fines, while incentivizing cooperation and compliance with the Criminal Division.

The White Collar and Government Enforcement practice group at Jackson Lewis, PC is experienced in handling corporate sentencing issues and available to assist clients facing such matters.

Considerations in Selecting an Investigator

A threshold issue in any internal investigation is the selection of an investigator.  A number of considerations will guide a company’s decision.

Internal or External Investigator

There are several factors to consider in selecting an investigator, and practical considerations frequently indicate that the investigation be conducted by an internal investigator.  However, employers often opt to engage external investigators for a variety of reasons, including high stakes or highly sensitive matters, investigations of a high-level officer, or investigations of an employee in the internal investigator’s chain of command.

If an external investigator is selected, the company should provide the investigator access to material company policies.  It may be appropriate to identify an independent company representative to assist the investigator in gaining access to personnel files and other documents and information needed to conduct the investigation.  In some cases, a special committee composed of subject matter experts from relevant areas of the company may be desirable to assist in the investigation.

Ability to Testify

Another consideration is whether the investigator will be available to the company to testify in disciplinary proceedings, arbitrations, and litigation.  The company should discuss this issue with the investigator at the onset to confirm that the investigator has the requisite experience, capability, and willingness to testify in such proceedings.

Special Considerations for Attorney-Investigators

Other considerations apply when the investigator is an attorney.  For example, if an attorney conducts the investigation, the company should consider that in future proceedings, the investigator may be a witness.  Additionally, in certain circumstances, the factual investigation and findings of an outside attorney may be subject to disclosure in future proceedings, even if the company takes the initial position that the investigator’s work is subject to the attorney-client communication privilege or the attorney work-product doctrine.

Ultimately, several factors affect a company’s decision in selecting an investigator.  The decision should be given significant weight, as it can impact the effectiveness of the investigation as a whole.

Do’s and Don’ts of Conducting Internal Investigations

In today’s post #MeToo era, most companies, big or small, will likely need to conduct an internal investigation on an employee’s claims. Knowing how to conduct a successful internal investigation will help a company protect itself. Not only do internal investigations help avoid litigation, they may also improve employee morale, increase productivity, and oftentimes, end inappropriate conduct in the workplace.

Here are several items to consider when preparing for and conducting effective internal investigations:

Do:

  1. Intake each complaint. Who and what has the employee reported? When and where did the conduct occur? Before beginning interviews, conduct an initial interview to assess the scope of the investigation. In addition, gather background information such as policies, procedures, prior relevant complaints, and the personnel files for each involved party.
  2. Preserve evidence. If there is evidence of the alleged misconduct in emails, instant messages or videos, take steps to protect and preserve that information in its original form in a timely manner.
  3. Interview key witnesses. Interview the complainant, witnesses who saw or know something, co-workers, managers/supervisors, and persons with other key knowledge. When interviewing each individual, ask that individual to identify other witnesses or evidence relevant to the investigation. If a witness refuses to participate in an interview, document any unsuccessful attempts to interview him/her.
  4. Interview separately. After identifying the relevant parties, interview each party alone and in private. Interviewing each individual separately helps bring out more information from each party. As you interview, look for opportunities to find inconsistencies with each party’s story.
  5. Implement corrective action if needed. Determine corrective action, develop a plan, and be open to conducting additional training as a preventative measure.

Don’t:

  1. Appear biased. Enter into each investigation with an open mind. Do not act or appear to act out of malice towards the complainant or any other individual.
  2. Promise confidentiality. You may instead assure involved parties that you will treat all information with the utmost sensitivity and share that information only on a need-to-know basis.
  3. Spread news. Do not discuss the investigation with persons inside or outside the company that have no need to know about it.
  4. Forget a closeout report. The closeout report should include a summary of the allegations, the evidence gathered, and the factual conclusions. Take careful notes throughout the investigation so that you can easily recall information to add to the report.
  5. Forget to follow up. After the investigation concludes, notify the relevant parties, including the complainant, that appropriate action has been taken and advise the witnesses to immediately raise any concerns of retaliation.

 

 

One Size Does Not Fit All: The Need for a Tailored Code of Conduct

Codes of Conduct are designed to set forth an organization’s values and principles, while detailing expectations for employees. In many ways, it is one of the most important documents an organization can develop. At times, when an employer decides it needs to develop a Code, it often asks counsel whether there is a sample Code or boilerplate language the company can adopt. But is an “off-the-shelf” Code of Conduct really of any value to an organization? The answer should be apparent – sufficient consideration should be devoted to a task that the organization will say this is the standard by which our business will operate!

Legal sources recommending or requiring Codes of Conduct and Business Ethics typically offer little in the way of details as to what an effective Code must include. For example, Section 802.1(a) of the Federal Sentencing Guidelines provides that in order for an organization to mitigate vicarious liability for the criminal conduct of its employees, it must have an effective compliance and ethics program in place. However, in describing an effective compliance and ethics program, the Guidelines provide little guidance other than requiring the organization to use due diligence to prevent and detect criminal conduct and otherwise promote an organizational culture that encourages ethical conduct by its employees and a commitment to compliance with legal requirements. The Guidelines state that compliance and ethics programs must be “reasonably designed, implemented, and enforced so that the program is generally effective in preventing and detecting criminal conduct.”

Similarly, Item 406 of Securities and Exchange Commission Regulation S-K requires covered companies to adopt a Code applicable to the principal executive officer, financial officer, accounting officer or controller or other persons performing similar functions. The Code must be reasonably designed to deter wrongdoing and to promote:

  • honest and ethical conduct;
  • full, fair and accurate timely and understandable reports to the Commission as well as public disclosures;
  • compliance with applicable laws; and
  • prompt internal reporting and accountability for adherence to the Code.

In addition to the requirements of Item 406, companies listed on the New York Stock Exchange are required to have a Code that applies to all directors, officers, and employees that addresses conflicts, corporate opportunities, confidentiality, fair dealing, protection of company assets, and legal compliance. Companies listed on NASDAQ must have a Code that applies to all directors, officers, and employees and contains an enforcement mechanism that ensures prompt and consistent enforcement of the Code, provides for anti-retaliation protection, clear and objective compliance standards, and a fair process to determine violations.

Beyond statutory and regulatory requirements, the particular industry a company operates within also may present particularized challenges that should be addressed in a Code. For example, is the company in a heavily-regulated industry like healthcare? Does the company have operations outside the United States? Does the company have government contracts that impose obligations on the company? In drafting or reviewing a Code of Conduct, these various factors must be taken into consideration. What works for one company might not work for another, even if the companies operate in the same industry. Since the fundamental principle underlying a Code of Conduct is that it be part of an effective compliance and ethics program, due consideration must be paid to what topics the Code needs to cover, whether the Code accurately and adequately reflects the company’s mission and core values, and whether the policies and reporting structures set forth in the Code are adequately designed to ensure issues raised by employees are timely and appropriately addressed.

Best Practices for Boards and Individual Directors

In today’s climate, boards are under increased scrutiny and governance continues to be a key compliance function. As a result, sound governance practices are an important focus for organizations.

Boards are expected to set organizational culture and foster an environment that encourages ethical conduct and a commitment to legal compliance. These expectations have played out in the wake of the #MeToo movement, with many boards reviewing their contribution to the company’s culture and their role in monitoring that culture. Board members are now overseeing the addition of anti-harassment policies, establishing procedures for addressing workplace harassment complaints, and taking an active role in the company’s response to such complaints.

In order to further its goal of sound governance practices, the board should first understand its legal duties to the organization. These include:

  • The Duty of Care. Directors should exercise diligence and attentiveness to their board responsibilities by attending meetings and actively participating. They should exercise reasonable prudence in carrying out their duties in the best interest of the organization.
  • The Duty of Loyalty. Directors owe a duty to faithfully pursue the interests of the organization, rather than their own personal interests or that of any other person or organization. Directors should avoid conflicts of interest or even the appearance of them. Directors are prohibited from self-dealing or diverting opportunities for their own personal gain.
  • The Duty of Obedience.Directors should act with fidelity, within the law, to the organization’s mission. Directors should be familiar with federal, state, and local laws related to the organization, as well as be familiar with and follow the organization’s governing documents.
  • Fiduciary Responsibilities. Financial oversight is a core responsibility of the board. Directors have equal and shared fiduciary responsibility for the organization. They should understand the content and significance of the organization’s financial statements and audits, and protect and appropriately use the organization’s resources.

Successful boards are self-aware, function in constructive partnership with chief executives, and are committed to continually improving performance. Best practices for meeting these responsibilities and incorporating good governance principles often include:

  • Meeting Attendance. Board members should make it a priority to attend all board meetings unless exceptional circumstances exist. One of the legal obligations for all directors is the duty of care. Without attending meetings — and preparing for them conscientiously — a board member is less capable of participating in educated and independent decision-making.
  • Member Recruitment. The board should be strategic about member recruitment and define its ideal composition based on the organization’s priorities.
  • Strategic Planning. The board should play a substantive role in developing, approving, and supporting organizational strategy. One of the board’s primary responsibilities is to set the direction for the organization.
  • Chief Executive Oversight. The board should develop a written job description for the chief executive, define the annual expectations jointly with the chief executive, and evaluate the chief executive’s performance annually.
  • Audit. The board often oversees the organization’s annual audit, selects the auditor, and meets with the auditor in an executive session without staff present to discuss the results.
  • Review of Bylaws and Policies. The board should review and amend its bylaws periodically as necessary. Board members should also review company policies and training requirements to ensure they remain legally compliant and reflect best practices.
  • Use of Committees. The board’s standing committee structure should be lean and strategic. Typically only ongoing board activities warrant a standing committee.
  • Complaints and Investigations. The board should understand how to identify complaints in their various forms, take those complaints seriously, and ensure they are investigated by the right people. This includes ensuring that no employee is punished or discriminated against because he or she reported improper conduct.

Because the trend of increased board scrutiny will likely continue, board members should understand their roles and comply with the corresponding legal requirements.

Ninth Circuit Rules Alleged FCPA Violation Cannot Support SOX Claim

In Wadler v. Bio-Rad Labs., Inc., the Ninth Circuit narrowed the circumstances under which a plaintiff can prove a Sarbanes-Oxley Act (“SOX”) claim.

Sanford Wadler, the former general counsel of Bio-Rad Laboratories, Inc., alleged that during his tenure, he raised concerns that Bio-Rad violated the Foreign Corrupt Practices Act (“FCPA”) in connection with certain business dealings in China. The CEO of Bio-Rad allegedly discovered that Wadler had reported his concerns to the Board’s Audit Committee and two days later, the CEO allegedly told human resources that “Wadler had ‘been acting a little bizarre lately’” and that he “might ‘want to put him on an administrative leave.’”

Wadler’s concerns were investigated, but the investigation concluded there was no evidence of an FCPA violation in China. Three days after the investigation findings were reported to the Board, the CEO fired Wadler.

Wadler sued under SOX, the Dodd-Frank Act, and California public policy. The jury returned a verdict in Wadler’s favor, resulting in an approximately $11 million award. The Defendants appealed, claiming the district court erred when it instructed the jury that the FCPA constitutes “‘rule[s] or regulation[s] of the Securities and Exchange Commission’ (‘SEC’) for purposes of whether Wadler engaged in ‘protected activity’ under SOX § 806[.]”

Applying concepts of statutory interpretation, the Ninth Circuit held that “an FCPA provision is not a ‘rule or regulation of the [SEC].’” The Ninth Circuit reasoned: “That the phrase ‘rule or regulation’ is used in conjunction with an administrative agency, the SEC, suggests that it encompasses only administrative rules or regulations,” not statutes such as the FCPA.

Wadler argued that the phrase “rule or regulation” should be interpreted broadly because of “SOX’s remedial purpose.” The Ninth Circuit swiftly rejected Wadler’s plea, reinforcing its conclusion that the statute’s text is paramount.

Ultimately, the Ninth Circuit “vacate[d] the SOX verdict” and remanded to the trial court with instructions “to consider whether a new trial is warranted.”

Seeking Unity, Not Uniformity*: Diversity and the Corporate Board of Directors

New board of directors appointments such as Indra Nooyi joining Amazon, Nikki Haley nominated by Boeing, and Michelle J. Howard as IBM’s latest director illustrate the accelerating trend of gender and minority diversity on corporate boards – an apt topic for Women’s History Month. And there are plentiful reasons for promoting board diversity.

Sometimes board diversity is required by law. Outside the U.S., primarily in Europe, gender diversity on boards is often required. Since 2003, when Norway adopted a 40% women directors standard, a number of other countries (including Germany, Spain, and France) now require various minimum women directors. In the U.S., California has become the first state to set gender diversity rules by law for all public corporations headquartered in the state. California’s SB 826 requires one woman director for such company boards by year-end 2019. By 2021, the number of women directors required rises to two (for boards of five) and three (for boards of six or more). Recent research published by the Board Governance Research LLC indicates that covered California companies must fill 1,060 existing or new board seats with women by year-end 2021. Several other states have taken the softer approach of adopting resolutions supporting voluntary actions. In fact, California began with this approach years ago and ended up with modest diversity improvements. Whether a state should or can properly legislate requirements for board diversity is controversial and legal challenges will likely follow the California law. Meanwhile, corporations continue to add diverse candidates to their boards, often for practical business reasons.

Over the past two years, women and minorities totaled a solid 50% of new S&P 500 directors, as reported in Spencer Stuart’s 2018 Board Index. Women candidates appear to be making particularly big strides and now represent 24% of all directors. Smaller public companies have more work to do. Why is this progress so important for a business? Institutional investors and proxy advisors (such as Blackrock, State Street, Vanguard, ISS, and Glass Lewis) have adopted voting policies requiring diversity progress, some with specific goals and consequences of negative voting recommendations. Further, firms like Russell Reynolds point to business research and studies showing that leadership diversity, beginning with board diversity, simply improves business performance. See 2019 Corporate Governance Trends and Harvard Business Review.

The trend toward board diversity will continue. We’ll be on the watch for legislative developments, court challenges, and corporate announcements.

*“Treasure diversity. Seek unity, not uniformity. Strive for oneness, not sameness.” Dan Zadra

Guideposts for Successful Internal Investigations: Part 2 – Commencing and Concluding the Investigation

Part 1 of this two-part series explored the five steps to consider before and at the start of any internal investigation.

The next five steps focus on conducting and concluding the investigation and will help guide a company during the actual investigation, after establishing its framework.

  1. Gather Information. The investigator should: (a) assess the complaint itself; (b) gather relevant policies and documents; (c) confirm contractual requirements (if any); (d) interview the complainant to understand the complaint, its substance, relevant documents, and the identity of relevant witnesses; (e) gather and assess additional policies and documents (if any); and (f) interview other witnesses to fully understand their knowledge of events, including additional relevant documents and witnesses. Each witness should be advised of the company’s anti-retaliation policies and told to report any retaliation to the company. If the investigation is being conducted by outside counsel, each witness should be informed that counsel represents the company and not the witness, among other things. This is commonly referred to as an Upjohn warning.
  2. Prepare findings and conclusions. Findings and conclusions can vary in form. An organization may dictate the charge of the investigator and whether it is requested that the investigator provide more than factual findings and in what format. An organization may choose an oral report, a written executive summary, or a detailed factual findings and analysis, depending on the circumstances. Any report should summarize the complaint, the information, interviews held and documents reviewed, and typically, the factual conclusions reached. It should be fact-based and generally devoid of legal analysis and opinions. At times, legal analysis might be requested by an organization and care should be taken to make certain such analysis is properly subject to attorney-client privilege and perhaps outside the fact-finding portion of the investigation.
  3. Take remedial measures (if necessary). If the investigation uncovers errors, mistakes, or wrongdoing, the company should take reasonably appropriate steps to remedy those issues and to prevent their reoccurrence. This could be through discipline of employees (up to and including termination), policy changes, or additional training. It could also involve a report to a government agency about potential violations of law.
  4. Follow-up with the complainant to close the investigation. This will build rapport and show the complainant that the company took her complaint seriously. In general, companies should explain that the investigation has been completed, that the company has taken appropriate action, and that the employee should continue to report any wrongdoing in the future. It should also include a reminder that retaliation is prohibited and if the employee experiences any retaliation, she should immediately report it.
  5. Prepare the investigative file. The investigator should prepare a file of conclusions, notes, and documents reviewed in reaching its conclusion. Attorney-client privileged communications and materials should be maintained in a separate file.

These five steps, when combined with the five steps establishing the framework of an investigation, will help companies make appropriate decisions, understand internal areas of concern, build appropriate defenses, and minimize or mitigate risks.

Guideposts for Successful Internal Investigations: Part 1 – Establishing an Investigation’s Framework

The ability to effectively conduct internal investigations is essential to any business.

From fiscal year 2014 to fiscal year 2018, the number of whistleblower retaliation complaints filed with OSHA has increased by 29 percent. Between 2007 and 2017, retaliation claims filed with the EEOC nearly doubled. In fiscal years 2017 and 2018, the Justice Department recovered over $6.5 billion from False Claims Act cases. The recoveries, settlements, and defense costs in these matters are real.

Not only do internal investigations help ensure ongoing legal and regulatory compliance, they also give companies a chance to correct any mistakes and identify potential risk areas before they become true liabilities. They can also fortify future defenses and minimize risk in litigation about alleged corporate misconduct.

Given the stakes, we have prepared this two-part blog series exploring effective steps for internal investigations.

This first post explores five steps to ensure the company identifies complaints when they arise and establishes an appropriate framework for investigating those complaints.

  1. Train board members, executive leadership, and managers on identifying, receiving and ensuring investigation of internal complaints. Not every complaint is couched as a complaint. A complaint might be embedded in an email or conversation between an employee and her manager about how the business is run. It might be raised “informally,” but it is nonetheless a complaint. Because complaints are not always clear, managers (from line supervisors to board members) need to understand how to identify complaints in their various forms, take those complaints seriously, and ensure they are investigated by the right people (e.g., in-house counsel’s office, compliance, or human resources). Failure to identify complaints can have serious ramifications.
  2. Identify and articulate the purpose or goal of an investigation. A company should endeavor to understand why it is conducting the investigation. Every internal investigation should have the following goals: (a) obtain a full, objective understanding of the facts; (b) facilitate fact-based decision-making; (c) take prompt corrective action and confirm disclosure requirements; and (d) preserve evidence and a complete record.
  3. Account for attorney-client privilege considerations. In-house or outside counsel should be informed about most investigations to ensure proper legal advice and maintain privilege. If a company intends to use the investigation and its results to defend a lawsuit or allegation of wrongdoing, it should be prepared to disclose underlying investigation interview notes, factual conclusions, and remedial steps, if any. Courts will generally not allow a company to use an investigation as a shield against liability while asserting attorney-client privilege regarding supporting documents obtained during the investigation. This does not mean all communications to or from the investigator must be disclosed. Steps can be taken to ensure attorney-client privilege is maintained where appropriate. For instance, the investigator can report findings to the business for decision-making purposes and separately to counsel for legal advice or in anticipation of litigation. If an attorney acts in the role of fact-finder, organizations should not necessarily assume there will be attorney-client privilege in subsequent proceedings. Understanding attorney-client privilege issues early can help a company maintain privilege to the maximum extent possible.
  4. Identify the appropriate investigator(s). Not every complaint requires the same investigator. An investigator may be qualified in one area, but another investigator might be more qualified in a different area. Sometimes, it may be important to have counsel investigate the complaint to provide legal advice or if litigation is anticipated. An attorney investigator might also be employed as an expert witness down the road, depending on the circumstances. The investigator should be as independent as possible. The investigator should also understand the importance of attorney-client privilege and the outer limits of its protections. This can help guide the investigator on when and how to share certain information with appropriate parties. The investigator should ultimately be someone the company is comfortable representing it as a witness in any potential dispute that later arises.
  5. Determine the scope of the investigation. Any investigation should be broad enough in scope to establish independence of the investigator. The investigator should not be limited in a way that might lead a third party to believe the results were preordained. Most investigations should encompass the complaint and any circumstances and facts reasonably related to the complaint and its subject matter.

These five initial steps to the investigation process will help companies minimize or mitigate risks associated with internal complaints.

In a separate blog, we will explore the next five steps to an effective investigation, focusing on the investigation itself, gathering information, and making reasonable assessments based on the evidence.

The Waiting Is the Hardest Part: Staff Decreases, Whistleblower Claim Increases Strain OSHA

A February 20, 2019 article from Bloomberg Law provides statistics to explain the significant delays experienced by litigators and attorneys alike in Occupational Safety and Health Administration’s investigation of whistleblower claims. A substantial increase in the number of whistleblower complaints filed with OSHA over the past five years and a contemporaneous decrease in the number of investigators available to investigate these claims has led to longer waits for OSHA decisions and delays in the adjudication of claims.

OSHA is charged with enforcing more than 20 whistleblower statutes. From fiscal year 2014 to fiscal year 2018, the number of whistleblower complaints filed with OSHA increased by 29 percent: from 7,408 to 9,566. Over this same period, the number of investigators available to investigate these claims decreased by 24 percent: from 100 to 76.

The staffing losses are due, in part, to a stagnant budget and a federal hiring freeze in 2017. The staffing restrictions resulted in OSHA opening full investigations into only 3,007 whistleblower cases in FY 2018, the fewest number of new investigations since 2013. This means, on average, each investigator opened approximately 40 new investigations in FY 2018, in addition to their already existing caseloads. Also during FY 2018, OSHA closed 2,964 investigations, down 15 percent from the prior year and the lowest since FY 2012. The average time to complete an investigation in FY 2018 for all types of whistleblower cases was 284 days, seven days more than the FY 2016 average. The Administration’s statistics are not likely to improve any time soon as it reportedly takes approximately two years for a new investigator to learn the requirements of the position.

The potential impact of these investigatory constraints is considerable. For example, under the Sarbanes-Oxley Act, a putative whistleblower has 180 days from an adverse employment action to file an administrative complaint with OSHA. The statute and regulations contemplate the entire administrative process, including OSHA’s investigation and decision, review of this decision by an Administrative Law Judge and subsequent by the Administrative Review Board, will be completed within 180 days. Based on current statistics, if OSHA opens an investigation into a complaint, it will take, on average, more than 100 days longer than the timeframe contemplated by the Act before OSHA completes its investigation. As the Act also permits whistleblowers to seek dismissal of their complaints in order to proceed de novo in federal court, more whistleblowers may elect to go this route, rather than have their claims languish at the administrative level. Since 2017, approximately 300 whistleblowers have elected to go this route, according to Bloomberg Law. However, as an employer only has 20 days to respond to a complaint filed with OSHA, the whistleblower is filing in federal court with full knowledge of the employer’s defense and the ability to craft a complaint that addresses any arguments raised by the employer. Additionally, while the claim languishes at the administrative level, an employer will typically have to deal with the loss of witnesses due to attrition or other factors, further complicating its defense of the whistleblower’s claim.

Please contact Jackson Lewis with any questions about avoiding whistleblower complaints.

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