[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
PRIVATE SECTOR WHISTLEBLOWERS:
ARE THERE SUFFICIENT LEGAL PROTECTIONS?
=======================================================================
HEARING
before the
SUBCOMMITTEE ON WORKFORCE PROTECTIONS
COMMITTEE ON
EDUCATION AND LABOR
U.S. House of Representatives
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
HEARING HELD IN WASHINGTON, DC, MAY 15, 2007
__________
Serial No. 110-37
__________
Printed for the use of the Committee on Education and Labor
Available on the Internet:
http://www.gpoaccess.gov/congress/house/education/index.html
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COMMITTEE ON EDUCATION AND LABOR
GEORGE MILLER, California, Chairman
Dale E. Kildee, Michigan, Vice Howard P. ``Buck'' McKeon,
Chairman California,
Donald M. Payne, New Jersey Ranking Minority Member
Robert E. Andrews, New Jersey Thomas E. Petri, Wisconsin
Robert C. ``Bobby'' Scott, Virginia Peter Hoekstra, Michigan
Lynn C. Woolsey, California Michael N. Castle, Delaware
Ruben Hinojosa, Texas Mark E. Souder, Indiana
Carolyn McCarthy, New York Vernon J. Ehlers, Michigan
John F. Tierney, Massachusetts Judy Biggert, Illinois
Dennis J. Kucinich, Ohio Todd Russell Platts, Pennsylvania
David Wu, Oregon Ric Keller, Florida
Rush D. Holt, New Jersey Joe Wilson, South Carolina
Susan A. Davis, California John Kline, Minnesota
Danny K. Davis, Illinois Bob Inglis, South Carolina
Raul M. Grijalva, Arizona Cathy McMorris Rodgers, Washington
Timothy H. Bishop, New York Kenny Marchant, Texas
Linda T. Sanchez, California Tom Price, Georgia
John P. Sarbanes, Maryland Luis G. Fortuno, Puerto Rico
Joe Sestak, Pennsylvania Charles W. Boustany, Jr.,
David Loebsack, Iowa Louisiana
Mazie Hirono, Hawaii Virginia Foxx, North Carolina
Jason Altmire, Pennsylvania John R. ``Randy'' Kuhl, Jr., New
John A. Yarmuth, Kentucky York
Phil Hare, Illinois Rob Bishop, Utah
Yvette D. Clarke, New York David Davis, Tennessee
Joe Courtney, Connecticut Timothy Walberg, Michigan
Carol Shea-Porter, New Hampshire
Mark Zuckerman, Staff Director
Vic Klatt, Minority Staff Director
------
SUBCOMMITTEE ON WORKFORCE PROTECTIONS
LYNN C. WOOLSEY, California, Chairwoman
Donald M. Payne, New Jersey Joe Wilson, South Carolina,
Timothy H. Bishop, New York Ranking Minority Member
Carol Shea-Porter, New Hampshire Tom Price, Georgia
Phil Hare, Illinois John Kline, Minnesota
C O N T E N T S
----------
Page
Hearing held on May 15, 2007..................................... 1
Statement of Members:
Wilson, Hon. Joe, ranking minority member, Subcommittee on
Workforce Protections...................................... 3
Prepared statement of.................................... 4
Woolsey, Hon. Lynn C., Chairwoman, Subcommittee on Workforce
Protections................................................ 1
Prepared statement of.................................... 2
Statement of Witnesses:
Chinn, Lloyd B., partner, Proskauer Rose LLP................. 40
Prepared statement of.................................... 41
Devine, Thomas, legal director, Government Accountability
Project.................................................... 45
Prepared statement of.................................... 46
Fairfax, Richard, Director of Enforcement, Occupational
Safety and Health Administration........................... 17
Prepared statement of.................................... 20
Moberly, Richard E., assistant professor of law, Cline
Williams Research Chair, University of Nebraska College of
Law........................................................ 32
Prepared statement of.................................... 34
Internet address to ``Unfulfilled Expectations: An
Empirical Analysis of Why Sarbanes-Oxley Whistleblowers
Rarely Win,'' by Richard E. Moberly, 49 William and
Mary Law Review (abstract)............................. 39
Simon, John.................................................. 14
Prepared statement of.................................... 16
Wigand, Dr. Jeffrey.......................................... 6
Prepared statement of.................................... 9
PRIVATE SECTOR WHISTLEBLOWERS: ARE THERE SUFFICIENT LEGAL PROTECTIONS?
----------
Tuesday, May 15, 2007
U.S. House of Representatives
Subcommittee on Workforce Protections
Committee on Education and Labor
Washington, DC
----------
The subcommittee met, pursuant to call, at 2 p.m., in Room
2175, Rayburn House Office Building, Hon. Lynn Woolsey
[chairwoman of the subcommittee] Presiding.
Present: Representatives Woolsey, Payne, Bishop of New
York, Shea-Porter, Wilson, Price, and Kline.
Staff Present: Aaron Albright, Press Secretary; Tylease
Alli, Hearing Clerk; Lynn Dondis, Senior Labor Policy Advisor
for Subcommittee on Workforce Protections; Michael Gaffin,
Staff Assistant, Labor; Peter Galvin, Senior Labor Policy
Advisor; Jeffrey Hancuff, Staff Assistant, Labor; Thomas Kiley,
Communications Director; Joe Novotny, Chief Clerk; Robert
Borden, Minority General Counsel; Steve Forde, Minority
Communications Director; Ed Gilroy, Minority Director of
Workforce Policy; Rob Gregg, Minority Legislative Assistant;
Richard Hoar, Minority Professional Staff Member; Victor Klatt,
Minority Staff Director; Jim Paretti, Minority Workforce Policy
Counsel; Molly McLaughlin Salmi, Minority Deputy Director of
Workforce Policy; Linda Stevens, Minority Chief Clerk/Assistant
to the General Counsel; and Loren Sweatt, Minority Professional
Staff Member.
Chairwoman Woolsey. A quorum is present. The hearing of the
Workforce Protection Subcommittee on Private Sector
Whistleblowers: Are There Sufficient Legal Protections, will
now come to order. Pursuant to committee rule 12(a), any Member
may submit an opening statement in writing, which will be made
part of the permanent record.
I now recognize myself, followed by Ranking Member Joe
Wilson, for an opening statement.
I want to thank all the witnesses for coming today, to
testify on whether current legal protections are sufficient to
protect whistleblowers, especially those laws that are
administered by the Department of Labor. And I want to
especially thank both Dr. Wigand and Mr. Simon for appearing
here today. You are going to tell your stories. Being a
whistleblower is very difficult, and I know that your lives
have changed in ways you can never have imagined when you first
made your decision to come forward.
Today you are among friends. This week is Whistleblowers
Week. We want to celebrate your actions and praise the
substantial public service that you have provided, all at a
considerable sacrifice to yourselves and your families.
We also want to learn from you because you know far better
than we do what additional protections are needed so that
people like yourselves will be encouraged to report
illegalities, safety and health violations, and fraud and abuse
when the situation makes it necessary.
The idea for this hearing was generated by a full committee
hearing held on the Sago mine disaster on March 28th, 2007,
just a couple of months ago. At that hearing we heard testimony
about the blacklisting faced by miners who speak up about
safety and health risks in the mines. This is true even though
they should be protected by MSHA, and they find that their very
jobs are threatened if they come forward.
But as our witnesses today will illustrate, miners are not
alone in having to deal with such problems. Over the years
Congress has indicated its clear intent to protect
whistleblowers by passing over 30 statutes prohibiting
retaliation against employees who report a myriad of problems,
from environmental spills to health and safety violations, to
corporate fraud.
However, while the laws may have made some things better,
they have not eliminated intimidation, harassment, blacklisting
and other forms of retaliation. Often the laws themselves are
inconsistent and certainly not always user friendly.
Let me give you one example. Mr. Fairfax's office at OSHA
administers 14 whistleblower provisions. Under these laws
complainants have either 30, 60, 90 or 180 days to file their
claim, depending on the statute that they are filing under.
These statutes of limitation are very short, sometimes creating
insurmountable hurdles, especially for someone who has just
been demoted or fired from a job not for performance, but
because he or she may have complained about an unsafe condition
at work.
It is as though in legislating we have created protections
or the expectation of protection without ensuring that these
protections are accessible.
Today we will explore the issues and at least begin to
answer some important questions: Do we need to expand the laws
to cover employees currently not covered. Are there procedural
and other hurdles in the law that we need to change so
complainants can successfully bring their claims forward? Do we
need to look more closely at how these laws are being
administered, including OSHA's Department of Enforcement? And
what is the need for resources in order to process
whistleblower claims in a timely manner?
I am looking forward to all of your testimony, and with
that I defer to Ranking member Joe Wilson for his opening
statement.
[The statement of Ms. Woolsey follows:]
Prepared Statement of Hon. Lynn C. Woolsey, Chairwoman, Subcommittee on
Workforce Protections
I want to thank all our witnesses for coming today to testify on
whether current legal protections are sufficient to protect
whistleblowers, especially those laws that are administered by the
Department of Labor.
And I want to especially thank both Dr. Wigand and Mr. Simon for
appearing here today to tell their stories. Being a whistleblower is
very difficult, and I know your lives have changed in ways you could
never have imagined when you first made your decision to come forward.
Today, you are among friends. This week is Whistleblowers' Week.
We want to celebrate your actions and praise the substantial public
service you have provided--all at considerable sacrifice to yourselves
and your families.
We also want to learn from you because you know far better than we
do what additional protections are needed so that people like
yourselves will be encouraged to report illegalities, safety and health
violations; and fraud and abuse when necessary.
The idea for this hearing was generated by a Full Committee hearing
held on the Sago Mine Disaster on March 28, 2007.
At that hearing, we heard testimony about the blacklisting faced by
miners who speak up about safety or health risks in the mines. This is
true even though they should be protected by MSHA (the Mine Safety and
Health Act) if they came forward.
But as our witnesses today will illustrate, miners are not alone in
having to deal with such problems.
Over the years, Congress has indicated its clear intent to protect
whistleblowers by passing over 30 statutes prohibiting retaliation
against employees who report on a myriad of problems, from
environmental spills to health and safety violations to corporate
fraud.
However, while the laws may have made some things better, they have
not eliminated intimidation, harassment, blacklisting and other forms
of retaliation.
And often, the laws themselves are inconsistent and certainly not
always user friendly.
Let me give you one example. Mr. Fairfax's office at OSHA
administers 14 whistleblower provisions. Under these laws, complainants
have either 30, 60, 90 or 180 days to file their claim depending on the
statute they are filing under.
These statutes of limitations are very short and sometimes create
insurmountable hurdles, especially for someone who has just been
demoted or fired from a job---not for performance--but because he or
she may have complained about an unsafe condition at work.
It is as though in legislating, we may have created protections or
the expectation of protection without ensuring that they are
accessible.
Today, we will explore the issues and at least begin to answer some
important questions.
Do we need to expand the laws to cover employees currently not
covered?
Are there procedural and other hurdles in the law that we need to
change so complainants can successfully bring their claims forward?
And do we need to look more closely at how these laws are being
administered, including OSHA's Department of Enforcement need for more
resources in order to process whistleblower claims in a timely manner?
I am looking forward to everyone's testimony,
With that, I defer to Ranking Member Joe Wilson for his opening
statement.
______
Mr. Wilson. Good afternoon. I would like to thank Chairman
Woolsey for convening this hearing and welcome our witnesses to
the subcommittee. At the outset I would also like to thank
Chairman Woolsey for restoring a sense of fairness to these
hearings with the witness ratio.
I believe this hearing to explore the Occupational Safety
and Health Administration's work will be very informative for
our panel, and I thank you, the witnesses, for being here
today. I look forward to your testimony on the whistleblower
programs for which OSHA is responsible.
OSHA administers 14 statutes in the whistleblower program.
The range of issues covered under the programs stem from the
Occupational Safety and Health Act, OSHA's core competency, if
you will, to the newly passed AIR 21 legislation. In addition,
several environmental laws are covered under this program.
With the addition of the relatively new and far-reaching
Sarbanes-Oxley Act, I am sure that some have questioned the
wisdom of housing all of these programs at OSHA. That said, I
am encouraged by the statistics demonstrating OSHA's
performance in investigating whistleblower-related claims. On
average OSHA is dispensing 2,000 whistleblower claims annually,
mainly in the OSHA and Sarbanes-Oxley arena. At the heart of
these programs is the issue of whether or not an employer
retaliated against a whistleblower.
For example, if an employee correctly brought to light a
concern about safety, environmental hazards, or financial
irregularities and then was fired, received a demotion, or had
his or her pay cut, this is a clear example of retaliation that
the law seeks to protect against.
However, it is not always crystal clear. I know this
firsthand from my National Guard service of 31 years as a staff
judge advocate to assist Guard members in reemployment rights
and reducing discrimination and retaliation against Guard
member service.
In the work of the investigators at OSHA to determine if
action taken by management is retribution or if the employee
simply is disgruntled, for example, there are two sides to
every story, and each side has a right to be heard. The
testimony we will hear today will highlight how these actions
are reviewed and how a determination is made about the true
motivation between the actions of employers and employees
alike.
I look forward to hearing from our witnesses about this
very important program.
Chairwoman Woolsey. Thank you, Congressman.
[The statement of Mr. Wilson follows:]
Prepared Statement of Hon. Joe Wilson, Ranking Minority Member,
Subcommittee on Workforce Protections
Good afternoon. I'd like to thank Chairwoman Woolsey for convening
this hearing and welcome our witnesses to the subcommittee. At the
outset, I would also like to thank Chairwoman Woolsey for restoring
some sense of fairness to these hearings with the witness ratio. I
believe this hearing to explore the Occupational Safety and Health
Administration's work will be very informative for our panel, and I
look forward to your testimony on the whistleblower programs for which
OSHA is responsible.
OSHA administers 14 statutes in the whistleblower program. The
range of issues covered under the program stem from the Occupational
Safety and Health Act--OSHA's core competency, if you will--to the
newly passed AIR 21 legislation. In addition, several environmental
laws are covered under this program. With the addition of the
relatively new and far-reaching Sarbanes-Oxley Act, I am sure that some
have questioned the wisdom of housing all these programs at OSHA.
That said, I am encouraged by the statistics demonstrating OSHA's
performance in investigating whistleblower-related claims. On average,
OSHA is dispensing 2,000 whistleblower claims annually, mainly in the
OSHA and Sarbanes-Oxley arena.
At the heart of all of these programs is the issue of whether or
not an employer retaliated against a whistleblower. For example, if an
employee correctly brought to light a concern about safety,
environmental hazards, or financial irregularities and then was fired,
received a demotion, or had his or her pay cut, this is a clear example
of retaliation that the law seeks to protect against. However, it is
not always this crystal-clear. I know this first hand from my National
Guard Service as Staff Judge Advocate to assist Guard members in re-
employment rights and reducing discrimination against Guard member
service.
It is the work of the investigators at OSHA to determine if action
taken by management is retribution or if the employee simply is
disgruntled, for example. There are two sides to every story and each
side has a right to be heard. The testimony we'll hear today will
highlight how these actions are reviewed and how a determination is
made about the true motivation behind the actions of employers and
employees alike.
I look forward to hearing from our witnesses about this important
program.
______
Chairwoman Woolsey. Without objection, all Members will
have 14 days to submit additional materials or questions for
the hearing record.
I would now like to introduce our very distinguished panel
of witnesses that are here with us this afternoon. I will
introduce you all in the order that you are seated and in the
order that you will speak.
Jeffrey Wigand has a distinguished background, and his
honors and activities are too numerous to name. Dr. Wigand may
be best known for his courageous activities in exposing Big
Tobacco. But in 1998, he founded Smoke-Free Kids, Inc., and has
spent the better part of a decade speaking out on the dangers
of tobacco consumption, especially for children.
Dr. Wigand received his B.A., master's and Ph.D. From the
State University of New York at Buffalo and also received a
master's in teaching from the University of Louisville. He also
received honorary degrees from Worcester Polytech, the Medical
Society of Nova Scotia, and Connecticut College.
John Simon is from Lake Villa, Illinois, and a former
trucker. He also acted courageously in exposing his former
employer's illegal transportation practices. Mr. Simon is a
graduate of Gray Lakes High School in Illinois.
Richard Fairfax is the Director of Enforcement Programs at
OSHA at the Department of Labor. He is a certified industrial
hygienist and has been at OSHA for 30 years. Mr. Fairfax
received his B.A. From California Polytech University and his
masters from Humboldt State University.
Lloyd Chinn is a partner at Proskauer Rose in New York
practicing in the areas of labor and employment law. Mr. Chinn
received his B.S. From Georgetown University and his law degree
from New York University.
Richard Moberly is an assistant professor and the Cline
Research Chair at the University of Nebraska College of Law
where he teaches employment law and evidence. Professor Moberly
is the author of a study on OSHA's handling of whistleblowers'
claims under the Sarbanes-Oxley Act. He received his B.A. from
Emory University and his law degree from Harvard Law School.
Tom Devine is the legislative director of the Government
Accountability Project, a leading organization representing the
rights of whistleblowers. Mr. Devine has written extensively
about whistleblower laws and has worked with whistleblowers for
over two decades. Mr. Devine received a B.A. From Georgetown
University, and his law degree from Antioch School of Law.
Now, many of you don't know how we do this, so just before
you get started, I want to talk to you about the lights and how
this all works. We have a lighting system. They are in front of
you right there. We have a 5-minute rule, and everyone,
including the Members up here, are limited to 5 minutes of
presentation and questioning.
The green light is illuminated when you begin to speak.
When you see the yellow light, it means you have 1 minute
remaining. When you see the red light, it means your time has
expired and you need to conclude your testimony. We will not
cut you off in midsentence, midthought, but we may cut you off
in the middle of a long paragraph.
Please be certain as you testify to turn on the speaker on
the microphone and speak into it, because it is right in front
of you, and we will be acting weird up here if you haven't. So
we want to hear you.
Now we will hear from our first witness Dr. Wigand.
STATEMENT OF JEFFREY WIGAND
Mr. Wigand. Good afternoon. First of all, I have to say it
is unusual for me to read something. I generally speak
extemporaneously, so in order to maintain the 5-minute time
limit, I am going to read my testimony.
Chairman Woolsey and distinguished members of the
subcommittee, thank you for providing me with the opportunity
to appear before you as you seek to strengthen the protections
of whistleblowers. I am here today at your invitation to
describe a rather extreme version of what can happen to a
worker in the private sector who tries to serve public
interests and his moral conscience, but instead runs afoul of
corporate retaliation of the most vicious and pervasive kind.
My name is Jeffrey Wigand, and you may know me as the
central character of the Hollywood movie The Insider, which
documented for millions of American viewers the unremitting,
inhumane, cruel and soul-wrenching daily pressure that can be
brought to bear against a whistleblower and whose truth-telling
comes at the highest possible personal price.
Nineteen years ago I began living the American dream. After
a quarter of a century as a senior executive at medical and
health care industry companies, working mostly for Fortune 50
firms, I secured a senior executive position, and I regarded as
the apex of my ambitions the post of a research executive vice
president of one of the world's largest tobacco companies.
My employer, Brown & Williamson, recruited me with the
promise that they intended to use my scientific expertise in
biochemistry to engineer a so-called safer cigarette. Naively,
I believed the cover story and accepted an executive job, which
at one point paid over $300,000 in salary and afforded a first-
class lifestyle in Kentucky for me, my wife, and two young
children.
However, I soon came to discover that my trust had been
badly misplaced, and B&W did not want to have a safer
cigarette. Instead, I lived in a bizarre upside-down world
where lawyers interpreted science, and where the first and
foremost corporate goal, besides increasing profits, was to
hide any scientific or clinical evidence linking tobacco to any
of its negative pervasive effects, and in a longstanding shadow
corporate world nicotine was not addictive, cigarettes were not
health-threatening, black was not white, and I was living a
lie.
As my long written testimony outlines, when the company's
top executives began deliberately editing minutes of scientific
meetings, I had reached a personal crossroads and a moment of
truth. I privately started investigating health issues relating
to the use of tobacco products, the role of cigarette design
and nicotine delivery, and the insidious marketing of tobacco
to children. The more I learned, the more I had difficulty
looking at myself in the mirror every morning and answering the
questions of my two young children.
Nevertheless, despite my growing disillusionment I was
living handsomely, and initially I did not want to disrupt the
comfortable lifestyle I had built for my family. Finally,
however, a confrontation with the ranking B&W executive of the
continued use of Coumarin, an additive in pipe tobacco, brought
all my longstanding internal conflicts to a head. I wrote an
internal memo about the toxicological data concerning Coumarin,
the pressing need for the company to assume its moral
responsibility by removing a dangerous chemical agent from its
products.
When the ranking executive with whom I had clashed over
this issue was promoted to chief executive officer and chairman
of the company, I was summarily fired.
Alone in a State where no lawyer wanted to challenge the
political and economic muscle of B&W, I had to negotiate my own
severance package; I had to retain the health care benefits due
to the serious health problems experienced by one of my little
girls.
But it wasn't the end of the story, not by a long shot. In
1993, B&W sued me for allegedly violating my secrecy agreement
by telling another employee the amount of my salary and
severance package. The company immediately dropped my health
care coverage, stopped paying my severance. They would
reinstate my health coverage I so desperately needed only if I
agreed to a Draconian, all-encompassing secrecy agreement which
would preclude me from ever revealing anything that I knew,
learned or observed about the inner workings of the company.
They used my daughter's health against me. But I reluctantly
signed the agreement.
About that time I received a Federal subpoena from the
Department of Justice to relate to them what I knew about the
so-called fire safe cigarettes or reduced ignition propensity
cigarettes that have a value of saving between 800 and 1,000
lives a year.
Shortly after that the Food and Drug Administration began a
historic probe into the tobacco industry. Congress, too, under
the leadership of Mr. Waxman, now Senator Wyden and the late
Congressman Mike Synar also started their own congressional
investigations. I informed congressional staff who contacted me
that I could only respond to them and provide them advice under
subpoena.
What came next changed the course of my life and that of my
family. Two anonymous phone calls were received after I
reported my congressional contacts to B&W, as I was required to
do by the contract I just executed. My daughters were
threatened with physical harm if I cooperated with any outside
inquiry.
Increasingly isolated professionally, frightened as anyone
could be, I contacted the local FBI office, which installed a
trap and trace line on my phone, and despite the attempted
intimidation, I became disgusted after watching the April 1994
testimony of the seven tobacco executives who all testified
that nicotine wasn't addictive and that smoking was no more
dangerous than eating Twinkies, in the words of one of the smug
tobacco CEOs. I realized the issue was at a critical juncture
and that I had to act.
After being contacted by the FDA official, I secretly
visited their headquarters in Rockville, Maryland, going
through unmarked entrances. My code name for these visits was
``Research.'' Only a small handful of people including the then
Commissioner David Kessler were aware of my presence.
I also consulted secretly with ABC News on a much-
publicized hour-long special over the role of nicotine and
cigarette manufacturers, over which Phillip Morris later sued
the network. ABC caved and settled the suit. And finally in
August of 1995, I agreed to an interview with CBS 60 Minutes to
reveal what I knew and understood about the workings of the
tobacco industry.
As is common knowledge now, the transcript of that
interview was leaked in advance of its broadcast. B&W filed
suit against me for alleged theft of trade secrets in violation
of my confidentiality agreement. I started routinely receiving
threats, and CBS provided armed security, opening my mail,
starting my car in the morning, and escorting my daughters to
school. I was living the unenviable lifestyle of a federally
protected witness, but the government was not helping safeguard
my life or that of my family.
Later when I was subpoenaed to give State-related
depositions in the class action brought by the State of
Mississippi, B&W pushed the Kentucky court to order me to be
held in contempt if I testified in another State. I testified
anyway. When I returned to Kentucky, I was met by Federal
marshals, and thankfully that night I did not end up in jail.
When will this Kafkaesque nightmare end, I kept asking
myself. My health was affected, my moods darkened. Meanwhile,
the horrendously long years were taking a toll on both me and
my family. I had become a professional pariah. My once
distinguished scientific and corporate career lay in ruins. I
was teaching high school at one-tenth of what I earned at B&W
in previous years.
The constant pressure and ostracism was too great and too
much for my wife, who divorced me after 10 years,
remarried, and took my daughters to live in another State.
Nevertheless, B&W continued its lawsuit against me----
Chairwoman Woolsey. Dr. Wigand, I am going to give you half
a minute. You have got to sum it up. Nobody else gets that kind
of time.
Mr. Wigand. I was intent on reading and not paying
attention. I am sorry. Please excuse me.
During the 4-year ordeal I was not protected by any
whistleblower statute, and I had no recourse except the truth.
You are in a position to change that situation, which is from
one form or another for literally hundreds of corporate and
Federal whistleblowers around the country, many who have gone
through the hellish life-changing experience like mine. Many of
them have been ruined professionally, emotionally or
financially. Please change this gaping hole in the
whistleblower laws.
Thank you for your attention. I am pleased to answer any
questions you might have, and please excuse my overuse of time.
[The statement of Mr. Wigand follows:]
Prepared Statement of Dr. Jeffrey Wigand
Thank you for giving me this opportunity to testify before this
Subcommittee on my experience with breaking ranks with the tobacco
industry--and more specifically with my former employer Brown &
Williamson (B&W). I speak as an insider who spent more than four years
as a high level senior executive in the industry and as one who has
seen the inner most secrets of the industry. In this testimony, I
provide a detailed chronology the events that led up to my decision to
come forward with what I knew. As you will see, the road was neither
easy nor short, and the decision to come forward transpired after a
considerable amount of time witnessing immoral and illegal actions. For
me, the decision to come forward was not an immediate response--an
``epiphany.'' Rather, the decision to come forward was a process. I do
believe that if laws were put in place to protect persons who likewise
decide to come forward, their road would be an easier, shorter one. And
obviously, if we can make it quicker and easier for someone to come
forward, then we can help to mitigate and forestall the harm caused by
the wrongdoing.
I want to make very clear that I am able to be here today--not
because I was protected by any whistleblower statute--but because of
the tremendous courage of so many people. There is a debt of gratitude
that I will never be able to repay: to my own daughters, to my
students, to the lawyers who risked their reputations, assets and own
personal safety for the search for truth and justice, and to all of
those who held an unwavering belief in me and the truth.
Essentially, I was hired by B&W to manage the development of a
safer cigarette. I came from the medical/health care industry, working
for 25 years as a senior executive for such companies as Pfizer, Merck
and Johnson & Johnson. I was accordingly steeped in the mindset of
using science to search for the truth, to make products better and to
improve the quality of life and to save lives. I found the position at
B&W attractive because it enabled me to use my expertise to develop a
``safer'' cigarette, and hence to use my skills and experience to
address a product that, when used as intended, kills. Thus the
consequences of my research were profound. The position at B&W was also
attractive to me because my wife and two young daughters, ages 2 and 2
months, had family in Louisville and we felt we could have a good life
there.
I accepted B&W's offer in November 1988. I began working for B&W in
January 1989, as its Vice-President of Research and Development in its
corporate headquarter offices in Louisville, Kentucky. At this time,
B&W was a subsidiary of BATUS, the US holding company but, for all
intents and purposes, a direct subsidiary of BAT Industries, formerly
British-American Tobacco Company, the second largest tobacco company in
the world. At B&W, I focused on learning all aspects of tobacco science
and chemistry and directed the development of a product, code-named
``Airbus'' that was a non-traditional nicotine-delivery device that
could cause less disease.
My first discomforting experience with B&W was early on. As part of
my corporate orientation, I was sent to one of B&W's outside corporate
counsels, Shook, Hardy & Bacon, located in Kansas City, Missouri. For 3
days, I was told that the research from numerous Surgeon General
Reports and other eminent public health scientific publications on the
human hazards of tobacco was based on flawed science, and that there
were no studies linking tobacco use to negative health consequences.
The attorneys at Shook, Hardy & Bacon also argued that nicotine was not
addictive, and therefore that tobacco use was an autonomous act. This
was the first time in my career that I had lawyers interpret the
science for me. In fact, during my initial hiring interviews with B&W's
executives, they unequivocally expressed that nicotine was highly
addictive and that tobacco use caused a myriad of debilitating and
fatal diseases. Indeed, it was at these interviews where I first heard
the mantra ``we are in the nicotine delivery business and tar is the
negative baggage.'' However, the lawyers were asking me to effectively
ignore these comments, not to mention the scientific research that is
replete with findings about the adverse health consequences caused by
tobacco. Although I returned to corporate headquarters after this part
of my orientation confused, I was not deterred from developing a safer
product.
In September of 1989, I was part of a Research Policy Group meeting
held in Vancouver, British Columbia, where all the high level senior
managers of research and development from BAT and BAT-affiliated
companies had gathered to develop strategic research priorities and
tactical programs. Over the course of several days, we discussed how to
make a safer product, how to test a safer product, how to address the
passive smoke issue, the feasibility of a reduced ignition propensity
or ``fire safe'' cigarette, and many other scientific topics. We all
knew and articulated that nicotine was addictive and that tobacco use
was responsible for a myriad of adverse health consequences. We also
expressed the belief that, although we might be able to develop a
``safer'' product, we could never deliver one that was completely
unsafe. The meeting generated twelve pages of detailed minutes
memorializing the summary of scientific discussions, as well as follow-
up programs to achieve key projects.
I circulated a copy of the meeting minutes to my immediate
supervisor, T. Sandefeur, Jr., the COO/President as a ``FYI.'' When the
minutes of the Vancouver meeting reached the other senior executives of
the company, they were clearly distressed. Then, in a move that shocked
me, Thomas Sandefeur, with the agreement of the Chairman/CEO Ray
Pritchard and General Counsel Mick McGraw, ordered in-house product
liability counsel, J. Kendrick Wells, III to rewrite the minutes, even
though he had not attended the meeting. Wells completely altered the
minutes removing any reference to the discussions that had taken place
and included only an abbreviated follow-up program. He reduced 12 pages
of meeting minutes into 2 and one half pages of vanilla. The intent of
attorney Wells was to destroy any content in the document that would
aid an adversary in litigation and undermine the five decades of legal,
technical and PR obfuscation.
In January 1990, the Chairman of BAT, Sir Patrick Sheehy, summoned
all the scientists who had been at the Vancouver meeting, along with
the product litigation attorneys from each of the companies, to a
meeting in New York. At that meeting, we were informed by the BAT
Solicitor General, Stuart Chalfen and attorney Nick Cannar, that a
lawyer would be placed at every sequence of scientific communication
and research. This meant that any communications, discussions, reports
or notes would be subject to attorney review prior to becoming a
permanent document with limited distribution. An elaborate system of
mandated lawyer vetting, sequestering and altering scientific documents
was instituted as a result of this meeting. In addition, all safer-
cigarette work was transferred and all further work on that project was
transferred overseas to the Southampton R&D facility in the UK.
As I continued to work at B&W, I realized that the company was not
interested in making safer products, but only in new finding new
adolescent consumers and maximizing profits. Disturbingly, I learned
that the culture of the tobacco industry was one in which great
importance was placed on keeping the public ignorant about the
addictive and lethal nature of tobacco products. The industry most
wanted to protect its fundamental legal and PR platform that tobacco
use was not addictive, that tobacco use was a free, consumer choice,
and that tobacco use was not the source of the scientifically linked
morbidity and mortality.
So, even after only a year at B&W, I was in a quandary as to what
to do with what I knew. But I stayed for three more years. Indeed, I
did not make the decision to come forward even after witnessing how
lawyers helped B&W to obfuscate the truth to the public. Why? I had a
wife, two young daughters, one of whom had a serious medical condition
requiring good medical insurance coverage, and a mortgage. And there
were perks with my $300,000 a year job, including a car, and all of the
usual amenities of a successful executive's position. I was also keenly
aware by now of how the industry intimidated defectors, paying legions
of lawyers to attack their credibility in an effort to stop their
behavior. I wanted no part of that and wanted to protect my family. My
intent was to transition back to the healthcare industry for I had
realized I had made a major error in my career. The truth is, had I
been assured that my family and I would be adequately protected, I
probably would have come forward at this point. But as you will learn,
my decision to come forward came much later, after witnessing more
disturbing events, and experiencing further turmoil.
So, I continued to work at B&W, knowing full well about the fraud
that they were perpetrating on the public. I began to investigate
health issues relating to the use of tobacco products, including the
role played by additives and cigarette design on nicotine deliveries,
the premature deaths caused by tobacco use, and the marketing of
tobacco to children. The more I learned, the more I had difficulty
looking in the mirror. But there was no obvious outlet to which I could
turn, I had a duty to my family. All things considered, I decided that
it was best not to rock the boat.
But something significant happened in August 1992. I received a
draft copy of a National Toxicology Program (NTP) report on Coumarin.
The report classified Coumarin as a carcinogen.
In 1954, the FDA banned the use and importation of Coumarin and
deleted it from the GRAS list because of its demonstrated animal
toxicity. Although the industry finally removed Coumarin during the
1986-1988 time period, they have a long history of using Coumarin in
their products. Importantly, when the industry removed Coumarin during
the 1986-1988 time period, they only removed this ingredient from
cigarettes. Coumarin, in other words, was still used in other tobacco
products such as pipe tobacco. Why did the industry continue to use
Coumarin in other products, even though they removed it from
cigarettes? The answer is simple. They did not have to. An FDA
regulation requires tobacco companies to disclose a list of all
additives used in the manufacturing of cigarettes, and cigarettes
alone, to the Department of Health and Human Services (US Code: Title
15, Chapter 36, 1965, Cigarette Labeling and Advertising Act). Thus,
tobacco companies do not have to disclose additives in pipe tobacco,
chew or other any other form. So, B&W continued to use Coumarin in pipe
tobacco. Their rationale was simple but disturbing. They reasoned that
since the law did not require the disclosure of ingredients in non-
cigarette products, then they could use any ingredient in these
products, including known carcinogens, with impunity. They felt no
moral obligation to make their product ``safer'' by removing known
carcinogens.
After the 1992 NTP report came out, I went to my supervisor, Mr.
Sandefeur, the COO/President of B&W. I had been to Mr. Sandefuer many
times before on issues of health and safety. We had many disagreements
including the use of the company's mantra ``hook 'em young, hook 'em
for life,'' and the impropriety of lawyer interference in science,
among many others. When I urged Mr. Sandefeur that Coumarin should be
removed from all of B&W's products, he instructed me to go back to the
lab and find a substitute for Coumarin. But he also told me that
despite evidence that Courmarin was a carcinogen, it would not be
removed from pipe tobacco because it would affect the taste of the
product and negatively impact sales and profits.
It was at this time that I constructed a memorandum that included
the NTP's findings, a recital of the 1954 FDA ruling, and the validated
toxicological data. Also included in the memo, was the argument that
the company was bound by a moral imperative that, when possible and
feasible, products should be designed so that their potential to create
harm is mitigated. This final issue caused me to be fired in March of
1993 when Mr. Sandefuer was promoted to Chairman/CEO of the company.
When I was terminated, being a ``whistleblower'' was the last thing
on my mind. All I wanted was to forget my experiences at B&W. Albeit, I
expected the company to adhere to the termination provisions in my
employment agreement, which included severance benefits, continued
health care benefits and retirement benefits among other provisions.
Much to my dismay, the company did not honor the totality of the
agreement. Consequently, I searched for a lawyer in the state of
Kentucky to represent me in a contract law matter but could not find
one who would oppose B&W. So I was forced to negotiate my own severance
package. I ended up with two years of salary and health coverage. The
company also voluntarily agreed to void the non-compete clause in my
1988 employment contract, provide out-placement services, and eliminate
any off-set against future earnings.
Then in September 1993, B&W sued me in a Kentucky court for
allegedly violating the boiler-plate provisions of the secrecy
provision of my employment agreement by telling another employee my
annual salary. With the filing of the lawsuit, the company immediately
stopped my health coverage and severance pay. B&W agreed to drop the
law suit and reinstate my benefits and salary if and only if I agreed
to a new, draconian secrecy agreement without any further
consideration. This new agreement prevented me from discussing anything
I knew about the internal workings of the company without the presence
of a B&W lawyer or without the prior vetting of my statements by some
such lawyer. I felt I had no choice and signed the agreement as my
daughter's health care was at risk.
The decision to sign the new agreement was made at the same time I
received a DOJ CID (Civil Investigative Demand)--a kind of federal
subpoena--from the Justice Department on the issue of fire-safe
cigarettes. Pursuant to the new secrecy agreement, I provided testimony
in the CID in the presence of a B&W lawyer from the firm of Kirkland
and Ellis.
In January 1994, I began working with CBS/60 Minutes on a ``fire
safe cigarette'' investigative report. Mr. Lowell Bergman, a producer
for CBS, received a box of some 2400 R&D documents from an anonymous
source. These documents encompassed the period of 1954 through June
1976 on the ``reduced ignition propensity physics of a natural
incendiary device.'' Mr. Bergman asked me to interpret the substance of
these documents for 60 Minutes. I agreed. I was paid $ 12,000.00 for
this work that spanned two weeks of sorting, ordering and interpreting
the R&D documents. The documents demonstrated that, in June 1976,
Philip Morris (PM) had developed and tested in a CPT (Consumer Product
Test) at a 95 % confidence level, a reduced ignition propensity
cigarette equal in taste, cost, and aesthetics of their leading brand,
Marlboro. PM called the project ``Hamlet * * * to burn or not to
burn.''
Disturbingly, but not surprisingly, PM decided against
manufacturing these ``fire safe'' cigarettes. In fact, because there
was no law mandating them to manufacture these ``safer'' cigarettes, PM
decided to shelve project Hamlet. This decision to shelve the project
was made notwithstanding the fact that a ``fire safe'' cigarette could
prevent approximately 800-1,000 deaths each year, as well as the
economic losses due to cigarette-created fires (cigarettes are the
single largest contributor to fire losses). Clearly, the morally
responsible course of action would have been to manufacture this
product. But PM refrained from this course of action because there was
do legal compulsion to do. This was deja vu. PM's tactic was the same
one used by my former employer, B&W, when confronted with the decision
not to use Coumarin. Just as PM did not make their cigarettes ``fire
safe'' because they did not have to, B&W did not remove Coumarin from
its pipe tobacco because it did not have to. Each company felt no moral
imperative to reduce harm.
As I read these documents, I became aware of the culture of
deception within the industry. I recognized names on these documents as
persons that I had heard speak when I was attending scientific meetings
in 1989-1991. At these meetings, these individuals were adamant that it
was not feasible to make fire safe cigarettes, and that the
responsibility for cigarette-caused fires rests with the furniture,
clothing and fabric industries. The CBS/60 Minutes aired the program in
April 1995 entitled ``Up in Smoke.'' I continued to keep my story to
myself.
In February 1994, the FDA began to explore the establishment of a
regulatory authority over tobacco products. In addition, the U.S.
Congress, under the leadership of Representatives Henry Waxman, Mike
Synar (now deceased) and Ron Wyden (now a Senator), initiated its own
tobacco inquiry. I was contacted by numerous Congressional staff
members seeking my help in this investigation. Ultimately, they wanted
me to testify. Because of my secrecy agreement, I told the
Congressional staff that I would need to be served with a subpoena.
Nevertheless, I began to help Congress to understand tobacco science.
After numerous contacts with members of the Congress, I contacted B&W
to apprise them of these conversations, pursuant to the terms of the
new contract that I recently signed to re-instate my severance package.
What came next changed the course of all future actions and changed
my family. Two anonymous phone calls were received after I reported the
Congressional contacts to the Company that threatened the safety of my
young daughters with physical harm if I cooperated with anyone about
the internal workings of B & W. As a result, I went to the local FBI
who installed a ``trap and trace'' on my phone line. Two threats made
to my phone were isolated, and from that day forward, I never made
further contact with the company, except in a Court of Law.
In April 1994, I watched the 7 heads of major U.S. tobacco
companies, including Mr. Sandfeur, testify before Congress under oath
that nicotine was not addictive and smoking was no more dangerous than
eating Twinkies. This was really the ``last straw'' as they say. I
realized that if I remained silent, I was a bystander to harm and I was
no different from the industry executives. It was at this time that I
felt I had to take action. So, in May 1994, I began to secretly share
my knowledge with the FDA. Because I was concerned of a repeat
retaliation and was convinced that the tobacco industry would try to
derail any FDA investigation, I insisted that my cooperation with the
FDA would need to be confidential and secret, limited in number of
participants and directly with the then Commissioner, Dr. David
Kessler. I traveled to the FDA offices in Rockville, Maryland under
assumed names and going through unmarked entrances. My code name was
``Research.'' I taught the FDA all aspects of cigarette design, tobacco
chemistry, high-nicotine genetically engineered tobacco (Y-1) and
numerous other subjects. I served as a navigator to documents the FDA
had acquired. For some time, I ``covertly'' disclosed what I knew.
However, two subsequent events transpired that compelled me to publicly
disclose what I knew. Both of these events put me in contact with more
internal documents which, once again, revealed a pattern of immoral and
illegal actions by the industry.
In early 1995, I became a non-testifying technical expert for ABC,
which was being sued for libel by Phillip Morris ($10 Billion). ABC, on
its newsmagazine program, Day One, aired a segment that stated that
nicotine was addictive and that the industry ``spiked'' nicotine in its
tobacco products in order to maintain an adequate delivery of addictive
nicotine. I was one of the limited experts who were allowed to see all
the PM produced documents in the discovery process. I am still bound by
a TRO from this action. The lawsuit was settled in August, 1995, with
ABC's unusual apology to PM, just a month after Disney announced it was
acquiring ABC/Capital Cities.
In June 1995, a professor of cardiology at the University of
California San Francisco, Dr. Stanton Glantz, contacted me. Dr. Glantz
was a recipient of a cache of tobacco documents smuggled out of B&W by
Merrill Williams, a paralegal filing clerk who had worked at a highly
secure section of the R&D facility during the time that I was employed
by B&W. Dr. Glantz was publishing 7 scientific papers on the contents
of the documents in the peer reviewed JAMA publication. He shared with
me the documents that spanned 1950 through the 1980s for technical
review and authentication purposes. They mirrored my exact experiences
while I was at B&W and provided me with the first opportunity to see
reports and documents that I had never seen while at B&W although I had
asked to do so repeatedly. There it was in black and white: how the
tobacco industry knew that tobacco was lethal but totally disregarded
public health and safety; how it had used additives to boost nicotine's
addictiveness; how lawyers controlled the flow of technical documents
and how they manipulated the science and hid the truth.
After these experiences I decided to rid my conscience of the
burden that I carried and decided to share the internal workings of B&W
with the American public via CBS/60 Minutes and reset my moral compass.
So, on August 5, 1995, my family I and agreed to an interview with 60
Minutes at CBS. We agreed that I would maintain custody and control of
the taped interview until I had arranged for competent legal counsel,
had my affairs in order until they arranged for physical security for
my family, upon the airing of the show.
However, CBS began to question whether my interview should be
aired. Somehow, B&W found out about the interview. In October, someone
with access to my interview transcript leaked it to the media. After
learning about the interview, B&W threatened to sue CBS for billions,
under the legal principle of ``tortuous interference,'' if CBS decided
to air the interview. During this time, Lawrence and Robert Tisch were
the principal owners of CBS via Loews Corporation, which also owned
Lorillard Tobacco Company. The Chairman at Lorillard was Andrew Tisch,
the son of Lawrence Tisch. Tisch the junior was one of the seven CEOs
who had testified before Congress in 1994. He was also under
investigation by the DOJ for perjury at the April 1994 Congressional
hearings. To further complicate matters, Lorillard was conducting a
multi-million dollar product transfer from B&W. Additionally,
Westinghouse tendered an offer to acquire CBS.
The interview was cancelled in October 1995, and the retaliation
from B&W began shortly thereafter.
B & W filed suit against me in Kentucky for theft of trade secrets
for violating my confidentiality agreement. I started receiving threats
and armed security was provided. A security detail lived with us every
minute--opening the daily mail, starting the car in the morning,
escorting my daughters to school and me to work. Ultimately, the school
where I was teaching was forced to place a sheriff's deputy at my
classroom door due to recurrent daily threats.
In November 1995, I was served with my second CID subpoena from the
U.S. Department of Justice, and I was also subpoenaed by the State of
Mississippi to testify in the State's civil suit against the tobacco
industry. When I traveled to Mississippi for depositions in both
hearings, I stayed with my attorney, Dickie Scruggs. His home had to be
swept for electronic eavesdropping devices and armed Mississippi State
Police patrolled the home all night.
B&W continued its campaign of legal intimidation to stop me from
giving the Mississippi deposition, by going to both the Mississippi
Supreme Court and Kentucky District Court to stop the testimony. The
Mississippi Supreme Court allowed the deposition to go forward. The
four hour deposition was laden with threats, and the Mississippi Court
ordered it to be sealed. In contrast, the Kentucky court ordered me to
be held in contempt if I testified. I testified anyway. When I returned
to Kentucky after giving my depositions, I was met by Federal Marshals
and thankfully did not have to go to jail. I went back to teaching.
In January 1996, my sealed Mississippi deposition found its way to
the Wall Street Journal, which despite a threatened lawsuit by B&W,
published the deposition on its front page and put it on its internet
site. In addition, B&W, using private investigators, a prominent
publicist, and some of the largest law firms spent millions to smear my
reputation with a 500 page dossier marketed to all the major media
outlets. The local Louisville paper published these smears, and despite
continued security, I still managed to receive death threats with a
live Israeli armor piercing bullet that was placed in my mail box in
January 1996 with another threat directed at my daughters. The pressure
was too much for my wife who notified me she would be filing for
divorce after 10 years of marriage.
Meanwhile, B&W continued its lawsuit against me in the Kentucky
court. Legions of the company's lawyers deposed me for 11 days, and the
local Kentucky Court threatened to hold my attorneys in contempt for
protecting my rights.
B&W's lawsuit against me finally ended on June 20, 1997. Thirty
nine state Attorneys General sued Big Tobacco, and were in the final
stages of $368 billion settlement with the industry. The Attorneys
General threatened to walk away from settlement discussions and sue in
each state unless B&W dropped their suit against me. So, B&W
reluctantly dropped their lawsuit against me at the eleventh hour.
Since that date, I have been free to speak the truth about the hazards
of tobacco to children in a classroom setting, to governmental
officials, to Ministers of Health throughout the world addressing the
``denormalization'' of tobacco, and to agencies such as the WHO and
CDC. I have also testified in select tobacco litigation cases such as
the 1998 DOJ RICO case, the Dutch litigation on additive regulations
and various state tort cases.
However, even though B&W promised to drop their suit against me as
a condition of the Master Settlement Agreement, I continue to suffer
the repercussions of my decision. For example, when I became a public
figure for the coordinated move to make Charleston, SC smoke-free, my
car and front door of my condo were marked with a black indelible
marker with slurs and threats. When I testified against the legal
misdeeds of the Kansas City law firm Shook, Hardy and Bacon, a member
of the firm used ``pretexting'' while I was a visiting scholar in
ethics at Auburn University seeking transcripts and information about
my lectures to the students after I testified under oath about how
Shook et. al. committed a fraud on the public. And although B&W agreed
to give me a positive performance evaluation when I was terminated, it
was very difficult for me to earn gainful employment after I decided to
speak to CBS 60 Minutes. This was the first time in my career that I
had difficulty finding a job.
During this four-year ordeal, I was not protected by any
whistleblower statute and had no recourse against the Company, except
for the truth. And as you have learned, my decision to come forward did
not happen at the instant I witnessed wrongdoing, but rather was the
result of a long and painful process. This process began with
experiencing how corporate attorneys vetted and destroyed documents,
and with witnessing how a corporate executive refused to remove a known
carcinogen from a product merely because doing so would ``impact
sales.'' Yet, even though these two events should have compelled me to
speak out, they did not. I endured further discomfort, realizing that I
had been lied to as I read the company's documents, and witnessing my
former boss lie under oath to Congress. To be sure, I spoke out when I
did, because, at this point, I had to. Quite literally, I could no
longer look in the mirror. But I do think that had there been
protection for me and my family, my decision would have come sooner
than it did. I have delineated in this testimony, my concern for my
family and my fear of retaliation were the principal driving forces of
why my decision to come forward was ``delayed.''
This is why the Paul Revere Freedom to Warn Act is needed. The Act
would provide potential whistleblowers with a psychologically
comforting counterweight to the fear of retaliation that naturally
accompanies the decision to come forward.
Thank you for allowing me to testify today.
______
Chairwoman Woolsey. Mr. Simon. Thank you.
STATEMENT OF JOHN SIMON
Mr. Simon. Hello. Good afternoon. My name is John Simon. I
am a single father, a homeowner, and I live in Illinois. I
began working as a commercial truck driver in 1986. In November
of 2004, I was hired to drive for a fuel-hauling company called
Sancken Trucking. I was to haul jet fuel to four States and
regional, national and international airports.
My employer told me that I should not keep a daily driver's
log the DOT required. I was supposed to keep such a log to keep
myself from getting in trouble regarding my on-duty time, my
break time.
I told my employer, Sancken Trucking, that it was wrong to
keep me from filling out the DOT log. I could not get them to
change their company policy. I called the Federal Motor Carrier
Safety Administration in Springfield, Illinois. I was told that
if I did not fill out these documents properly, that I would be
held responsible.
Sancken still refused to change their policy. I was told I
needed to do things the way they wanted it done, how they
wanted it done, and when they wanted it done. A few weeks later
I filed a written complaint with FMCSA and with OSHA after
being demoted to a 40 percent less-pay job, and I was told by
my boss that I was going to be put in a position that was the
most dangerous job in the company. In January 2005 I was
injured at work, received workers' compensation benefits. I was
off work for about 6 weeks.
In March 2005, the FMCSA audited my employer for compliance
with DOT safety regulations. I tried to return to work when my
doctor cleared me to return after my injuries healed. I
reported back to work just as the DOT audit of my employer was
being completed. I was fired the next day.
On April 8th I filed a complaint with OSHA because I
believe I was fired for filing complaints with FMCSA and OSHA.
OSHA dismissed my claim, and about 2 months later I hired an
attorney who requested a hearing before an administrative law
judge from the Department of Labor.
A hearing took place before Judge Leland of the Department
of Labor in September 2005. On January 11th, 2006, Judge Leland
issued a recommended order ordering me back pay, other damages
and attorneys' fees. He also ordered Sancken Trucking to
immediately reinstate me. The law requires that the
reinstatement is immediate, even if an appeal is taken to the
Department of Labor Administrative Review Board.
I informed Sancken Trucking that I received the order of
reinstatement to my previous position at my previous rate of
pay. I tried to return to work. They refused my reinstatement.
Instead, they told me that I was going--I am sorry, I skipped
ahead. I am a little nervous, if you can tell.
They refused to reinstate me; instead told me I was going
to be treated like a new employee at less pay and no benefits,
and my schedule was going to be changed, in violation of Judge
Leland's order.
My attorney asked the Office of the Solicitor of Labor to
bring a civil suit to enforce Judge Leland's order reinstating
me. On May 24th, 2006, the Solicitor's Office filed a suit for
an injunction forcing Sancken Trucking to reinstate me. During
this process I was without health insurance benefits that I
received when I was with Sancken.
On August 17th the judge issued an injunction order to
order Sancken Trucking to comply with Judge Leland's order
reinstating me to my former position at my former rate of pay.
When I reported back to work, it appeared that Sancken Trucking
was going to make it difficult as possible for me to work
there.
I chose to leave the trucking industry. I was tired of
fighting. I already had another employment position which now
offered me health insurance.
The periods of unemployment since my discharge have imposed
a terrible financial burden on me and my family. The periods
when I was without health insurance, the long periods of
unemployment, and loss of my job, the stress of the legal
proceedings and waiting for the final decision for such a long
time have caused me great emotional distress. I was recently
released from my last employment position because of my
experience with Sancken Trucking. My boss told me that he could
not get past what had happened between Sancken Trucking and I,
so he had to let me go. I was the hardest worker he had ever
met, never missed a day, but I still had to leave.
Chairwoman Woolsey. Would you sum up? Thank you.
Mr. Simon. In the law there is a part, the immediate
reinstatement needs to be enforced. It took 9 months for that
to be enforced, and that is just too long.
[The statement of Mr. Simon follows:]
Prepared Statement of John Simon
My name is John Simon and I reside in Lake Villa, Illinois. I am a
single father of a teenage daughter, a homeowner and a whistleblower. I
began working as a commercial truck driver in 1986. In November of
2004, I was hired to drive for a small fuel hauler called Sancken
Trucking.
My employer told me that I should not keep a daily driver's log.
DOT regulations required that I keep such a log, recording my on-duty
time, driving time and break time. I told my employer that it was wrong
not to keep the DOT log. I notified the Federal Motor Carrier Safety
Administration's office in Springfield, Illinois that my employer told
me not to keep a daily log. A few weeks later I filed a written
complaint with FMCSA and a written complaint with OSHA.
In January 2005, I was injured at work and received workers
compensation benefits. I was off work for about 6 weeks. In March 2005,
the FMCSA audited my employer for compliance with DOT Safety
Regulations. I tried to return to work when my doctor cleared me to
return after my injuries healed. I reported back to work just as the
DOT audit of my employer was being completed. I was fired on the next
day, March 11, 2005.
On April 8, 2005, I filed a complaint with OSHA because I believed
I was fired for filing complaints with the FMCSA and OSHA. OSHA
dismissed my claim about 2 months later. I hired an attorney who
requested a hearing before an administrative law judge from the
Department of Labor. A hearing took place before Judge Leland of the
Department of Labor in September 2005.
On January 11, 2006, Judge Leland issued a recommended order
awarding me back pay, other damages, and attorney fees. He also ordered
Sancken Trucking to immediately reinstate me. The law requires that the
reinstatement is immediate, even if an appeal is taken to the
Department of Labor's Administrative Review Board.
On January 16, 2006, I informed Sancken Trucking that I had
received the order reinstating me to previous position and my provision
rate of pay and that I wanted to return to work. They refused to
reinstate me. Instead they told me that I was going to be treated like
a new employee with less pay and a different schedule in violation of
Judge Leland's order that I be reinstated to my previous position.
My attorney asked the Office of the Solicitor of Labor to bring a
civil suit to enforce Judge Leland's order reinstating me. On May 24
2006, the Solicitor's Office filed suit for an injunction forcing
Sancken Trucking to reinstate me. During this process I was without the
health insurance benefits I had received when I worked for Sancken
Trucking. On August 17, 2006, a Judge issued an injunction ordering
Sancken Trucking to comply with Judge Leland's order reinstating me to
my former position at my former rate of pay. When I reported back to
work it appeared that Sancken Trucking was going to make it as
difficult as possible for me to work there. I chose to leave the
trucking industry. I was tired of fighting. I already had other
employment with health insurance but at lesser rate of pay than Sancken
Trucking had promised me.
The periods of unemployment since my discharge have imposed a
terrible financial burden on my family and me. The periods when I was
without health insurance, the long periods of unemployment, the loss of
my job, the stress of the legal process and waiting for a final
decision for such long time have caused me great emotional distress.
I was recently released from my last employment position because of
my past experiences with Sancken Trucking. My boss told me that he
could not get past what had happened between Sancken Trucking and
myself.
Although I won a recommended decision from the administrative law
judge in January 2006, no final decision has yet been issued. The law
requires the Secretary of Labor to issue a final decision in trucking
whistleblower cases within 120 days after the hearing. I understand
that the Department of Labor's Review Board is taking 2\1/2\ to 3 years
to decide cases after the administrative law judges issue decisions in
cases that have had full hearings. This means that I will have to wait
another year or more for a final order. If Sancken Trucking appeals
further, or if the ARB sends the case back to the ALJ, it may be 3 or
years more before my case is over and I can put this behind me.
Employees who discharged for refusing to break the law or filing
complaints cannot afford to wait for the Administrative Review Board to
take two and a half to three years to decide cases. They have bills to
pay and families to support. I lost thousands of dollars due to Sancken
Trucking firing me. I have run up large balances on my credit cards and
tapped all of my savings just to survive. I have recently spoken with
several realtors because I may need to sell my home in order to avoid
bankruptcy. I cannot explain to my 15-year old daughter why we may have
to sell our home.
Had I known then what I know now, I may not have blown the whistle
on my employer. I just don't know what I would have done. I may have
just quit and moved on. But Sancken Trucking would likely still be
violating the federal truck safety regulations.
The process needs to be reformed so that the Department of Labor's
Review Board decides cases promptly and within the 120-day period
prescribed in the law. Procedures need to put in place so that when an
employer disobeys an order for reinstatement an enforcement action is
brought promptly so the employee is guaranteed wages during the appeal
process. Finally, employers who violate the truck driver whistleblower
law should be subject to punitive damages, which will work as incentive
for them to obey the law.
______
Chairwoman Woolsey. Mr. Fairfax.
STATEMENT OF RICHARD FAIRFAX, DIRECTOR OF ENFORCEMENT,
OCCUPATIONAL SAFETY AND HEALTH ADMINISTRATION
Mr. Fairfax. Good afternoon, Chairman Woolsey, Ranking
Member Wilson, distinguished members of the committee, ladies
and gentlemen. Thank you for the opportunity to appear before
you today to speak about OSHA's administration of the
whistleblower provisions of 14 statutes, as you have mentioned
previously.
My name is Richard Fairfax. I am the Director of
Enforcement Programs for the Occupational Safety and Health
Administration, and I have served with OSHA since 1978.
When the OSHA Act became law in 1970, OSHA's authority was
limited to investigating whistleblower complaints under a
single statute, that being the OSHA Act's whistleblower
provision section 11(c).
Currently our program employs 72 full-time investigators,
and we enforce the provisions of 14 separate statutes. Also
under OSHA there are 26 State plan states that operate their
own programs pursuant to section 18 of the OSHA Act. In these
State plan states, the States enforce their equivalent of
section 11(c) of the OSHA Act. Federal OSHA enforces the 13
other whistleblower statutes covered by Federal OSHA.
As a little history, in the 1980s responsibility for the
Surface Transportation Act of 1982, the International Safe
Container Act of 1977, and the Asbestos Hazard Emergency
Response Act of 1986 were delegated to OSHA. In 1997, under a
memorandum of understanding with the Department's Wage and Hour
Division, six environmental statutes in the Energy
Reorganization Act were delegated to OSHA also. In 2001, the
Wendell H. Ford Aviation Investment and Reform Act for the 21st
Century was added; and finally in 2002, both the Sarbanes-Oxley
Act and the Pipeline Safety Improvement Act were added.
The general provisions of each statute are administered and
enforced by the primary agency responsible for the substantive
requirements of those acts, while OSHA administers only the
whistleblower provisions.
A whistleblower complaint under any of the 14 statutes is
based on the belief by an employee that he or she has been
retaliated against through an unfavorable personnel action for
that employee's engagement in an activity protected by law. In
some cases complainants can file under more than one statute.
To establish a violation for any of 14 statutes, our
investigators must find four elements of a prima facie case
have been met. The four elements include protected activity:
OSHA must establish that the complainant engaged in an activity
protected by the statute; employer knowledge: OSHA must
establish that a person involved in a decision to take adverse
action was aware of or suspected that the complainant was
engaged in a protected activity; adverse action: OSHA must
establish that the complainant suffered some form of adverse
employment action initiated by that employer. Finally, OSHA
must establish a causal link or nexus between the protected
activity and the adverse action.
In investigating a whistleblower complaint under these
statutes, the Department of Labor does not represent the
complainant nor the respondent, but, in fact, is a neutral
factfinder. Investigators must evaluate both the complainant's
allegation and the respondent's nonretaliatory reason for the
alleged adverse action.
Consequently, our investigations can become quite
complicated and lengthy and time-consuming as multiple
interviews are often required, and evidence along with
statements must be verified at each step of the way. If an
investigator is unable to conclude that all the elements of a
prima facie allegation have been established by the
preponderance of the evidence, the case is dismissed.
From the beginning of an investigation, the case can be
settled at any time the parties are amenable to it. I will say
OSHA makes every effort to settle these cases early on. An
investigation consists of gathering the evidence by two
principal means, interviewing the complainant and respondent as
well as all their witnesses and then collecting whatever
documentary evidence is offered.
Once the investigative report is written, the Secretary's
findings can be issued. The statutes require that the Secretary
through OSHA either dismiss the case, find reasonable cause
that a violation of the relevant statute has occurred--we call
this a merit case--or approve a settlement. If reasonable cause
is found before issuing findings, the investigator where
appropriate broaches the subject again of settlement with the
respondent. If the respondent is agreeable, settlement
negotiations are initiated.
In a merit case the remedies available vary according to
the statute. Remedies not only involve relief for the
individual who filed the complaint, but also address the impact
of a violation on the entire workforce.
Both complainants and respondents have the right to seek an
administrative hearing under 11 of the 14 statutes where these
cases are heard before a Department of Labor administrative law
judge. After a decision is issued by an administrative law
judge, either or both parties may appeal it to the
Administrative Review Board, which is authorized to issue final
orders for the Secretary of Labor.
I would like to take just a few moments and talk about the
program. Presently we average about 1,900 cases annually, and
we only have 72 investigators. While the statutes I have
described have prescribed time frames for completion of the
investigation and the issuance of findings, we are seldom able
to meet these time frames due the complexities of the
investigative process.
Despite the increased number of statutes and increasing
number of complaints filed under the new statutes, the total
number of complaints filed annually remains relatively steady
at between 1,800 and 2,100 cases. The outcomes of OSHA's
investigations in fiscal year 2006 are consistent with the
past. Sixty-five percent were dismissed, 14 percent were
withdrawn, 2 percent were merit cases. Of those, 66 were
settled by OSHA, 28 percent we had settlements approved, and 6
percent issued findings in favor of the complainant.
In conclusion, I hope that my testimony has shed some light
on the complex process by which whistleblower complaints are
resolved, and I appreciate the opportunity to speak for you and
will answer any questions you have.
Chairwoman Woolsey. Thank you.
[The statement of Mr. Fairfax follows:]
Chairwoman Woolsey. Professor Moberly.
STATEMENT OF RICHARD MOBERLY, ASSISTANT PROFESSOR, UNIVERSITY
OF NEBRASKA COLLEGE OF LAW
Mr. Moberly. Good afternoon. My name is Richard Moberly. I
am assistant professor of law in the Cline Williams Research
Chair at the University of Nebraska. I teach and write about
whistleblower protection.
In response to the question this hearing presents, my
research indicates that whistleblowers have some legal
protection, but the protection is likely insufficient. Over 30
Federal statutes protect whistleblowers and relate to a variety
of topics, including workplace safety, the environment, public
health, and corporate fraud. However, these statutes provide
only a relatively limited amount of protection because of their
ad hoc and narrow approaches. Rather than protect any employee
who reports any illegal activity, Federal statutes only protect
whistleblowing related to a specific topic or statute, and then
only if the whistleblower works for an employer covered by the
statute.
Even if the right type of illegal activity is reported, the
whistleblower may or may not be protected, depending on how the
employee blew the whistle. Some statutes only protect employees
who formally participate in enforcement proceedings, while
others protect employees who affirmatively report illegal
activity or who refuse to engage in misconduct. Some statutes
require reports to be made externally to the government, while
others protect whistleblowers who report misconduct to their
supervisors.
The procedural requirements for a whistleblower to file a
claim are varied as well. Some laws permit whistleblowers to
file claims directly in Federal court, while others require
whistleblowers to file claims with an administrative agency
like OSHA. Some of these statutes permit only the agency to
prosecute claims on an employee's behalf, while others permit
employees to pursue their own claims.
As Chairwoman Woolsey suggested, the statute of limitation
for these laws vary from 30 to 300 days, which only compounds
the confusion created by these multiple protections and
procedures. Suffice it to say, one would never create this
system from scratch.
Whether a whistleblower is protected depends on the
employer for which the employee works, the industry in which
the employee works, the type of misconduct reported, the way in
which an employee blew the whistle, and, under some statutes,
the willingness of an administrative agency to enforce the law.
Because of these nuances it is simply too easy for good-
faith whistleblowers to fall through the gaps created by these
varied requirements, a situation that fails to encourage
employees to blow the whistle and fails to protect them when
they do.
The problems with the current system are illustrated by the
Sarbanes-Oxley Act of 2002, which applies to employees of
publicly traded companies who report fraud. At the time it was
passed, many expected that Sarbanes-Oxley would provide the
broadest most comprehensive coverage of any whistleblower
provision in the world. These expectations have not been
realized. Employees rarely win Sarbanes-Oxley cases.
In the act's first 3 years, only 3.6 percent of Sarbanes-
Oxley whistleblowers won relief after an OSHA investigation.
Only 6.5 percent of whistleblowers won appeals in front of an
administrative law judge. Subsequent statistics from OSHA
indicate that not a single Sarbanes-Oxley whistleblower won a
claim before OSHA in fiscal year 2006 out of 159 decisions made
by the Agency during that year.
My empirical study of Sarbanes-Oxley outcomes highlights
more general problems. First, the legal and procedural nuances
I detailed earlier don't have real bite. Employees who don't
fall squarely within the law's narrow legal boundaries do not
get protected. Under Sarbanes-Oxley, for example, ALJ
determined that 95 percent of whistleblower cases failed to
satisfy these boundary issues as a matter of law and dismissed
those cases. Judges almost never hear the factual merits of
whether retaliation occurred because an employee blew the
whistle.
Second, ALJs dismissed one-third of Sarbanes-Oxley cases
because whistleblowers failed to satisfy the act's 90-day
statute of limitations, demonstrating that such short statute
of limitation periods can have drastic consequences.
Third, retaliation cases are highly fact-intensive cases
that require resources, time and expertise. Requiring an
administrative investigation may not efficiently utilize
government resources and may unduly delay justice under that
act. As an example I detailed some of the problems with OSHA's
enforcement of Sarbanes-Oxley in my written statement.
As a result of these problems, rank-and-file employees
likely cannot determine the protection available to them before
blowing the whistle, which means that Federal law is not doing
its job of encouraging employees to come forward with
information about misconduct.
Society cannot gain the enormous public benefits from
whistleblowers who disclose health and safety issues and other
corporate misconduct. To address these issues Congress should
comprehensively examine the manner in which Federal law
protects whistleblowers, and I have detailed specific
recommendations in my written testimony. Thank you.
Chairwoman Woolsey. Thank you.
[The statement of Mr. Moberly follows:]
Prepared Statement of Richard E. Moberly, Assistant Professor of Law,
Cline Williams Research Chair, University of Nebraska College of Law
Madam Chair and Members of the Subcommittee: Thank you for the
invitation to appear before you to talk about whether there are
sufficient legal protections for private-sector whistleblowers. I teach
and write about whistleblower protection and I am honored to talk with
you about this topic.
The short answer to the question this hearing presents is that
there are many protections for whistleblowers, but it is doubtful
whether there are sufficient protections. In this testimony, I hope to
explain the ways in which current protections fall short by focusing on
four primary areas:
1. The importance of encouraging and protecting whistleblowers in
the private sector;
2. A general description of private-sector whistleblower
protection, particularly under federal law;
3. Examples of whistleblower protection issues under the Sarbanes-
Oxley Act of 2002, to illustrate problems with the federal protection
of whistleblowers; and
4. Areas in which federal whistleblower protection should be more
closely examined.
1. Whistleblowers Provide a Public Benefit
A rationale often provided for protecting whistleblowers is one of
``fairness,'' whistleblowers take a great risk by disclosing
information about corporate misconduct, and it is unfair that they
should be retaliated against because of their actions. While this
justification has resonance, I want to focus on another rationale:
whistleblowers provide a substantial public benefit.
Private sector whistleblowers enhance corporate monitoring and
improve corporate law enforcement. We need whistleblowers to report
corporate misconduct in order to supplement the traditional methods of
monitoring corporations. Employees know more than others who might
discover corporate wrongdoing (such as the government or even an
independent board of directors) because they are on-the-ground inside
the corporation and, collectively, know everything about its inner
workings.\1\ In fact, even with few corporate or legal incentives
provided to whistleblowing employees, roughly one-third of fraud and
other economic crimes against businesses are reported by
whistleblowers.\2\
Furthermore, almost all the benefits of a whistleblower's
disclosure go to people other than the whistleblower: society as a
whole benefits from increased safety, better health, and more efficient
law enforcement. However, most of the costs fall on the whistleblower.
There is an enormous public gain if whistleblowers can be encouraged to
come forward by reducing the costs they must endure. An obvious, but
important, part of reducing whistleblowers' costs involves protecting
them from retaliation after they disclose misconduct.
2. Federal Whistleblower Protection for the Private Sector
Despite the importance of protecting whistleblowers from
retaliation, no uniform whistleblower law exists. Rather, protections
for private sector whistleblowers consist of a combination of federal
and state statutory protections, as well as state common law
protections under the tort of wrongful discharge in violation of public
policy. These uneven protections are often rightly labeled a
``patchwork,'' because of the wide variance in the scope of protections
each provides.
a. Narrow Substantive Protections for a Broad Range of
Industries
Federal protections for whistleblowers take an ad-hoc, ``rifle-
shot'' approach. Rather than protect any employee who reports any
illegal activity, federal statutes only protect whistleblowing related
to a specific topic or statute, and then only if the whistleblower
works for an employer covered by the statute.
For example, the Surface Transportation Assistance Act of 1982 only
protects whistleblowing related to the safety of commercial motor
vehicles.\3\ The only employees who are protected are drivers of
commercial motor vehicles, mechanics, or freight handlers who directly
affect commercial motor vehicle safety in the course of their
employment.\4\
Even if the whistleblower reports the right type of illegal
activity, statutes vary on whether the whistleblower will be protected
depending upon how the employee blew the whistle. Some statutes appear
to only protect employees who participate in proceedings related to
violations of particular statutes,\5\ while others also protect
employees who affirmatively report illegal conduct \6\ or who refuse to
engage in illegal activity.\7\ Moreover, some statutes require reports
to be made externally to the government,\8\ while others will protect
whistleblowers who report misconduct to their supervisors.\9\
These types of nuanced protections exist for a broad range of
industries. More than 30 separate federal statutes provide anti-
retaliation protection for private-sector employees who engage in
protected activities in a variety of areas, including workplace safety,
the environment, and public health. Statutes protect employees who
disclose specific violations in certain safety-sensitive industries,
such as the mining,\10\ nuclear energy,\11\ and airline industries.\12\
Private sector employees may be protected if they disclose corporate
fraud on the government \13\ or on shareholders.\14\ The list of
protected employees ranges from the expected--employees who make claims
under anti-discrimination statutes such as Title VII \15\--to the
surprising--employees who participate in a proceeding regarding
drinking water or who report an unsafe international shipping
container.\16\
b. A Wide Variety of Procedural Requirements
The procedural requirements for whistleblowers to file a claim are
as varied as the activities protected by the statute. Some statutes
permit whistleblowers to file claims directly in federal court.\17\
Others require whistleblowers to file claims with administrative
agencies, such as the Department of Labor. In fact, 14 statutes require
whistleblowers to file with the Occupational Safety and Health
Administration within the Department of Labor. Even among these OSHA
statutes, the procedures vary depending on the type of claim. Some
statutes, like the Occupational Safety and Health Act, permit only the
agency to investigate and prosecute claims of retaliation on an
employee's behalf. Others permit employees to pursue their own claims
by requesting an administrative investigation, from which appeals can
be made to an administrative law judge, then an administrative review
board, and ultimately to a federal court of appeals. The Sarbanes-Oxley
Act of 2002 has the additional procedural nuance of requiring
whistleblowers to first file a claim with OSHA, but then permitting
whistleblowers to withdraw their claim and file in federal district
court if the agency does not complete its review within 180 days.
Depending on the statute invoked by the whistleblower, the statute
of limitations for claims can be 30 days,\18\ 60 days,\19\ 90 days,\20\
or 180 days.\21\ The statute of limitations for retaliation under
employee discrimination statutes can reach 300 days.\22\
The burdens of proof differ as well. Some retaliation cases require
proof that the adverse employment action taken against the employee
would not have occurred ``but for'' the employee's protected conduct.
Others require only that the protected activity play a ``motivating,''
or even less onerously, a ``contributing'' factor in the adverse
employment action. Statutes vary on the level of proof required for
employers to rebut a prima facie case of retaliation, from
preponderance of the evidence to clear and convincing evidence that the
employer would have made the same decision absent any protected
activity.
c. Many, but not Sufficient, Protections
Suffice it to say, one would never create this system from scratch.
Instead, this network of protections has evolved on an ad hoc basis in
order to support specific statutory schemes. Whether a whistleblower is
protected depends upon the employer for whom the employee works, the
industry in which the employee works, the type of misconduct reported,
the way in which the employee blew the whistle, and, under some
statutes, the willingness of administrative agencies to enforce the
law.
Indeed, given this grab bag of statutes, rank-and-file employees
likely cannot determine the protection available to them without
consulting an attorney before blowing the whistle. Not surprisingly,
surveys demonstrate that most employees are unaware of the protections
they may (or may not) receive should they report wrongdoing.\23\ If
employees are not aware of or do not understand their protections, then
these anti-retaliation provisions are not doing their job of
encouraging employees to come forward with information about
misconduct. Society cannot gain the enormous public benefits from
whistleblowing. Thus, while there may be many legal protections for
whistleblowers, it is doubtful whether there are sufficient
protections.
3. The Sarbanes-Oxley Example
One statute that might have fixed some of these problems was the
Sarbanes-Oxley Act of 2002, which Congress passed in response to
corporate scandals involving Enron, WorldCom, and others. Under
Sarbanes-Oxley, employees of publicly-traded companies who report
fraudulent activity may bring claims against any person who retaliates
against them as a result of their disclosure. By protecting employees
at publicly-traded companies, the hope was to provide protections to a
much broader range of employees than had previously been protected by
statutes focusing primarily on particular industries. At the time it
was passed, many whistleblower advocates and legal commentators
expected that Sarbanes-Oxley would provide the broadest, most
comprehensive coverage of any whistleblower provision in the world.
a. Whistleblowers Rarely Win
These expectations have not been realized: employees rarely win
Sarbanes-Oxley cases. I recently completed an empirical study of all
Department of Labor Sarbanes-Oxley determinations during the first
three years of the statute, consisting of over 700 separate decisions
from administrative investigations and hearings.\24\ Only 3.6% of
Sarbanes-Oxley whistleblowers won relief through the initial
administrative process at OSHA that adjudicates such claims, and only
6.5% of whistleblowers won appeals in front of a Department of Labor
Administrative Law Judge. That's 13 whistleblowers at the OSHA level,
and 6 at the ALJ level. Moreover, more recent statistics from OSHA
indicate that not a single Sarbanes-Oxley whistleblower won a claim
before OSHA in Fiscal Year 2006--out of 159 decisions made by the
agency during that year.
This low win rate for whistleblowers has two primary causes. First,
administrative decision-makers focus an extraordinary amount of
attention on whether the whistleblower is the ``right'' type of
whistleblower. Did the whistleblower disclose the ``right'' type of
misconduct, to the ``right'' type of person? Did the whistleblower work
for the ``right'' type of company? Did the whistleblower provide a
complaint precisely within the 90-day statute of limitations? ALJs
determined that over 95% of Sarbanes-Oxley whistleblower cases failed
to satisfy one or more of these questions as a matter of law. Thus,
very few whistleblowers were actually provided the opportunity to
demonstrate that they were the subject of retaliation.
Second, at the initial OSHA investigative level, when OSHA found
that an employee's claim actually satisfied all of Sarbanes-Oxley's
legal requirements, OSHA still found for the employee only 10% of the
time. This low win rate seems surprising, because Sarbanes-Oxley
purposefully presents a very low burden of proof for employees once
their prima facie case is met.
By themselves, these statistics should give us pause, given the
high expectations regarding the potential of Sarbanes-Oxley to provide
relief to whistleblowers whose employers retaliate against them. But,
as important, Sarbanes-Oxley's implementation illustrates broader
problems with the federal ad hoc approach to whistleblower protection.
b. Problems with Whistleblower Protection
Boundary Problems. First, by only protecting certain types of
disclosures and certain types of employees, federal law puts enormous
pressure on whether the whistleblower's disclosure was the ``right''
kind of disclosure or the employee is the ``right'' type of employee.
Not only is this difficult for employees to predict ahead of time, but
it also requires line-drawing by decision-makers that can narrow the
scope of the protections more restrictively than intended by Congress.
Sarbanes-Oxley demonstrates this problem. The Act protects
disclosures related to certain federal criminal fraud provisions as
well as rules and regulations related to securities requirements. Also,
the Act only protects employees of publicly-traded companies. My study
revealed that administrative decision-makers frequently focused on
these two legal requirements to dismiss cases, and often by reading the
statute's boundaries very narrowly. For example, Sarbanes-Oxley
protects any disclosure related to mail or wire fraud, without
qualification. However, the DOL's Administrative Review Board has ruled
that the disclosure of mail or wire fraud in general is not sufficient;
the fraud disclosed by a whistleblower must be ``of a type that would
be adverse to investors' interests.'' \25\ Similarly, ALJs have ruled
that Sarbanes-Oxley does not protect employees of privately-held
subsidiaries of publicly-traded companies unless the employee can
pierce the corporate veil between the companies or demonstrate that the
publicly-traded company actively participated in the retaliation.\26\
In this and other instances, such narrow interpretations leave good
faith whistleblowers without protection if they report the wrong type
of fraud or work for the wrong type of company.
Procedural Hurdles. Procedural hurdles loom large for
whistleblowers. For example, ALJs dismissed one-third of Sarbanes-Oxley
cases because the whistleblower failed to satisfy Sarbanes-Oxley's
relatively short 90-day statute of limitations. As I noted earlier, the
limitations period of other federal whistleblower protection statutes
ranges from 30 to 300 days. Short filing periods can have drastic
consequences. Because most employees who file whistleblower claims
allege that they lost their jobs,\27\ additional time to file claims
would provide whistleblowers the ability to first take care of pressing
responsibilities, such as finding another job and dealing with the
upheaval of losing a primary source of income, before ultimately
locating a competent attorney to file a claim.
Investigating Claims. Third, retaliation cases are highly fact-
intensive cases that require resources, time, and expertise. Requiring
an administrative investigation prior to an adjudicatory hearing may
not efficiently utilize government resources. For example, when
Sarbanes-Oxley was added to OSHA's responsibilities, OSHA did not
receive any additional funding for cases that now consist of
approximately 13% of OSHA's caseload. This lack of resources has led to
lengthy delays to resolve cases: although the Act's regulations mandate
that OSHA complete its investigation within 60 days, the average length
of a Sarbanes-Oxley investigation in Fiscal Year 2005 was 127 days.
Also, OSHA had primarily dealt with environmental and health and safety
statutes prior to Sarbanes-Oxley. Asking the agency to discern the
nuances of securities fraud seems well beyond its traditional scope.
Moreover, OSHA investigators who must examine cases involving 14
different laws may not adequately differentiate among provisions that
often provide for different burdens of proof and substantive
protections. Add to that internal OSHA procedures that did not give the
whistleblower a full and fair opportunity to rebut an employer's
allegations, and it should not be surprising that few Sarbanes-Oxley
whistleblowers have been successful at the OSHA investigative stage of
their claim. In short, the Sarbanes-Oxley results call into question
OSHA's utility as an investigative body for whistleblower claims.
4. Areas to Examine
There are two main types of questions to consider going forward.
First, if you are satisfied with the current ``rifle-shot'' approach to
whistleblower protection, are there ways in which it can be improved?
Second, if the current model is not satisfactory, what would a
different model look like?
a. Improving the Current System
Clarifying Broad Protections. In areas such as Sarbanes-Oxley, in
which it can be demonstrated that administrative decision-makers or
courts have narrowly read the protections that Congress already has
granted, Congress could clarify the statute's broad reach. Passing
legislation that clearly repudiates decisions narrowing an act's scope
could alleviate the tendency of decision-makers to draw restrictive
legal boundaries in whistleblower cases. Congress has repeatedly taken
such an approach for federal employee whistleblowers when
administrative and judicial rulings undermined the broad protections of
the Civil Service Reform Act and, more recently, the Whistleblower
Protection Act.\28\ Congress should similarly examine federal statutory
protections for private sector whistleblowers.
Lengthening the Statute of Limitations. The short statutes of
limitations that currently exist are unrelated to the goals of
whistleblower statutes and serve no real purpose other than to trip up
unsuspecting whistleblowers after they have already taken the serious
risk of coming forward with information about misconduct. Increasing
statutes of limitations to at least 180 days would be an easy, but
nonetheless extremely helpful, solution.
Improving Transparency. The adjudication of whistleblower claims
should be more transparent. For example, OSHA does not publish any of
its statistics or decision-letters. I received them by asking OSHA
directly and by submitting a Freedom of Information Act (FOIA) request.
No information about monetary awards or settlements are publicly
available and OSHA denied my FOIA request for this information. The
Office of Administrative Law Judges puts its decisions on the internet,
but does not compile any statistics about its results. Statutory
requirements that employers post notices about the available
whistleblower protections are inconsistent: some statutes have them,
others do not. The lack of meaningful, public information about
whistleblower provisions and cases interpreting them fails to provide
employees sufficient guidance regarding whether they will be protected
if they blow the whistle, and also undermines the public discourse
about whether these protections are effective. The decisions, and the
decision-making process, of administrative agencies need more public
oversight.
b. Implementing New Protections
The Importance of Defining Legal Boundaries. The problems with the
current system can inform decisions on the areas on which one should
focus when implementing new protections. Given the problems with the
current narrow boundaries of many whistleblower provisions, a new
whistleblower law should protect whistleblowers for disclosing a broad
range of illegal activities. But, as with everything, the devil is in
the details. Should whistleblowers who report any illegal activity be
protected? Or only activity that is illegal under federal law or some
subset of federal laws? Should we require whistleblowers to be correct
that the activity they report is, in fact, illegal, or should we
protect whistleblowers who reasonably disclose misconduct in good
faith, even if the misconduct is not actually illegal? Should we
require whistleblowers to report illegal activity externally to a law
enforcement officer, or should we protect whistleblowers who report
misconduct internally to their supervisor?
I am quite confident you understand that legal definitions and
boundaries matter--it is what you debate everyday. My point is that for
whistleblower protections in particular, the evidence demonstrates that
the boundaries you draw will have real bite, for two reasons. The first
relates to the nature of whistleblowing: whistleblowers take real
risks, and the current topic-by-topic, ad hoc approach to protecting
whistleblowers does not provide employees sufficient certainty
regarding their protections as they decide whether to blow the whistle.
Second, statutory boundaries particularly matter for whistleblower
protections because of the manner in which whistleblower laws currently
are administered: narrow protections only encourage, or in some
instances, require administrative and judicial decision-makers to
define whistleblowers out of protected categories. Agencies and courts
currently spend too much time debating whether this is the ``right''
type of employee, the ``right'' type of report, or the ``right'' type
of illegal activity, and not enough effort determining whether
retaliation occurred. Broadly defining the legal boundaries of any new
protection may enable decision-makers to focus on the important factual
question of causation: was this employee retaliated against for
reporting something illegal?
Providing Structural Disclosure Channels. Finally, I urge you to
examine other types of encouragement for whistleblowers. For example,
in the Sarbanes-Oxley Act of 2002, Congress required publicly-traded
companies to implement a whistleblower disclosure channel directly to
the company's board of directors. This internal reporting mechanism can
supplement anti-retaliation protections because it encourages reporting
directly to individuals with the authority and responsibility to
respond to information about wrongdoing. Procedural and structural
modifications that encourage effective employee whistleblowing should
be considered along with any reform of anti-retaliation
protections.\29\
5. Conclusion
From one perspective, whistleblowers demonstrate that employees can
be effective as corporate monitors. At great risk to their careers, a
few employee whistleblowers bravely attempt to expose wrongdoing at
corporations involved in misconduct, such as Enron, WorldCom, Global
Crossing, and others.
Viewed differently, however, such isolated scandals also illustrate
the difficulty of relying upon employees to function as effective
corporate monitors. The financial misconduct at Enron and other
companies lasted for years before being revealed publicly. Countless
lower-level employees necessarily knew about, were exposed to, or were
involved in the wrongdoing and its concealment--but few disclosed it,
either to company officials or to the public. Thus, while
whistleblowers who reveal corporate misconduct demonstrate employees'
potential to monitor corporations, the fact that so few have come
forward also confirm that this potential often is not fully realized.
The challenge for policy-makers is to provide sufficient
encouragement and protection for employees so that they can fulfill
their essential role of corporate monitoring. Without employees willing
to blow the whistle on corporate misconduct, we lose one key aspect of
society's ability to monitor corporations effectively. Thorough and
comprehensive statutory whistleblower protections will encourage
private-sector whistleblowers and should be an integral part of our
corporate law enforcement effort.
endnotes
\1\ For a more complete discussion of the importance of employees
as corporate monitors, see Richard E. Moberly, Sarbanes-Oxley's
Structural Model to Encourage Corporate Whistleblowers, 2006 BYU L.
REV. 1107, 1116-25.
\2\ See Kathleen F. Brickey, From Enron to WorldCom and Beyond:
Life and Crime After Sarbanes-Oxley, 81 Wash. U. L.Q. 357, 365 n.37
(2003) (citing study reported in Jonathan D. Glater, Survey Finds
Fraud's Reach in Big Business, N.Y. Times, July 8, 2003, at C3).
\3\ See Surface Transportation Assistance Act of 1982, 49 U.S.C.
Sec. 31105(a).
\4\ See id.
\5\ See, e.g., Clean Air Act of 1977, 42 U.S.C. Sec. 7622(a);
Solid Waste Disposal Act of 1976, 42 U.S.C. Sec. 6971(a).
\6\ See International Safe Container Act, 46 U.S.C. Sec. 1506(a).
\7\ See, e.g., Surface Transportation Assistance Act of 1982, 49
U.S.C. Sec. 31105(a); Energy Reorganization Act, 42 U.S.C. Sec.
5851(a)(1)(B).
\8\ See Records and Reports on Monetary Instruments Transactions,
31 U.S.C. Sec. 5328.
\9\ See Federal Mine Safety and Health Act, 30 U.S.C. Sec. 815(c).
\10\ See Mine Safety and Health Act of 1977, 30 U.S.C. Sec.
815(c).
\11\ See Energy Reorganization Act, 42 U.S.C. Sec. 5851.
\12\ See Wendell H. Ford Aviation Investment and Reform Act for the
21st Century (AIR 21), 49 U.S.C. Sec. 42121.
\13\ See False Claims Act, 31 U.S.C. Sec. 3730(h).
\14\ See Sarbanes-Oxley Act of 2002, 18 U.S.C. Sec. 1514A.
\15\ See Equal Employment Opportunity Act (Title VII), 42 U.S.C.
Sec. 2000e-3(a).
\16\ See Safe Drinking Water Act, 42 U.S.C. Sec. 300j-9;
International Safe Container Act, 46 U.S.C. Sec. 1506.
\17\ See, e.g., Federal Deposit Insurance Act, 12 U.S.C. Sec.
1831j.
\18\ See, e.g., Solid Waste Disposal Act, 42 U.S.C. Sec. 6971.
\19\ See, e.g., International Safe Container Act, 46 U.S.C. Sec.
1506.
\20\ See, e.g., Sarbanes-Oxley Act of 2002, 18 U.S.C. Sec. 1514A.
\21\ See, e.g., Energy Reorganization Act of 1974, 42 U.S.C. Sec.
5851.
\22\ See, e.g., Age Discrimination in Employment Act, 29 U.S.C.
Sec. 626.
\23\ TERANCE D. MIETHE, WHISTLEBLOWING AT WORK: TOUGH CHOICES IN
EXPOSING FRAUD, WASTE, AND ABUSE ON THE JOB 54 (1999).
\24\ See Richard E. Moberly, Unfulfilled Expectations: An Empirical
Analysis of Why Sarbanes-Oxley Whistleblowers Rarely Win, 49 Wm. & Mary
L. Rev. ___ (forthcoming 2007), available at http://ssrn.com/
abstract=977802.
\25\ See Platone v. FLYi, Inc., No. 04-154, at 15 (ARB Sept. 29,
2006).
\26\ See Bothwell v. Am. Income Life, No. 2005-SOX-57, at 8 (Dep't
of Labor Sept. 19, 2005); Hughart v. Raymond James & Assoc., Inc.,
2004-SOX-9, at 44 (Dep't of Labor Dec. 17, 2004).
\27\ The study found that 81.8% (378/462) of Sarbanes-Oxley
Complainants whose allegation regarding retaliation was discernable
alleged that they were fired from their jobs as retaliation.
\28\ See Whistleblower Protection Enhancement Act of 2007, H.R.
985, 110th Cong. (2007).
\29\ See Moberly, supra note 1, at 1141-78 (discussing the
importance of implementing effective whistleblower disclosure
channels).
______
[Internet address to ``Unfulfilled Expectations: An
Empirical Analysis of Why Sarbanes-Oxley Whistleblowers Rarely
Win,'' by Richard E. Moberly, 49 William and Mary Law Review
(abstract), follows:]
http://ssrn.com/abstract=977802
______
Chairwoman Woolsey. Mr. Chinn.
STATEMENT OF LLOYD CHINN, PARTNER, PROSKAUER ROSE
Mr. Chinn. Madam Chairwoman, Ranking Member Wilson----
Chairwoman Woolsey. Your microphone isn't on.
Mr. Chinn. Madam Chairwoman, Ranking Member Wilson, members
of this subcommittee, I am pleased to appear and testify before
you today about the legal protections afforded to
whistleblowers. I counsel and defend employers in employment
matters. Often this representation focuses on the avoidance of
whistleblower claims, or, failing the avoidance of those
claims, litigation.
The question before you today, whether there are sufficient
legal protections for whistleblowers, and I would suggest that
question might ought to be modified in the following fashion:
Are there sufficient legal protections for whistleblowers
consistent with employers' competitive and potentially
profitable operations? And I would also add consistent with
fairness and due process to employers.
I am going to focus my remarks on the antiretaliation
provisions in Sarbanes-Oxley. The antiretaliation provisions in
Sarbanes-Oxley which were supported at the time of their
enactment, I believe, by the Government Accountability Project,
reflect a tried-and-true approach to whistleblowing in this
country on a Federal level.
Congress has chosen over the years when regulating a
substantive legal area, if it feels that it is necessary to do
so, it protects employees of employers in that regulated area
by providing some sort of whistleblower action. Those
whistleblower actions are designed to meet the goals, the
overarching goals, of the substantive legislation at issue.
They are not generalized whistleblower protections, nor are
they meant to be.
I should say as an aside, to the extent there are proposals
before the committee to enact a general whistleblower statute,
that is any employee who complains about anything and suffers
anything harmful, as a result has a cause of action, a Federal
cause of action. I would suggest that that would be legislation
of a monumental scope, one that would provide a recipe for
chaos and unintended consequences and would be far, far too
broad to meet any particular legislative goals faced by the
Congress.
Such an act also would ignore the Federal protections that
already exist and have been crafted to meet specific
legislative goals. It would be a massive--provide a massive
potential to overwhelm existing agencies and the Federal
courts, would ignore State regulation where States have chosen
to enact that sort of regulation, and ultimately it would
result in extraordinary litigation costs for employers.
Does that beeping mean I should stop talking?
With respect to Sarbanes-Oxley, I think a few words are
appropriate since Sarbanes-Oxley is one of our more recent
federally enacted whistleblower statutes. I think it is very
important for the committee to recognize and understand that
the Sarbanes-Oxley antiretaliation provisions are very
favorable as they are written today for employees. The burden
of proof at the prima facie stage for establishing a causal
connection between the protected activity and an adverse action
is very low. An employee need only show a contributing factor;
that is, that the protected activity was a contributing factor
in the resulting adverse action. This is a very low burden.
By contrast, in other employment litigation contexts, a
plaintiff employee might need to show a determining factor, a
significant factor, or at least a motivating factor.
Contributing factor is a very low standard. Once an
employee makes that showing, essentially an employer can only
win if it can prove that it would have taken the same action
anyway, notwithstanding the protected activity. And the
regulations governing Sarbanes-Oxley require that that showing
be by clear and convincing evidence. And for those who
litigate, those words have meaning. That is a far higher burden
than the preponderance of the evidence, the normal burden in
civil cases.
Another very favorable component of Sarbanes-Oxley for
employees is that Sarbanes-Oxley in essence provides a choice
of forum to the employee. Yes, the employee must start off with
a complaint to OSHA, but if that complaint has not been fully
adjudicated through all three levels of OSHA's review within
180 days, the employee has the right to go to Federal court.
The employer does not have that right; the employee does. As a
practical matter the employee will always have this right
because it will always take 180 days to exhaust all of those
processes.
Now, apart from the burdens of proof itself and the way in
which a Sarbanes-Oxley plaintiff goes about proving his or her
case, in our experience, in my firm's experience, OSHA performs
thorough and competent investigations, particularly when
compared to those investigations conducted by other Federal,
State and local agencies with whom we deal on a regular basis
representing employers.
Chairwoman Woolsey. Mr. Chinn, could you wrap up? We are
going to have Mr. Devine, and then we all have to go vote.
Mr. Chinn. I will do so.
In summing up I would just urge the committee that in
addressing either a broad whistleblower protection or looking
specifically at Sarbanes-Oxley, that it take into account the
costs attendant to any such protections. While it is
important--while whistleblowers serve an important role in
society, as all the witnesses here agree, there are costs
associated with these claims.
Professor Moberly's paper makes clear under any regulatory
regime regulating employment, the rate of failure of employees
who bring claims is extraordinarily high. Those are meritless
claims, and they are very expensive to litigate. I would ask
that the committee keep those costs, the cost to litigate those
claims, in mind in evaluating this subject. Thank you very
much.
Chairwoman Woolsey. Thank you. We can go further on that
with questions.
[The statement of Mr. Chinn follows:]
Prepared Statement of Lloyd B. Chinn, Partner, Proskauer Rose LLP
Madame Chairwoman and members of the Sub-Committee, I am pleased
and honored to be here today to testify about the legal protections
that are offered to private sector whistleblowers.
By way of introduction, I am a Partner in the Labor and Employment
Section of the law firm Proskauer Rose LLP. Although I practice out of
my firm's New York City office, I have handled employment matters in
federal and state courts and administrative agencies around the
country. My fifteen year legal career has been almost exclusively
devoted to the representation of employers in employment matters,
whether engaged in counseling for the purpose of avoiding employee
disputes or litigating those disputes as they arise. Throughout, I have
advised and represented clients in connection with litigating or
avoiding retaliation and whistleblower claims. In recent years, my
practice, at least in the for-profit sector, has focused on the
representation of financial services firms.
The issue before you today is whether there are sufficient legal
protections for private sector whistleblowers, balanced, against, of
course, the need for employers to run their businesses in a competitive
and potentially profitable manner. I am going to focus my prepared
remarks on the anti-retaliation provisions contained in the Sarbanes-
Oxley Act of 2002.
Before discussing the Sarbanes-Oxley anti-retaliation provision as
such, it is important to place that provision in context. Congress
enacted Sarbanes-Oxley against the backdrop of the Enron debacle, a
disaster born out of, among other things, fraudulent financial
reporting which grossly overstated earnings and understated
obligations. Given the breadth with which Enron stock had been held by
pension and 401k funds as well as individual investors, Enron's fall
was felt widely throughout the economy.
Unlike Title VII of the 1964 Civil Rights Act, the Fair Labor
Standards Act or Occupational Safety and Health Act, Sarbanes-Oxley is
not a statute intended in the first instance to govern employee/
employer relations. As the preamble to Sarbanes-Oxley states, it is an
Act ``to protect investors by improving the accuracy and reliability of
corporate disclosures made pursuant to the securities laws, and for
other purposes.'' To that end, Sarbanes-Oxley contained eleven titles,
ranging from Title I, which established the Public Company Accounting
Oversight Board to Title IV, which requires enhanced financial
disclosures to enhancing various relevant criminal provisions in Titles
IX and XI. As part of Sarbanes-Oxley's overall effort to protect
investors in public companies from fraud, Congress enacted Section 806
of the Act, titled, ``Protection for employees of publicly traded
companies who provide evidence of fraud''. This anti-retaliation
provision must not be mistaken for, or compared against, some sort of
generalized whistleblower protection act. Indeed, the approach adopted
in Sarbanes-Oxley is consistent with the federal government's oft-used
approach of enacting targeted anti-retaliation protections that fit
within the specific aims of the substantive legislation.
The Sarbanes-Oxley Anti-Retaliation Provisions Are Favorable To
Employees
The anti-retaliation provisions contained in Sarbanes Oxley are
unquestionably very favorable to employees. First and foremost, the
burden of proof for a Sarbanes-Oxley whistleblower claim is extremely
favorable to the claimant. To establish a prima facie case of
retaliation, the employee need only establish that: (i) he ``engaged in
a protected activity or conduct''; (ii) the respondent ``knew or
suspected, actually or constructively, that the employee engaged in
protected activity''; (iii) he ``suffered an unfavorable personnel
action''; and (iv) the circumstances were sufficient to give rise to
the inference that the protected activity was a contributing factor in
the unfavorable action.'' \1\ According to at least one district court,
``The words `a contributing factor' mean any factor which, alone or in
connection with other factors, tends to affect in any way the outcome
of the decision.'' \2\ By contrast, in other employment litigation
contexts, a plaintiff-employee must establish that the impermissible
consideration was a ``determining'' or a ``significant'' factor in the
employer's decision, a unquestionably higher burden of proof.\3\
According to the regulations promulgated under Sarbanes-Oxley, once
an employee proves a prima facie case of retaliation, an employer can
avoid liability only if it ``demonstrates by clear and convincing
evidence that it would have taken the same unfavorable personnel action
in the absence of the complainant's protected behavior or conduct.''
\4\ By contrast, in a mixed motive retaliation case under Title VII, an
employer need only prove by a preponderance of the evidence that it
would have taken the same action in the absence of the employee's
protected conduct.\5\
To engage in activity protected by the statute, a Sarbanes-Oxley
complainant need only ``reasonably believe'' that his report describes
a violation of the laws, rules and regulations set forth in the
statute.\6\ By contrast, certain whistleblower statutes require an
``actual violation'' of the statute, rule or regulation at issue.\7\
In addition, as a practical matter, employees (unlike employers)
have a choice of forum for their Sarbanes-Oxley retaliation claims--
they may choose whether to pursue a Sarbanes-Oxley whistleblower claim
before OSHA or in federal court. A Sarbanes-Oxley complainant may:
if the Secretary has not issued a final decision within 180 days of
the filing of the complaint and there is no showing that such delay is
due to the bad faith of the claimant, bring[ ] an action at law or
equity for de novo review in the appropriate district court of the
United States * * * \8\
Given the time frames allotted for the various proceedings before
OSHA, it would not be surprising to learn that many, if not most,
claimants will have this option. OSHA has sixty (60) days from filing
to issue a reasonable cause determination; the parties then have thirty
(30) days to request review by an Administrative Law Judge; appeals
from an ALJ's decision must be made to the Department of Labor's
Administrative Review Board (``ARB'') within ten (10) days, and the ARB
has 120 days to issue a final decision (which itself may be appealed to
a Federal circuit court of appeals).\9\ As Professor Moberly has noted,
the option to seek de novo review in federal court ``almost certainly
will be available for employees, because it is unlikely that the entire
process will be completed in that period of time.'' \10\
OSHA Performs Thorough Investigations
Apart from the statute itself, based upon my law firm's experience
with OSHA investigations of Sarbanes-Oxley retaliation claims, we
believe that OSHA has generally conducted thorough investigations, and
has certainly done so when compared to investigations conducted by
other federal, state and local agencies with whom we routinely
interact.\11\ Transferring jurisdiction over Sarbanes-Oxley retaliation
claims from OSHA to another agency at this point would waste the
experience and knowledge that OSHA has accumulated in handling these
matters. And doing away with the requirement that Sarbanes-Oxley
complainants first file with OSHA before going to federal court would
leave to the already-overburdened federal courts the task of weeding
out, in the first instance, the many Sarbanes-Oxley retaliation claims
that are procedurally flawed.
Sarbanes-Oxley's Salutary Effects On The Workplace
Apart from victories obtained by Sarbanes-Oxley plaintiffs, whether
through OSHA or in federal court, Sarbanes-Oxley has had a salutary
effect on the workplace. Section 301 of Sarbanes-Oxley mandates that
public company audit committees:
establish procedures for--(A) the receipt, retention, and treatment
of complaints received by the issuer regarding accounting, internal
accounting controls, or auditing matters; and (B) the confidential,
anonymous submission by employees of the issuer of concerns regarding
questionable accounting or auditing matters.\12\
In other words, Sarbanes-Oxley mandated the creation of an avenue
by which employees can raise certain issues without having to go
through the company's executives. Moreover, apart from Sarbanes-Oxley's
specific requirements in this regard, companies have adopted proactive
policies requiring the investigation and resolution of complaints made
pursuant to corporate codes of ethics. While it would be impossible to
quantify, Sarbanes-Oxley has undoubtedly promoted a culture more open
to and welcoming of internal complaints by employees.
Whistleblower Statutes Must Reflect A Balance Between Employee
Protections and Costs
While the enactment of Sarbanes-Oxley has undoubtedly positively
impacted investors in and employees of public companies alike, as with
any statute regulating the workplace, Sarbanes-Oxley has also had
costs. It is beyond dispute that for every meritorious case filed under
any employment statute, there are far more cases that are not.\13\ The
costs incurred by employers to defend such actions are staggering; the
defense of a meritless case can range from five to seven figures.
Moreover, there are certain employees who will abuse statutes such as
Sarbanes-Oxley, viewing a complaint protected thereunder as providing
guaranteed immunity from management or scrutiny. And because of the
very favorable burdens of proof to employees under Sarbanes-Oxley,
employers must be extraordinarily careful in managing employees who
have engaged in protected activity, even those whose complaints are
specious or in bad faith. Therefore, before considering any proposals
to make Sarbanes Oxley even more favorable to employees, the attendant
costs to employers must be considered.
A Brief Comment On Professor Moberly's Forthcoming Article
In a forthcoming article entitled ``An Empirical Analysis of Why
Sarbanes-Oxley Whistleblowers Rarely Win'' Professor Moberly asserts
that Sarbanes-Oxley has ``failed to protect the vast majority of
employees who filed a Sarbanes-Oxley retaliation claim'' because, in
his view, they do not win often enough.\14\ He comes to this conclusion
by comparing Sarbanes-Oxley ``win'' rates (before OSHA only, not in
federal court) with the ``win'' rates of claimants under other
employment statutes.\15\ The unstated premise necessary to this
argument is that employers are, in fact, retaliating against employees
in violation of Sarbanes-Oxley at the same (or greater) rate that
employers violate other employment statutes. But Professor Moberly
offers no support for any such hypothesis. (He, in fact, expressly
disavows possessing any evidence to support such a claim).\16\
In addition, much of Professor Moberly's criticism of the claimant
``win'' rate with OSHA reflects a disdain for the statute's limited
coverage in terms of employer types and protected activity. But that
limited scope flows naturally from the statute's original purposes,
discussed above. Indeed, by Professor Moberly's own analysis, if the
employee losses accounted for by such issues are excluded, employees
win at much higher rates (10.6 percent before OSHA and 55.6 percent
before ALJ's).\17\
Professor Moberly is also highly critical of the statute's 90 day
statute of limitations, and claims that it is contrary to Sarbanes-
Oxley's purpose.\18\ In fact, a short limitations period is entirely
consistent with the Act's purpose of protecting investors in public
companies. If a company is engaged in securities fraud, and it is
retaliating against putative whistleblowers who are trying to bring
that conduct to light, it is indeed in the interests of investors that
the fraud and retaliation be brought to light in an expeditious manner.
Moreover, of the fourteen anti-retaliation statutes administered by
OSHA, seven have a thirty (30) day limitations period, one has a sixty
(60) day limitations period, three (including Sarbanes-Oxley) have
ninety (90) day limitations periods; only three have periods greater
than ninety (90) days.\19\ Thus, it can hardly be said that the
Sarbanes-Oxley limitations period is ``restrictive'' (as asserted by
Professor Moberly), relative to other similar statutes.
Conclusion
The anti-retaliation provisions of Sarbanes-Oxley were enacted
against a particular backdrop with a specific purpose, to protect
investors in public companies. The statute, in its current form, is
very favorable to employees who present valid claims. Based on the
experience of Proskauer Rose, OSHA has done a relatively thorough job
in investigating and handling these claims. And American corporations
are taking actions internally to protect whistleblowers from
retaliation. Notwithstanding these positives, significant costs are
undoubtedly associated with Sarbanes-Oxley. Under these circumstances,
there is no basis for Congress to amend the anti-retaliation provisions
of Sarbanes-Oxley or otherwise alter its enforcement mechanisms.
endnotes
\1\ 29 C.F.R. Sec. Sec. 1980.104 (b)(1), 1980.109(a) (emphasis
added).
\2\ Collins v. Beazer Homes USA, Inc., 334 F. Supp. 2d 1365, 1379
(N.D. Ga 2004).
\3\ See, e.g., Hazen Paper Co. v. Biggins, 507 U.S. 604, 610
(1993)(to succeed on an age discrimination claim, a plaintiff must show
that age was a determinative factor in adverse action); Woodson v.
Scott Paper Co., 109 F.3d 913 (3d Cir. 1997) (jury must be instructed
that improper motive must have had a determinative effect on the
decision to fire in order for plaintiff to prevail on Title VII
retaliation claim).
\4\ 29 C.F.R. Sec. Sec. 1980.104 (b)(2) (emphasis added);
1980.109(a); Platone v. Atl. Coast Airlines Holdings, Inc., 2003-SOX-27
(ALJ Apr. 30, 2004), at 28, rev'd on other grounds, Platone v. FLYi,
Inc., Case No. 04-154 (ARB Sept. 29, 2006).
\5\ See, e.g., Kubicko v. Ogden Logistics Services, 181 F.3d 544
(4th Cir. 1999) (if employer establishes by a preponderance of the
evidence that it would have taken the same act adverse act in the
absence of protected activity, Title VII retaliation claim fails).
\6\ 18 U.S.C. Sec. 1514A(a)(1).
\7\ See, e.g., Pail v. Precise Imps. Corp., 681 N.Y.S.2d 498, 500
(1st Dep't 1998) (applying New York State's private employer whistle-
blower statute).
\8\ 18 U.S.C. Sec. 1514A(b)(1)(B).
\9\ 29 C.F.R. Sec. Sec. 1980.105(a),(c); 1980.109(c), 1980.110(c).
\10\ Richard E. Moberly, Unfulfilled Expectations: An Empirical
Analysis of Why Sarbanes-Oxley Whistleblowers Rarely Win, 49 Wm. & Mary
L. Rev. (forthcoming Fall 2007) (manuscript at 12, on file with SSRN:
http://ssrn.com/abstract=977802).
\11\ Any suggestion that more thorough investigations by OSHA would
necessarily favor complainants is nothing but pure speculation. Indeed,
one could hypothesize various sets of facts in which a more thorough
investigation would favor the employer. For example, while the timing
of an adverse action as related to a complainant's protected activity
might, on the surface, suggest a connection between the two, a more in-
depth analysis might reveal that the employer had planned the adverse
action prior to learning of the protected activity, thus undermining
any inference of retaliation.
\12\ 15 U.S.C. Sec. 78j (m)(4).
\13\ See, e.g., Moberly, Unfulfilled Expectations (manuscript at
20).
\14\ Moberly, Unfulfilled Expectations (manuscript at 2).
\15\ Some of the comparisons offered by Professor Moberly are
highly suspect. For example, comparing the rate at which the United
States Equal Employment Opportunity commission finds ``reasonable
cause'' to the rate at which OSHA finds ``reasonable cause'' is like
comparing apples to oranges. A ``reasonable cause'' finding by OSHA, if
not appealed, is a final determination on the merits. A ``reasonable
cause'' finding by the EEOC has no such effect.
\16\ Moberly, Unfulfilled Expectations (manuscript at 24) (``Thus,
we do not know, and cannot determine, whether employees filed ``good''
or ``bad'' Sarbanes-Oxley cases.''); (see also manuscript 24 n. 128).
\17\ Moberly, Unfulfilled Expectations (manuscript at 41)
\18\ Id. at 49-51.
\19\ The statutes other than Sarbanes-Oxley are the Occupational
Safety and Health Act of 1970 Sec. 11(c), 29 U.S.C. Sec. 660 (30
days); the Surface Transportation Assistance Act of 1982, 49 U.S.C.
Sec. 31105 (180 days); the Asbestos Hazard Emergency Response Act of
1986, 15 U.S.C. Sec. 2651 (90 days); the International Safe Container
Act of 1977, 46 U.S.C. app. Sec. 1506 (60 days); the Safe Drinking
Water Act of 1974, 42 U.S.C. Sec. 300j-9(i) (30 days); the Federal
Water Pollution Control Act Amendments of 1972, 33 U.S.C. Sec. 1367
(30 days); the Toxic Substances Control Act of 1976, 15 U.S.C. Sec.
2622 (30 days); the Solid Waste Disposal Act of 1976, 42 U.S.C. Sec.
7001 (30 days); the Clean Air Act of 1977, 42 U.S.C. Sec. 7622 (30
days); the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, 42 U.S.C. Sec. 9610 (30 days); the Energy
Reorganization Act, 42 U.S.C. Sec. 5851 (180 days); the Wendell H.
Ford Aviation Investment and Reform Act for the 21st Century (AIR21),
49 U.S.C. Sec. 42121 (90 days); and the Pipeline Safety Improvement of
2002 Sec. 6, 49 U.S.C. Sec. 60129 (180 days).
______
Chairwoman Woolsey. Mr. Devine.
STATEMENT OF TOM DEVINE, LEGAL DIRECTOR, GOVERNMENT
ACCOUNTABILITY PROJECT
Mr. Devine. Thank you.
I would like to begin by responding to a few of the
previous speaker's points. He said that as a general view
whistleblower laws that protect complaints about anything would
cause chaos. Of course, that is true; whistleblower laws
protect those who exercise free speech rights to challenge
abuses of power that betray the public trust. Let us be clear
who we are talking about.
Second, the gentleman said the SOX law is very favorable on
paper. It is on paper. That is the problem. The Achilles heel
is administration and due process rights to enforce those paper
rights.
Let me give you a few examples of the Achilles heels. The
first one is the Occupational Safety and Health Administration.
Just to illustrate the quality of work there, due to the volume
of complaints, GAP has had to develop a manual on how
whistleblowers can find their cases when OSHA loses them.
During the investigation the Agency regularly engages in
double standards on the right to counsel, access to evidence
and the opportunity to rebut the other side's arguments. Then
there is the other end of the administrative process, the
Appeals Review Board. That reflects the legal system's lowest
common denominator for appellate review. The members are minor
league political appointees with 1-year terms, frequently
without any subject matter expertise, who don't even move to
Washington because they view their jobs as part time. They
haven't returned any corporate whistleblower to the job since
Sarbanes-Oxley was passed in 2002.
GAP has helped about 4,000 people since I came there in
1979. Every day we are called on by whistleblowers to answer
questions about the facts of life with their rights. My
testimony has a baker's dozen examples of those questions and
the answers we must give if we are going to be honest. They are
based on the three-part Department of Labor process highlighted
today.
Let me give you a few examples. First, who do these laws
protect? Well, in any given industry, potentially any employee
or almost no one. It is like a road with more potholes than
pavement. The laws are generally tucked into specific laws such
as environmental or occupational safety statutes. Any
corporation potentially could violate those laws. So any
corporate employee potentially has rights about some things,
but about other more significant problems, they have none.
For example, at a meatpacking plant a whistleblower can be
protected for disclosing the runoff of fecally contaminated
water into the river, but not for selling fecally contaminated
meat or poultry that arrives on our families' dinner tables. Or
a pharmaceutical company, you have rights if you challenge
false statements to the shareholders, but not false statements
to the government or the public for potentially lethal drugs
like Vioxx, which killed 50,000 Americans from unnecessary
heart attacks.
Second, what am I protected from blowing the whistle
against? Most law protects exposure of illegality or other
actions to carry out the purposes of the statute. The Sarbanes-
Oxley eliminated that catch-all. So now the game is how illegal
is illegal enough. Some of the early decisions have made a few
factors to answer that. You must first prove that, one, the
fraud itself is material or about sometimes 1 percent of the
annual revenues; second, that the government actually will act
to punish the misconduct; third, that the punishment will have
a direct and specific impact on shareholders that lowers stock
value. There is no protection for, quote speculation, also
known as warnings. So much for knowing where you stand.
Third, if I speak out, when will I be become a legally
recognized whistleblower? That is a good question. It used to
be that challenging corporate misconduct internally triggered
rights as an essential preliminary step for responsible
government disclosures, but under some recent decisions that
coverage has been disqualified, which forces employees to
ignore their employers and contact the government behind the
company's back or else risk waiving their rights. That is not a
healthy system.
Well, how long do I have to act on my rights? Generally 30
to 90 days. There is a doctrine called equitable tolling, but
don't count on it. In one case DOL extended the deadline to a
year; in another Mr. Henry Emanuel they threw out his case for
being 43 days late.
How long is this going to take? On paper, 30 to 90 days,
but in our experience 2 to 3 years commonly, up to 14 years, 6
years not uncommon. To illustrate, it took Labor 4\1/2\ years
to tell Mr. Emanuel he was too late for his rights by filing 43
days after a 30-day deadline.
Madam Chair, again, we say that whistleblower laws can be
divided into those that create a free speech cardboard shield
or a metal shield. Anyone going into battle with a cardboard
shield, no matter how impressively it is painted, is going to
die. While conflict is always dangerous, with a metal shield
you have a fighting chance to win.
The current system is broken. It is a cardboard shield. It
is time to get this right, and thank you for starting that
process.
Chairwoman Woolsey. Thank you.
[The statement of Mr. Devine follows:]
Prepared Statement of Thomas Devine, Legal Director, Government
Accountability ProjectPrepared Statement of Thomas Devine, Legal
Director, Government Accountability Project
Madam Chair: Thank you for inviting my testimony. My name is Tom
Devine, and since January 1979 I have served as legal director of the
Government Accountability Project, a nonprofit, nonpartisan, public
interest law firm dedicated to helping whistleblowers--those employees
who exercise free speech rights to challenge illegality or other abuses
of power that betray the public trust. Since we began 30 years ago, GAP
has assisted over 4,000 whistleblowers. GAP has led outside campaigns
that led to passage of numerous government, military, and corporate
whistleblower protection laws. We represent whistleblowers in test
cases of those statutes, and to investigate their dissent against
alleged misconduct threatening the public. We steadily monitor
implementation of whistleblower statutes and share our results through
books, law review and popular articles, as well as congressional
testimony. See, e.g., The Whistleblower's Survival Guide: Courage
Without Martyrdom, and ``The Whistleblower Protection Act of 1989:
Foundation for the Modern Law of Dissent,'' 51 Administrative Law
Review 531 (1999).
Since 2000 GAP has worked hard for whistleblower protection on the
international level as a transparency cornerstone for globalization.
For example, we teamed up with American University Law School to draft
a model whistleblower protection law implementing the Organization of
American States (OAS) Inter-American Convention Against Corruption.
Over the last two years we have worked closely with officials at the
United Nations and the African Development Bank to issue new
whistleblower policies that for the first time protect public freedom
of expression by employees at Intergovernmental Organizations.
Currently we are completing work with the Tanzanian government's
Prevention and Combating Corruption Bureau for a national whistleblower
law to be introduced in that nation's Parliament this summer.
Unfortunately, in all too many instances we cannot point to U.S.
laws as the baseline for global best practices in whistleblower
protection. While well intentioned, their roads have led to a
professional hell on earth for whistleblowers who rely on legal rights.
The system of corporate whistleblower laws has been dysfunctional at
best, and frequently a trap that rubber stamps retaliation for all
naive enough to assert their rights.
Word spreads like wildfire in the employment grapevine at any
institution when that occurs, and the lesson learned is unfortunate:
don't work within the system. When corporate abuses of power betray the
public trust, there are three choices other than professional suicide:
look the other way, remain a silent observer, or go behind the
company's institutional back to out-Machiavelli the Machiavelli's with
an anonymous campaign. Blowing the whistle through established
structural checks and balances is like ``committing the truth.'' One of
America's most effective whistleblowers, Ernie Fitzgerald, coined that
phrase, because you will be treated like you committed a crime.
Corporate whistleblower law is a crazy-quilt of hit or (usually) miss
protections generally tucked into specific public health and safety
laws. With scattered exceptions, the lucky ones covered by the law
generally are unemployed, while serving open-ended sentences as
prisoners of an administrative law system with rigid, unforgiving
deadlines to act on rights, despite unrealistically short deadlines and
a convoluted maze of inconsistent bureaucratic procedures with
decisions seldom less than two to three years. and most statutes
without any chance for interim relief. This is professionally akin to
patients who die while waiting for an operation or organ donor.
The ultimate losers are the public. Two long-accepted truths are
that secrecy is the breeding ground for corruption, and sunlight is the
best disinfectant. Hand in hand with accountability, whistleblowing as
the freedom to warn is at least as significant. Otherwise even the best
leaders are ignorant of misdeeds, and those who fly blind are liable to
crash. When whistleblowers have the freedom to warn, both corporate and
government institutions can prevent avoidable disasters, before there
is nothing left but damage control and finger pointing.
In GAP's experience, since the 1980's whistleblowers have proved
their importance to society again and again. To illustrate, investors
believed whistleblowers over Nuclear Regulatory Commission rubber-
stamps and pulled the plug on plants that were accidents waiting to
happen. At the Hanford nuclear waste site, after a contractor publicly
announced the loss of 5,000 gallons of radioactive waste but reassured
there was no danger of it reaching the public, whistleblowers exposed
the truth: The real volume was 440 billion gallons. There already are
trace readings of the wrong kind of radioactive ``hot'' water in the
Columbia River water basin for the Pacific Northwest. Corporate
whistleblowers at meat and poultry plants repeatedly exposed attempts
to profit from fecally-contaminated products if the government
deregulated. Their disclosures helped keep public health disasters such
as the deadly Jack in the Box food poisoning tragedy from becoming the
norm. Dr. Jeffrey Wigand's rock of the truth turned into a landslide
that destroyed the tobacco industry's credibility and helped spark a
global cultural sea change about cigarettes.
Whistleblowers are the life blood for effective law enforcement. It
is difficult to win criminal convictions without testimony from those
who bear witness against corruption. Without protection for witnesses,
anti-corruption campaigns are empty and lifeless. Whistleblowing
disclosures to the SEC doubled normal rates during congressional Enron
hearings. As SEC enforcement chief Stephen Cutler commented, ``Because
of this phenomenon, among other reasons, we are learning of potential
securities law violations earlier than ever before. Keep those cards
and letters, not to mention emails, coming.'' This committee has
serious work to do, or government officials like Mr. Cutler will be
waiting for Godot. Profiles in Courage are the exception, not the rule.
Every day at GAP we are called by whistleblowers asking us the
facts of life if they rely on legal rights. Below are a baker's dozen
examples of the questions we receive, and the answers we are forced to
give if we want to be honest.
While there are 32 federal laws offering scattered protection for
corporate whistleblowers, the answers are for the most common
scenarios--witness protection provisions through a three step
Department of Labor process in enforcement clauses of 14 public health
and safety laws.1 For simplicity, they will be referred to as the DOL-
administered laws. Although even these statutes are not consistent, as
a rule their common features are an initial investigation by the
Occupational Safety and Health Administration (OSHA), an opportunity to
start with a clean slate at a due process hearing before an
Administrative Law Judge (ALJ), and appellate review for the Secretary
of Labor by an Administrative Appeals Board (ARB) which issues the
final agency decision. In most cases employees can seek limited review
by the relevant U.S. Court of Appeals. As seen below, even within the
DOL- administered whistleblower model, there are numerous, significant
variations, generally due to nothing more than when the particular
statute was passed.
1. Who do the corporate whistleblower laws protect? In any given
industry, potentially any employee or almost no one. The limited
subjects eligible for protection are like a road with more potholes
than pavement. The 14 whistleblower statutes are part of the
enforcement provisions for laws covering specific issues, most
frequently public health and safety laws such as the Clean Air, Water
or Superfund Acts. The list also includes truck (Surface Transportation
Act, or STA) and airlines safety (AIR21), occupational safety generally
and mine safety, and scattered narrow areas like safe cargo container
and. Pipelines. Any corporation may violate environmental or
occupational safety laws, so all employees have rights to challenge
those particular types of misconduct. But for other potentially greater
abuses of power, they may have none. No one can be sure without a
lawyer to navigate.
For example, an employee at a meat packing plant has free speech
rights when challenging release of fecally contaminated water flowing
into the river. But the same employee has no rights when challenging
fecally contaminated meat and poultry that shows up on our families'
dinner table. A truck driver is protected for challenging bad tires,
but not illegal cargo. An employee of a pharmaceutical company has
protection for disclosing false statements in financial reports to the
shareholders. But there is none for challenging false statements to the
government and the public about potentially lethal drug safety hazards,
like the threat of unnecessary heart attacks from killer pain killers
such as Vioxx that killed 50,000 Americans.
2. What am I protected for blowing the whistle against? Most
whistleblower statutes protect those who challenge illegality or take
any other action to ``assist in carrying out the purposes'' of that
particular law. The Sarbanes Oxley (SOX) law's early track record
illustrates the risk of omitting the catchall phrase. In theory, SOX
sweeps through industry distinctions by protecting those who challenge
fraud, or any illegality that materially affects the shareholders'
interest. But employees at privately-held subsidiaries of public
corporations cannot count on having rights, and those working at a
large corporation's international offices have none.
Most frustrating under Sarbanes Oxley, it is not enough to blow the
whistle on illegality. The question still has not been clearly
answered, ``How illegal is illegal enough for free speech rights?''
Under some early decisions it also is necessary to prove that--1) the
fraud itself is material (such as one percent of annual revenues); 2)
the government would take action to punish the misconduct; and 3) the
punishment would have a direct and specific impact on shareholders that
lowers stock value. There is no protection for challenging any
misconduct with ``speculative'' consequences. So much for knowing where
you stand. And it's doubtful whether the law applies at all if the
company requires submission of all disputes to a company-controlled
system of arbitration as an employment condition.
None of the laws have the well-established protected speech
boundaries of the Whistleblower Protection Act for federal government
workers that also are included in many state laws: illegality, gross
waste, gross mismanagement, abuse of authority or a substantial and
specific danger to public health or safety.
3. If I speak out, when will I become a legally-recognized
whistleblower? That's a good question. It used to be that challenging
corporate misconduct triggered rights as an ``essential preliminary
step'' for responsible disclosures to the government. But recent
Surface Transportation Act decisions have disqualified protection for
internal disclosures, forcing employees to contact the government
behind their employer's back or else risk waiving their rights. To
illustrate the consequences, the ARB recently canceled protection for a
trucking employee who ``red tagged'' (required repairs before use)
vehicles for safety violations. This adds significant, potentially
unnecessary burdens for government enforcement units, where a
corporation would have acted in good faith if employees had the freedom
to warn of problems that may well have been honest mistakes.
It also can have lethal consequences for the public. Examples of
red tags are broken doors, inoperable lights, and defective brakes. (On
a personal note, the latter is the same violation that caused my
brother's death at 30 years old while waiting at a stop light--
depriving his wife, six month and three year old children of a father.)
4. Am I protected for refusing to violate the law? Rarely. Unlike
the Whistleblower Protection Act for government workers and an
increasing number of state laws, in most DOL administered laws, you're
only protected for making noise. If you try to walk the talk, you are
walking the plank.
5. How long do I have to act on my rights? It ranges from 30-90
days in most DOL-administered statutes. In theory, the law could
provide flexibility through a doctrine called ``equitable tolling.''
But don't count on it. In one case, DOL extended the deadline to a
year. But in another dispute involving organic market employee Henry
Immanuel, DOL threw out his case for being 43 days late.
Mr. Immanuel's surreal ordeal is illustrative. Ironically, he was
fired for blowing the whistle when an organic market threw five gallons
of toxic industrial cleaner in a trash dumpster. Within 13 days he
filed a reprisal complaint with the Maryland Occupational Safety and
Health (MOSH) agency. After six months, they informed him that they
were the wrong agency to handle the dispute. He then began a campaign
asking government offices where he was supposed to defend his rights.
Despite a series of false leads, he found out about OSHA and filed a
complaint 73 days later. That was 43 days after the normal 30 day
deadline. According to DOL, it was too late and there were no excuses.
In order to avoid Mr. Immanuel, without explanation the ARB disregarded
a series of prior rulings extending deadlines up to a year due to
similar circumstances. Despite a legal doctrine that asserted the same
rights in the wrong forum qualifies for deadline purposes, the ARB
somehow asserted that he hadn't made the same ``precise'' complaint
before the Maryland and federal OSHA's, again without explanation.
In another recent decision, the ARB abandoned the longstanding
doctrine of continuing violations. This means employees must file new
lawsuits against each act of additional harassment within 30 days.
6. How long will this case take? In theory, most statutes give the
Department of Labor 90 days for a decision. In reality, expect to be
twisting in the wind for at least two to three years. One vindicated
Department of Energy whistleblower on radioactive releases at nuclear
weapons facilities twisted for 14 years before the current political
appointees reversed a series of preliminary victories that had kept
getting sent back to perfect technicalities. Six years is not uncommon.
To illustrate the double standard between deadlines for whistleblowers
and deadlines for the government, it took the Labor Department 4.5
years to tell Mr. Immanuel that he was too late to keep his rights by
filing 43 days after the 30 day deadline.
7. Can I get any interim relief while I'm waiting? In a few recent
DOL-administered laws such as AIR21 and SOX, you can get a ruling for
interim relief. But even then don't count on enforcing it. A recent
court decision held that since employers cannot immediately appeal
interim rulings, it would violate the company's due process rights for
courts to enforce a DOL ruling that the employer defies.
8. When it's all over, what are my chances of winning? Around one
in twenty. This is the bottom line for whistleblowers. If there is no
realistic chance of success, the law is a trap that offers legal
wrongs, not rights. If there is not a fair chance to win, asserting
your rights costs tens of thousands of dollars and drags out painful
disputes for years--all to officially endorse the retaliation you are
challenging by rubberstamping it. GAP regularly must ground
whistleblowers in this reality.
Professor Moberly's statistics on SOX results are representative
for the DOL legal system generally, so they are worth emphasizing: 3.6%
win rate at the OSHA level, 6.5% with Administrative Law Judges, and
not a single case where the ARB has ordered retaliation to stop in over
four and a half years.
9. Will the government respect my rights on paper? The ARB seems to
have a blind spot for congressional language. For example, the Board
functionally has erased the common catchall provision providing
protection for any action to assist the government ``to carry out the
purposes'' of the relevant statute. Recent rulings on the STA truck
safety law are illustrative. In one case, the ARB disregarded a
driver's refusal to drive while impaired due to sleep deprivation--
specifically protected activity in that statute. Instead, it created a
loophole with the explanation that the employee shouldn't have been
hired in the first place.
Despite unqualified statutory language banning any discrimination
because of legally-protected activity, discrimination no longer counts
until there is a victim. For example, companies can issue retaliatory
warning letters, even though their effect is to mean the person can be
fired for the next offense. That is the employment equivalent to saying
nothing can be done when someone points a gun, until the bullet enters
flesh and draws blood. The SOX language outlawing ``threats'' of
retaliation apparently has vanished, although that type of harassment
can have the worst chilling effect--de facto prior restraint.
There is no way to predict how DOL will read the law in any
particular case. Recent trucking decisions canceling protection for
``essential preliminary steps'' to a disclosure reverse over two
decades of case law, without explanation. This means those with jobs
like safety inspectors, auditors or truck drivers proceed at their own
risk when issuing reports or notices of violation that are the
foundation for government disclosures.
GAP has been frustrated by Kramer vs. Kramer type scenarios in the
same case. In one instance the Secretary of Labor reversed an
Administrative Law Judge and sent the case back to properly interpret
the law in a scathing ruling. The ALJ issued a nearly identical
opinion, and the next time up the decision was approved.
10. What do I have to prove to win; what tests will I have to pass?
It all depends on which law. Ten of the laws are governed by antiquated
burdens of proof from 1974: an employee must prove that protected
activity is the ``primary, motivating factor'' in order to establish a
basic prima facie case. Then the burden of proof shifts, and the
employer can still prevail if it proves by a preponderance of the
evidence'' that it would have taken the same action for independent
reasons. Under four recent DOL-administered whistleblower statutes, the
more modern standards of the Whistleblower Protection Act apply: the
employee only has to prove protected activity was a ``contributing [or
relevant] factor'' for a prima facie case, and the employer must prove
its independent justification with ``clear and convincing'' evidence.
11. Will I be able to go to court for my day in court? For two of
the 14 laws, yes. Under SOX an employee can go to court and start
fresh, if the DOL administrative process has not produced a final
ruling in 180 days and the delays are not due to the whistleblower's
bad faith. Under the Energy Reorganization Act, nuclear energy and
weapons workers have that same option if it takes DOL more than 360
days. Under all the other DOL-administered statutes: no. Most of the
DOL-administered laws provided limited review in U.S. Courts of
Appeals, but not all. For example, for mine safety or OSHA violations,
there is only review to internal commissions where an employee can ask
the agency to change its mind.
12. If I go to court, will a jury decide whether my rights were
violated? In theory, that is possible under SOX, but no one has made it
to a jury since the law's 2002 passage. The same is true for nuclear
whistleblowers, although their access was not established until the
2005 Energy Policy Act. The courts have warned they may not accept jury
trials despite clear congressional intent, because of a technical error
in drafting the law.
13. When it's over, will I understand why I won or lost? Get
serious. While there are exceptions, increasingly the rule is not to
supply an answer or even hints about ``why'' any given conclusion was
reached. The Board regularly keeps secret both the evidence and
reasoning for its conclusions.
No solution can be reliable unless it addresses a problem's causes.
At the Department of Labor, there are two Achilles' heels are at the
beginning and end of the process--the Occupational Safety and Health
Administration (OSHA), and the Appeals Review Board (ARB). To put
whistleblowers' frustrations at OSHA in perspective, due to the volume
of complaints GAP had to develop a manual for how whistleblowers can
find their cases when OSHA loses them. During the investigation, the
agency regularly engages in double standards on the right to counsel,
access to evidence and the opportunity to rebut the other side's
arguments.
The ARB has the final word for the Secretary of Labor after an
administrative hearing. It reflects the legal system's lowest common
denominator for appellate review. The members are political appointees
selected by the Secretary of Labor for one year terms--effectively
minor league patronage appointments without enough time to accumulate
expertise even if they were qualified. They view their jobs as part
time, frequently living in their home states except when they fly in
for meetings and tell the career staff how to rule, without
consistently first reading the staff's memoranda analyzing the record
and the law. While the Office of Administrative Law Judges (OALJ) is
well-respected, realistically it cannot overcome the legitimacy
breakdown that surrounds it.
In piecemeal fashion, Congress has been acting in good faith, if
inconsistently, to protect corporate whistleblowers for over 30 years.
The piecemeal inconsistencies reflect scattershot lessons learned, and
demonstrate Congress' good faith in trying to improve whistleblower
rights. But the system is broken. In the process, there has been an
opportunity to learn many lessons.
Our organization is available and pleased to assist staff to
develop solutions, based on 28 years of frequently painful experience
learning the reality behind free speech rights on paper. At GAP we
divide whistleblower laws into cardboard and metal shields. Anyone
going into battle with a cardboard shield, no matter how impressively
it is painted, is doomed. While conflict is always dangerous, a person
with a metal shield has a fighting chance to survive. The current
system of corporate whistleblower laws is a cardboard shield.
The result? The current corporate laws have created more victims
than they have helped. The net impact of free speech laws has been to
punish those who exercise that right, while creating a chilling effect
in the process. Your leadership is long overdue. It is long past time
to get it right, with a composite law that is coherent, consistent,
comprehensive, and actually works.
______
Chairwoman Woolsey. We have a series of votes. We will be
back in about a half hour. So get up and stretch your legs, but
we will be back.
[Recess.]
Chairwoman Woolsey. We are back in order. And as long as I
am the first person to ask questions anyway, I will get started
so you guys can get on with your lives. There will be other
Members coming back, but once the day is over for voting,
people just sort of disappear. So don't be disappointed if we
don't have the full committee back here.
So I am going to begin with you, Mr. Devine, because we
ended with you. So I am going to start with you. I mean, how do
you respond to critics who claim that most whistleblower cases
are without merit, and that profitability should trump freedom
of speech? What is your response to that?
Mr. Devine. In our experience, about a third of the--I
should preface it, Madam Chair, that we are a small
organization that doesn't have the funds to regularly meet
payroll, so we have to be very careful who we represent. The
only thing we really have going for us is credibility. And if a
whistleblower is a phony, camouflaging their own hidden agendas
or misconduct, and we champion them, no one would take
seriously the other people we help. That is the key question
for us. And in our experience, about a third of the people who
contact us have valid whistleblower claims out of the totals.
And it is not that everyone else is in bad faith; they may
have another dispute that is really more discrimination, race
and sex, or a personality conflict where they were treated
unfairly, but not a whistleblower case. The whistleblower
statutes that have worked have generally had between a 25 and
33 percent success rate for decisions on the merits, and that
is pretty much consistent with our experience. That is why
Professor Moberly's statistics are so disappointing, where
anywhere from an eighth to a fourth of really the bottom--the
bottom level for a statute that is functional in terms of
results.
Chairwoman Woolsey. That leads me right into asking you,
Mr. Chinn, how do you consider a program successful if there is
a 5 percent favorable decision towards employees, and then that
means 95 percent favorable towards the employer? How does that
turn into success?
Mr. Chinn. Well, Madam Chairperson, I would say that the
first question really is to what degree was there unlawful
conduct, in this context retaliation?
Chairwoman Woolsey. You have said that, but the statistics
have to say that 95 percent of the people that come before and
used Sarbanes-Oxley, they are not--95 percent of them are not
doing it for the wrong reasons and are not out of step. I mean,
what is missing in this picture that the other good cases are
being thrown out?
Mr. Chinn. Um-hmm. Well, I don't know that that proposition
is correct, Madam Chairperson, with all due respect, that is
that good cases are being thrown out. Sarbanes-Oxley was
enacted for a very specific reason, and it does have very
specific requirements with respect to protected activity.
Chairwoman Woolsey. Would anybody else up here like to
respond to that? Because I think you--you are supporting
something that is not working. How does that work, Mr. Fairfax,
with you? I mean, if you have an agency that is--your workload
has increased considerably, you have got only what, two more
employees, and how can you possibly be effective?
Mr. Fairfax. I actually think we are very effective. Our
merit rate--we count our merit rate as any case where we issue
a finding of merit or that we settle on behalf of the
complainant. Remember, as I said in my testimony, we are
working all the time with the complainant and the respondent,
and throughout the phase of the investigation we are meeting
with them. And if we think we are going forward with a merit
case, we encourage them to try to settle the case. That saves
people time and money across the board. More times than not
these cases are settled. So when you add up where we issue a
merit finding, and then you add up where we settle the case,
right now we are right at around 22 percent as what we would
include as a merit case.
Chairwoman Woolsey. So, Professor Moberly?
Mr. Moberly. One of the concerns I have with including
settlements as merit rates is that we have no idea what these
cases are settled for. So the settlement rate, I think, is kind
of a red herring when you look at it. I have asked for that
information from OSHA. OSHA has a regulatory--under their own
regulations a responsibility to oversee settlements to make
sure they are fair and adequate and reasonable. And they have
denied my Freedom of Information Act request for that
settlement information, which I think would let us look more
deeply at whether these cases are successfully resolved with
settlement.
Chairwoman Woolsey. Okay. We will be back.
Mr. Kline?
Mr. Kline. Thank you, Madam Chair. Thank the witnesses for
being here today.
I know that my colleagues and I had discussed a number of
these questions, and they haven't come back from votes yet, so
I am going to skip around just a little bit. I am looking at
this chart. Do you folks have this thing?
Mr. Fairfax, this is percentage of meritorious cases by
year.
Mr. Fairfax. Yes, I have a copy of it.
Mr. Kline. It looks to be--in your testimony you mentioned
something like 23 percent were considered meritorious. As I am
looking at this across the years from 2000 to 2006, it looks
like they are always in the twenties.
Mr. Fairfax. Yep.
Mr. Kline. Regardless of administration, regardless of
party, we are running somewhere in the twenties of cases that
are considered meritorious; is that right?
Mr. Fairfax. That is correct. And that actually goes back
30 years we have been consistent in that range.
Mr. Kline. Okay. That is good. I was going to ask, because
my chart stops here at 2000, which would have been the last
year of the Clinton administration. So interesting to see that
we have stayed pretty much consistent administration to
administration. And this is, I think your testimony was,
something like 1,800 to 2,100 cases?
Mr. Fairfax. Correct.
Mr. Kline. Is that----
Mr. Fairfax. Yeah. We average probably around 1,900, but
1,800 to 2,100 cases per year. And that has been consistent for
the last 5 or more years.
Mr. Kline. Okay. We have gone through this issue of
sometimes they are settled, you reach a settlement; sometimes
they are withdrawn to go to court; is that correct?
Mr. Fairfax. In some statutes, sir, the complainant can
take them directly to court.
Mr. Kline. Okay. Let us talk about that aspect of it, where
the complainant, in order to seek a remedy by Federal court,
withdraws the complaint.
Mr. Fairfax. They don't actually withdraw the complaint.
They withdraw it essentially from us. Under the Sarbanes-Oxley
and the Environmental Energy Resource Act, the complainants
can--if we haven't resolved it within a certain time period,
they can pull the case back and take it back to Federal court.
Mr. Kline. Do you continue to track these cases?
Mr. Fairfax. Yes, we do.
Mr. Kline. And do you have any information on how those
cases have come out?
Mr. Fairfax. The last data I looked at it was not very
successful. I don't have the actual numbers, but I didn't feel
it was very successful. I thought our success rate of settling
these case or finding merit was better.
Mr. Kline. Thank you.
Professor Moberly, have you got some sort of sense of what
the appropriate win rate should be? I mean, you have been
somewhat critical of what seems to be a low win rate, I think
the Chairwoman said 5 percent or something. What should it be?
Mr. Moberly. Well, under EEOC investigations it is closer
to 10 percent. It depends on if you look at under claims that
are filed in Federal court, those claims usually resolve at
about 13 or 14 percent. So, you know, these are--Sarbanes-Oxley
cases tend to be resolved at a rate three or four times less
than what we see in comparable other employment statutes.
Mr. Kline. So 15 percent or something like that is what
you----
Mr. Moberly. I think Mr. Devine already made a statement
that he thought, you know, 25 to 30 percent we see under other
claims. I think the False Claims Act is somewhere in that range
as well.
Mr. Kline. Okay. So we are sort of groping for a number
here. In your studies, again staying with you, Professor
Moberly, you don't count cases which settle. Do I understand
that right?
Mr. Moberly. That is correct. I just count cases that have
gone all the way through the administrative process.
Mr. Kline. Why don't you count those? It looks like we are
getting an incomplete picture if you don't count those.
Mr. Moberly. Sure. And I am pretty clear in my paper why I
don't count those. And the reason is--the reason, I explained
to Chairwoman Woolsey, is I don't have any information. You
know, employers and employees settle cases for all sorts of
reasons, some of which are unrelated to merit. Nuisance value.
And unless we know the amounts for which those cases are
settled, it doesn't make sense to include them as automatically
meritorious for employees. Employees may be out of work. It may
be 6 months into their----
Mr. Kline. Or not meritorious would be the other side of
that; is that right?
Mr. Moberly. That is very true. Yes.
Mr. Kline. So if you are looking at a total number of
cases, 1,800, 1900 cases, if we were looking at the OSHA
example of Mr. Fairfax, some percentage of those get settled,
you are just disregarding those completely, but you are taking
the percentage of the total number; is that correct?
Mr. Moberly. No, sir, that is not.
Mr. Kline. You are dropping those out?
Mr. Moberly. The settlements and withdrawals are dropped
out of the numerator or denominator. These are cases that have
just been resolved completely by OSHA or ALJ and the win rate
for those cases.
Mr. Kline. Got you.
Thank you, Madam Chair.
Chairwoman Woolsey. Thank you.
Mr. Bishop.
Mr. Bishop. Thank you, Madam Chair.
Witnesses, thank you very much for all your testimony.
Professor Moberly, you said--I think I am going to
paraphrase you--that this is not the system we would create if
we were creating a system from scratch. Briefly, can you
outline the system we would create if we were creating one from
scratch?
Mr. Moberly. I think what the current system demonstrates
is that these narrow ad hoc protections serve to define
whistleblowers out of protection; that agencies at least and
courts also focus on these kind of boundary issues so that we
never get to the claim of whether someone was retaliated
against. The courts and agencies spend a lot of time focusing
on is this the right type of employee? Did they make the right
type of disclosure? Did they do it in the right way? Did they
tell the right person? So the first thing you would have to do
is, I think, broaden those definitions so that they don't
become land mines for whistleblowers, and they actually provide
true encouragement. So broader overall protections.
I think an easy and very helpful solution would be to
increase the statute of limitations for these provisions across
the board. The various numbers from 30 days to 300 days, I
think, are potentially disastrous for employees. And a longer
statute of limitations purposes, I think--longer statute of
limitations period would serve the purposes a little better.
And I think there could be more transparency in the
process. I had to file a Freedom of Information Act request
just to get decision letters from OSHA to find out what
happened on these cases, and those could be made more
available.
Mr. Bishop. Thank you very much.
Mr. Chinn, I know you were taking notes, but could you
comment on Professor Moberly's very brief outline of a system
that we would create from scratch, what your assessment of it
would be?
Mr. Chinn. I would be happy to do that, Congressman Bishop.
With respect to--well, first of all, I am not exactly sure what
is being proposed. Definitions should be broadened. I am not
sure on a statute-by-statute basis or as Professor Moberly is
proposing, some sort of Unified Whistleblower Protection Act.
Mr. Bishop. Let us assume he is proposing a unified
whistleblower protection.
Mr. Chinn. Okay. With that assumption in mind, I think that
that is a very radical proposal and would be something akin to,
in terms of scope, to the enactment of Title 7. And if you are
going to make that sort of step, it seems to me that there
would be some sort of findings necessary before you would go to
that, as opposed to anecdotal horrors, which can be matched, I
assure you, Congressman, with anecdotal horrors of meritless
cases taking up tremendous sums of money, or people misusing
the statutes for protection, even in the two-thirds of the
times seen by Mr. Devine.
If we are going to now federalize and nationalize a
whistleblower protection program that would protect everyone
who in any job who complains about anything, I think that would
be a recipe for chaos, and it would ignore the carefully
targeted, drafted legislation that exists today. And it would
also ignore the State protections that exist on a State-by-
State basis throughout the country.
Mr. Bishop. I am sure you don't agree with this, but the
carefully targeted legislation that you described is
legislation that has failed to protect people. So either there
is something wrong with the way it has been crafted, or there
is something wrong with the way it is administered.
Mr. Chinn. Well, Dr. Wigand described his case as an
extreme example, and I would suggest that concluding that a
national Uniform Whistleblower Protection Act--the enactment of
such an act based on extreme examples would be bad policy.
Mr. Bishop. What about Mr. Simon's example? Would you find
that to be an extreme?
Mr. Chinn. No. But I think Mr. Simon fits within a current
statute. Mr. Simon's complaint is the way in which he has been
dealt with, and there may well be answers to that, but those
answers fall far short, in my humble opinion, of requiring a
national Whistleblower Protection Act.
Mr. Bishop. Okay. I am going to run out of time, and I want
to ask Mr. Fairfax a question. You say you have 1,900 cases
annually, with 72 investigators. Professor Moberly's testimony
included a statistic that now 13 percent of your caseload is
Sarbanes-Oxley issues, which prior to 2002 was not a factor for
you, and yet there has been no increase in staff. And so my
question to you is the unit that handles this within OSHA, is
it adequately staffed? Would you benefit, would the system
benefit, from additional investigators?
Mr. Fairfax. Thank you. Actually, I think we do a good job
with what we have. I mean, while the number of Sarbanes-Oxley
cases has gone up a little bit since it was enacted, the number
of cases under section 11(c) of the OSHA statute have
decreased. So the balance has been there. We are really only
averaging 25, maybe 30 cases per year per investigator, which
is considerably less than what we averaged for our compliance
officers that do our inspections. So, you know, I look at the
data, and I evaluate it, and I look at the number of cases, and
I look at our workload spread across the country, and I think
we are pretty well balanced out and have the resources to do
it.
Mr. Bishop. Thank you.
Would the Chairman indulge me for one additional question?
Chairwoman Woolsey. Yes.
Mr. Bishop. Why do you think your non-Sarbanes-Oxley cases
have declined?
Mr. Fairfax. We have been looking at that for years,
because they have steadily been going down since probably the
late 1990s. I don't have an answer why they have been going
down. You know, maybe we are out there enough, and enough
people know about the provision under section 11(c) of the OSHA
Act. But I don't have an answer off the top of my head for
that.
Mr. Bishop. Thank you very much. Thank you all.
Chairwoman Woolsey. While we are waiting for the Ranking
Member to come, I will give him a little bit more time by
asking a question. I would like to ask Dr. Wigand and Mr.
Simon, you know, most people aren't as brave as the two of you.
I mean, they just aren't made that way. And so what I would
like to know from you is what actions--what actions should be
taken that would encourage workers to speak out from your
perspective, starting with Dr. Wigand?
Mr. Wigand. I think if there was some legal framework that
provides a psychological comforting counterweight to the fear
and the retaliation. To tell the truth, you need bodyguards is
an extreme, I agree, but when you take on the tobacco industry,
you take on a $45 billion industry that has unlimited resources
and had five decades of fraud. Would I have liked to have had
some entity that would have provided for me legal,
psychological, marital and other types of support? One, it
probably would have made it a little bit easier. Number two, it
may have made it a lot earlier. And if it was earlier, there
may have been a lot more lives that were saved. I did not have
that available.
As they characterized, my case may be extreme, but I think
it is extreme for all people who find that what their actions
get back is extreme retaliation. The retaliation of Mr. Simon
was no different than the retaliation of me. It is retaliation
for telling the truth, and we need protection to tell the
truth.
Chairwoman Woolsey. Mr. Simon?
Mr. Simon. I think through my experience, and that is all I
can base any of this on is my experience in all of this, that
the companies were not in any way, even after the hearing at
Federal AL--the ALJ, they sided on my behalf after the hearing,
and there was no financial responsibility on the employer's
part. They weren't held to any type of, I guess, reason to try
to settle the case or to want to settle the case. If there
could be a way that they are immediately responsible once it
gets to a certain point, like after a hearing, that they are
going to either put the employee back to work at a profitable
position for them and the employee, or some other way they are
held financially responsible, they are not going to do
anything, in my opinion. They are going to just basically laugh
at you, like they did to me, and throw you out of their office.
Chairwoman Woolsey. Sorry. Mr. Devine?
Mr. Devine. Madam Chair, I would say there are four
cornerstones for an effective solution. The first is no
loopholes coverage for all who disclose evidence challenging
abuses of power that betray the public trust. The second is
consistent procedures that incorporate modern burdens of proof
so everybody has the same rules to prevail. The third is first-
class due process rights so you get a genuine day in court. And
the fourth is if you win, that it matters; results that will
eliminate the prejudice when you win, both on the interim or
the final levels.
And I feel that it is necessary to respond to a few of Mr.
Chinn's comments, because he said this will be a very radical
proposal. Well, you know, I thought freedom of speech is what
defined our country. This is freedom of speech where it counts.
Radical to whom?
Second, he said that having a national law with a
consistent, coherent set of rights would be bad policy. Quite
frankly, coherence replacing chaos, I think, is good policy. I
think that objection flunks the laugh test.
And third, he said that, well, we shouldn't do this because
some people might abuse their rights. Well, in that case I
guess we should cancel all the our rights, because they can all
be abused.
And if we are talking about the costs, let us weigh the
costs of frivolous lawsuits to the costs for society when a
corporation abuses its power. And if the view of the corporate
sector is we need to make a record of the full extent of the
price that society has paid for corporate abuses of power, I
say let us get started.
Chairwoman Woolsey. Thank you.
Mr. Wilson?
Mr. Wilson. Thank you, Madam Chairman.
Mr. Chinn, there has been testimony that OSHA is
interpreting Sarbanes-Oxley as a statute incorrectly or too
narrowly. What would be your opinion as an analysis of
Sarbanes-Oxley?
Mr. Chinn. Well, I think, first of all, there are a number
of decisions out there from OSHA; there are now court decisions
as well. Some of the decisions that are cited by Professor
Moberly or by Mr. Devine are not any way controlling. They are
just part of the body of case law that is developing. I think
in general, though, the decisions are consistent with the
overall purposes of the act.
What is complained about here, for example, the statute of
limitations, which--by the way, the statute of limitations for
a retaliation claim under Sarbanes-Oxley is not at all out of
line with the other 13 statutes or 14 total statutes
administered by OSHA. The complaint that there are decisions
dismissing cases for being untimely, well, that is what a
statute of limitations is for. The complaint that there are
decisions dismissing claims brought by employees of private
employers, well, that is what the statute says. So I don't
think--those are complaints about the legislation. Those are
complaints that don't recognize that the legislation was
enacted with a particular purpose in mind, the purpose to
protect investors. It was not, as is being discussed today
among some of the panelists, a general whistleblower protection
statute.
So I think that the interpretations, I mean, some of them
conflict, and that is normal, just like district court opinions
around the country will conflict until they simmer up and
create decisions in circuits, and ultimately the Supreme Court
rules. But I think that they are generally consistent with the
text of the act, the text of the regulations promulgated under
the act, and the intent of the act.
Mr. Wilson. And, Director Fairfax, thank you for your
service. And I indeed have represented workers in regard to
retaliation, and it has always been a terrific experience when
people get a job back. But how does OSHA define a win?
Mr. Fairfax. We define it as we do an investigation. If we
think we have a merit case that we are developing, we approach
the respondent after talking with the complainant about
settling the case. We look at a win as a case that we settle, a
case that we issue findings of merit on, or in some cases the
parties get together themselves, through a union or whatever,
and they settle a case that comes back to us to approve. We
count that as a win also. So those three areas we count as
successful outcomes for the complainant, or a win for us.
Mr. Wilson. And we appreciate that very much.
Additionally, there is several areas of unsettled law that
OSHA is attempting to address. Can you explain what those are
and when you think they will be settled by the courts?
Mr. Fairfax. I am not sure what you are asking, unsettled.
Mr. Wilson. This is in Sarbanes-Oxley specifically.
Mr. Fairfax. One of the ones I am most familiar with is
dealing with employees of U.S. corporations that are overseas.
We have some, I guess, lawsuits, I guess, if you will, on those
cases, and we are pursuing them through. We haven't settled
those cases yet. That is the one I am most familiar with of the
two or three.
Mr. Wilson. And do you have any anticipation when this may
be resolved, or is there a role of Congress to clean up----
Mr. Fairfax. No, it is working its way through the courts.
I would think sometime this year I would hope.
Mr. Wilson. And, Mr. Chinn, as a practicing attorney with
Sarbanes-Oxley whistleblower cases, it is my understanding you
also practice in other areas. Can you outline some of the
differences that a complainant would experience with Sarbanes-
Oxley as, say, an EEOC complaint alleging discrimination?
Mr. Chinn. Sure. Be happy to. A Sarbanes-Oxley complainant
faces a very different, much more favorable burden of proof
than does a Title 7 discrimination plaintiff. As I mentioned in
my opening remarks, a Title 7--well, a Sarbanes-Oxley
plaintiff, to satisfy a prima facie case, need only demonstrate
that the protected activity was a contributing factor. Under
Title 7, for example, if you are pursuing the burden-shifting,
pretext-type analysis under Title 7, an employee will have to
show that the prohibited factor, let us say one's age or--well,
Title 7, I am sorry, one's gender, one's sex, one's race was a
determinative factor in the outcome. That is a much higher
burden than the burden placed on a Sarbanes-Oxley plaintiff.
Sarbanes-Oxley plaintiff, in effect, as I mentioned
earlier, has a choice of forum. Because 180 days is such a
brief period of time, once 180 days elapses, Sarbanes-Oxley
plaintiff can remain before OSHA. If the Sarbanes-Oxley
plaintiff thinks that that is a good place to be, that is where
the plaintiff can stay, the complainant can stay. If the
complainant wants to change venue at that point and go to
Federal court--and the employer doesn't have that right; only
the employee does. And that, too, is different in the sense
from Title 7 litigation. One must obtain a right to sue before
one can go to court. Now, as a practical matter, on a
statistical basis those are typically granted, but they must be
granted in order to go to Federal court. You don't have an
automatic right to go at the expiration of a period of time.
Mr. Wilson. Thank you.
Chairwoman Woolsey. Well, I thank you all for coming. I
particularly thank you, Dr. Wigand and Mr. Simon. You have
shared your stories with us. Your courage is amazing. What you
did and what you continue to do is vitally important. Your
testimony today actually could encourage others to come forward
to report instances of illegality in the workplace. And at the
same time, your testimony could encourage OSHA to redouble its
efforts to administer the laws that are in effect and under
their jurisdiction on a timely, fair basis.
This week is Whistleblowers Week in Washington. There are
many events taking place designed to highlight and promote good
government and protection for whistleblowers who choose to
speak out. I am sure all of us--well, I am sure certainly most
of the witnesses will all celebrate the important role that the
whistleblower community played earlier this year in securing
the passage of H.R. 985, the Whistleblower Enhancement Act,
which extends whistleblower protections to Federal employees
who work on national securities matters, and very importantly
provides explicit protection to Federal employees who report
instances of Federal research being suppressed or distorted for
political reasons.
It is with regard to private employment that many laws have
been enacted to protect whistleblowers. They were passed with
the best of intentions. But this hearing today has illustrated
to me that we have a distance to go with regard to
whistleblowers in the private sector. The laws differ one from
another in substantial respects. Deadlines for filing
complaints are extremely short. Complaints get dismissed at a
high rate. Cases are taking too long to be resolved. And too
many whistleblowers are still suffering severe consequences for
telling the truth.
It is clear that we all need to change things, and today's
hearing to me is a new beginning. Laws to protect
whistleblowers have always received bipartisan support here in
the Congress. No matter what side of the aisle we are on, we
recognize that it benefits everyone in this country, and
particularly workers, when they are able to report
illegalities.
I hope all the members of this subcommittee can work
together to explore legislative and other options to ensure
that when workers come forward, we have meaningful protections
and procedures in place for them. I thank you for coming, and
this hearing is adjourned.
[Whereupon, at 4:18 p.m., the subcommittee was adjourned.]