What's New
What's New | News

Is Your Company in the Crosshairs? Practical Tips to Avoid Retaliation Claims Under Dodd-Frank’s Whistleblower Provisions

Tuesday, September 27, 2011

Bernadette Romano
Marketing Coordinator
Pepper Hamilton LLP
215.981.4775 (Direct)
866.737.7372, ext. 4775 (toll free)

New York, NY – September 27, 2011- The Dodd-Frank Wall Street Reform and Consumer Protection Act not only imposes significant reforms to the financial system, but also affects human resource professionals, who need to be familiar with Dodd-Frank’s whistleblower and anti-retaliation provisions. Pepper Hamilton's of counsel Russell E. Adler, who counsels employers on employment issues, says that while Dodd-Frank provides powerful financial incentives to employees and other potential whistleblowers who voluntarily report suspected violations of the federal securities laws to the Securities and Exchange Commission (SEC), employers can and should take steps that can help them avoid resulting retaliation claims.

Adler says, “If the SEC brings a successful enforcement action, the whistleblower will receive between 10 and 30 percent of the total monetary sanction, provided the sanction is $1 million or more. Controversially, the Act empowers whistleblowers to bypass their company’s internal reporting and compliance policies and go directly to the SEC with their concerns.”

Under the Act, Adler says, “a whistleblower is defined as an individual who provides the SEC with information about a possible violation of federal securities laws that has occurred, is ongoing or is about to occur, provided the whistleblower has a reasonable basis for the belief. The protections from retaliation – which could include discharge, demotion, suspension, direct or indirect threats, harassment or discrimination in any other manner in the terms and conditions of employment – apply, regardless of whether the whistleblower ultimately receives the potentially massive financial award.”

Assuming that an employee in the accounting department of your organization sends an e-mail to his department head (bypassing his direct supervisor) about a possible securities law violation and that you have been consulted on how to address the situation, Adler provides the following recommendations to help avoid a retaliation claim.

  1. Be inclusive when deciding whether the complaint or information constitutes protected activity. A hasty dismissal of the complaint as without merit, absent strong supporting evidence, carries substantial risk.
  2. Get the word out. Consider informing people in the employee’s supervisory chain, human resources, compliance, the legal department and senior management (depending on the size of the organization) that a complaint has been made and divulge the identity of the whistleblower, while simultaneously reiterating to such individuals: your company’s anti-retaliation policy; that the complaint will be investigated in accordance with your company’s policy; that the matter is not to be discussed orally or in writing with the complainant or anyone else, except in the course of the company’s investigation; and that no employment action may be undertaken without consulting the appropriate personnel (e.g., human resources, the individual’s supervisor, compliance, etc.).
  3. Communicate promptly with the whistleblower. If the employee perceives that the company is disregarding or minimizing his complaint (a likely result if he is met with silence) he is more likely to perceive retaliation is occurring and go to the SEC or retain counsel if he has not already done so.
  4. Maintain communication after the investigation is concluded and the matter is resolved. After concluding the internal investigation and remedying the violation, if any, you should maintain contact with the employee to ensure that the employee is not subjected to retaliation, so he knows the company takes its anti-retaliation policy seriously.
  5. Promptly remediate retaliatory action if it occurs. In the event you learn of retaliatory action at any point in the process, it must be promptly and appropriately remediated, the employee should be informed as to how that was accomplished (without disclosing confidential personnel information), and you should ensure the action taken was sufficient.
“Although the particular course of action taken will vary based on specific company policies and the particular facts, following these steps should significantly minimize the risk of retaliation claims when responding to whistleblower complaints,” says Adler. “The same holds true for other employment-related claims as well.”

About Pepper Hamilton

Pepper Hamilton LLP is a multi-practice law firm with more than 500 lawyers nationally. The firm provides corporate, litigation and regulatory legal services to leading businesses, governmental entities, nonprofit organizations and individuals throughout the nation and the world. The firm was founded in 1890.

Copyright © 2015 Pepper Hamilton LLP | Use of This Site Subject to These Terms & Conditions | PRIVACY POLICY | Contact Us: or 866.737.7372 | Find Pepper Hamilton LLP on Facebook | Pepper Hamilton LLP on LinkedIn | Follow Pepper Hamilton LLP on Twitter | Pepper Hamilton LLP YouTube Channel | View Pepper Hamilton LLP's documents on JD Supra