Legal Standpoint: The Whys and Wherefores of Whistleblowing

By Lawrence White    //    Volume 20,  Number 1   //    January/February 2012

To the list of challenging regulatory issues likely to arise on your campus, add this relatively new one: protecting the statutory rights of employees who go public with accusations of malfeasance.

A generation ago, American employers brooked no insubordination from so-called whistleblowers. In his book Whistleblowing at Work (Westview Press, 1998), sociologist Terance D. Miethe described the common perception of a whistleblower as a “snitch” and a “lowlife who betrays a sacred trust largely for personal gain.” In 1972, as reported in a paper prepared for Santa Clara University’s Markkula Center for Applied Ethics in 2003, a labor arbitrator famously denied a whistleblower’s plea for reinstatement by telling him “You cannot bite the hand that feeds you and insist on staying on for the banquet.”

Starting in the 1970s, Congress added anti-retaliation provisions to virtually every major civil-rights, employment, and consumer-protection law, including the Age Discrimination in Employment Act, the Americans with Disabilities Act, Title VII of the Civil Rights Act of 1964, the Fair Labor Standards Act, and the Occupational Safety and Health Act. Today federal laws (and, in many jurisdictions, state statutes and municipal ordinanances) prohibit employers from demoting, firing, or retaliating in any other manner against employees for reporting violations to public authorities.

Whistleblower protections have been expanded in the last decade. Congress enacted the Sarbanes- Oxley Act in 2002 to foster greater corporate responsibility in the aftermath of lawsuits against Enron, WorldCom, Tyco, and others. One significant provision in Sarbanes-Oxley, applicable to nonprofit and for-profit institutions alike, makes it a felony to take adverse employment action against any person “for providing to a law-enforcement officer any truthful information relating to the commission or possible commission of any Federal offense.”

In 2008, in response both to passage of Sarbanes-Oxley and to a series of scandals affecting the financial reputations of some large nonprofit organizations (including the J. Paul Getty Trust and the Smithsonian Institution), the Internal Revenue Service issued a report urging every nonprofit “to adopt an effective policy for handling employee complaints and to establish procedures for employees to report in confidence any suspected financial impropriety or misuse of the charity’s resources.” That same year, the IRS added this simple question to Form 990, the informational tax return filed by most colleges and other tax-exempt organizations: “Does the organization have a written whistleblower policy?” As AGB Senior Fellow Thomas Hyatt observed in a column in Trusteeship in 2008, most institutions interpreted the question to mean that institutions were required to adopt such a policy—and all but a few have done so in the past three years.

Now, then, may be a good time to take a careful look at the whistleblower protection policy your institution has adopted—or, if it has not done so, to start that process. The policy should include the following elements:

  • A robust internal-audit function with a reporting line to the board committee or subcommittee responsible for institutional audit functions.
  • An institutional reporting process requiring employees to report concerns whenever they have legitimate reason to believe that malfeasance has occurred. A good policy typically includes a tollfree hotline allowing employees to make reports anonymously.
  • An explicit prohibition against retaliation, such as this from the University of Iowa’s exemplary policy: “[The institution] encourages its faculty, staff, and students to make good-faith reports of University-related misconduct. The commitment to improve the quality of the University through such reports is vital to the well-being of the entire campus community. Retaliation as a response to such a report will not be tolerated.”

Retaliation claims are becoming increasing common on campuses and can needlessly complicate otherwise routine employment litigation. Employees have an absolute, legally protected right to file claims and lawsuits against their employer. Trustees and everyone who supervises employees on a campus should be aware of the pitfalls associated with adverse employment actions against a subordinate who could be characterized as a whistleblower.

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