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Do Whistleblower Laws Apply to Private Companies?

Picture this: you’ve dedicated your life to your company and your boss. But one day, you discover that your manager is embezzling funds. You know that turning him in is the right thing to do, but you can’t help but wonder…

Will speaking up cost you your job?

This situation happens more often than you’d think. Every year, thousands of employees file complaints with the U.S. Department of Labor, which range from destruction of financial records to occupational safety negligence. And these employees don’t have anything to worry about — thanks to the Whistleblower Protection Act.

Our modern whistleblower laws help keep employees safe from personal retaliation in the aftermath of a report. However, it is important to note that the Whistleblower Protection Act was intended specifically for GOVERNMENT EMPLOYEES. If you’re in the private sector, the rules might be a little different.

What Are Whistleblower Laws?

In 1989, Congress passed the Whistleblower Protection Act. This federal law guaranteed that federal whistleblowers would not face any retaliation if they spoke out about misconduct within their departments. The law protects any employee who reported illegal activity, as well as “mismanagement, gross waste of funds, abuse of authority or a substantial and specific danger to public health and safety” that was taking place in their offices.

The Whistleblower Protection Act prevents retaliation for federal workers, but what about civilians? Here, the Occupations Safety and Health Administration (OSHA) stepped up to create the Whistleblower Protection Program. This program works to enforce 20 statutes the government has in place to prevent employers from retaliating or discriminating against a whistleblower.

However, like most things in the United States, whistleblower laws differ from one state to the next. Penalties for breaking whistleblower laws can vary, and protections can be drastically different for privately- or publicly-held companies.

Whistleblower Laws & Public Companies

After the Enron and WorldCom scandals of 2002, Congress passed the Sarbanes-Oxley Act (SOX), which extended protections to whistleblowers outside the government sector. Under SOX, employees at private companies were also granted protections if they reported wrongdoing, which the government hoped would prevent further misconduct as we’d seen with the Enron Corporation.

SOX protects any employee of a public company if he or she reports wrongdoing related to the following:

  •     Securities fraud
  •     Shareholder fraud
  •     Bank fraud
  •     Mail fraud
  •     Wire fraud
  •     A violation of any SEC rule or regulation

But what about whistleblowers whose reports don’t meet this criterion? This is where OSHA’s Whistleblower Protection Program comes into play; they work to protect whistleblowers under several federal statutes, including the Safe Drinking Water Act, the Seaman’s Protection Act, the Consumer Product Safety Improvement Act, and more.

By enforcing these statutes, OSHA is helping public employees retain their jobs — even if their actions led to an investigation and penalties for the organization. This helps keep companies honest and gives whistleblowers the assurance they need to speak up.

Whistleblower Laws & Private Companies

Whistleblower protection laws like SOX are great for public workers… but what about individuals working at private companies? When SOX was first passed in 2002, these organizations were immune from any penalties — and as a result, whistleblowing had serious consequences.

However, in 2014 a Supreme Court decision changed the way SOX was interpreted, which extended protections to some public workers. SOX now protects the private contractors and subcontractors of public companies, and it also protects privately-owned companies if they provide services for publicly traded companies.

Keep Your Company Protected

The full extent of whistleblower laws has yet to be tested in the court system, but private companies would be wise to protect themselves by choosing to protect their potential whistleblowers. After all, penalties for retaliating against a whistleblower can be substantial (depending on where you live) 

So how do you make sure that your company protects its whistleblowers? Firstly, your business must have an established compliance program. This does two things: it establishes a protocol for dealing with reports of misconduct and non-compliance, and it fosters a corporate culture where all employees know that non-compliance will not be tolerated. The best way to protect your whistleblowers is to make sure they never have to report anything!

Additionally, private companies should invest in a whistleblower hotline for their employees. This adds an extra layer of anonymity for potential whistleblowers, which can help them feel more comfortable with coming forward. Ideally, your hotline should be available 24/7, and it should be run by a third-party vendor.

Third-Party Compliance Organizations

Why do you need a third-party vendor to run your whistleblower hotline? Simple: a third-party vendor is further removed from your organization. Your hotline operators don’t know your employees, and therefore they can take reports without any knowledge of who is speaking to them. This helps ensure that your employees are truly anonymous, which protects them from retaliation even more.

Third-party vendors are also dedicated to the process of handling non-compliance reports. With their help, follow-up investigations won’t slip through the cracks (or worse, land on the desk of someone who might cover up the report). This guarantees that bad actors within your organization get the penalties they deserve, and your company can remain in compliance going forward.

To learn more about the benefits of third-party compliance vendors, contact ComplianceLine today. We will help you find the right fit for your organization, so you can properly protect whistleblowers — or better yet, prevent misconduct before it starts!

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