HR Headaches: New rules create “jackpot” for whistleblowers

Whistleblower laws and lawsuits are evident in almost every field.

This summer, Kansas City saw a whistleblower lawsuit that claimed an area utility company used gifts to improperly influence government officials in an attempt to have a downtown federal office building convert to electric heating and cooling.

One area that is especially widespread involves the Dodd-Frank financial reform law. The law offers hefty rewards to those reporting securities law violations and creates a scenario that businesses cannot afford to ignore.

You can argue the need for such a law following the near disastrous banking and Wall Street collapses of 2007-2008. What seems very questionable, however, are some reward mechanisms included in Dodd-Frank. It allows for whistleblowers to receive as much as 30 percent of penalties collected if they total at least $1 million. That seems more likely to guarantee motivations of personal benefit rather than legitimate concern. Not surprisingly, lawyers are lining up with polished ad campaigns encouraging employees to blow the whistle if they suspect violations.

What does this provision mean for business people? Do things right and right away.

Obviously, you need to become familiar with the law and be in compliance. When and if your employees raise a problem, you should establish an environment where they feel comfortable and obliged to come to you first. Work with them; do not marginalize them or dismiss their concerns. The only reason they would have to go outside—become a whistleblower—is if they cannot trust or communicate with you. Be aware—even if you do these things, you could still be in for an unpleasant ride.

I have a client that had an employee who “turned the company in” to OSHA for a safety concern. The company endured the examination and was exonerated. The next year this same employee “turned the company in” to the Department of Labor on a Prevailing Wage beef. Again, the company endured an examination of the allegation and was exonerated. This employee figured he had whistleblower protection status and continued to poison the relationship between the employees and management. He didn’t. I extricated him, but obviously it was a very delicate situation.

Getting back to the Dodd-Frank provision, there is a “jackpot” mentality in our culture. This means that many people see the lottery and the opportunity to sue somebody—someone with money—is the way to wealth accumulation. This law plays right into this mentality. The plaintiff’s lawyers are gearing up. Owners and managers are wise to know the law and operate with these dangers in mind.

Steve Cohen is president/partner of Labor Management Advisory Group Inc., and HR Solutions: On-Call. He has more than 35 years of specialized experience solving HR problems in companies of all sizes. He recently wrote “Mess Management: Lessons from a Corporate Hit Man.” He’ll be providing insight on HR topics every month exclusively for KCBCentral.