Protections under Illinois law
The Illinois Whistleblower Act imposes three restrictions on employers that prohibit:
- the adoption of certain policies
- retaliation against employees for certain disclosures they make
- retaliation against employees when they refuse to participate in specified activities.
The act applies to all private-sector employers that have one or more employees in Illinois; it does not apply to governmental entities.
Significantly, the employee is protected only if he or she has reasonable cause for believing the information disclosed reveals unlawful conduct. Thus, not every disclosure is protected; employees bear some responsibility to consider the reasonableness of their belief prior to informing the government or law enforcement.
The act does not protect employees from refusing to participate in their assigned duties based on their having "reasonable cause" to believe their conduct may violate a law; instead, the act protects employees only when they refuse to participate in an activity that would result in a violation of the law. Thus, the act places a greater risk on an employee for refusing to perform an assigned duty than for disclosing information.
A violation of the act constitutes a criminal misdemeanor. An employee bringing a claim can seek reinstatement, back pay, actual damages, attorneys' fees and litigation costs. The act does not provide for punitive damages.
Public sector protections
The State Officials and Employees Ethics Act provides whistleblower protections to State employees who report – or threaten to report – wrongdoing, provide information or testify regarding wrongdoing, or assist in the enforcement of the Ethics Act. Retaliation against a State employee for reporting or providing of information of wrongdoing is strictly prohibited by the Ethics Act and may result in a violation of State law.
Protections under federal law
The federal False Claims Act has been in effect since 1863, but employees have been using the act recently to recover large amounts of money from their employers, sometimes with the help of the federal government. Under this federal act, an employee may file suit against his or her employer for suspected fraud against the federal government. These lawsuits are called “qui tam” actions and the individual initiating the lawsuit is referred to as a “relator.”
The act permits an employee to receive from 15% to 30% of any monies collected by the government in settlement of the claim or as compensation for overcharges made by the employer to the government. The U.S. Department of Justice recovered more than $5.6 billion for qui tam plaintiffs under the False Claims Act in its 2021 fiscal year. The U.S. Attorney General’s office of the United States is authorized under the act to intervene on behalf of the government and then becomes primarily responsible for the prosecution of the case. However, even if the Attorney General intervenes, the employee is still entitled to recover a percentage of amounts received by the government in settlement or otherwise. Employers who do business with the federal government need to be aware that disgruntled employees have this additional option available to them.
The act also prohibits retaliation against an employee who has taken any lawful action in furtherance of bringing a claim under the act. A retaliation claim brought under this provision is not dependent on the outcome of the employee’s qui tam lawsuit.
There is also the Illinois False Claims Act, which was enacted in 2008. The liability and damage provisions under the Illinois statute largely mirror its federal counterpart.
Sarbanes-Oxley’s Whistleblower Protections
The Sarbanes-Oxley Act (SOX) applies generally to publicly traded companies and imposes a number of reporting and disclosure requirements that are designed to provide more transparency with respect to a company’s financial condition and strengthen corporate governance in the aftermath of Enron and its progeny.
Significantly, Section 806 of SOX prohibits a publicly traded company, as well as any officer, employee, contractor, subcontractor or agent or employee of the company (or of any private subsidiary or affiliate, if included on a consolidated financial report), from taking any adverse employment action or to discriminate against an employee in the terms and conditions of employment because they “lawfully” provide information, cause information to be provided or otherwise assist in any investigation of conduct of the employer which the employee “reasonably believes” to constitute a violation of:
- the federal criminal statutes prohibiting mail, wire, bank or securities fraud
- any rule or regulation of the Securities and Exchange Commission (SEC)
- any provision of federal law relating to fraud against shareholders.
Employees are protected from such retaliation under SOX if they provide such information or assistance to:
- any federal regulatory or law enforcement agency
- any member of Congress or any Congressional committee
- any person with “supervisory authority” over the employee (or any other such person working for the employer who has authority to “investigate, discover or terminate misconduct”).
The U.S. Department of Labor delegated enforcement authority over the whistleblower provisions of SOX to the Occupational Safety and Health Administration (OSHA). The complaint, investigation and relief procedures as well as court review is beyond the scope of this book, however, an aggrieved employee must take action no later than 180 days after the date the alleged violation has occurred or after the date the employee became aware of the violation.
Section 1107 of SOX imposes criminal penalties, including possible imprisonment for up to 10 years, for retaliating against an employee for providing “truthful” information to a law enforcement officer relating to the commission or possible commission of any federal offense whether or not the offense is a violation of SOX. “Federal offense” is not defined anywhere in SOX or the federal criminal code. Although the term is usually used in reference to criminal violations, courts have used the term in both civil and criminal contexts.
A prevailing employee is entitled under SOX to “all relief necessary to make the employee whole,” specifically including reinstatement with seniority rights, back pay with interest and any “special damages” sustained “as a result of the discrimination,” to include litigation costs, expert witness fees and reasonable attorney fees. SOX specifically provides that nothing in it “shall be deemed to diminish the rights, privileges or remedies of any employee under Federal or State law or any collective bargaining agreement.” Thus, additional remedies beyond those provided for in SOX may be available under state law.
Unlike the False Claims Act, SOX does not allow an individual to bring a “qui tam” lawsuit or to recover a reward, even if the information provided by the employee is used successfully by the government. However, Dodd-Frank (the Wall Street Reform and Consumer Protection Act) amended SOX to create whistleblower protections for any employee providing the SEC with “original” information about and ongoing or imminent violation of securities law, participating in an SEC investigation or making required disclosures under SOX. A whistleblower under Dodd-Frank is protected from retaliation and may bring a cause of action for retaliatory discharge without first pursuing administrative remedies, as is required under SOX.
In addition, a Dodd-Frank whistleblower may recover 10-30% of any SEC penalties recovered as a result of the information provided (if the recovery exceeds a million dollars). The amount of the reward paid to the whistleblower is discretionary with the SEC, but this possibility is used as an incentive to encourage employees, including even compliance officers, to report wrongdoing to the SEC.
The whistleblower program under Dodd-Frank has doled out $500 million in total awards as of June 4, 2020. On that date, the SEC announced that it had authorized an award of more than $50 million to a whistleblowing employee, the largest award by the SEC to date.
Supervisor training is necessary
An employer may be held liable under SOX even if the employee is incorrect in asserting that a violation of law has occurred, so long as the employee’s belief that a violation has occurred is reasonably held. Further, SOX protects any employee who brings such information to the attention of a supervisor or any other person within the company who has authority to remedy misconduct. Publicly traded employers will need to train managers and supervisors to ensure that they are aware that retaliation against employees who provide such protected information is unlawful.
Internal procedures should also be developed to ensure that protected information is properly reported to responsible officials of the company, including implementation of a Corporate Responsibility Policy as a part of the company’s overall efforts to ensure compliance with legal requirements, as well as to communicate to employees the company’s internal business ethics requirements.