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Are Whistleblowers in Legal Danger?

April 13th, 2018

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Nobody likes a tattletale.

Since our days on elementary school playgrounds, we have been conditioned to avoid tattling. The possibility of being declared the class snitch has kept many school children’s lips tightly sealed—and, sadly, that attitude continues in the professional world today.

Dr. Leora Eisenstadt, assistant professor in the Department of Legal Studies at the Fox School of Business, once asked her undergraduate students in a business law and ethics class a simple question: Would they be willing to oust the firm they worked for, knowing there was fraudulent activity occurring?

Out of 22 students, only one said yes.

For the students who decided to stay quiet, their choice was not ddue to a lack of morality, but rather a fear of not recovering from the act of whistleblowing.

“Whistleblowing involves speaking out against an organization that you see doing something illegal, corrupt, or harmful to the general public,” says Eisenstadt. “Whistleblowers are often the subject of retaliation—once you come forward, you you are likely to face termination or some other adverse employment action.”

Eisenstadt and co-author Dr. Jennifer Pacella of Baruch College confront the laws regarding whistleblowers in their paper, “Whistleblowers Need Not Apply,” which has been accepted for publication by the American Business Law Journal. Under Title VII of the Civil Rights Act of 1964, retaliation against someone who complains of discrimination is prohibited. In contrast, the “swiss cheese” laws covering whistleblowing often provide little to no protection for the tipsters, who are likely to be ostracized and blacklisted from their company or even industry after the story breaks.

After reviewing the Whistleblowers Protection Act, Dodd–Frank Act, Sarbanes–Oxley Act, and the False Claims Act, Eisenstadt and her co-author uncovered many of the loopholes that would inherently exclude whistleblowers from potential support. Although the laws prohibit retaliation to some extent, three out of four statutes do not protect whistleblowers from future employers’ prejudices.

While whistleblowers may be lauded by the public as a righteous and ethical individual who brought down a corrupt company, new employers are likely to see them as disloyal troublemakers.

“Beyond losing your job, the main reason people won’t come forward as whistleblowers is that they know they could be blackballed in the industry and face an extraordinarily difficult time finding future employment,” says Eisenstadt. “Sometimes, that is even more traumatizing than losing your present job.”

While anti-discrimination law clearly prohibits retaliation against job applicants, whistleblowers are typically left out in the rain. Eisenstadt and Pacella, in the first article to examine the lack of legal protections for whistleblowers who are applying for new jobs, propose a way to change that.

“We are arguing that Congress needs to step in and amend each of these federal statutes to provide protection for whistleblower applicants,” says Eisenstadt. “Our reform proposal is remarkably simple: take the language that’s in Title VII (and the decades of court interpretations that come with it) and add it to the whistleblower statutes.”

By adding the phrase “and job applicants,” Eisenstadt argues that this would end the problem of courts’ varying and unclear interpretations and create stronger protections for a vulnerable group. With clear statutory language detailing protections available to whistleblowers, courts can more fairly apply the law to the many types of whistleblowing cases that occur in both private and public settings.

“This is a problem that requires legislative action and not something the courts can do on their own,” says Eisenstadt.

With their hopes set to send their research to legislatures once published, the future of whistleblowers may become more positive—and maybe those 21 students who stayed quiet will eventually speak up.

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