2. Burdens of Proof
Generally speaking, a plaintiff in a whistleblower retaliation claim, a plaintiff must show that: 1) he or she was retaliated against for reporting inappropriate activity; 2) he or she reported that information to the employer and/or the government, depending on the particular statute’s purview; 3) the disclosure was required or protected by that law, rule or regulation within the SEC’s jurisdiction. Further, the employee must establish that he or she had a subjectively and objectively reasonable belief that the conduct in question violated the law.
If a Bank has entered into a consent decree, and if the compliance whistleblower raises issues around alleged inappropriate activity that was the subject of the consent decree, it is likely that a court would grant that the employee indeed had both a subjectively and objectively reasonable belief that unlawful conduct took place.
In most instances, an employee need only establish that his or her protected activity was a contributing factor, not necessarily a motivating factor, to the adverse employment action. The words “contributing factor” mean any factor which, alone or in connection with other factors, tends to affect in any way the outcome of the decision.
On the other hand, an employer can normally avoid liability if it can establish by “clear and convincing” evidence that it would have taken the same adverse action against a complainant absent his or her protected activity. Thus, even if the employee can establish that he or she was retaliated against in violation of these laws, the employer can prevail if it demonstrates that it would nevertheless have taken the same action against the employee because of conduct unrelated to their whistleblower activities.
In essence, this reverses the normal burden of proof under discrimination actions in which the burden always remains on the plaintiff.
Regardless of the test, for an employer to prevail in a whistleblower claim, it will need to establish that it took adverse action against the alleged whistleblower for reasons unrelated to any protected whistleblower activities in which she may have engaged. Instead, the employer will need to argue that any disciplinary action the Bank takes taken against the employee was based upon job performance problems or other non-protected activities.
Depending on the particular statute, a whistleblower who prevails in a retaliation claim can recover lost wages, the value of benefits, attorney’s fees, expert witness fees, compensation for emotional distress, punitive damages, liquidated damages, and, under some statutes, a percentage of any recovery the Government obtains in a criminal prosecution against the employer. Additionally, a court can order a terminated employee reinstated.
3. The AMLA
The AMLA bars employers from discharging, demoting, threatening or harassing employees who provide information relating to money laundering and BSA violations to the attorney general, secretary of the treasury, regulators and others, including their own employer.
The AMLA strengthens the incentive program because it (1) narrows the government’s discretion to pay an award, (2) increases the potential amount of whistleblower awards, and (3) implements protections specific to money-laundering whistleblowers, in a manner largely modeled after Dodd-Frank.
The AMLA covers a wide range of financially based organizations, including banks, branches and agencies of foreign banks, broker-dealers, insurance companies, operators of credit card systems, mutual funds, certain casinos, and travel agencies, among the twenty-six covered categories. (The full list of covered entities appears at 31 U.S.C. §5312.)
In addition, the law now places under the BSA’s purview any person or business that engages in the transmission of currency, funds or value that substitutes for currency, meaning that organizations dealing in cryptocurrency now come within the statute’s reach. Persons involved in the sale of antiquities are also now covered.
A. AMLA Whistleblowing Protection and Procedure
The AMLA defines “whistleblower” as any individual (or two or more people acting jointly) “who provides information relating to a violation of this subchapter … to the employer of the individual or individuals, including as part of the job duties of the individual or individuals, or to the [Treasury] Secretary or the Attorney General.”
In other respects, the anti-retaliation provisions resemble protections under Dodd-Frank and the Sarbanes-Oxley Act. Complaints are filed initially with the Department of Labor and if they are not resolved within six months (assuming that the delay was not caused by claimant’s bad faith), employees can file actions in federal court and have a jury trial. Available relief can include reinstatement with no loss in seniority, compensatory damages, counsel fees, double back pay with interest added, and other appropriate remedies regarding the prohibited conduct.
B. Expanded Financial Incentives for Whistleblowers
The new statute provides that the secretary of the treasury “shall” pay an award to those who provide original information leading to successful enforcement of various money-laundering laws, if the SEC obtains sanctions of $1 million or more. As with Dodd-Frank, certain individuals, like regulatory and law enforcement officials and those who participated in the wrongdoing, are prohibited from receiving an award. To incentivize reporting, the AMLA replaced the BSA’s $150,000 award cap, which was discretionary in any event, with a payment ceiling of 30% of the government’s collection, if the monetary sanctions imposed exceed $1 million and which is now mandatory unless the reporting individual is disqualified.
Again, like Dodd-Frank, factors to be taken into consideration by the government when deciding the amount of the award include the significance of the information, the degree of assistance provided and the programmatic interest of Treasury in deterring violations. Treasury retains the discretion to make nominal payments, and there is no right to appeal the amount awarded. However, the “monetary sanctions” figure on which the reward will be based excludes forfeiture, restitution and victim compensation payments, and since the government frequently seeks large forfeiture judgments when resolving money-laundering actions, this provision may significantly limit whistleblower awards.
C. Importance of Investigation and Corporate Compliance Programs
Federal and state regulators have made clear, in recent years, that employers must implement and follow well designed investigation protocols to root out claims of retaliation and protect whistleblowers.
In January 2019, the New York State Department of Financial Services (“DFS”) issued a new directive on whistleblower policies (“DFS Guidance”). A few short months later, the U.S. Department of Justice Criminal Division (“DOJ”) issued an “updated” Evaluation of Corporate Compliance Programs Guidance (“DOJ Guidance”).
The DOJ Guidance emphasizes that there are three main questions for prosecutors to consider during a criminal investigation:
- Was there a well-designed compliance program?
- Was the compliance program effectively implemented?
- Did the compliance program work as intended?
Prosecutors assess, among other things, whether policies, training and communication are sufficiently robust to encourage a culture of compliance and responsibility.
The company’s reporting process should emphasize disclosure of suspected misconduct and dissuade any fear of retaliation. There is also an emphasis on confidential reporting options.
The DFS Guidance articulated ten “pillars,” emphasizing the need to have in place reporting channels that are independent, well-publicized, easy to access, and consistent, with strong protections for a whistleblower’s anonymity.
The DFS Guidance also requires that the employer have in place established procedures for identifying and managing potential conflicts of interest, and that staff members are adequately trained to receive whistleblowing complaints, determine a course of action, and competently manager any investigation, referral, or escalation.
Further, the DFS Guidance demands that employers establish procedures for investigating allegations of wrongdoing, ensuring appropriate follow-up to valid complaints, protecting whistleblowers from retaliation, and providing confidential treatment of these complaints.
The DFS Guidance recommends, as well, that regulated employers give appropriate oversight of the whistleblowing function to senior management, internal and external auditors, and the Board of Directors. Perhaps most important, the DFS Guidance demands that the employer have in place a top-down culture of support for the whistleblowing function.
D. Importance of Documentation of Performance Problems
The relevant cases underscore the importance of documenting performance or disciplinary issues before taking adverse action against an employee who may have engaged in protected activity. In Johnson v. ACE Limited, ARB Case No. 10-052 (Jan. 30, 2012), a case brought under Sarbanes-Oxley, the Department of Labor Arbitration Review Board (“ARB”) found that although the complainant had engaged in protected activity, the employer had demonstrated by clear and convincing evidence that it would have fired him anyway because of his incompetence, his outside business interests and his insubordinate behavior when questioned about the outside business.
In Giurovici v. Equinix, Inc., ARB Case No. 07-027 (Sept. 30, 2008), the ARB found that even if the former employee could establish that he had engaged in protected activity, his claim would have failed because the company offered clear and convincing evidence it would have fired him anyway because of his well-documented record of poor performance and insubordination.
Similarly, in Pardy v. Gray, 2008 U.S. Dist. LEXIS 53997, at **17–18 (S.D.N.Y. July 15, 2008), the court held that the employer company established by clear and convincing evidence that it discharged employee for undisputed record of poor performance.
An assessment of the strength of the anticipated defense therefore must take into account the quality of contemporaneous documentation of the alleged whistleblower’s performance issues.