by Jason M. Zuckerman
Since the enactment of the Sarbanes-Oxley Act of 2002 (SOX), publicly traded companies have begun to focus on protecting whistleblowers and providing mechanisms for employees to raise concerns. This results from numerous provisions in SOX that mandate whistleblower protection, a high number of SOX whistleblower retaliation complaints filed with the U.S. Department of Labor, and the realization that it is better for an organization to learn about unethical or unlawful conduct internally than to find out about the conduct from a news article, a subpoena from law enforcement, or an investigation from a regulatory agency.
Unfortunately, the scandals that prompted Congress to enact SOX have not been limited to the private sector. Nonprofits have also been subject to increasing scrutiny due to allegations of excessive compensation, self-dealing, and ineffective governance. Many of these problems came to light from whistleblower disclosures.
At the encouragement of the U.S. Senate Finance Committee, the Panel on the Nonprofit Sector was formed to prepare recommendations for Congress to improve the oversight and governance of charitable organizations.
The Panel's final report, which was released in June 2005 and is available at www.nonprofitpanel.org, provides a comprehensive series of recommendations intended to strengthen nonprofit governance and improve transparency and accountability. Many of these reforms are modeled on SOX. The final report addresses whistleblower protections and recommends that nonprofits voluntarily comply with the whistleblower provisions of SOX.
Protecting whistleblowers is an
essential component of an ethical and
open work environment. Whistleblower
protection should not be viewed only as
a prophylactic mechanism designed to
avoid employee lawsuits. Instead,
protecting whistleblowers from
retaliation and encouraging
constructive whistleblowing benefits
nonprofits by increasing transparency
and by giving management the opportunity
to learn early on of unethical or
unlawful practices directly from their
employees rather than from the media,
law enforcement, or a regulatory agency.
In addition, effective whistleblower
protection helps foster a work
environment in which all employees are
held accountable, thereby improving
performance and empowering employees.
This article provides general guidance
for the establishment of a comprehensive
whistleblower protection program at a
Provide Employees Multiple Avenues to Report Concerns
While employees will hopefully feel comfortable raising concerns directly with their supervisors, many employees are reluctant to raise concerns with line management for fear of retaliation, especially where their concerns pertain to unethical or illegal conduct by their line managers. Therefore, nonprofits should provide several options for employees to raise concerns, including the option of raising a concern anonymously.
Establish an Ombudsperson Program
Establishing a forum in which employees can raise concerns internally and have assurance that their concerns will be investigated and appropriately addressed is an effective means of mitigating the risk of whistleblowerretaliation lawsuits and resolving employee concerns internally before the concerns are exposed in the media or in regulatory enforcement proceedings. In addition, an ombudsperson program can help alert the board of directors or management to alleged violations early on, thereby providing an opportunity to intervene and prevent further damage.
To be successful, such a program must be perceived by employees as credible. Accordingly, the ombudsperson should be independent of line management and conduct objective investigations that are not geared toward reaching a conclusion favored by management. Sham investigations always backfire. Employees who suspect that their concerns are not being taken seriously will go outside the organization and report them to someone who they believe will take them seriously, such as the media, a regulatory agency, or law enforcement.
Accordingly, the ombudsperson investigating an employee's concern should frequently update the employee on the status of the investigation and on corrective actions taken to remedy the problems identified by the concerned employee.
Preferably, the ombudsperson should report directly to the board. This ensures adequate independence and strengthens the credibility of the program, thereby increasing the likelihood that employees will raise their concerns internally.
Adopt a Policy ProhibitingRetaliation
Employees should be put on notice that
all forms of retaliation against
whistleblowers, including harassment, termination, and blacklisting, will not be tolerated and will result in disciplinary action. In addition, the policy should provide that individuals who blow the whistle will be protected from retaliation. While the policy needs to incorporate relevant legal requirements, including federal and state whistleblower protection statutes and common law claims, the policy should be concise and easy to understand. The policy should unambiguously state that employees have the right to raise concerns without being subjected to reprisal.
Train Managers and Supervisors
Merely adopting a policy is not enough
to prevent retaliation against
whistleblowers. Instead, managers and
supervisors should be educated about
whistleblower protections and provided
the tools to address employee concerns.
To be effective in sensitizing managers and supervisors to the rights and responsibilities of employees to raise concerns, training should be practical and interactive. A PowerPoint presentation filled with legalese will not have a lasting impact. Instead, the training should be in plain English and should provide case studies that offer participants the opportunity to apply what they learn in the training.
Moreover, training should address Section 1107 of SOX, which makes it a criminal offense to "knowingly" retaliate against a whistleblower who has provided to a law enforcement officer any truthful information relating to the commission or possible commission of any federal offense.
Take Disciplinary Action Against Those Who Engage in Retaliation
When a manager or supervisor retaliates
against an employee who
voiced a concern, other employees are dissuaded from raising concerns for fear that they will also suffer retaliation. Failing to hold an employee accountable for violating an antiretaliation policy signals to other employees that the organization is not truly committed to maintaining an open and ethical work environment. Accordingly, nonprofits should enforce their anti-retaliation policies and monitor compliance with those policies.
By viewing whistleblowers as allies
rather than as adversaries and by
making a relatively minimal investment
in processes and procedures designed to
protect whistleblowers, nonprofits can
increase transparency, empower
employees, learn early on about
unethical or unlawful practices, and
enhance legal and procedural compliance.
Jason Zuckerman is an attorney in private practice in Washington, D.C. His practice focuses on litigating whistleblower retaliation claims, conducting internal investigations, and advising companies on whistleblower protections and other employment law issues.
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