An Analysis of Current Whistleblower
Laws: Defending a More Flexible
Approach to Reporting Requirements
Gerard Sinzdak'
INTRODUCTION
Sherron Watkins is regarded as a hero for her decision to blow the whistle on the illegal activities of her employer Enron.' Had Enron survived the resulting scandal, however, the company could have fired or otherwise retaliated against Watkins with legal impunity.'^ Under Texas's whistleblower law, employees of private employers receive legal protection against retaliation only if they report wrongdoing to an external law enforcement agency.
Because Watkins reported her concerns only to Enron CEO Kenneth Lay, her actions did not meet Texas's strict report recipient requirement.'
The Texas whistleblower law is not unique. Most state whistleblower statutes restrict the parties to whom a whistleblower may report in order to receive protection from retaliation.^ The majority of states, for example, protect only those employees' who file reports with external govemment bodies. In
Copyright © 2008 Califomia Law Review, Inc. Califomia Law Review, Inc. (CLR) is a
Califomia nonprofit corporation. CLR and the authors are solely responsible for the content of their publications. t J.D., University of Califomia, Berkeley School of Law (Boalt Hall), 2008. I would like to thank Professor Gillian Lester for her guidance and assistance with this Comment.
1. Richard Lacayo & Amanda Ripley, Persons of the Year, TIME, Dec. 30, 2002, at 30.
2. Watkins expected the company to "just stick [her] in a comer and treat [her] like a pariah and sort of force [her] out." Miriam A. Cherry, Whistling in the Dark? Corporate Fraud,
Whistleblowers and the Implications of the Sarbanes-Oxley Act for Employment Law, 79 WASH.
L. REV. 1029, 1051-52 (2004).
3. TEX. GOV'T CODE ANN. § 554.002(b) (2004).
4. Cherry,5Mpranote2, at 1036-37.
5. Following Enron and other corporate scandals. Congress passed the Sarbanes-Oxley Act
("SOX"). SOX provides protection to employees of public companies who, like Watkins, report violations of securities and accounting regulations. Unlike Texas's whistleblower law, SOX protects both employees who report intemally to supervisors and extemally to govemment regulators. Sarbanes-Oxley Act of 2002 § 806(a), 18 U.S.C. § 1514A (2006)).
6. See infra Part U.C.
7. See, e.g.. CAL. LAB. CODE § 1102.5 (West 2008); CONN. GEN. STAT. § 31-51m (1992);
1633
1634 CALIFORNIA LAW REVIEW [Vol, 96:1633 these states, employees who, like Watkins, only report employer wrongdoing internally cannot rely on the protections of their state whistleblower law, A few states take the opposite approach, requiring employees to first report their suspicions internally to supervisors,^ Virtually no states protect those who choose to report to the media or other non-governmental third parties.
This Comment analyzes the arguments both for and against strict report recipient requirements. This analysis reveals that neither an external nor an intemal report recipient requirement provides sufficient protection to whistleblowing employees, who face a very real threat of retaliation,' Studies indicate that whistleblowers choose their report recipient based on a wide variety of practical considerations—including the employee's status in an organization, the status of the wrongdoer, the organization's culture, and the significance of the wrongdoing,'*' A rigid report recipient requirement— whether extemal or intemal—cannot match the diversity of situations in which employees find themselves. An unduly restrictive reporting requirement therefore inevitably leaves many good-faith whistleblowers unprotected,"
In order to avoid unjust denials of protection, this Comment proposes that states adopt a more open-ended report recipient standard. More specifically, states should provide protection to employees who report either intemally to a supervisor or extemally to a govemment body so long as the employee possessed both a subjectively and objectively reasonable belief that the recipient could correct the employer's unlawful behavior. State laws should also extend protection to employees who report to the media or to other third parties via the Intemet when certain conditions are met. This flexible standard would more accurately reflect the variety of situations confronting employees.
In addition, the reasonableness requirement would protect employers' interest in avoiding meritless lawsuits from "chronic complainers"'^ and would promote society's interest in effective law enforcement.
MICH, COMP, LAWS § 15,361 (2006),
8, See, e.g., N,J, STAT, ANN, § 34:19-1 to -8 (2008); N,Y, LAB, LAW § 740 (McKinney
2008); OHIO REV, CODE, ANN, § 4113,52 (West 2008),
9, See generally MARCIA P, MICELI & JANET P, NEAR, BLOWING THE WHISTLE: THE
ORGANIZATIONAL AND LEGAL IMPLICATIONS FOR COMPANIES AND EMPLOYEES (1992) (discussing evidence of retaliation against whistleblowers); David Culp, Whistleblowers: Corporate
Anarchists or Heroes? Towards a Judicial Perspective, 13 HOFSTRA LAB, L,J, 109, 113, 123
(1995) (describing a study that reveals that retaliation was a primary concem for federal employees who considered blowing the whistle); Laura Simoff, Comment, Confksion and
Deterrence: The Problems that Arise From a Deficiency in Uniform Laws and Procedures for
Environmental "Whistleblowers," 8 DICK, J, ENVTL, L, & POL'Y 325, 342 (1999) (describing the high incidence of retaliation against whistleblowers in the science community),
10, See EUetta Sangrey Callahan & Terry Morehead Dworkin, Who Blows the Whistle tO: the Media, and Why: Organizational Characteristics of Media Whistleblowers, 32 AM, BUS, L,J,
151, 162-63 (1994) (providing study of whistleblowers and their motivations),
11, See infra ?anU.
12, See Blackburn v. United Parcel Serv,, Inc, 3 F, Supp, 2d 504, 517 (D,N,J, 1998)
(providing an example of a lawsuit brought by a "chronic complainer").
2008] A FLEXIBLE APPROACH TO REPORTING REQUIREMENTS 1635
Section I of this Comment provides an overview of the salient features of current state and federal whistleblower laws. The case studies presented in
Section II illustrate the application of four such laws to recent whistleblowers.
Section III then analyzes the policies which underlie various report receipt requirements and demonstrates why restrictive requirements afford inadequate protection to employees. Finally, Section IV presents a proposal for a more flexible approach to report recipient requirements and applies the proposed standard to the case studies detailed in Section II.
I
CURRENT WHISTLEBLOWER PROTECTIONS: RATIONALES AND SOURCES
Whistleblowers provide a valuable service to both their employers and the public at large. In just the past year, whistleblowers have played a prominent role in the discovery and remediation of employer and government misconduct in such areas as aviation safety,'^ public health,'" privacy,'^ and corporate sales and marketing practices.'* Employees are often in a unique position to recognize and report wrongdoing within both the private and public sectors.
They can alert employers to problems before those problems escalate. If an employer refuses to resolve an issue, employees may be the only parties capable of reporting the problem to external authorities.'^ As one court noted,
"[w]ithout employees who are willing to risk adverse employment consequences as a result of whistleblowing activities, the public would remain unaware of large-scale and potentially dangerous abuses."" The presence of
13. See Matthew L. Wald & Micheline Maynard, Behind the Chaos in Air Travel, a
Pendulum Swing at the F.A.A., N.Y. TIMES, Apr. 13, 2008, at Al (discussing the actions of two
FAA whistleblowers).
14. Ana Radelat, CDC Enters Fray of Tainted Trailers, USA TODAY, Apr. 2, 2008, at 3A
(detailing story of whistleblower at the CDC who called attention to the dangers of formaldehyde fumes in trailers that the Federal Emergency Management Agency had provided to people displaced by hurricanes Rita and Katrina); see also John Carey, What Ever Happened to 'An
Apple a Day'?, Bus. WK., Mar. 31, 2008, at 93 (whistleblowing activity of a pharmaceutical sales representative resulted in Warner-Lambert's criminal conviction and payment of $340 million fine). 15. Eric Lichtblau & David Stout, Report on F.B.I. Use of Personal Data, N.Y. TIMES,
Mar. 13, 2008, available at http://www.nytimes.com/2008/03/13/washington/13cnd-fbi.html.
(describing whistleblower's role in uncovering the FBI's misuse of personal information).
16. Linda A. Johnson, Merck to Pay $671 million to Settle Whistle-Blower Suit, S.F.
CHRON., Feb. 8, 2008, at C2 (detailing agreement by Merck to pay $671 million to the U.S. govemment to settle charges that its sales and marketing practices violated federal law; the charges resulted from an investigation that began when two whistleblowers reported Merck's conduct to public officials).
17. See, e.g., Stefan Rutzel, Snitching for the Common Good: In Search of a Response to the Legal Problems Posed by Environmental Whistleblowing, 14 TEMP. ENVTL. L. & TECH. J. 1,
2 (1995) (discussing the critical role that employees play in alerting companies and govemment regulators to violations of environmental laws).
18. "Seventy-five to eighty percent of the information on which the Inspectors General Act
[sic] comes from so-called whistleblowers." 135 CONG. REC. H752 (daily ed. Mar. 21, 1989).
19. Dolan v. Cont'l Airlines, 563 N.W.2d 23, 26 (Mich. 1997).
1636 CALIFORNIA LAW REVIEW [Vol. 96:1633 whistleblowers may also help deter misconduct in the first instance.^" Finally, information provided by whistleblowers can substantially reduce the cost to the public of detection and investigation of wrongdoing or corruption.^'
Despite, or perhaps because of, their important role as legal monitors, whistleblowers are frequently the victims of retaliation.^^ Over the past three decades, legislators and judges on both the federal and state level have grappled with the issue of how best to protect these employees.^^ A consistent view has not emerged.^''
The diverging approaches adopted by lawmakers stems from the myriad and often conflicting factors and policy goals that a judge or legislator must evaluate when deciding how best to craft or interpret a whistleblower law. For example, a lawmaker must consider whether the primary purpose of a whistleblower law is to protect those who have made a good-faith effort to report wrongdoing or whether the purpose is to provide incentives to encourage reporting in the first place." In other words, should whistleblower laws provide protection or incentives or both? Practical questions also arise over what legal requirements are feasible from an employee's perspective and what incentives are most likely to prove effective. A legislator or judge must ftirther decide whether whistleblower protections or incentives should vary based on the law an employer is allegedly violating or whether they should apply regardless of the legal violation. Designers of a whistleblower law must also weigh the interests of employers. A law that provides employees with excessive protections or incentives may lead to unwarranted govemment investigations,
20. See Elletta Sangrey Callahan & Terry Morehead Dworkin, The State of State
Whistleblower Protection, 38 AM. BUS. L.J. 99, 108 (2000) (noting that state legislatures implement whistleblower laws as a meehanism for deterring wrongful conduet by employers).
21. See Simoff, supra note 9, at 326 (noting that whistleblowers help reduce the public cost of monitoring and detection).
22. See, e.g., Rebecca L. Dobias, Amending the Whistleblower Protection Act: Will Federal
Employees Finally Speak Without Fear?, 13 FED. CIR. B.J. 117 (2003) (discussing a 2000 study by the Merit Systems Protection Board which revealed that one in fourteen federal employees experienced retaliation after reporting govemment misconduct, fraud, waste, or abuse); see also
Simoff, supra note 9, at 342 (discussing a study by the Office of Research Integrity of the United
States Department of Health & Human Service which reported that more than two-thirds of scientific whistleblowers experience negative eonsequences for their actions, including one in four whistleblowers losing their job).
23. This Comment addresses whistleblower statutes and protections for whistleblowers that are provided by the common law. Other, non-whistleblower-specific laws may provide additional protections in some circumstances. For example, government employees may reeeive protection from the First Amendment if their disclosures meet certain requirements. See Terry Morehead
Dworkin & Elletta Sangrey Callahan, Employee Disclosures to the Media: When is a "Source " a
••Sourcerer"?, 15 HASTINGS COMM. & ENT. L.J. 357, 369-73 (1993) (discussing whistleblowing and the First Amendment). These non-whistleblower specific options are beyond the scope of this
Comment.
24. See infra Part II.C.
25. See Elletta Sangrey Callahan & Terry Morehead Dworkin, The State of State
Whistleblower Protection, 38 AM. BUS. L.J. 99, 100 (2000) (describing the incentive and protection approaches of various federal whistleblower laws).
2008] A FLEXIBLE APPROACH TO REPORTING REQUIREMENTS 1637 disruptive work environments, and unfair publicity.
This diverse set of policy choices has led to an equally diverse array of whistleblower statutes and associated requirements. Some statutes, for instance, protect an employee only if the employee reports an actual violation of the law.^* By contrast, some statutes protect employees who are mistaken about an employer's wrongdoing, so long as the employee reasonably believed that wrongdoing had occurred." Many statutes offer protection for a report of any violation of a law, statute, or regulation.^^ Others protect only those employees who report legal violations that pose "a substantial and specific danger to the public health or safety."^' Some statutes cover only public employees,^" while others apply to both public and private employees.
The area of whistleblower law that has generated the greatest controversy, however, concems requirements over the appropriate recipient of a whistleblower's report. Most lawmakers agree that whistleblowers should not receive protection for reporting to just anyone. However, significant disagreement exists as to who should qualify as an appropriate recipient. At the moment, three altematives predominate. These are: (1) protecting only those employees who report externally to a govemment agency, (2) protecting only those employees who report intemally to a supervisor or senior executive, and
(3) protecting employees who report either extemally to a govemment agency or intemally to a supervisor or senior executive. Each of these options represents a particular choice among the policy decisions described above.
Category three, for example, reflects a choice to offer broad protection to employees, perhaps at the expense of more tailored incentives. An intemal reporting requirement, on the other hand, demonstrates a more employercentric view while extemal reporting requirements focus on the public role of whistleblowers. Section III of this Comment analyzes each of the report requirement options in detail and the policy choices that they reveal. This
26. See id. at Appendix A (table excludes Wyoming's whistleblower protection statute, which provides protection to public employees. WYO. STAT. ANN. § 9-11-103 (2007)).
27. See N.J. STAT. ANN. §§ 34:19-1 to -8 (West 2000).
28. See, e.g.. CAL. LAB. CODE § 1102.5 (West 2008); N.J. STAT. ANN. 34:19-2 (West
2000).
29. N.Y. LAB. LAW § 740(2)(a) (2006).
30. See, e.g.. I I I . COMP. STAT. § 395/0.01-1 (1993).
31. See. e.g.. CAL. LAB. CODE § 1102.5 (West 2008).
32. Variation exists within these three categories. For example, within the external report requirement category, some state and federal statutes require whistleblowers to report to a particular govemment agency, while others allow reports to any government entity. See infra Part
I.A-C. Likewise, some statutes that require intemal reporting allow an extemal report if the employer fails to correct the violation within a reasonable time, while others do not. See OHIO
REV. CODE. ANN. § 4113.52(C) (LexisNexis 2008). For the purposes of this Comment, these minor variations are not relevant. The analysis of each of the three broad categories almost always applies with equal force to the variations within a category.
33. Option three, allowing either extemal or intemal reporting, is similar to the standard that this paper proposes. Its advantages and disadvantages are therefore discussed in Part IV.
1638 CALIFORNIA LAW REVIEW [Vol. 96:1633 analysis indicates that a modified version of the broad protection offered by option three provides the most desirable solution.
A. Federal and State Whistleblower Laws
Before turning to an exploration of the three report requirement options described above, a brief review of the current sources of whistleblower laws is necessary. Whistleblowers can currently seek protection from three sources: federal statutes, state statutes, and wrongful disCharge claims based on state common law exceptions to the employment-at-will doctrine. As discussed below, federal legislators and courts have taken a very different approach to report recipient requirements than their state counterparts. For the most part, federal laws are quite hospitable to a whistleblower's choice of report recipient, allowing employees to report either intemally or externally.^'' State laws, on the other hand, almost invariably limit report recipients.''^
Although federal whistleblower laws are generally more protective than state laws with respect to report recipients, they only protect reports of very specific types of employer wrongdoing—namely, violations of a limited number of federal laws. The whistleblower provisions of Sarbanes Oxley, for example, protect only employees of public companies who report unlawful accounting and other financial practices. Because the number of legal violations to which federal whistleblower laws apply is limited,''* most private employees must rely on state whistleblower laws, which generally cover reports of a violation of any statute or regulation.''^
B. Federal Statutes
Federal legislators and courts have taken a different approach to report recipient requirements than the majority of their state counterparts. As this section of the Comment will discuss. Congress and the federal courts have, with few exceptions, provided whistleblowers with significant discretion when choosing a report's recipient. For example, the Whistleblower Protection Act of
1989 ("the WPA"), the successor to the ineffective Civil Service Reform Act of
1978, provides general whistleblower protection to most federal employees and allows reporting to anyone.^' It also provides a specific external entity to whom whistleblowers may report, namely the Office of Special Counsel ("the
34. See infra Part I.B.
35. The majority of states require a report to an external govemment agency; a few require that the employee report intemally first. See infra ?ait U.C.
36. See infra note 59.
37. See supra note 28.
38. See Thomas M. Devine, The Whistleblower Protection Act of 1989: Foundation for the
Modern Law of Employment Dissent, 51 ADMIN. L. REV. 531, 532-35(1999) (discussing the ineffectiveness of the CSRA).
39. 5 U.S.C. § 2302(b)(8) (2006).
2008] A FLEXIBLE APPROACH TO REPORTING REQUIREMENTS 1639
.'*'' The OSC investigates both the alleged violations that whistleblowers report and claims of retaliation against whistleblowers."'
While the WPA applies only to federal employees, some federal statutes extend whistleblower protections to workers in the private sector. For instance, the Clean Air Act''^ the Energy Reorganization Act"^ the Safe Drinking Water
Act"", and the Occupational Safety and Health Act"^ all provide some form of protection to public or private employees who report employer actions that violate the respective statute. The Sarbanes-Oxley Act is a prominent recent example. It provides protection to employees of publicly traded companies who report violations of federal securities laws,"^
These topic-specific statutes, as interpreted by the federal courts, also provide employees with significant discretion when deciding on a report recipient,"^ The language of the whistleblowing provisions in most of the topicspecific statutes is nearly identical,"^ but also ambiguous as "to whom" a whistleblower must report in order to receive protection. The Clean Water
Act provides a good example. Under that Act, it is unlawful for an employer to fire or discriminate against any employee who "has filed, instituted, or caused to be filed or instituted any proceeding under this chapter, or has testified or is about to testify in any proceeding resulting from the administration or enforcement of the provisions of this chapter,"'" Since the Environmental
Protection Agency ("EPA") enforces the Clean Water Act, the provision could be read to require an employee to initiate a formal "proceeding" with the EPA,
The Third Circuit, however, rejected this narrow interpretation. It held that an employee's intemal complaint to his employer qualified as a "proceeding" under the Clean Water Act and was therefore protected whistleblowing activity," The court justified extending the Clean Water Act's whistleblowing protection to intemal whistleblowers by emphasizing the important role that
40, Id.
4L 5 U,S,C, § 1212(a) (2006),
42, 42 U,S,C, § 7622 (2008),
43, 42 U,S,C,§ 5851 (2008),
44, 42 U,S,C, § 300J-9Í (2008),
45, 29 U,S,C, § 660(c) (2006),
46, 18U,S,C,§1514A(2006),
47, See Terry Morehead Dworkin & EUetta Sangrey Callahan, Internal Whistleblowing:
Protecting the Interests of the Employee, the Organization, and Society, 29 AM, BUS, L,J, 267,
276-79 (1991) (discussing the federal court's broad approach to topic-specific statutes),
48, W, at 270 n, 13,
49, The language used in the Sarbanes-Oxley Act is an exception to this practice. It clearly delineates to whom a report must be made. The report must be made to: a federal regulatory body or law enforcement agency, any member of Congress, or a person with supervisory authority over the employee, 18 U,S,C, § 1514A(a)(l) (2006),
50, 33U,S,C,§ 1367(a)(2006),
51, Passaic Valley Sewerage Comm'rs v, Dep't of Labor, 992 F,2d 474 (3d Cir, 1993),
52, Id. at 478-79,
1640 CALIFORNIA LAW REVIEW [Vol. 96:1633 whistleblowers play in effectuating the Clean Water Act's substantive goals."
According to the Third Circuit, the importance of this role warranted interpreting the whistleblowing protections of the Act as broadly as possible.
The court also noted that most employees naturally report intemally first and therefore the Act's whistleblowing protection "would be largely hollow if it were restricted to the point of filing a formal complaint with the appropriate external law enforcement agency."^" Thus, the Clean Water Act's whistleblower provision protects both external and intemal whistleblowers.
Relying on similar rationales, other federal courts have interpreted the other topic-specific statutes in a similarly broad manner.^^
Thus, federal statutes generally allow a fairly broad range of report recipients. Employees can typically report either extemally to an appropriate govemment agency or intemally to a supervisor. In some cases, a report to a non-govemmental extemal body, such as the media, may also qualify an employee for protection.^^ Such broad protection is justified on both normative and practical grounds. Congress and federal courts recognize that whistleblowers serve an important function in assuring compliance with the substantive goals of federal statutes." Employees are often the first to become aware of possible health, safety, quality, and other legal violations by employers. The courts also recognize that, in practice, employees utilize multiple channels to report their employer's violations and should therefore not be required to report extemally.^^
Federal statutory protection does, however, have its limitations. The broadest statute, the Whistleblower Protection Act, protects only federal employees. Topic-specific statutes offer whistleblower protection to both public and private employees, but these statutes only apply to a narrow set of
53. Id.
54. Id. at 478.
55. See, e.g.. Rayner v. Smirl, 873 F.2d 60, 63-64 (4th Cir. 1989) (holding that whistleblower provision of Federal Railroad Safety Act protects intemal and extemal complaints);
Kan. Gas & Elec. Co. v. Brock, 780 F.2d 1505, 1510-12 (10th Cir. 1985) (affirming that intemal reports are protected under ERA); Love v. RE/MAX of Am., Inc., 738 F.2d 383, 387 (10th Cir.
1984) (holding that whistleblower protection provision of Fair Labor Standards Act includes intemal complaints); Mackowiak v. Univ. Nuclear Sys., Inc., 735 F.2d 1159 (9th Cir. 1984)
(holding that employee who made intemal safety and quality control complaints protected under whistleblower provision of Energy Reorganization Act); Phillips v. Interior Bd. of Mine
Operations Appeals, 500 F.2d 772, 779 (D.C. Cir. 1974) (holding that a coal miner who complained to foreman is protected under the Federal Coal Mine Health and Safety Act);
Donovan v. R.D. Anderson Constr. Co., 552 F. Supp. 249 (D. Kan. 1982) (extending OSHA's whistleblowing protections to employee who reported potential employer violations to the media).
56. See 5 U.S.C. § 2302(b)(8) (2006) (the WPA allows reports to "any person"); see also
Donovan, 552 F. Supp. at 249 (extending OSHA's whistleblowing protections to employee who reported potential employer violations to the media).
57. See Passaic Valley Sewerage Comm 'rs, 992 F.2d at 478 (affirming that the legislative intent of the Clean Water Act's whistleblower provisions was to facilitate employer compliance with the Act's requirements).
58. Id. at 478-79.
2008] A FLEXIBLE APPROA CH TO REPORTING REQUIREMENTS 1641 unlawful activities. Employees who report violations of state law or violations of the many federal laws that do not contain whistleblower provisions^ are therefore not covered by federal statutes. Thus, in many situations, employees of private companies or state and local governments cannot seek federal whistleblower protection.
C. State Statutes
Whistleblower statutes are available in some form