Best Practices for Whistleblower Compliance
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This document summarizes a webinar on best practices for whistleblower compliance programs. It discusses examining whistleblower statutes to ensure compliance, reviewing best practices for establishing a hotline, and discussing employee training on hotlines and anti-retaliation policies. The webinar examines laws like Sarbanes-Oxley, Dodd-Frank, and the False Claims Act and recommends developing an accessible internal reporting process, promptly addressing complaints, maintaining confidentiality, and documenting all reports and investigations.
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Best Practices for Whistleblower Compliance
- 2. Hotline Confidential: Is Your Company Using Best Practices for Whistleblower Compliance? May 29, 2014
- 3. Chelsie Chmela Events Manager Chelsie.Chemla@ethisphere.com 703.960.2360 We welcome you to submit any questions for the panel through the chat functions you see on your screen. HOST QUESTIONS MATERIALS You’ll receive a copy of this presentation following the webinar (within a few days) along with some additional resources. You can also contact us with any questions at info@convercent.com. 3
- 4. Hotline Confidential: Is Your Company Using Best Practices for Whistleblower Compliance? Thursday, May 29, 2014
- 5. ©2014 Convercent. All rights reserved. Presenter: Autumn Lowry Manager of Professional Services & Behavioral Sciences Specialist for Convercent Areas of expertise: • Corporate investigations on topics related to: Unethical conduct, retaliation, theft, harassment, discrimination • Threat assessments for workplace violence incidents • Corporate trainings on various topics including: Workplace violence, sexual harassment, and the Process of Workplace InvestigationsBachelor of Science: Psychology & Criminal Justice Illinois State University Master of Arts: Forensic Psychology University of Denver 5 HOTLINE CONFIDENTIAL
- 6. ©2014 Convercent. All rights reserved. Presenter: David Schwartz Partner, Labor and Employment Law Group Skadden, Arps, Slate, Meagher & Flom LLP David Schwartz advises clients on a full spectrum of employment-related issues, including before state and federal administrative agencies and courts, as well as in arbitration proceedings. His litigation experience includes: • Defense of whistleblower, discrimination, breach of contract and fraud claims • Cases concerning the enforcement of restrictive covenants and breaches of fiduciary duties In non-litigation matters, he has worked with clients to implement whistleblower and non-harassment policies; conduct internal investigations; negotiate collective bargaining agreements; create compensation programs; review reduction-in-force plans; and negotiate and draft employment and separation agreements. Bachelor of Arts: University of Rochester (cum laude) Juris Doctor: Cornell Law School (cum laude) david.schwartz@skadden.com 212-735-2473 6 HOTLINE CONFIDENTIAL
- 7. ©2014 Convercent. All rights reserved. Agenda and Objectives • Examine whistleblower anti-retaliation statutes to ensure your organization is prepared to handle these claims • Review best practices for instituting a hotline • Discuss how to train employees on the existence of a hotline and anti-retaliation 7 HOTLINE CONFIDENTIAL
- 8. ©2014 Convercent. All rights reserved. What is a whistleblower? • Informant • A person who exposes alleged misconduct • Violation of a law, rule, regulation, policy Well known whistleblowers: Frank Serpico (1967-1971) – NYPD, police corruption Karen Silkwood (1974) – nuclear energy Erin Brockovich (1993) – power plants Jeffrey Wigand (1996) – “The Insider,” tobacco industry Edward Snowden (2013) – NSA spying operations 8 HOTLINE CONFIDENTIAL
- 9. ©2014 Convercent. All rights reserved. Sarbanes-Oxley (SOX) 2002 • Established requirement to hear employees’ whistleblower complaints • Put procedures in place to protect the confidentiality of those who file complaints • Retaliating against a whistleblower may carry criminal and civil penalties for your company and individuals • Established OSHA administrative process • Tight timeframes for filing of complaints and responses and issuance of determinations 9 HOTLINE CONFIDENTIAL
- 10. ©2014 Convercent. All rights reserved. Dodd-Frank Wall Street Reform and Consumer Protection Act (2010) • Focus: violations of securities laws • Most commonly applied to public and financial companies • Some private and non-profit companies also covered • Also applicable to employees of private companies (e.g., investment advisors) that contract with public and financial companies (e.g., mutual funds) • Employers cannot discriminate against a whistleblower • Discharge, demote, threaten, harass (directly or indirectly) • Whistleblowers’ information that leads to enforcement actions greater than one million can collect up to 30% of the settlement 10 HOTLINE CONFIDENTIAL
- 11. ©2014 Convercent. All rights reserved. Occupational Safety and Health Act (OSHA) (1970) • Must have a reporting channel available to report workplace hazards, illness, and injuries • Must display a hotline poster • Whistleblowers cannot be retaliated against, in general • Over 20 statutes that protect against retaliation for reports connected to specific health and safety acts 11 HOTLINE CONFIDENTIAL
- 12. ©2014 Convercent. All rights reserved. Equal Employment Opportunity Commission (EEOC) • Responsible for enforcing federal laws related to discrimination based on a protected class • Illegal to fire, demote, harass, or otherwise retaliate against someone who filed a charge of discrimination or participates in proceedings related to the filing of a complaint • In 2013, 41% of claimants brought forth concerns related to retaliation • Reporting procedure provides affirmative defense to some claims 12 HOTLINE CONFIDENTIAL
- 13. ©2014 Convercent. All rights reserved. False Claims Act (FCA) (1863) • Sets criminal and civil penalties for defrauding the US government • Employers prohibited from retaliating • Qui tam whistleblowers can collect up to 30% of the award • Doesn’t specifically mandate the use of a hotline 13 HOTLINE CONFIDENTIAL
- 14. ©2014 Convercent. All rights reserved. Federal Acquisition Regulation (FAR) • Governs the acquisition process by which the government purchases goods and services • 2009 Ethics Compliance Program Rule expanded obligations of government contractors to detect and report misconduct • Must display hotline awareness posters • Protects contractors who report issues internally and to the government 14 HOTLINE CONFIDENTIAL
- 15. ©2014 Convercent. All rights reserved. US Foreign Corrupt Practices Act (FCPA) (1977) • In 2012, DOJ and SEC released a resource guide • Chapter 8 outlines elements of an effective FCPA compliance program • Provide a mechanism for reporting suspected misconduct • Whistleblowers should be able to report confidentially, without fear of reprisal • Similar whistleblower provisions and protections as under SOX and Dodd-Frank 15 HOTLINE CONFIDENTIAL
- 16. ©2014 Convercent. All rights reserved. Additional Considerations • Some statutes apply to internal complaints and others to agency complaints only • More than half the states have their own whistleblower laws • Some only apply to public sector workers while others extend protections to private sector employees as well • Industry-specific standards • Financial services and healthcare have enhanced requirements for hotlines, self-disclosure, and non-retaliation • US companies operating in foreign jurisdictions • Example: UK Bribery Act, EU Privacy Standards, data protection laws 16 HOTLINE CONFIDENTIAL
- 17. ©2014 Convercent. All rights reserved. Takeaways • There is a need for internal controls to limit the basis for complaints • Whistleblower complaints are inevitable • Oftentimes whistleblower complaints lead to investigations • Investigations are painful • Investigations are helpful 17 HOTLINE CONFIDENTIAL
- 18. ©2014 Convercent. All rights reserved. 18 HOTLINE CONFIDENTIAL
- 19. ©2014 Convercent. All rights reserved. 19 HOTLINE CONFIDENTIAL “The lower your expectations, the greater your disappointments.” Communication ExpectationsLeadership
- 20. ©2014 Convercent. All rights reserved. Best Practices for Whistleblower Programs 1. Provide multiple contact points 2. Acknowledge receipt of complaints and act promptly 3. Develop, implement and communicate an internal process 4. Maintain records and documents 20 HOTLINE CONFIDENTIAL
- 21. ©2014 Convercent. All rights reserved. 1. Provide Multiple Contact Points • Choice: confidential versus anonymous • Multiple intake methods • Have clear, well-publicized submission options • Train managers who may intake reports • Cultural awareness 21 HOTLINE CONFIDENTIAL
- 22. ©2014 Convercent. All rights reserved. 2. Acknowledge Receipt of Complaints and Act Promptly • Responding in person • Responding to a complaint submitted telephonically or online • Responding to anonymous complaints • Responding to former employee complaints 22 HOTLINE CONFIDENTIAL
- 23. ©2014 Convercent. All rights reserved. 3. Develop and Implement an Internal Process • Develop an approach that is general enough to be applied to different kinds of complaints • Assign a department/person to ensure consistency and enforce standards • Act consistently and transparently • Confidentiality • What can you promise? • What should you say? 23 HOTLINE CONFIDENTIAL
- 24. ©2014 Convercent. All rights reserved. 4. Maintain Records and Documents • Establish and enforce practices for data entry and data retention • Use a comprehensive case management system that supports investigations • Consider the statistical data you want to capture • Limit data access 24 HOTLINE CONFIDENTIAL
- 25. ©2014 Convercent. All rights reserved. Hotline Best Practices • Determine uses for the hotline • Open and available 24/7, 365 days a year • Support local languages • Provide multiple channels for report intake (phone, web, in person) • Offer anonymity • Automated report distribution and alerts • Case management capable of customized, detailed reporting with metrics • Policy and document search and download capabilities • Policy attestation • LMS 25 HOTLINE CONFIDENTIAL
- 26. ©2014 Convercent. All rights reserved. Rewards • Diminishes trust and credibility • Frustrates internal compliance and reporting efforts • Diminishes sense of civic duty • Causes a delay in reporting Fear of retaliation primary bar to reporting, not the lack of rewards. 26 HOTLINE CONFIDENTIAL
- 27. ©2014 Convercent. All rights reserved. Hotline Communication Strategy • Plan to communicate service frequently • Communicate the services in ways that resonate with your employees • Communicate in multiple formats • Educate management on the services • Goal = Report internally before going to the government 27 HOTLINE CONFIDENTIAL
- 28. ©2014 Convercent. All rights reserved. Commitment to Non-Retaliation • Legal protections vary according to subject matter • Adverse action • Explicitly and persistently communicate to employees • Anyone involved in employee oversight, monitoring, and discipline should be trained to understand anti-retaliation expectations and implications • Contract with a third-party to manage the hotline service and conduct workplace investigations to avoid the possibility of retaliation 28 HOTLINE CONFIDENTIAL
- 29. ©2014 Convercent. All rights reserved. Conclusions A successful Whistleblower Program must: • Be compliant with federal, state, and local laws • Be supported and communicated by the organization leaders • Have an anonymous hotline that is appropriately communicated • Emphasize non-retaliation through training and education 29 HOTLINE CONFIDENTIAL
- 30. ©2014 Convercent. All rights reserved. Resources [Guide] Answering the Call: Requirements for Reporting Channels Convercent Case Manager http://www.convercent.com/solution/case-manager/ • Full hotline, incident management • Reporting and auditing • Investigation management • Demo available 30 HOTLINE CONFIDENTIAL
- 31. ©2014 Convercent. All rights reserved. Thank you. Questions? Follow me on Twitter @autumn8141 31 HOTLINE CONFIDENTIAL
- 32. This webcast and all future Ethisphere webcasts are available complimentary and on demand for BELA members. BELA members are also offered complimentary registration to Ethisphere’s Global Ethics Summit and other Summits around the world. For more information on BELA contact: Brette Baecker Senior Director, Engagement Services Brette.Baecker@Ethisphere.com 480.397.2656 Business Ethics Leadership Alliance (BELA)
- 33. June 11, 2014 Russian Sanctions: What the U.S. and OFAC Directives Mean for Global Companies All upcoming Ethisphere events can be found at: http://ethisphere.com/events/ PLEASE JOIN US FOR
- 34. THANK YOU
Editor's Notes
- My name is Autumn Lowry and I have worked for the company for over 7 years. At Convercent, we provide easy-to-use ethics and compliance software that gives you predictive analytics to mitigate people risk and safeguard your reputation. Convercent serves customers ranging from large corporations to fast-growing small companies with operations in over 130 countries, and across a variety of industries. I work on the professional services team as a behavioral sciences specialist and manage our investigations team. I received my graduate degree from DU in Forensic Psychology. My areas of expertise include:
- I am David Schwartz. I am a partner in the Labor and Employment Group at Skadden, Arps. In my practice, I address many types of employment-related issues. Over the last few years, I have been engaged to address numerous whistleblower claims and investigations. In fact, I am involved in several of these matters currently.
- Thank you for joining us today. Autumn and I are happy to discuss Whistleblower Hotlines with you. So we are all on the same page, we are talking about various ways in which employees [though in some cases possibly others] can raise issues on an anonymous basis with their employers. Before we get to the best practices for using hotlines, we thought it would be helpful to cover some of the reasons why employers have whistleblower hotlines. For some employers, anonymous hotlines are statutorilyrequired (SOX). In other instances, having a complaint procedure may provide an affirmative defense to certain claims. The complaint procedure need not necessarily be anonymous but some employers opt to go that route. Finally, in some cases, employers adopt hotlines because they have determined that having a mechanism for anonymous internal reporting may head off reports to government agencies. These reports may be made by employees for a variety of reasons. Some no doubt are "true believers." Others may be "job protectors." Finally, some are certainly "bounty seekers." With these thoughts in mind, I will cover the statutory underpinnings for anonymous hotlines. Autumn will address best practice for setting up hotlines as well as training employees on their existence along with the importance of anti-retaliation provisions.
- Before we get to the statutory grounds for establishing or at least considering anonymous hotlines, we should answer the question: What is a whistleblower? As the name suggests, it is someone who "blows the whistle" – that is someone who provides information – generally to an employer or government regulator – about an actual or threatened violation of law. In many, though not all, instances the whistleblower need not be correct about the underlying violation. In these cases, it is generally enough that the employee had a good-faith belief of a violation. However, under some statutes, the whistleblower must have been correct in his or her assessment that the complained of conduct actually violated a law. Once a person engages in protected activity – legal speak for "becomes a whistleblower" – the employer cannot take action against the employee because he or she engaged in the protected activity. There are often legal fights over the extent to which the protected activity has to impact the employer's actions for those actions to give rise to a claim. More often, there are factual disputes over issues such as whether the employer knew the employee was a whistleblower, whether the employer took some adverse action against the employee and whether the employer would have taken the action even absent the protected activity. Here are a few well known "whistleblowers" Frank Serpico played by Al Pacino in Serpico Karen Silkwood played by Merly Streep in Silkwood Erin Brochovich played by Julia Roberts in Erin Brochovich Jeffrey Wigand played by Russell Crow in The Insider Edward Snowden – so famous that he does not need a movie or too busy to sell the movie rights.
- SOX was enacted in 2002 in the wake of several high-profile corporate restatement cases including those involving Enron and Worldcom. The statute regulates a wide range of corporate and securities issues at publically traded companies. It also expanded the enforcement authority of the Securities Exchange Commission or SEC. For our purposes today, it is worth noting that companies covered by SOX are required by Section 301 of SOX (15 U.S.C. § 78j-1(m)(4)) to establish procedures for accepting anonymous complaints. However, tipsters are often known to the employer. Sometimes the nature or wording of the complaint makes it obvious. Sometimes the tipster makes it known that he or she was the whistleblower – either by not making the complaint anonymously or by revealing themselves to be the source as part of the company's investigation, usually while being interviewed. Claims for retaliation under SOX must be brought before OSHA, the Occupational Safety and Health Agency. We will get to the reasons why in a few moments. For now, I just want to note that there are strict deadlines for employees to bring SOX claims, for employers to respond to SOX claims and for OSHA to decide them. Without going through all the steps, OSHA decisions can ultimately be appealed to the federal courts. But, OSHA and the courts have very broad remedial power. Also, I want to note the very recent decision in Lawson v. FMR LLC, in which the US Supreme Court extended SOX whistleblower protections to employees of contractors and subcontractors of public companies. Claimants must allege fraud that implicates the shareholders of publicly held mutual funds to be protected. Still, it sweeps many unsuspecting employers into the scope of the SOX anti-retaliation provisions.
- As sure as night follows day, regulation follows economic meltdown. In 2010, Dodd-Frank became the law of the land in the US. It includes a whole host of regulatory changes in response to the Great Recession. For our purposes today, I want to focus on a few key elements. 1. It expanded coverage to pick up certain private companies. 2.It too includes protections for whistleblowers. 3. Employees may now go straight to federal court with a whistleblower claim. There is no need to file first with OSHA. 4. Perhaps most importantly, Dodd-Frank provides employees with significant incentives to report wrongdoing to the SEC by establishing a bounty program. Under this program, individuals are entitled to 10% to 30% of amounts collected by the SEC based on original information provided by the tipster. There have been several payouts under this program, some of which have been quite substantial.
- Returning now to OSHA. OSHA is a government agency that has historically played a significant role in the whistleblowing arena. OSHA is responsible for enforcing the whistleblower provisions of over a dozen statutes, including the OSH Act. Its investigators and administrative law judges are generally experienced in addressing workplace retaliation issues. However, often times, they do not have the experience to address some of the complicated or nuanced accounting issues that come up in SOX cases. With respect to its real sweet spot, workplace safety and health issues, OSHA requires that employers keep track of workplace injuries, that employees have a way to report workplace injuries and hazards and that people who do report these situations not be subject to retaliation. In this connection, employer must display a poster with an OSHA hotline number.
- Sticking with the pure employment arena, federal anti-discrimination laws such as Title VII, the Americans with Disabilities Act and the Age Discrimination in Employment Act all have anti-retaliation provisions. Neither these statutes nor the EEOC regulations require that employers have anonymous whistleblower hotlines. But, there are two issues I want to stress on this point. First, adopting and following a complaint procedure can serve as the basis for an affirmative defense to many harassment claims. So, employers have an incentive to establish a procedure for fielding complaints, even if not necessarily on an anonymous basis. Second, many employers successfully avoid liability on underlying claims of discrimination while nevertheless losing – and sometimes losing large amounts – on retaliation claims.
- Returning to the world of fraud, the False Claims Act is supposed to protect the federal government from fraud. Like all of the other statutes we have been discussing, it too includes an anti-retaliation provision. It does not require an employer to have an anonymous hotline but, like Dodd-Frank, it does allow tipsters – often employees – to collect up to 30% of a recovery through qui tam actions. The Office of the Inspector General suggests using a hotline as a means of detecting fraud before it is reported to the government
- Chapter 8 of the US Sentencing Commission’s Federal Sentencing Guidelines – Elements of an Effective Compliance Program Establish and promote a system for employees to report or seek guidance about potential misconduct “without fear of retaliation” Periodically access the effectiveness of your compliance program; monitoring and reviewing the hotline
- 34 states
- The best way to avoid whistleblower claims is through a culture of compliance. If everyone behaves, there is nothing to complain about. Still, for most large organizations, whistleblowing is all but inevitable. Investigations are painful. Disruptive Take time Cause anxiety among employees Can lead to rumors Expensive But, ultimately, if done right, investigations can be helpful. Can correct problems Can help a company build a defense to lawsuits or government investigations Government agencies often rely on investigations done by outside counsel in assessing whether to take further regulatory action With these thoughts, I am happy to turn this over to Autumn.
- Choice: offer anonymity, but encourage personal contact. If employees fear retribution,lack of confidentiality, or that concerns will be ignored/will not make a difference the program will likely fail and not be utilized to its full potential Intake Methods: telephonic helpline, web-based, in-person, comments box/ask a question, fax, mail, email Cultural Awareness: some cultures are more comfortable submitting issues online or in-person Also, need to have languages for all individuals (for example India versus ??)
- Crucial to address reports in a timely fashion. If reports are mishandled or left unresolved, the program will lose credibility and the value of your hotline will decrease
- A well conceived process will minimize missteps with the team and ensure all cases are managed with a level of dedication and sophistication Well established process with also provide your organization with an affirmative defense. Transparency and consistency are key elements to creating a sense of fairness and justice within the corporate culture. When possible, companies should share the results of investigations to instill confidence in the issue management process. This will show employees that management takes misconduct seriously and will act on reports.
- Stats: type of case, findings, accused parties, locations/departments, investigation length, number of interviews conducted, outcomes (coaching, verbal, written, suspension, termination) Data Access: limit to required personnel; ensure case management system has audit trails and ability to restrict/add access as needed
- Uses: SOX versus everything Internal versus External Hotline
- A solid communication strategy will raise awareness of the hotline service and increase adoption among employees Plan to communicate the Convercent services frequently, not just when they are first made available. Frequent communications will not only remind employees of the services, but will emphasize the importance of and demonstrate your commitment to them. Plan to communicate the services in ways that resonate with your employees and how they these services will benefit them. This may require modifying your message by department, geographic location or by job function. Plan to communicate the Convercent services in multiple formats to ensure everyone is made aware and the communications are not accidentally overlooked. Examples may include email communications, announcements on your intranet site, announcements at company events and/or meetings, updates to your employee handbook, and posters or banners in high traffic areas, training. Plan to educate management teams on the new services so they can assist in educating their employees and answer any questions that might arise.
- Legal protections: best to have a blanket policy for participation in any internal investigation; however, federal law does offer specific protections Adverse Action: termination, demotion, denying a promotion/overtime, discipline, denial of benefits, failure to hire/rehire, intimidation/making threats, reduce in pay/hours
- for more information check out our website and Convercent.com
- If you found today’s topic and content interesting, follow me on twitter and check out our website for more upcoming webinars. Are there any questions today before we sign off