New Financial Incentives and Legal Protections for Whistleblowers

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Among its numerous provisions, the new law contains important economic incentives and legal protections for certain financial whistleblowers. As a result, it creates new employment law rights for employees in both New York and New Jersey.

New Economic Incentives for Whistleblowers
With some limited exceptions, if a whistleblower brings new information about a violation of the Dodd-Frank Act to the attention of the Securities and Exchange Commission (“SEC”), and the SEC recovers a monetary sanction of more than $1 million, then the whistleblower will receive between 10% and 30% of the sanction the SEC receives. In deciding the percentage the whistleblower will receive, the SEC is required to consider: (1) how significant the whistleblower’s information was to the successful recovery; (2) how much assistance the whistleblower (and any lawyer representing the whistleblower) provided to the SEC; (3) the benefit of deterring employers from future violations of the Dodd-Frank Act by giving financial incentives to whistleblowers; and (4) other relevant factors the SEC will establish through rules and regulations.

New Legal Protections for Whistleblowers
The Dodd-Frank Act also prohibits retaliation against whistleblowers. Specifically, it makes it unlawful for employers to fire, demote, suspend, threaten, harass, or otherwise discriminate against a whistleblower with respect to the terms and conditions of a whistleblower’s employment because he or she provided information to the SEC under the Act, or assisted with an SEC investigation or legal action relating to information the whistleblower provided to the SEC under the Act. An employee who experiences prohibited retaliation can sue to seek his job back with full seniority (reinstatement), past lost wages, and compensation for any special damages sustained as a result of the discharge or discrimination, including attorneys’ fees, expert witness fees, and other litigation costs.

Limitations Against Employees Waiving Their Rights
The Dodd-Frank Act also prohibits employees from waiving their rights under it, by making any employment policy or agreement that tries to waive an employee’s rights under the Dodd-Frank act unenforceable. Similarly, any agreement requiring an employee to arbitrate his claim under the Act is unenforceable.

The whistleblower protections of the Dodd-Frank Act go into effect in July 2011. However, other laws already protect employees who blow the whistle in New York and New Jersey. For example, the federal government, New York and New Jersey each have False Claims Acts which allow some whistleblowers who identify fraud against the federal or state government a chance to receive a portion of any money the government is able to recover. In addition, the federal Sarbanes-Oxley Act, the Whistleblower Protection Act of 1989, and New Jersey’s Conscientious Employee Protection Act (CEPA) are a few examples of laws which protect whistleblowers from retaliation. If you are a whistleblower working in New York or New Jersey and have experienced harassment or other retaliation as a result, you should consider speaking to a whistleblower lawyer who can help protect your rights.