Whistle Blowing

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Question: Provide an example where employee whistle-blowing is justified and an example of where it is not. Provide support for each example. (ch. 15) 4 References – 600 words

Whistle-Blowing and Free Speech in the Workplace

 

Another area where employer and employee rights and duties frequently conflict involves free speech. Do employees have the right to openly express their opinions about their company and its actions? If so, under what conditions do they have this right?

 

The U.S. Constitution protects the right to free speech. This means the government cannot take away this right. For example, the legislature cannot shut down a newspaper that editorializes against its actions or those of its members. However, the Constitution does not explicitly protect freedom of expression in the workplace. Generally, employees are not free to speak out against their employers, since companies have a legitimate interest in operating without harassment from insiders. Company information is generally considered to be proprietary and private. If employees, based on their personal points of view, were freely allowed to expose issues to the public and allege misconduct, a company might be thrown into turmoil and be unable to operate effectively.

 

Page 342On the other hand, there may be situations in which society’s interests override those of the company, so an employee may feel an obligation to speak out. When an employee believes his or her employer has done something that is wrong or harmful to the public, and he or she reports alleged organizational misconduct to the media, government, or high-level company officials, whistle-blowing has occurred.

 

An example of a whistle-blower was Michael Winston, a former executive at Countrywide Financial Corporation with responsibility for leadership development. Countrywide, which was later acquired by Bank of America, was a leading subprime lender during the housing boom of the mid-2000s. Winston had complained vigorously to the chief production officer about the company’s strategy of funding almost all loans, whether or not the borrower was qualified. “I told him that you need to focus on customer satisfaction, on the quality of the loan portfolio, and on building leaders who would focus their people on that,” Winston recalled. “I wrote him a very comprehensive memo.” Soon afterward, Winston’s budget was cut, he was excluded from meetings, and his office was relocated. Eventually, he was fired. In 2011, he won a lawsuit against his former employer. “It [was] the littlest of Davids beating the biggest of Goliaths,” said Winston.36 Speaking out against an employer can be risky; many whistle-blowers find their charges ignored—or worse, find themselves ostracized, demoted, or even fired for daring to go public with their criticisms. Whistle-blowers in the United States have some legal protection against retaliation by their employers, though. As noted earlier in this chapter, most workers are employed at will, meaning they can be fired for any reason. However, most states now recognize a public policy exception to this rule. Employees who are discharged in retaliation for blowing the whistle, in a situation that affects public welfare, may sue for reinstatement and in some cases may even be entitled to punitive damages. The federal Sarbanes-Oxley Act, passed in 2002 (and described more fully in Chapters 5 and 13), makes it illegal for employers to retaliate in any way against whistle-blowers who report information that could have an impact on the value of a company’s shares. More recently, the Dodd-Frank Act of 2010 (described more fully in Chapters 7 and 14) requires the government to pay a reward to whistle-blowers who voluntarily provide information that leads to successful prosecutions for violations of federal securities laws. Dodd-Frank also prohibits retaliation against employees who do so.37

 

Moreover, whistle-blowers sometimes benefit from their actions. The U.S. False Claims Act (also known as the Lincoln Law), as amended in 1986, allows individuals who sue federal contractors for fraud to receive up to 30 percent of any amount recovered by the government. In the past decade, the number of whistle-blower lawsuits—perhaps spurred by this incentive—increased significantly, exposing fraud in the country’s defense, health care, municipal bond, and pharmaceutical industries.

 

Page 343For example, several whistle-blowers at Johnson & Johnson, the pharmaceutical company, shared a $112 million reward in 2013 after they helped the government bring a successful case against their employer for illegally marketing the antipsychotic drug Risperdal (which had been approved to treat schizophrenia and bipolar disorder). The government said the company had promoted the drug for unapproved uses, such as for elders with dementia, children with attention deficit hyperactivity disorder, and people with developmental disabilities, in spite of known health risks for these groups. Johnson & Johnson eventually paid $2.2 billion in criminal and civil fines to settle the charges. The government was able to build a successful case against Johnson & Johnson because several employee whistle-blowers came forward. Said one of the whistle-blowers’ lawyers, “She quit without a job. They were asking her to market the drug for the elderly. She knew that was dangerous.”38 Whistle-blowing has both defenders and detractors. Defenders point to the successful detection of fraudulent activities and prosecution of wrongdoers. Under the False Claims Act, through 2012 $55 billion had been recovered by the federal and state governments that would otherwise have been lost to fraud.39 Situations dangerous to the public or the environment have been exposed and corrected because insiders have spoken out. Yet opponents cite hundreds of unsubstantiated cases, often involving disgruntled workers seeking to blackmail or discredit their employers.

 

When is an employee morally justified in blowing the whistle on his or her employer? According to one expert, four main conditions must be satisfied to justify informing the media or government officials about a corporation’s actions. These are

 

The organization is doing (or will do) something that seriously harms others.

The employee has tried and failed to resolve the problem internally.

Reporting the problem publicly will probably stop or prevent the harm.

The harm is serious enough to justify the probable costs of disclosure to the whistle-blower and others.40 Only after each of these conditions has been met should the whistle-blower go public.