A POT OF GOLD AT THE END OF THE RAINBOW: AN ECONOMIC
INCENTIVES-BASED APPROACH TO OSHA WHISTLEBLOWING
Jarod S. Gonzalez*
I.
II.
III.
IV.
V.
INTRODUCTION ……………………………………………………………………...
THE ANTI-RETALIATION MODEL …………………………………………………....
THE STRUCTURAL MODEL …………………………………………………………..
THE BOUNTY MODEL ………………………………………………………………..
CONCLUSION…………………………………………………………………………
I. INTRODUCTION
Would society benefit from increased employee whistleblowing in the workplace safety
and health arena? This is a normative question that one should consider before deciding the
steps, if any, to take to reform the Occupational Safety and Health Administration’s
Whistleblower Program. The question is debatable. This piece, however, assumes that more of
the right kind of employee whistleblowing is beneficial to society. Based on this assumption,
this article considers how to shape the occupational safety and health law to further incentivize
employees to complain about workplace health and safety violations. The backdrop to the law
should be the recognition that employees who complain to the Department of Labor about such
issues are often viewed as snitches. The decision to blow the whistle puts an employee’s career
and reputation on the line. Therefore, there is a built in pressure on an employee not to complain
even when an employer’s workplace safety and health practices are exceedingly poor.
The current structure motivates employees to complain about workplace safety and health
practices by providing some employees who make complaints with protection from employer
retaliation in the workplace. Ant-retaliation provisions by themselves will not by and large
motivate employees to take action regarding workplace safety and health problems. The law
should be reformed to strengthen the anti-retaliation provisions to make them substantively and
procedurally fairer to both employees and employers. Reforms in the anti-retaliation provisions
would be a small step forward, but the impact such changes would have on incentivizing
employee whistleblowing in any systemic way is likely to be modest at best.
This article suggests some small steps for reform within the context of the anti-retaliation
model. Moreover, this article goes further and sketches a template for a workplace health and
* Frank McDonald Research Professor of Law 2009-2010, Texas Tech University School of Law; B.B.A., summa
cum laude, University of Oklahoma, 1997; J.D., with highest honors, University of Oklahoma College of Law,
2000. I thank my fellow panelists at the 2010 AALS Program on The Future of OSHA Reform for their insights and
comments regarding this piece. Thanks to Professor Michele Kwon at Texas Tech University School of Law for
sharing with me her insights regarding the IRS Whistleblower Program.
1
Electronic copy available at: http://ssrn.com/abstract=1538336
safety whistleblower model that is decidedly different – a bounty model. Monetarily rewarding
employees who complain about ultimately illegal employer workplace safety and health
practices could systemically increase the type and amount of whistleblowing. This type of
model has been utilized with regard to fraud against the government by government contractors
and tax fraud. It is at least conceivable that a similar model would translate to workplace safety
and health.
II. THE ANTI-RETALIATION MODEL
There is a general consensus that workers who “blow the whistle” on prohibited
employer practices regarding workplace safety and health should be protected from reprisals by
their employers. The Occupational Safety and Health Administration (OSHA), a sub-agency
within the Department of Labor (DOL), administers a Whistleblower Protection Program that
tries to protect whistleblowers from such reprisals. OSHA is charged with enforcing
whistleblower provisions in approximately 17 statutes.1 Many of these whistleblower provisions
involve protecting nonfederal employees who blow the whistle on workplace safety and health
issues.2 But the non-whistleblower parts of the statutes themselves are not necessarily
administered by the DOL.3 When a whistleblower provision is created in a federal statute
designed to protect the whistleblower against subsequent retaliation; Congress has generally seen
fit to give OSHA the authority to investigate those whistleblower complaints.4
1 Occupational Safety and Health Act of 1970, 29 U.S.C. § 660(c); Federal Railroad Safety Act of 1970, 49 U.S.C. §
20109; Energy Reorganization Act of 1974, 42 U.S.C. § 5841; Asbestos Hazard Emergency Response Act of 1986;
Clean Air Act, 42 U.S.C. § 7622; Comprehensive Environmental Response Compensation, and Liability Act of
1980, 42 U.S.C. § 9610; Federal Water Pollution Control Act, 33 U.S.C. § 1367; Safe Drinking Water Act, 42
U.S.C. § 330j-9(i); Solid Waste Disposal Act, 42 U.S.C. § 6971; Toxic Substances Control Act, 15 U.S.C. §2622;
International Safe Container Act; National Transit Systems Security Act of 2007; Pipeline Safety Improvement Act
of 2002, 49 U.S.C. § 60129; Surface Transportation Assistance Act of 1982, 49 U.S.C. § 31105; Consumer Product
Safety Improvement Act of 2008, 15 U.S.C. § 2051, Section 40; Wendell H. Ford Aviation Investment and Reform
Act for the 21st Century, 49 U.S.C. § 42121; Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1514A.
2 See 29 U.S.C. § 660(c)(1) (OSH Act anti-retaliation provision).
No person shall discharge or in any manner discriminate against any employee because such
employee has filed any complaint or instituted or caused to be instituted any proceeding under or
related to this Act or has testified or is about to testify in any such proceeding or because of the
exercise by such employee on behalf of himself or others of any right afforded by this Act.
3 See e.g., Clean Air Act, 42 U.S.C. § 7622; Comprehensive Environmental Response Compensation, and Liability
Act of 1980, 42 U.S.C. § 9610; Federal Water Pollution Control Act, 33 U.S.C. § 1367; Safe Drinking Water Act,
42 U.S.C. § 330j-9(i); Solid Waste Disposal Act, 42 U.S.C. § 6971; Toxic Substances Control Act, 15 U.S.C.
§2622; International Safe Container Act; National Transit Systems Security Act of 2007; Pipeline Safety
Improvement Act of 2002, 49 U.S.C. § 60129; Surface Transportation Assistance Act of 1982, 49 U.S.C. § 31105;
Consumer Product Safety Improvement Act of 2008, 15 U.S.C. § 2051.
4 In an unusual move, Congress authorized the Department of Labor [and hence OSHA] to investigate retaliation
claims filed by whistleblowers who complain to their employers about corporate fraud under section 806 of the
Sarbanes-Oxley (SOX) Act. See 18 U.S.C. § 1514A(b)(1)(A); Order Delegating Responsibility for Administration
of SOX Regulations, 67 Fed. Reg. 65008 (Oct. 22, 2002). The DOL does not typically concern itself with corporate
fraud and accounting irregularities but it does have an expertise in investigating retaliation against whistleblowers
generally.
2
Electronic copy available at: http://ssrn.com/abstract=1538336
OSHA enforces a whole host of retaliation provisions, including Occupational Safety and
Health Act (OSH Act) retaliation claims under Section 11(c).5 For non-OSH Act retaliation
claims, the administrative process for these claims tends to follow a similar pattern. The
whistleblower alleging retaliation must first file a complaint with OSHA.6 The whistleblowers
then pursue their claims through the OSHA investigation phase, adjudication by a Labor
Department Administrative Law Judge, appeal to the Administrative Review Board, and finally
an appeal to a federal court of appeals under “substantial evidence” review.7
The OSH Act retaliation provision does not allow the whistleblower to prosecute his or
her retaliation claims through the administrative process outlined above. Instead, the prosecution
of a Section 11(c) complaint depends on the DOL deciding to investigate and prosecute the
retaliation claim on the whistleblower’s behalf. Section 11(c) does not contain a private right of
action. It is entirely up to the DOL whether or not to bring a Section 11(c) action.8 If the agency
decides to sue, the action must be brought in federal district court.9 The Act does not provide the
right to a jury trial. Neither does the Seventh Amendment to the United States Constitution
guarantee the right to a jury trial because Section 11(c) cases are viewed as equitable actions.10
A. Anti-Retaliation Reforms
1. Resources and Efficiency
The Department of Labor should put more resources into the OSHA Whistleblower
Protection Program and available resources should be used more efficiently by OSHA. The
United States Government Accountability Office recently published a report on the OSHA
5 See supra note 1.
6 See 29 C.F.R. § 24.103 (explaining retaliation complaint filing procedure for Energy Reorganization Act of 1974,
42 U.S.C. § 5841); Clean Air Act, 42 U.S.C. § 7622; Comprehensive Environmental Response Compensation, and
Liability Act of 1980, 42 U.S.C. § 9610; Federal Water Pollution Control Act, 33 U.S.C. § 1367; Safe Drinking
Water Act, 42 U.S.C. § 330j-9(i); Solid Waste Disposal Act, 42 U.S.C. § 6971; and Toxic Substances Control Act,
15 U.S.C. §2622); 29 C.F.R. § 1978.102 (explaining retaliation complaint filing procedure for Surface
Transportation Assistance Act of 1982); 29 C.F.R. § 1979.103 (AIR-21 retaliation complaint filing procedure); 29
C.F.R. § 1980.103 (SOX retaliation complaint filing procedure).
7 See 29 C.F.R. § 24.100-.115 (ERA); 29 C.F.R. § 1978.100-.115 (STAA); 29 C.F.R. § 1979.100-.114 (AIR 21); 29
C.F.R. § 1980.100-.115 (SOX).
8 See Wood v. Department of Labor, 275 F.3d 107, 110-112 (D.C. Cir. 2001) (whistleblower’s challenge to DOL’s
decision not to pursue a Section 11(c) action in court failed because Secretary determined that no violation occurred
and such decision is completely discretionary with the Secretary).
9 A whistleblower alleging retaliation must file his complaint with the Department of Labor within 30 days of the
alleged retaliatory act. See 29 U.S.C. § 660(c)(2); 29 C.F.R. § 1977.15(d). The Secretary of the Department of
Labor has 90 days from the date of the complaint to notify the whistleblower regarding whether retaliation occurred.
Id. at § 660(c)(3); § 1977.16. The 90-day period is directory in nature. Id. at § 1977.16. If the Secretary determines
that retaliation against the whistleblower took place, the Secretary may bring “an action in any appropriate United
States district court against such person [the employer that engaged in retaliation].” See 29 U.S.C. § 660(c)(2); 29
C.F.R. § 1977.3. See also RANDY S. RABINOWITZ, OCCUPATIONAL SAFETY & HEALTH LAW 596-597 (2d ed. 2002)
(describing Section 11(c) procedure).
10 See Martin v. Sharpline Converting, Inc., 790 F. Supp. 2d 252, 253-254 (D. Kan. 1992); Dunlop v. Hanover Shoe
Farms, Inc., 441 F. Supp. 385, 388 (E.D. Pa. 1976).
3
Whistleblower Protection Program.11 The report delves into considerable detail regarding
problems in the Program and identifies steps to enhance the program such as establishing a
mechanism to ensure the accuracy of data in its management system and improving its auditing
systems.12 The goal is to make the investigation and prosecution of whistleblower retaliation
claims more effective and efficient. Implementing the GAO recommendations would be a move
in the right direction if the current administrative model is kept in place.
2. Technical Statutory Flaws
But it is not simply a question of resource allocation and efficiency. The whistleblower
statutes have several technical flaws that impede a successful anti-retaliation regime. First, the
lack of a private right of action under the OSH Act is problematic and should be remedied as
soon as possible by adding such a statutory right. A whistleblower should not have to rely on the
DOL to pursue a claim on its behalf. Currently, if the DOL fails to act, the whistleblower is left
to the vagaries of state statutory law and state common law regarding whether a private right of
action is available.13 Moreover, even if a state law action might be available, the whistleblower
must overcome the defense that the OSH Act preempts the state law claim.14 Even if a federal
statutory private right of action is not added, the OSH Act should be specifically amended to
clarify that the OSH Act does not preempt state law whistleblower claims based on workplace
safety and health complaints.15 In a perfect world, plaintiffs alleging whistleblower retaliation
based on workplace safety and health complaints should be able to simultaneously pursue
11 See United States Government Accountability Office, Report to Congressional Requesters, Whistleblower
Protection Program: Better Data and Improved Oversight Would Help Ensure Program Quality and Consistency,
GAO-09-106 (January 2009), available at http://edlabor.house.gov/documents/111/pdf/publications/GAOWhistleblower.pdf (last visited October 27, 2009).
12 Id. at 1-72; See also Whistleblower Laws Inadequately Enforced; More Resources, Tracking Needed, GAO Says,
Daily Lab. Report (BNA) No. 38 at A-5 (Mar. 2, 2009).
13 See Grant v. Butler, 590 So. 2d 254 (Ala. 1991) (no wrongful discharge claim allowed under Alabama law for
reporting a health and safety violation to OSHA); Braun v. Kelsey-Hayes Co., 635 F. Supp. 75 (E.D. Pa. 1986) (no
Pennsylvania common law claim available because employer’s alleged retaliatory conduct fell within the remedies
provided for by Section 11(c) of the OSH Act);
14 Compare the Grant and Braun decisions, supra note 13, with contrary authority stating that the OSH Act’s antiretaliation provision does preempt state tort claims for wrongful discharge. See Flenker v. Willamette Industries,
Inc., 967 P.2d 295 (Kan. 1998) (common law tort remedy under Kansas law is not preempted by the OSH Act).;
Schweiss v. Chrysler Motors Corp., 922 F.2d 473 (8th Cir. 1990) (wrongful discharge claim under Missouri law not
preempted by Section 11(c) of OSH Act).
15 This type of action has already taken place in some OSHA whistleblower statutes. In 2007, Congress amended
the Federal Railroad Safety Act to make clear that the FRSA does not preempt other state law claims related to
whistleblower retaliation against railroad employees. See 49 U.S.C. § 20109(g), (h) (2008). Subsections (g) and
(h) state:
(g) No preemption.—Nothing in this section preempts or diminishes any other safeguards against
discrimination, demotion, discharge, suspension, threats, harassment, reprimand, retaliation, or
any other manner of discrimination provided by Federal or State law.
(h) Rights retained by employee.—Nothing in this section shall be deemed to diminish the rights,
privileges, or remedies of any employee under any Federal or State law or under any collective
bargaining agreement. The rights and remedies in this section may not be waived by any
agreement, policy, form, or condition of employment.
4
through private rights of action multiple state and federal claims until an element of estoppel is
reached.16
Second, the statute of limitations periods are too short—the limitations periods range
from 30 days to 180 days, depending on the statute.17 Amendments to the various retaliation
statutes to establish a 300-day limitation period, which is consistent with Title VII law, would be
an improvement on the status quo.18 Indeed, even a one-year limitations period seems
reasonable.
Third, the causation standard in OSHA whistleblower cases varies considerably
depending on the statute in question. The burden of proof possibilities range from a
“contributing factor” standard to a “but for” standard.19 When the employer is provided a “same
decision” affirmative defense, the employer’s burden on this affirmative defense ranges from a
16 In Gonero v. Union Pac. R.R. Co., cite (E.D. Cal. October 19, 2009), a federal district court permitted a
mechanic to pursue California common law wrongful discharge and intentional infliction of emotional distress
claims--based upon retaliation for the mechanic complaining to his employer about the unsafe operation of track
switches—even though the mechanic had the right to pursue a federal whistleblower action under the Federal Rail
Safety Act. The court relied on the 2007 FRSA amendments that preserve state law rights for whistleblowers who
are also protected by FRSA. The “preservation of state law rights” policy exemplified in FRSA makes good sense
for other whistleblower statutes. There is considerable value to preserving state statutory and common law
whistleblower claims while also strengthening federal OSHA whistleblower protections. See e.g., Jarod S.
Gonzalez, State Antidiscrimination Statutes and Implied Preemption of Common Law Torts: Valuing the Common
Law, 59 S.C. L. REV. 115, 145 (2007) (“If our judicial system believes in the continued vitality and importance of
the [common] law, which it should, the common law should not be lightly eschewed unless there is a clear
legislative direction to do so.”).
17 See Solid Waste Disposal Act, 42 U.S.C. § 6971 (30 days); International Safe Container Act, 46 U.S.C. § 1506
(60 days); Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1514A (90 days); Energy Reorganization Act of 1974, 42
U.S.C. § 5851 (180 days). See Statement of Richard E. Moberly, Hearing on Private Sector Whistleblowers: Are
There Sufficient Legal Protections? Subcommittee on Workforce Protections, Committee on Education and Labor,
United States House of Representatives 3 (May 15, 2007).
18 See Statement of Richard E. Moberly, supra note 15.
19 See 49 U.S.C. § 42121(b)(2)(B)(iii) (AIR-21 Act) (“The Secretary may determine that a violation of subsection
(a) has occurred only if the complainant demonstrates that any behavior described in paragraphs (1) through (4) of
subsection (a) was a contributing factor in the unfavorable personnel decision alleged in the complaint.”) (emphasis
added); 18 U.S.C. § 1514A(b)(2)(C) (SOX) (contributing factor standard); 42 U.S.C. § 5851(b)(3)(C), 29 C.F.R. §
24.104(e)(3) (ERA) (contributing factor standard); 29 C.F.R. § 24.104(d)(3) (Safe Drinking Water Act, Federal
Water Pollution Control Act, Toxic Substances Control Act, Solid Waste Disposal Act, Clean Air Act, and
CERCLA) (motivating factor standard); 29 C.F.R. § 1977.6 (OSH Act) (substantial reason/but for causation
standard) (“The proscriptions of section 11(c) apply when the adverse action occurs because the employee has
engaged in protected activities. . . . [T]o establish a violation of section 11(c), the employee’s engagement in
protected activity need not be the sole consideration behind discharge or other adverse action. If protected activity
was a substantial reason for the action, or if the discharge or other adverse action would not have taken place “but
for” engagement in protected activity, section 11(c) has been violated.”) (emphasis added). In OSH Act retaliation
cases, some federal courts have applied the substantial reason and but for test from the regulation. See Secretary of
Labor v. HMS Direct Mail Serv., Inc., 752 F. Supp. 573 (W.D.N.Y. 1990). Other federal courts have applied
causality tests that align more with the McDonnell Douglas burden-shifting approach from employment
discrimination law. See Reich v. Hoy Shoe Co., 32 F.3d 361 (8th Cir. 1994); Martin v. Anslinger, Inc., 794 F. Supp.
640 (S.D. Tex. 1992); RABINOWITZ, OCCUPATIONAL SAFETY & HEALTH LAW 599 (2d ed. 2002).
5
preponderance of the evidence standard to a clear and convincing evidence standard.20 The
burdens of proof should be made uniform across all of the statutes. At first glance, incorporating
the Title VII approach to the burdens of proof might seem like the right way to proceed.
However, a Title VII approach—plaintiff must satisfy motivating factor standard and the
employer must prove its same decision defense by a preponderance of the evidence21—is not the
best choice for OSHA whistleblower law. OSHA whistleblowers may be at even more of a
disadvantage in winning cases than employment discrimination plaintiffs generally.22 OSHA
whistleblowers put their jobs and careers on the line like no other employment law plaintiffs
really do. OSHA whistleblower law should be focused on strengthening whistleblower
protections, not diluting them.23 Therefore, it makes sense to adopt a uniform burdens of proof
structure that is favorable to OSHA whistleblowers.24 Adoption of this approach would be
consistent with the most recent history involving federal whistleblower statutes. Since 1989,
Congress has passed at least eleven whistleblower laws, all of which incorporate the clear and
convincing standard for an employer’s affirmative defense.25 The clear and convincing standard
has neither been confusing to apply nor overly burdensome for employers during the past twenty
years.26
3. Adopting a Federal Courts Model for all OSHA Whistleblower Claims
Excluding the OSH Act, the whistleblower statutes enforced by OSHA generally follow
an administrative model for adjudicating whistleblower claims.27 It is questionable whether a
pure administrative model is the best model for these types of claims. OSHA investigators,
Office of Administrative Law Judges, and Administrative Review Board Judges have developed
expertise in hearing these types of cases. However, as evidenced by the January 2009 GAO
report, the effectiveness and efficiency of the overall administrative process are questionable.28
20 See 29 C.F.R. § 24.104(d)(4) (Safe Drinking Water Act, Federal Water Pollution Control Act, Toxic Substances
Control Act, Solid Waste Disposal Act, Clean Air Act, and CERCLA) (“The complaint will be dismissed if the
respondent demonstrates by a preponderance of the evidence that it would have taken the same unfavorable
personnel action in the absence of the complainant’s protected activity.”) (emphasis added); 49 U.S.C. §
42121(b)(2)(B)(iv) (AIR-21 Act) (“Relief may not be ordered under subparagraph (A) if the employer demonstrates
by clear and convincing evidence that the employer would have taken the same unfavorable personnel action in the
absence of that behavior.”) (emphasis added).
21 See 42 U.S.C. §§2000e-2(m), 2000e-5(g)(2)(B).
22 See Richard E. Moberly, Unfulfilled Expectations: An Empirical Analysis of Why Sarbanes-Oxley Whistleblowers
Rarely Win, 49 WM. & MARY L. REV. 65, 93 (2007) (comparing win rates among OSHA whistleblower plaintiffs,
EEOC plaintiffs, and plaintiffs in other federal employment cases).
23 See Letter from Law Professors to Congressional Representatives re Reconciliation of H.R. 1507 and S. 372
Related to the Whistleblower Protection Enhancement Act of 2009 (October 30, 2009) (on file with author).
24 Id.
25 Id.
26 Id.
27 See supra notes 6 and 7.
28 See supra note 11 at 32 (“OSHA faces two key challenges in administering the whistleblower program—it lacks
a mechanism to adequately ensure the quality and consistency of investigations, and man investigators report that
they lack the certain resources they need to do their jobs—including equipment, training, and legal assistance.”).
6
OSHA investigations in many cases do not create much value for either the whistleblower
plaintiffs or employer defendants. Investigations are cursory, yet the processing of claims is
often delayed due to lack of resources and inadequate training.29 Moreover, many complaints
are “screened out” by OSHA without conducting a full investigation.30 A significant number of
these dismissed complaints may have been improperly dismissed. To the extent the merits of a
whistleblower complaint are investigated and significantly developed at the investigation stage, it
is questionable how the investigation aids the process at the OALJ stage. In short, the
bureaucracy is an impediment to whistleblower claims. The solution is to transition from a
federal administrative regime to de novo claims heard in federal district court by juries.
Some important reforms have occurred recently.
In 2002, Congress passed the
31
Sarbanes-Oxley Act. The SOX whistleblower provision adopts a hybrid administrative/federal
courts model for adjudicating claims brought by whistleblowers claiming retaliation for
corporate fraud complaints. A SOX whistleblower claim must be filed with the Department of
Labor. If the Secretary has not issued a final decision within 180 days of the filing of the
complaint, the whistleblower may sue in federal district court.32 The federal court “safety valve”
is designed to encourage the Department of Labor to process SOX whistleblower claims within
the 180-day time frame. The SOX whistleblower may bring a de novo case in federal district
court only if there is not final agency decision within 180 days.33 In 2007, Congress adopted a
similar hybrid model for Federal Railroad Safety Act whistleblower claims.34
If tiny reform steps are all we are after, Congress should make the hybrid model uniform
across all of the OSHA-enforced whistleblower statutes. The current hybrid model is better than
the pure administrative model because it contains some access to the federal courts. In the
29 See supra note 11 at 39 (substantial number of OSHA whistleblowers lack training on SOX and AIR-21 Acts; 40
percent of investigators reported that a lack of training hinders their ability to complete investigations within
required time frames).
30 See supra note 11 at 28 (the number of claims screened out by OSHA exceeded the number of claims
investigated during fiscal year 2007 in some OSHA regions).
31 18 U.S.C. § 1514A.
32 See 18 U.S.C. § 1514A(b)(1) (“IN GENERAL. A person who alleges discharge or other discrimination by any
person in violation of [the SOX anti-retaliation prohibition] may seek relief . . . by (A) filing a complaint with the
Secretary of Labor; or (B) if the Secretary has not issued a final decision with 180 days of the filing of the complaint
and there is no showing that such delay is due to the bad faith of the claimant, bringing an action at law or equity for
de novo review in the appropriate district court of the United States, which shall have jurisdiction over such an
action without regard to the amount in controversy.”).
33 148 CONG. REC. S7420, S7420 (daily ed. July 26, 2002) (“Only if there is not final agency decision within 180
days of the complaint (and such delay is not shown to be due to the bad faith of the claimant) may he or she bring a
de novo case in federal court with a jury trial available (See United States Constitution, Amendment VII; Title 42
U.S.C. § 1983).
34 49 U.S.C. § 20109(d)(3) (2008) (De novo review.—With respect to a complaint [filed under the FRSA with the
Department of Labor], if the Secretary of Labor has not issued a final decision within 210 days after the filing of the
complaint and if the delay is not due to the bad faith of the employee, the employee may bring an original action at
law or equity for de novo review in the appropriate district court of the United States, which shall have jurisdiction
over such an action without regard to the amount in controversy, and which shall, at the request of either party to
such action, be tried by the court with a jury.”).
7
federal courts, whistleblowers can pursue their claims without bureaucratic intervention through
full discovery under the Federal Rules of Civil Procedure. A remedial structure with the full
panoply of tort-style remedies, without damages caps, and with federal court access will
encourage the private bar to accept more workplace health and safety whistleblower cases.
Furthermore, if the whistleblower statutes make clear that jury trials are available, which they
should, then private citizens through the jury system will play a significant role in deciding these
types of case. There is no better institution than the American jury for deciding whistleblower
claims based on workplace health and safety complaints.35
Because the primary aims are federal court access with jury trial rights, the current hybrid
model is wanting. For example, relatively few SOX whistleblower cases are heard by federal
district courts for several reasons. First, the federal courts have often declined to exercise
jurisdiction over SOX whistleblower cases because of a technical problem at the agency level
based on the exhaustion of administrative remedies doctrine.36 Second, SOX whistleblower
plaintiffs do not generally have access to the federal courts because either the Secretary makes a
final decision within the 180-day period37 or the claims have progressed so far at the
administrative level that the federal courts are refusing to exercise jurisdiction based on collateral
estoppel/issue preclusion principles.38 These roadblocks to the federal courts are inherent in the
current hybrid systems present in SOX and FRSA. Finally, under the current hybrid systems,
even if a whistleblower makes it to federal district court, there is not necessarily a right to a jury
trial. The 2007 FRSA amendment expressly guarantees the jury trial right.39 But the federal
district courts have held that there is no jury trial right under SOX40, although there is a good
35 See e.g., Vikram David Amar, Implementing an Historical Vision of the Jury in an Age of Administrative
Factfinding and Sentencing Guidelines, 47 S. TEX. L. REV. 291, 293 (2005) (“The basic constitutional vision
underlying the Booker/Blakely/Apprendi line of cases focuses on the centrality of the institution of the jury in our
system of government of the people, by the people, and for the people.”); Jarod S. Gonzalez, SOX, Statutory
Interpretation, and the Seventh Amendment: Sarbanes-Oxley Act Whistleblower Claims and Jury Trials, 9 U. PA. J.
LAB. & EMP. L. 25, 84 (2006) (claims brought by whistleblowers who assert corporate wrongdoing are best decided
by juries under a historical vision of the jury).
36 See Smith v. Psychiatric Solutions, Inc., No. 3:08-cv-00003 (N.D. Fla. Mar. 31, 2009) (federal court dismissed
SOX whistleblower complaint because whistleblower named publically-traded parent corporation in the OSHA
complaint but failed to name the subsidiary in the OSHA complaint);
37 See supra note 11 at 30 (in a small portion of [SOX] appeals, OAJL did not make a decision within the required
time frames and the whistleblowers took their case to U.S. District Court.”).
38 See Allen v. Stewart Enterprises, Inc., No. 2:05-cv-04033, (E.D. La. April 6, 2006) (applying collateral estoppels
principles to bar federal district court suit when the ALJ had issued a 109 page decision, which was pending on
review at the ARB); Procedures for the Handling of Discrimination Complaints under Section 806 of the Corporate
and Criminal Fraud Accountability Act of 2002, Title VIII of the Sarbanes-Oxley Act of 2002, 69 Fed. Reg. 52104,
52111 (2004) (comments to OSHA regulation advocate application of collateral estoppels principles to cases that
have been substantially litigated at the administrative level).
39 See 49 U.S.C. § 20109(d)(3) (2008).
40 See Schmidt v. Levi Strauss & Co., 621 F. Supp. 2d 796 (N.D. Cal. 2008) (no right to jury trial in SOX
whistleblower action); Walton v. Nova Information Systems, 514 F. Supp. 2d 1031 (E.D. Tenn. 2007) (same);
Murray v. TXU Corp., 2005 U.S. Dist. LEXIS 10945 (N.D. Tex. June 7, 2005) (same). Two federal district courts
denied motions to strike jury demands in SOX whistleblower actions but permitted such motions to be considered at
8
argument that such right is either implied by the statute or guaranteed by the Seventh
Amendment to the United States Constitution.41
The lack of a jury trial right could be remedied across all of the OSHA whistleblower
statutes. The current “safety valve” model present in SOX and FRSA—no federal court action
until agency adjudication time-period expires—is not an impediment to guaranteeing the jury
trial right once a whistleblower gets to federal court. But the current approach does impede
significant numbers of whistleblowers from the right to sue in the federal district courts in the
first place.42 And that is a problem.
The most radical solution would be to ditch the administrative process altogether. Simply
create private rights of action that require the whistleblower claims be brought in federal district
court and guarantee jury trial rights. This solution would get rid of OSHA investigations, ALJ
determinations, ARB decisions, and substantial evidence review in the federal courts of appeals.
Due to the significant amount of resources invested in the current administrative system and the
expertise developed over some years (and frankly due to inertia), this solution is not politically or
practically workable. But perhaps there is a way to tinker with the administrative process to
make it better: save the Department of Labor’s resources by cutting out the OSHA investigation
stage. Under this proposal, the whistleblower would proceed immediately to the OALJ stage.
The ARB and the federal courts of appeals could be kept in the loop as well. The ALJ
procedures must guarantee full FRCP-style discovery rights and juries. The “safety valve” to
federal district court lurks if the agency decision is not made within the relevant time frame.
Another possible approach is to “pick your poison.” The whistleblower must pick one of
two options at the time it first brings the complaint. It can either pick the federal district court
route or the administrative process route. But once it decides the forum, it must stick with it to
judgment and there will be no parallel proceedings. This type of approach does raise its own set
of questions. Would whistleblowers ever take the administrative route? If few whistleblowers
choose that route, the administrative process would wilt and die. The bureaucracy is taken down
slowly instead of with the stroke of a pen. The results could be surprising. Competition would
incentivize the federal judiciary and the agency to handle whistleblower cases effectively and
efficiently. The relative tradeoffs between the two systems could lead to diverging choices
among whistleblowers about which system to choose. The chances are good that providing a
federal court option at the outset of filing a whistleblower claim would lead to an equilibrium
that is better than the current approach, which goes overboard in preferring administrative
adjudication of OSHA whistleblower claims.
a later time without prejudice. See Fraser v. Fiduciary Trust Co. Int’l, 417 F. Supp. 2d 310, 325 (S.D.N.Y. 2006);
Hanna v. WCI Communities, Inc., 348 F. Supp.2d 1332, 1334 (S.D. Fla. 2004).
41 See Gonzalez, supra note 35.
42 See supra notes 36-38.
9
Whistleblower claims should be adjudicated in system(s) that are transparent, fair,
effective, and efficient. OSHA, the OALJ, and the ARB have an administrative stranglehold for
non-OSH Act whistleblower claims because of the adherence to a pure administrative model.
The Department of Labor has a stranglehold on OSH Act whistleblower claims if for no other
reason than there is no private right of action for those claims. The agency’s monopoly over
these claims is not good for our society. The aim should be to have federal private rights of
action for all of the OSHA whistleblower statutes. The statutes should allow such claims to be
brought in federal district court and tried to juries.
III. THE STRUCTURAL MODEL
Other scholars have recognized that strong statutory and common law protections for
whistleblowers may not by themselves be sufficient to encourage effective employee whistle
blowing.43 In particular, Professor Richard E. Moberly has advanced a couple of alternate
theories that go beyond the traditional statutory and common law anti-retaliation protections.
First, in Protecting Whistleblowers by Contract, Professor Moberly explains how the law of
contract could be used to provide further anti-retaliation protections for whistleblowers.44 He
points to rules recently enacted by the major stock exchanges that require publically traded
companies to publish a Code of Ethics promising not to retaliate against employees for reporting
illegal conduct.45 He argues that enforcing these Code anti-retaliation promises could provide
broader whistleblower protection than currently exists and explains solutions to get around
doctrines, such as the employee handbook doctrine, that would make such promises
unenforceable.46 Second, in Sarbanes-Oxley’s Structural Model to Encourage Corporate
Whistleblowers, Professor Moberly advocates for a “Structural Model” approach that requires
companies to provide employees with a standardized channel to report misconduct to a
company’s board of directors as a means of encouraging more effective employee whistle
blowing.47 This model is helpful because it attacks the behavioral norms that otherwise
discourage effective employee whistle blowing.48
Professor Moberly has done yeoman’s work in conceptualizing and detailing alternate
models for encouraging employee whistle blowing. The “Structural Model” and “Contract
Model” have direct applicability to employee whistle blowing in the workplace safety and health
arena. It is imperative that these models play a substantial role in conceptualizing whistleblower
reform efforts for workplace safety and health.
43 See DANIEL P. WESTMAN & NANCY M. MODESITT, WHISTLEBLOWING: THE LAW OF RETALIATORY DISCHARGE
182-186 (2d ed. 2004) (Code anti-retaliation protections for whistleblowers); Marlene Winfield, Whistleblowers as
Corporate Safety Net, in WHISTLEBLOWING—SUBVERSION OR CORPORATE CITIZENSHIP? 21, 24 (Gerald Vinten ed.,
1994) (describing an ombudsman system).
44 79 U. COLO. L. REV. 976 (2008).
45 Id. at 977-78.
46 Id. at 978-79.
47 2006 BYU L. REV. 1107.
48 Id. at 1141-1161.
10
IV. THE BOUNTY MODEL
The primary focus of this article is to add in a small way to the conversation engaged in
by Professor Moberly and others regarding whistleblower reform efforts. The goal is to examine
whether a Bounty Model, in combination with other reform models, could better encourage rankand-file employees to provide effective information to appropriate actors regarding workplace
safety and health violations of federal law and corporate fraud violations.
Federal agencies have used bounty programs in some form or fashion for many years.
They go by different names such as bounty schemes, rewards programs, incentive payment
programs, and moiety acts.49 Various bounty schemes are currently operational. Informantpaying programs exist under Securities and Exchange laws, United States Customs Service laws,
Internal Revenue Service laws, the False Claims Act, and other federal programs.50 Under
securities trading laws, the Securities and Exchange Commission is authorized to pay informants
who tip off the agency to insider trading violations.51 Bounties are paid from amounts imposed
as a penalty for insider trading violations and recovered by the SEC or Attorney General.52
Informants who provide original information to the United States Customs and Border Protection
Service regarding violations of U.S. Customs laws may receive a monetary reward of up to
twenty-five percent of the net amount recovered.53 Under Internal Revenue Service laws, the
IRS whistleblower program pays awards to individuals who blow the whistle on others who do
Under recent amendments to the IRS whistleblower program, the
not pay their taxes.54
maximum potential award to the whistleblower is raised to 30% of the recovered amounts.55
The False Claims Act authorizes private citizens to bring qui tam actions56 on behalf of the
federal government against any persons who defraud the federal government.57 The government
has the right to intervene in a qui tam suit under the False Claims Act. If the government
intervenes, it is primarily responsible for conducting the litigation, but the qui tam plaintiff is still
a party. If the government declines to intervene, the qui tam plaintiff conducts the litigation.58
49 See Marsha J. Ferziger and Daniel G. Currell, Snitching for Dollars: The Economics and Public Policy of
Federal Civil Bounty Programs, 1999 U. ILL. L. REV. 1141, 1142 n.5 (1999).
50 Id. at 1201-1207. Other federal agencies that maintain awards programs include the National Highway Traffic
Safety Administration, the Environmental Protection Agency, the Coast Guard, the National Marine Fisheries
Service, and the Federal Bureau of Investigation. Id. at 1143 n.12.
51 See 15 U.S.C. § 78u-1(e) (2006); 17 C.F.R. § 201.61-.68 (2008).
52 15 U.S.C. § 78u-1(e) (2006).
53 See Tariff Act of 1930, 19 U.S.C. § 1619(a) (2006).
54 See Internal Revenue Code, 26 U.S.C. § 7623 (2006).
55 See Internal Revenue Code, 26 U.S.C. § 7623(b)(1) (2006).
56 Qui tam is the Latin abbreviation for the Latin phrase “qui tam pro domino rege quam pro se ipso in hac parte
sequitur,” which means “he who pursues this action on our Lord the King’s behalf as well as his own.” 1 John T.
Boese, Civil False Claims and Qui Tam Actions 1-7 (3d ed. 2007). Qui tam actions have their origins in the courts
of Ancient Rome. Qui tam actions flourished under the common law and statutes of England during the Middle
Ages and were transported to the American colonies and later into American law. See Geoffrey Christopher Rapp,
Beyond Protection: Invigorating Incentives for Sarbanes-Oxley Corporate and Securities Fraud Whistleblowers, 87
B.U. L. REV. 91, 96 n.19 (2007). An excellent history of English and American qui tam law is found in an article by
Professor Randy Beck. See J. Randy Beck, The False Claims Act and the English Eradication of Qui Tam
Legislation, 78 N.C. L. REV. 539 (2000).
57 See 31 U.S.C. §§ 3729-3733 (2006); 31 U.S.C. § 3730(b)(1) (authorizing qui tam action).
58 Id. § 3730(b)(4).
11
A qui tam plaintiff is entitled to between 15% and 30% of any amounts recovered, depending on
how much the qui tam plaintiff contributed to the litigation and whether the government
intervened.59
A. Bounty Programs and Alteration of Regulation
Common threads run through the various bounty programs. First, the bounty programs
partially privatize in a very unique way the investigation and administration of a public
regulatory scheme, presumably for the benefit of the regulatory system as a whole. Some
commentators have argued that this type of private-public partnership is often good for both the
informants and the government.60 Private individuals reap monetary profits from pointing out
federal violations to the relevant government agency. Regulators obtain information that they
otherwise would not know about, develop stronger cases against bad actors, and more efficiently
use scarce investigative and litigation resources.61 For example, Professor Pamela Bucy has
used Game Theory to explore how bounty models alter the regulatory world and whether the
alteration is for better or worse.62 She explains that regulators are willing to compromise their
independence, prosecutorial discretion, and secrecy to work with private parties if doing so
delivers more benefits than costs. Similarly, private individuals will decide to alert regulators to
federal violations when the benefits of doing so outweigh the huge personal, professional, and
financial hardships associated with blowing the whistle. With a regulatory mechanism like the
False Claims Act, which incorporates a bounty model, private individuals are more likely to
blow the whistle because the benefit side of the cost-benefit analysis is increased. The very real
career-threatening, life-altering costs are still present. But the potential of collecting a
substantial financial reward and protecting oneself from blame are true benefits that go above
and beyond the satisfaction of doing the right thing.63 Of course, doing the right thing is a value
unto itself that is worthy of honor and praise. But human nature being what it is the courageous
few may need a little bit more of a push to stick their neck out.
Second, bounty programs raise important moral and ethical questions irrespective of their
alleged economic efficiencies. They are socially and politically dangerous because many people
do not believe it is best to monetarily reward an informant, whatever the public benefit the
informant may be providing.64 This philosophy is best exemplified during the 1998 debates
regarding whether to discontinue the IRS whistleblower program. At that time, Senator Harry
Reid of Nevada called for an end to the IRS whistleblower program. He termed it the “Snitch
59 Id. § 3730(d).
60 See Ferziger and Currell, supra note 49, at 1143 (“Bounty schemes survive in spite of their moral hazards for one
reason: they work. The government recovers millions of dollars annually that it could not have recovered without
the information provided by informants, and government agencies pay out hundreds of bounties in return.”).
61 See Pamela H. Bucy, Games and Stories: Game Theory and the Civil False Claims Act, 31 FLA. ST. U. L. REV.
603, 675 (2004).
62 Id. at 675-76.
63 Id.
64 See, e.g., Ferziger and Currell, supra note 49, at 1142 (explaining how “snitching” is viewed in negative terms by
some and using example of Linda Tripp’s conduct during President Clinton-Monica Lewinsky ordeal to illustrate
point); Tamar Frankel, Using Sarbanes-Oxley To Reward Honest Corporations, 62 BUS. LAW. 161 (2006) (“There
are good reasons for avoiding monetary rewards for honesty. A direct monetary reward for honesty is unseemly.
Honesty should be considered the rule and not the exception.”) (emphasis removed).
12
Program” and the “Award for Rats Program.” He argued to end the program on moral
grounds.65 Senator Reid’s effort failed, but the sentiment he expressed is one which many
people in American society agree.66 Accordingly, this moral dilemma must be taken into
consideration when determining whether a bounty model is for the better or for the worse in
OSHA cases.
B. The Efficacy of Bounty Programs
The beauty of bounty programs is in the eye of the holder. In addition to the morality
concerns previously expressed, there is a fear that bounty programs inevitably lead to vexatious
litigation because of the monetary incentive.67 Furthermore, depending on whether the bounty
program provides the whistleblower with a FCA-style private right of action coupled with an
agency intervention option, an agency may bear considerable administrative costs as part of the
program.68
The vexatious litigation and administrative expense criticisms seem to me to be largely
overblown. Bounty programs may spur some to make frivolous claims but not in a way that is
decidedly different from any civil statute that creates a private right of action.69 The FCA
bounty model—private right of action with agency intervention right—does not have to be
incorporated into all bounty programs. If a FCA bounty model is developed in other contexts,
the agency must be given the resources to review the informant complaints and make
intervention decisions.70
The morality concern is a sticking point and difficult to get past. But this objection can
be overcome to some degree if one focuses on the following: think about what the decision to
blow the whistle really means for the whistleblower and the public good that comes from the
right kind of whistle blowing. There is no doubt that an individual’s decision to blow the whistle
often takes a severe economic, physical, emotional, and spiritual toll on that individual.71 But
when that decision is made in the right kind of cases—cases that involve wrongdoing on a large
scale—society does truly benefit.72 The bounty model encourages effective whistle blowing
65 144 CONG. REC. S4379-05, at S4397-98 (Statement of Sen. Reid).
66 See supra note 63.
67 See Pamela H. Bucy, Private Justice, 76 S. CAL. L. REV. 1, 63-64 (2002) (explaining that the threat of
nonmeritorious litigation under the FCA creates uncertainty for business planning and leads to needless extensive
and expensive preventative programs); Elletta S. Callahan & Terry M. Dworkin, Do Good and Get Rich: Financial
Incentives for Whistleblowing and the False Claims Act, 37 VILL. L. REV. 273, 325 (1992) (noting that “[v]oices
raised against the FCA consistently cite the danger of meritless claims motivated by greed.”).
68 See Rapp, supra note 56 at 134 (“A further objection to the qui tam model is that it increases the burden on
regulatory authorities forced to review such actions, monitor their progress, and make decisions about
intervention.”).
69 Id. at 133.
70 Id. at 134.
71 Id. at 119-125.
72 Id. at 135 (noting that the social value of disclosure of serious frauds is particularly and therefore financial
bounties are a good tool for maximizing effective whistle blowing when financial incentives are structured to
increase with the seriousness of the underlying fraud). See also Bucy, supra note 61 at 676 (“when the FCA or any
similar mechanism that pulls private parties into the public regulatory effort, is good, it is very good. When it is bad,
it is very bad. The key lies with the private parties. If the private party brings information to regulators of real
13
even though collateral effects are present: more people will act from impure motives and there
will be some increase in frivolous claims.73
1. The Whistleblower’s Plight
There are powerful disincentives for persons not to bring serious legal violations to the
attention of civil enforcement agencies. Even in a world of anti-retaliation employment
protections for whistleblowers, the whistleblower faces the likelihood of one or more of the
following happening to him or her: loss of employment; social ostracism; emotional strain;
strain on family life; physical injury; and blacklisting from his or her chosen industry.74
Professors Earle and Madek point that out that even when a whistleblower “wins” a workplace
retaliation lawsuit, the cost may not be worth it.75 They use the example of the SOX plaintiff in
Welch v. Cardinal Bankshares.76
Mr. Welch, the SOX whistleblower plaintiff, was a chief financial officer for Cardinal
Bankshares. He earned an approximate annual salary of $58,000. Due to improprieties in the
company’s accounting practices and insider trading concerns, he refused to certify the
company’s 2002 financial statements. The company subsequently terminated his employment.
He was unable to find a job for substantial portions of the next several years. After his
employment ended with Cardinal, Mr. Welch filed a SOX whistleblower claim with OSHA.
After a long, drawn-out Department of Labor administrative process, he won a judgment against
Cardinal for back pay, special damages, and reinstatement. But the victory came at a big price.
During the pendency of the case, Mr. Welch lost his farm and had to move to a smaller house.
He and his wife depleted their savings and they owed their attorney over $90,000.77
Mr. Welch’s story is not an aberration. Research surveys of individuals who blow the
whistle and then live through the effects of those decisions indicate that a substantial proportion
of them would not have blown the whistle if they had known then what they know now. One
researcher states that almost “all [whistleblowers] say they wouldn’t do it again—if they had a
chance, that is.”78 In another survey, 44% of the whistleblowers said that they would do it again
fraud, identifies real wrongdoers, and brings valuable resources to regulators, the FCA—or any similar
mechanism—works enormously well.”); Ferziger and Currell, supra note 49 at 1197 (“[g]ood informant tips alert an
agency to clear violations of law for which a high monetary penalty can be imposed; the worst tips alert agencies to
actions that appear to be violations but are not.”).
73 See Elizabeth C. Tippett, The Promise of Compelled Whistleblowing: What the Corporate Governance
Provisions of Sarbanes-Oxley Mean for Employment Law, 11 EMPL. RTS. & EMPLOY. POL’Y J. 1, 9-10 (2007) (costs
of whistleblower rewards programs are that the public may find such programs unsavory, co-workers will become
suspicious of whistleblower motives, and rewards will motivate frivolous claims).
74 See Rapp, supra note 56 at 118-125 (discussing the various “counterincentives that can convince insiders not to
bring information about ongoing corporate and financial fraud to light” such as loss of employment, fear of social
ostracism, psychological strain, and blacklisting); Tippett, supra note 73 at 16 (citing survey of 84 whistleblowers
which found that 82% of those whistleblowers experienced harassment after blowing the whistle, 60% were fired,
17% lost their homes, and 10% admitted to attempted suicide.).
75 See Beverley H. Earle and Gerald A. Madek, The Mirage of Whistleblower Protection under Sarbanes-Oxley: A
Proposal for Change, 44 AM. BUS. L.J. 1, 23-25 (2007).
76 See Welch v. Cardinal Bankshares, Case No. 2003-SOX-15 (U.S. Dep’t of Labor Office of Admin. Law Judges).
77 See Earle and Madek, supra note 75 at 123-125.
78 See C. Fred Alford, Whistleblowers: Broken Lives and Organizational Power 1 (2001).
14
in a different way and 33% reported that they would not have blown the whistle because it
“wasn’t worth it.”79
Against this backdrop, one can understand the policy allure of a bounty program. Bounty
programs provide the monetary incentives that might motivate potential informers to speak out
when they otherwise would not do so for the practical reasons previously explained.
2.
Bounty Programs Succeed on Economic Terms
A steely-eyed analysis of the bounty programs currently in existence demonstrates that
some of them are economically successful at a certain level. The fact that these programs are
still in existence at Customs, the IRS, the SEC, and through the False Claims Act is some
evidence of their continuing vitality. But it is clear that current federal bounty programs are not
all the same. The False Claims Act and IRS Whistleblower bounty programs appear to have
achieved some level of success; not so much for the SEC bounty program. Examining how the
FCA, IRS, and SEC bounty programs have fared about the years will help determine whether a
workable bounty program could be prudently imported into the OSHA enforcement scheme.
a.
False Claims Act
Since 1986, when Congress strengthened the qui tam provisions of the False Claims Act,
total recoveries under the False Claims Act amount to approximately $24 billion.80 In fiscal year
2009 alone, the United States government obtained $2.4 billion from False Claims Act cases, the
second-highest recovery amount in history.81 Of that $2.4 billion, about $2 billion was
recovered in lawsuits filed under the False Claims Act’s qui tam provisions.82 Relators, i.e.,
whistleblowers, received $255 million in awards in fiscal year 2009.83 Approximately twothirds of the total $2.4 billion recoveries for 2009 were from health care fraud.84
b.
IRS Whistleblower Program
For more than 140 years, the IRS has been authorized to pay awards to individuals who
blow on the whistle on those who do not pay their taxes.85 Prior to 2006, awards to
whistleblowers were discretionary and set at 1%, 10%, or 15% of the amounts recovered, with a
79 See Rapp, supra not 56 at 118 (citing to study from Sonja L. Faulkner, After the Whistle is Blown: The Aversion
Impact of Ostracism 57 (Aug. 1998) (unpublished Ph.D. dissertation, University of Toledo)).
80 See Justice Department Recovers $2.4 Billion in False Claims Cases in 2009; More than $24 Billion Since 1986,
FY 09 Recovery is Second-Largest in History, DOJ Press Release 09-1253, November 19, 2009, available at
http://www.justice.gov/opa/pr/2009/November/09-civ-1253.html.
81 Id.
82 Id.
83 Id.
84 Id.
85 Act of Mar. 2, 1867, ch. 169, § 7, 14 Stat. 471, 473 (codified by ch. 11, § 3463, 35 Rev. Stat. 686 (1873-74)).
Codified as 26 U.S.C. § 7623 in 1954.
15
$10 million cap.86 For much of the IRS whistleblower provision’s history, the provision was
underutilized. One commentator stated that the IRS whistleblower provision in effect prior to
2006 had “paltry bonuses, stingy administrators, inadequate protection for whistleblowers, and
unreceptive courts.”87 In 2006, however, things changed. That year Congress amended the IRS
whistleblower program to strengthen the IRS’s ability to pay rewards to tax whistleblowers.88
Under current law, rewards to tax whistleblowers are mandatory if several conditions are
satisfied. First, in order to qualify for the mandatory award, the whistleblower must provide
information relating to a tax noncompliance matter in which the tax in dispute exceeds $2
million.89 Second, if the taxpayer who is alleged not to have paid the appropriate amount of
taxes is an individual, the taxpayer’s gross income must exceed $200,000 for any taxable year at
issue.90 Finally, the information provided must substantially contribute to a decision to take
administrative or judicial action that results in the collection of tax. When these conditions are
satisfied, the whistleblower must receive an award between 15-30% of the collected proceeds
resulting from administrative or judicial action.91
The early evidence indicates that the changes in the IRS whistleblower program will spur
more whistleblower submissions at higher tax amounts. The combination of increased
whistleblower submissions regarding tax disputes of $2 million or more, the increased
whistleblower “take” regarding recovered proceeds, and the mandatory nature of the program
will likely lead the IRS to recover more taxes under this program and pay out more in
whistleblower rewards in the years to come. For example, under the new law, by the end of
Fiscal Year 2008, the IRS received 476 submissions relating to 1,246 taxpayers that met the $2
million threshold, of which 228 alleged more than $10 million. This far surpasses the number of
“high ceiling” whistleblower claims in prior years. Under the old law, “only 8 of 198 full paid
claims in 2008 involved collections of more than $2 million, and only three involved collections
of more than $10 million.”92 Even under the old law, amounts collected as tax and amounts paid
as rewards was on an upward trajectory between 2004 and 2008. In 2004, the IRS collected
$74,130,794 and paid $4,585,143 as rewards. In 2008, the IRS collected $155, 985,834 and paid
$22,370,756 as rewards. All of the awards, including those in 2008, were based on the old law
and the applicable percentages were based on the old law, not the higher percentages established
by the 2006 amendments.93
c. SEC Bounty Program
There is less available data to judge the effectiveness of the SEC bounty program and the
Customs bounty program. At least with respect to the SEC bounty program, the evidence
86 Treas. Reg. § 301-7623-1(a); IRS FY 2008 REPORT TO CONGRESS ON THE WHISTLEBLOWER PROGRAM , available
at http://www.irs.gov/pub/whistleblower/annual_report_to_congress_september_2009.pdf [hereinafter FY 2008
WHISTLEBLOWER REPORT].
87 Dennis J. Ventry, Whistleblowers and Qui Tam for Tax, 61 TAX LAW. 357, 363-64 (Winter 2008).
88 See Tax Relief & Health Care Act of 2006, Pub. L. No. 109-432, Div. A, Title IV, § 406(d), 120 Stat. 2960;
Adding subsection (b) to 26 U.S.C. § 7623.
89 Internal Revenue Code, 26 U.S.C. § 7623(b)(5)(B) (2006).
90 Internal Revenue Code, 26 U.S.C. § 7623(b)(5)(A) (2006).
91 Internal Revenue Code, 26 U.S.C. § 7623(b)(1) (2006).
92 FY 2008 WHISTLEBLOWER REPORT, supra note 86 at 7-8.
93 FY 2008 WHISTLEBLOWER REPORT, supra note 86 at 10.
16
suggests that the current program is not widely used. There appear to be very few instances in
which the SEC has a paid a bounty to an informant. In the decade after the bounty program
came into existence, a general consensus seemed to be that only one case of a SEC bounty
payment to an informant existed.94 During the 2000s, the SEC may have been a bit more active
in paying out bounties, but there is scant evidence to suggest that any possible increase in SEC
bounty payouts has impacted the level of insider trading whistle blowing to any appreciable
level.95
C. An OSHA Bounty Program
The final part of this article addresses two important questions. Would it be a good idea
to incorporate a bounty program into the OSHA enforcement scheme? If so, what would an
effective OSHA bounty program look like? These questions are interrelated. These questions
will be analyzed through the lens of two statutes, the Sarbanes-Oxley Act and the Occupational
Safety and Health Act, as a means of examining whether bounty programs would be good policy
for all of the various OSHA-enforced whistleblower statutes. The purpose of this analysis is not
so much to provide definitive answers for all time to these questions but to suggest that the
possibility of an OSHA bounty program is at least plausible. The questions raised are complex
and there are no easy answers. Hopefully, the analysis will find a good home within the
burgeoning whistleblower scholarship law in general and in particular the whistleblower
scholarship that is questioning the legitimacy, efficiency, and effectiveness of expanding
whistleblower financial incentives programs to new contexts.96
There are several attributes to effective bounty programs. First, the payment of a bounty
must be made mandatory if certain requirements are satisfied like providing original information
that leads to a judgment.97 The FCA and the new and improved IRS whistleblower program are
revenue-positive, in part, because there is certainty in the bounty payment if the whistleblower
makes a claim of fraud and the fraud is subsequently proven. One of the likely impediments to
94 See Justin Tyler Hughes, Note: Equity Compensation and Informant Bounties: How Tying the Latter to the
Former May Finally Alleviate the Securities Fraud Predicament in America, 82 S. CAL. L. REV. 1043, 1055-1056
(2009); Rapp, supra note 56, at 117-118; Ferziger and Currell, supra note 49, at 1164-1165.
95 See Rapp, supra note 56, at 118 (“Although the SEC may have recently begun to use this provision more often, it
has not, to date, offered sufficient incentives to prompt effective whistleblowing.”).
96 See Orly Lobel, Citizenship, Organizational Citizenship, and the Laws of Overlapping Obligations, 97 CAL L.
REV. 433 (2009); Justin Tyler Hughes, Note: Equity Compensation and Informant Bounties: How Tying the Latter
to the Former May Finally Alleviate the Securities Fraud Predicament in America, 82 S. CAL. L. REV. 1043 (2009);
Raxak Mahat, A Carrot for the Lawyer: Providing Economic Incentives for In-House Lawyers in a Sarbanes-Oxley
Regime, 21 GEO. J. LEGAL ETHICS 913 (2008); Geoffrey Christopher Rapp, Beyond Protection: Invigorating
Incentives for Sarbanes-Oxley Corporate and Securities Fraud Whistleblowers, 87 B.U. L. REV. 91 (2007);
Elizabeth C. Tippett, The Promise of Compelled Whistleblowing: What the Corporate Governance Provisions of
Sarbanes-Oxley Mean for Employment Law, 11 EMPL. RTS. & EMPLOY. POL’Y J. 1, 9-10 (2007); Jeffrey Manns,
Private Monitoring of Gatekeepers: The Case of Immigration Enforcement, 2006 U. ILL. L. REV. 887 (2006); Ben
Depoorter and Jef De Mot, Whistle Blowing: An Economic Analysis of the False Claims Act, 14 SUP. CT. ECON.
REV. 135 (2006); Pamela H. Bucy, Games and Stories: Game Theory and the Civil False Claims Act, 31 FLA. ST.
U. L. REV. 603 (2004); Marsha J. Ferziger and Daniel G. Currell, Snitching for Dollars: The Economics and Public
Policy of Federal Civil Bounty Programs, 1999 U. ILL. L. REV. 1141 (1999).
97 See Ferziger and Currell, supra note 49 at 1181-1183.
17
encouraging informants to step forward under SEC bounty program is the lack of certainty in the
bounty payment. The SEC bounty payment is entirely discretionary with the SEC.98 Second,
the bounty amount has to be set at a level that will encourage whistleblowers to bring actual,
serious violations to the attention of the courts or the agencies but will not inundate courts and
agencies with weak claims. From an agency’s perspective, it would be inefficient to sift through
a high number of claims and exert significant resources on such claims only to discover that the
vast majority of those claims have little merit or are of low value because the violations are
minor.99 The “best whistleblower” profile is one who brings inside information concerning very
serious wrongs to the agency’s attention and that information would not otherwise be obtained
from the agency due to constraints on investigative resources.100 Third, the whistleblower
should be paid out of the proceeds recovered from the violator.101 Finally, as much as possible,
it is helpful to maintain the whistleblower’s anonymity.102
1.
SOX Bounty Program
Applying the attributes of a successful bounty program, it is fair to say that the SarbanesOxley Act screams out for a bounty program.103 This is true for several reasons. First, the SOX
anti-retaliation whistleblower provision is exceedingly weak. It does little to encourage riskaverse information holders to blow the whistle on corporate fraud.104 Second, the frauds that are
present in the SOX context—fraud against publically-traded corporations—have the potential to
be huge and may not be easily discovered by regulators. The gains to the public from
encouraging whistleblowers to speak out about serious wrongdoing and massive fraud are clear.
Third, the value of the SOX bounty action may be determined by the amount of the corporate
fraud. The SOX whistleblower recovers a percentage of the amount of the proven corporate
fraud like under the FCA and IRS program.105
The SOX bounty program could take several shapes. Professor Bucy has proposed a new
federal qui tam-style civil action for a securities fraud violation that could be brought by a
private person suing for the person and for the United States government. The private relator
would be entitled to 15-25% of the proceeds of the action.106 Professor Rapp advocates that qui
tam bounties for SOX whistleblowers could be achieved through two ways: the use of existing
state false claims law107 and/or through amendment to the Fair Funds provision of SOX.108
Under this amendment, when a Fair Fund is created as a result of an SEC enforcement action
98 Id. at 1191.
99 Id. at 1151-1152.
100 See Bucy, supra note 61 at 676.
101 See Ferziger and Currell, supra note 49 at 1156.
102 Id. at 1157-1158.
103 Recall that SOX is not a workplace safety and health statute, but the SOX whistleblower anti-retaliation
provision is currently enforced by OSHA. See supra note 4. The fact that SOX is a fraud statute makes it a natural
for a bounty scheme.
104 See, e.g., Richard E. Moberly, Unfulfilled Expectations: An Empirical Analysis of Why Sarbanes-Oxley
Whistleblowers Rarely Win, 49 WM. & MARY L. REV. 65 (2007).
105 See supra notes 55 and 59.
106 See Bucy, Private Justice, supra note 67 at 105-110.
107 See Rapp, supra note 56 at 139-143.
108 Id. at 147-149.
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against a fraud violator, the original source of the information is entitled to a 15-25% bounty.
The scheme could be regulated purely administratively by the SEC. Or the private
whistleblowers could be required to file complaints in federal court (like the FCA) and the SEC
could subsequently take over the litigation through intervention (like the FCA).109 Commentator
Justin Hughes argues for a modified qui tam approach in which a “complaint” will be filed with
the SEC and the proceeding will be handled by the SEC administratively. Traditional qui tam
rights will not be available under his approach.110 I am in favor of generally following the
procedure for asserting a qui tam action under the FCA, which would include a private suit by
the whistleblower with intervention rights by the SEC. In my view, a SOX bounty program in
some form or fashion would be a giant step forward for whistleblowing.
2.
OSH Act Bounty Program
SOX is not a workplace safety and health statute. Conceptually, it is natural to see how a
corporate-securities fraud statute would benefit from a bounty program in the same way that
society benefits from such programs that counteract fraud in government contracts and tax fraud.
These three go together like Tinker to Evers to Chance—the prolific Chicago Cubs double play
combination during the early 1900s.111 It is more of a stretch to imagine how a bounty program
would function when the whistleblowing takes place under a workplace health and safety statute
like the OSH Act. There are certainly challenges to incorporating such a program into the OSH
Act and ultimately it might not work. But consider why and how such a program could work.
Three key administrative pieces are already in place to incorporate an OSH Act bounty program:
a whistleblowing procedure; an administrative procedure for investigating employee complaints
regarding workplace safety and health violations and adjudicating citations that grow out of
those complaints; and a civil penalty structure that fines employers for violations of the Act.112
a.
OSH Act Whistleblowing
The OSH Act provides employees with the right to report violations and request
inspections of the workplace and requires OSHA to consider such complaints.113 Indeed, past
data indicates that a significant percentage of OSHA investigations are opened due to employee
complaints. A survey from the 1990s revealed that approximately 70 percent of employee
complaints resulted in citations, and about 50 percent of all employee complaints led to findings
of willful, repeat, or serious violations.114
b. OSH Act Administrative Procedure
109 Id.
110 See Justin Tyler Hughes, Note: Equity Compensation and Informant Bounties: How Tying the Latter to the
Former May Finally Alleviate the Securities Fraud Predicament in America, 82 S. CAL. L. REV. 1043, 1069-70
(2009);
111 GIL BOGEN, TINKER, EVERS, AND CHANCE: A TRIPLE BIOGRAPHY (McFarland & Co., Inc. Publishers) (2003).
112 Occupational Safety and Health Act of 1970 §§ 1-18, 29 U.S.C. §§ 651-678 (2006).
113 29 U.S.C. § 657(f)(1) (2006) (“Any employees or representative of employees who believe that a violation of a
safety or health standard exists that threatens physical harm, or that an imminent danger exists, may request an
inspection by giving notice to the Secretary or his authorized representative of such violation or danger.”).
114 RICHARD CARLSON, EMPLOYMENT LAW 493-94 (Second Edition, Aspen Publishers) (2009).
19
The OSH Act establishes an administrative procedure in which OSHA investigates
allegations of violations and such allegations are adjudicated within an agency framework.
There is a multi-step enforcement process. OSHA conducts an investigation.115 If OSHA
discovers a violation of an OSH Act standard or the general duty clause, it will issue a citation,
which states the level of the violation, requests abatement of the violation, and perhaps imposes a
monetary penalty.116 The employer may then contest the citation.117 If that happens, OSHA
issues a complaint.118 There is an administrative hearing before an Administrative Law
Judge.119 The Administrative Law Judge’s decision on the citation is subject to an
administrative appeal to the Occupational Safety and Health Review Commission, a panel
appointed by the President of the United States to independently review OSHA enforcement
proceedings.120 The party aggrieved by the Commission’s decision may appeal to the D.C.
Circuit Court of Appeals or the federal court of appeals where the violation occurred or where
the employer maintains its principal office.121
c. Civil Penalty Structure
The OSH Act contains a civil penalty structure for violations of the Act.122 For a
violation determined not serious, OSHA may assess a fine up to $7,000.123 In the case of
“willful” or “repeated” violations, the civil penalties assessed go up to $70,000 per violation.124
For each “willful” violation, the penalty assessed may not amount to less than $5,000.125
d. The Proposal
The proposed OSH Act bounty program has several characteristics. First, the OSH Act
whistleblower must pass several hurdles to be eligible for a bounty. The whistleblower must
make a complaint in writing regarding OSH Act violations to the agency. The complaint must
then trigger an OSHA investigation, which culminates in the assessment of civil penalties against
the employer after the administrative and judicial procedures have run their course. The
minimum amount of the penalty paid by the employer must exceed $5,000 for an employee to
receive a reward. The $5,000 amount would be per enforcement proceeding. Accordingly,
multiple violations in which the fine is less than $5,000 would meet the threshold so long as the
total penalties springing from the investigation amounted to $5,000. Employee complaints based
on a workplace fatality would be ineligible for a bounty on the ground that OSHA is extremely
likely to investigate a workplace in which a fatality occurs regardless of any employee
complaint. This ineligibility rule would also avoid a “race to the agency” by fellow employees
in the event of a workplace accident that involves multiple fatalities. Second, there must be
115
116
117
118
119
120
121
122
123
124
125
29 U.S.C. § 658(a).
Id.
29 U.S.C. § 659.
Id.
Id.
29 U.S.C. § 661(a); CARLSON, supra note 114 at 472.
29 U.S.C. § 660(a).
29 U.S.C. § 666.
Id. at § 666(c).
Id. at § 666(a).
Id.; CARLSON, supra note 114 at 476.
20
certainty in the payment of the bounty if the required conditions are satisfied. OSHA should not
have discretion as to whether ultimately to pay an award. If OSHA proceeds with an
administrative action based on an employee complaint of OSH Act violations, the employee
“shall” receive an award. Third, the bounty must be set high enough to encourage employee
whistleblowing regarding serious violations and the bounty should be paid out of the penalties
recovered from the violator. It is probably best to follow the False Claims and IRS
Whistleblower approach and set recovery as a percentage of the recovered proceeds: 15-30% of
the recovered penalties would be a reasonable figure depending on the extent to which the
whistleblower contributed to the recovery of civil penalties. There is no cap on the
whistleblower reward amount but the $5,000 penalty amount must be satisfied for the
whistleblower to recover. Fourth, the whistleblower’s anonymity should be protected if at all
possible. Finally, it may be a good idea to create an OSHA Whistleblower Office that oversees
the awards program.
3. Policy Choices and Criticisms of the OSH Act Proposal
It is evident that the OSH Act bounty program is strikingly similar to the IRS
Whistleblower bounty program. This is intentional. Two characteristics of the IRS
Whistleblower bounty program in particular translate well to an OSH Act bounty program. First,
the OSH Act bounty program is best conducted in a purely administrative regime. It is not wise
to give employees a private right of action to prove an OSH Act violation. If employees were
given pure qui tam/FCA style rights, it would wreck havoc with the OSH Act enforcement
system as it is currently constituted. The whistleblower employees and the agency would too
often be at cross-purposes. Second, there should be some mechanism in place to discourage the
reporting of minor violations on the theory that it would be more efficient if the bounty program
encourages the reporting of serious violations in which the penalties are substantial. An
alternative approach that has no monetary threshold for recovery might inundate the agency with
too many complaints, which would make it harder for the agency to separate the wheat from the
chaff. Admittedly, the $5,000 threshold amount proposed is speculative. It is not known
whether this number is too high or too low to accomplish the objective. But this threshold
screens out for bounty purposes a lot of complaints. In 2006, the average fine was about $119
for a non-serious violation and in failure to abate cases was $3,628.126 The fixed percentage
bounty [15-30%], the requirement that bounties will be paid when the statutory conditions are
satisfied, and the lack of a cap on the bounty should still encourage more whistleblowing.
Indeed, in many cases OSH Act whistleblowers would be able to recover thousands of dollars
based on tips regarding violations in which the penalties assessed amount to hundreds of
thousands of dollars.127
126 CARLSON, supra note 114 at 476.
127 See, e.g., U.S. Labor Department’s OSHA cites eastern Connecticut paper mill for widespread safety hazards,
including deteriorating mill building hazards, OSHA News Release 09-98-BOS/BOS 2009-027, Jan. 30, 2009,
available at http://www.osha.gov (last visited December 19, 2009) (OSHA cites paper mill company for $320,500 in
proposed fines); U.S. Labor Department’s OSHA proposes $61,000 in fines against Newburgh, N.Y. employer for 37
safety and health hazards, OSHA News Release 09-393-NEW/BOS 2009-100, April 13, 2009, available at
http://www.osha.gov (last visited December 19, 2009).
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There are a variety of possible criticisms to the OSH Act proposal in this article. The
criticisms can be grouped into two categories. One group may come from commentators who
think that importing a bounty program into the workplace safety and health arena is simply a bad
idea. The other group may come from commentators who think that a bounty program is a good
idea, but that the proposed OSH Act bounty program is not structured appropriately. This article
is designed to welcome commentary, criticisms, and analysis from all quarters and so interested
individuals are urged to make their views known. The following are a few thoughts regarding
possible criticisms.
a. Subjectivity of OSH Act Violations and Penalty Structure
One could argue that a bounty program tied to an agency’s recovery of civil penalties like
the proposed OSH Act bounty program is not likely to succeed because the whistleblower cannot
know before making the complaint how much in penalties will be recovered through an
investigation. For example, even if a whistleblower knew for certain that workplace safety and
health laws were being violated, a variety of factors go into whether civil penalties will be
assessed against the employer and, if so, the amount. Specifically, the complicated OSH Act
penalty regime makes this type of prediction difficult. Moreover, the inherent subjectivity of the
general duty clause and certain OSH Act standards makes predicting an actual OSH Act
violation difficult to assess. Accordingly, risk-averse employees will not be encouraged to blow
the whistle.
These criticisms are valid but there are persuasive counter points. The OSH Act penalty
structure does make judging penalties difficult. However, the $5,000 penalty amount
requirement exists to signal potential whistleblowers that a bounty will not exist if violations are
minor. There is some subjectivity in determining whether OSH Act violations occurred and that
does make an OSH Act whistleblower’s calculation challenging. But complex frauds against the
government involving government contracts and income tax are also challenging to unravel and
to decide whether violations occurred and this has not stopped successful bounty programs in
those contexts. Whether complex tax laws or complex workplace safety and health laws are at
issue, insiders are generally in a good position to make judgments on whether the law has been
violated. The proposed OSH Act bounty program desires to reward an employee who tips off
the agency to major violations that put the physical safety of people in jeopardy. Under this
program, potential whistleblowers can make their decisions knowing the risk-reward calculus.
b. Low OSH Act Penalties
The proposal sets the whistleblower’s recovery as a percentage of the proceeds recovered by
the agency as civil penalties against the employer. A critic could point out that the statutory
penalty amounts are so low and that the amounts OSHA assesses in cases tends to be so low that
whistleblowers will not be financially incentivized to act. For example, if a whistleblower
receives 20% of a $10,000 penalty [i.e., $2,000], such amount is so low that it is not worth the
risk. This is a good point. It is important to keep in mind that there are cases in which the
penalties assessed amount to hundreds of thousands of dollars or even millions of dollars.128 But
128 Id.; See OSHA Top 10 Enforcement Citations, available at http://www.osha.gov/dep/bp/Top_10_Enforcement
(last visited December 19, 2009).
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such penalty amounts are atypical. Raising the penalty amounts under the OSH Act, an issue
which is currently before the United States Congress, would certainly work hand in hand with
the development of an OSH Act bounty program.129
c. Structural Modification
Commentators Ferziger and Currell argue that the most economically efficient bounty
systems include low-fixed percentage bounties (one to three percent of the penalty recovered)
and that the maximum allowable bounty shall always be paid where an agency recovers a penalty
based on an informant’s tip.130 Their rationale is that high certainty of a reward when there is
any penalty recovered in combination with a low percentage discourages the low level violations
from being brought and encourages the whistle to be blown on major violations.131 The current
proposal is for a higher-fixed percentage with a minimum recovery amount threshold ($5,000 per
OSHA enforcement proceeding) for reward eligibility. This approach tries to accomplish the
goals outlined by Ferziger and Currell but in a slightly different way. Once again, there is much
room for discussion regarding the best way to structure an OSH Act bounty program.
V. CONCLUSION
This article suggests two paradigm changes to reforming OSHA whistleblower laws:
anti-retaliation claims should be private actions brought in federal court and determined by juries
and OSHA-enforced whistleblower statutes should contain bounty programs to further
incentivize whistleblowing in the workplace health and safety area. The Sarbanes-Oxley Act and
the Occupational Safety and Health Act illuminate what effective bounty programs might look
like if increased whistleblowing is desired from a policy perspective. Economic incentives in the
nature of bounties should be considered as part of the OSHA whistleblower reform process. A
real pot of gold for OSHA whistleblowers may be what the future holds.
129 See Protecting America’s Worker’s Act, H.R. 2067, 211th Cong. § 310 (2009).
130 See Ferziger and Currell, supra note 49 at 1197-98.
131 Id.
23