Mark E. Baker is partner in our Northern Virginia office
When Congress passed the American Recovery and Reinvestment Act of 2009 (ARRA, or the stimulus bill) 10 months ago, in an effort to stimulate a faltering U.S. economy with massive federal funds, it imposed a variety of new requirements on ARRA fund recipients. With more than 75 percent of the funds still to be distributed and many ARRA programs only now being implemented, this is a good time for employers who might be receiving those funds to take stock of some of the employment-related strings that come attached.
Importance Of ARRA Section 1553
Although much public attention has been focused on such federal mandates as executive compensation guidelines and broader requirements for payment of federally prescribed "prevailing wages," a less heralded but potentially more far-reaching set of provisions gives sweeping protections to whistleblowers. Those protections, found in section 1553 of ARRA, present significant risks for stimulus fund recipients and ought to be considered by any employer contemplating entry into a contract or program that has ARRA funding.
Background
The stimulus bill created a plethora of new federally funded programs in such diverse areas as transportation and infrastructure development, housing, healthcare, education, energy, weatherization and energy efficiency programs, environmental protection and clean-up, and defense. The money for these programs is distributed through a variety of federal, state and local governmental channels. In an effort to assure that these funds are not squandered, ARRA extends whistleblower protections to employees of state and local governments, as well as employees of contractors, subcontractors and grantees who receive any ARRA funds. Although the U.S. Department of Labor (DOL) already administers numerous whistleblower laws through the Occupational Safety and Health Act and a variety of other environmental, transportation and nuclear regulatory laws, ARRA's whistleblower provisions are unprecedented in their scope of coverage, employee protections and procedural advantages for the whistleblowing employee.
Covered Employees And Employers
The ARRA whistleblower provisions define covered "employees" to include any "individual performing services on behalf of an employer" – a broad definition that could encompass independent contractors and consultants. Employees of the federal government, however, are expressly excluded.
"Non-federal employers" who employ such "employees" and are subject to whistleblower claims include contractors, subcontractors, grantees, professional membership organizations, professional bodies, federal agents or licensees, and other recipients operating with any funds made available through ARRA, as well as anyone "acting directly or indirectly in the interest of an employer receiving covered funds." Because substantial stimulus bill funds are funneled through state and local governments, those governments that receive funding and their contractors and subcontractors also are considered to be covered non-federal employers.
Broad Scope Of Protected Whistleblower Activity
ARRA section 1553 prohibits discharge, demotion or other discrimination against any employee of a non-federal employer receiving ARRA-covered funds in retaliation for the employee's disclosure of "information that the employee reasonably believes is evidence of" any of the following:
- gross mismanagement of an agency contract or grant related to covered funds
- gross waste of covered funds
- substantial and specific danger to public health or safety related to the implementation or use of covered funds
- abuse of authority related to the implementation or use of covered funds
- any other violation of law (including laws governing competition for or negotiation of a contract) related to a contract, grant or award involving covered funds
Covered disclosures include those made to the federal Recovery Accountability and Transparency Board, an inspector general, the U.S. Comptroller General, Congress, any state or federal regulatory or law enforcement agency, any other federal agency, a court or grand jury, "a person with supervisory authority over the employee" or a person working for the employer who has authority "to investigate, discover, or terminate misconduct."
Unlike most other whistleblower laws, ARRA explicitly provides that "a disclosure made in the ordinary course of an employee's duties" is protected. This provision has the potential to enable employees who deal with compliance and reporting as a part of their job, or even employees who voice a concern to management about "mismanagement" or "waste" in the routine course of performing other duties, to claim that they have engaged in protected activity.
ARRA is unprecedented and far-reaching in its scope of protected conduct. If construed in accordance with the latest Supreme Court precedent on what constitutes "retaliation," prohibited employer conduct may include any action that would prompt a reasonable person from engaging in protected activity. As a result, job actions with no direct economic effect on an employee who has complained about wasteful practices associated with ARRA funds could give rise to a claim.
Complaint Processing, Burdens Of Proof And Remedies For Violations
Unlike most existing federal whistleblower provisions, which vest investigative and enforcement authority with DOL, ARRA specifies that complaints of alleged retaliation are to be submitted to the Inspector General (IG) of the agency involved in providing the ARRA funding. The IG must investigate the complaint and submit a report of findings to the complainant, the complainant's employer, and the head of the agency. Based solely on the IG report, the agency head must determine whether prohibited retaliation occurred and, if a violation is found, may order the employer to (1) take affirmative action to abate the retaliation; (2) reinstate a terminated employee with compensation for back pay and benefits, compensatory damages and other "make whole" relief; and (3) pay the affected employees' attorneys' fees and related costs. There are no caps on recoverable damages.
Notably, all of the above remedies can be imposed without any evidentiary hearing or opportunity for administrative appeal as is available through the traditional DOL processes for deciding whistleblower claims. Even more ominous for covered employers, the burdens of proof that govern ARRA whistleblower claims decidedly favor the complainant. A whistleblower alleging retaliation is deemed "to have affirmatively established the occurrence" of the violation if he or she demonstrates that a protected disclosure was "a contributing factor" in the alleged retaliation. Further, a disclosure may be demonstrated as a contributing factor by circumstantial evidence that the person taking the retaliatory act "knew of the disclosure," or that the timing between the disclosure and the alleged retaliatory act permits a reasonable conclusion of causation. The covered non-federal employer may overcome these presumptions if the employer convinces the agency head "by clear and convincing evidence" that the action would have been taken absent the disclosure.
If the agency head orders relief for the whistleblower complainant and the employer fails to comply with the order, s/he must file an action in federal district court seeking enforcement of the order. The court may grant injunctive relief, compensatory and exemplary damages, and attorney's fees and costs.
If the agency head denies relief to the whistleblower or does not issue a final decision within 210 days after the filing of a complaint, or if the IG investigation is administratively discontinued, the whistleblower may bring a de novo action in a federal district court against his or her employer seeking the same type of remedies specified above. A jury trial is available in such actions.
Both whistleblower complainants and employers who are adversely affected by an agency order may seek review of the order in a U.S. court of appeals. Appellate review is subject to the review standards of the Administrative Procedure Act, which give relatively broad deference to agency decision making.
Limitations On Arbitration Agreements And Waivers
Employee rights under the ARRA whistleblower provisions may not be subject to mandatory arbitration agreements, nor may they be waived by any agreement, policy or other condition of employment. The only exception to these limitations is that arbitration provisions in a collective bargaining agreement may apply to disputes arising under the agreement.
Mandatory Notice Posting
Any employer receiving ARRA funds must post notices informing employees of ARRA section 1553's rights and remedies for whistleblowers.
Conclusion
The stimulus bill's whistleblower provisions are plainly intended to encourage employee disclosure of alleged mismanagement, waste, and abuse associated with the use of ARRA-covered funds. More than that, however, those provisions are an invitation to whistleblower claims through their breadth of protections, lenient burdens of proof, broad remedies, and carve-outs from usually favored arbitration and waivers. A heightened degree of risk and unpredictability associated with such claims arises from the fact that they will be investigated and reviewed by a variety of different agency IGs and agency heads who are neither experienced nor trained in the nuances of employment-related claims. Employers should not expect consistency or predictability with such a patchwork of decision makers.
As more ARRA funding works its way into the U.S. economy in the months and years to come, employers who tap into that funding will face significantly higher risk of liability from "whistleblowing" employees. Before signing onto ARRA-funded contracts or other projects (including those with state and local governments receiving ARRA funding), employers should take steps to ensure that their managers understand the type of employee activity that is protected and the care that must be taken in dealing with employees who engage in that activity.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.