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The Retaliation Juggernaut: Why Retaliation Risk is Everywhere & What You Should Do about It

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Retaliation continues to be the most common claim filed with the EEOC – a trend that is unlikely to change if the past twelve years of rising claims are any indication. Recently-enacted provisions of the U.S. Dodd-Frank Act increase protections for whistleblowers and raise the penalties for retaliation against them. However, employers are still struggling to understand the basic components of retaliation and often silo these complaints in the compliance or legal department without seeking HR input.

Andrew Foose, Vice President, Advisory Services, NAVEX Global and Greg Keating, Partner, Littler, provide an overview of the latest whistleblower protection laws, recent cases that have changed the breadth and scope of retaliation and end with practical strategies to mitigate skyrocketing whistleblower and retaliation risk.

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The Retaliation Juggernaut: Why Retaliation Risk is Everywhere & What You Should Do about It

  1. 1. VIRTUAL CONFERENCE NAVEX Global November 2013 Virtual Conference The Retaliation Juggernaut: Why Retaliation Risk is Everywhere & What You Should Do About it VIRTUAL CONFERENCE
  2. 2. VIRTUAL CONFERENCE Today’s Speakers 2 Gregory Keating, Shareholder Littler Mendelson Andy Foose, Vice President Advisory Services NAVEX Global
  3. 3. VIRTUAL CONFERENCE Retaliation
  4. 4. VIRTUAL CONFERENCE The Rising Tide 15.7% 17.4% 19.5% 20.6% 22.6% 24.0% 25.4% 27.1% 27.5% 27.0% 27.9% 28.6% 29.5% 29.8% 32.3% 34.3% 36.0% 36.3% 37.4% 38.1% 14% 19% 24% 29% 34% 39% FY 1993 FY 1994 FY 1995 FY 1996 FY 1997 FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
  5. 5. VIRTUAL CONFERENCE Anti-Retaliation Protections are Everywhere  ACA  OSHA  ADA  False Claims Act  Equal Pay Act (FLSA)  FLSA  Immigration Reform and Control Act (IRCA)  ADEA  FLSA  NLRA  Workers Compensation Acts  The Rehabilitation Act  USERRA
  6. 6. VIRTUAL CONFERENCE What is Retaliation? Employers cannot take: • “adverse action” against their employees • for “participating” in “protected activity” • or “opposing” unlawful employment practices.
  7. 7. VIRTUAL CONFERENCE Proving a Retaliation Claim  I engaged in “protected activity.”  I was subject to “adverse action.”  There is a “causal connection” between 1 and 2. o 3 strikes – You’re Out 7
  8. 8. VIRTUAL CONFERENCE Key Concepts To Understand  “Protected Activity” o How to define it? o What are the limits, and when can you curb it?  “Adverse Action”  A “Causal Connection” 8
  9. 9. VIRTUAL CONFERENCE Protected Activity  Participation  Opposition 9
  10. 10. VIRTUAL CONFERENCE Protected Activity? Maybe. Employee most complain about some potentially unlawful conduct or activity.  “Mr. Smith is not treating me right.” • Protected?  “I noticed something doesn’t look quite right on last quarter’s sales reports.” • Protected?  “I told my supervisor that we are omitting required information from our 10-K reports, but he just told me the reports are fine and not to worry about it.” • Protected? 10
  11. 11. VIRTUAL CONFERENCE What Counts as an Adverse Action? U.S. Supreme Court: One standard that has been applied in whistleblower cases says that an employer’s action will be deemed “materially adverse” if it “well might have dissuaded a reasonable worker from making or supporting” a protected complaint. o Giving a negative reference or job evaluation? o Demoting the employee’s spouse? o Changing job assignments? o Allowing name-calling?
  12. 12. VIRTUAL CONFERENCE Materially Adverse Standard  Does not protect against: o “petty slights, minor annoyances, and simple lack of good manners.” o “snubbing.”  But...“context matters.”
  13. 13. VIRTUAL CONFERENCE Adverse Action: Retaliatory Harassment  Employers face liability for coworker harassment or retaliation if the employer knows of the conduct and fails to address it  Claim may exist even without a showing of a hostile work environment  Court focuses on actions of the ultimate decision maker
  14. 14. VIRTUAL CONFERENCE Outside Of Employment Incidents outside the employment context can constitute an adverse action:  The following actions were considered sufficient to constitute an adverse action in the discrimination context: o A false report to a government agency about the complainant’s immigration status o Accosting a complainant outside of work with a hostile tone and manner and foul language o Defaming a complainant in the news, the news media alleging that she misappropriated state funds
  15. 15. VIRTUAL CONFERENCE Adverse Action: Third-Party Retaliation Thompson v. North American Stainless, LP 131 S. Ct. 863 (2011): Complainant filed a sex discrimination charge with the EEOC. Three weeks later, her fiancé was fired.  In a unanimous decision, the U.S. Supreme Court held that a reasonable worker obviously might be dissuaded from engaging in protected activity if she knew that her fiancé would be fired.  Where is the line? It depends: o “We expect that firing a close family member will almost always meet the Burlington standard, and inflicting a milder reprisal on a mere acquaintance will almost never do so, but beyond that we are reluctant to generalize.”
  16. 16. VIRTUAL CONFERENCE Whistleblowing
  17. 17. VIRTUAL CONFERENCE How are they Related? Whistleblowing ↔ Retaliation
  18. 18. VIRTUAL CONFERENCE Whistleblowers  Make good faith reports of suspected misconduct o For example: • Non-compliance with accepted accounting practices • Bribery in foreign transactions • Violations of health and safety laws • Securities violations, such as insider trading  Are protected from retaliation for blowing the whistle  May be entitled to rewards from the government for blowing the whistle on certain misconduct
  19. 19. VIRTUAL CONFERENCE Whistleblowers – Two Variations 1. Employees who alert outside authorities (e.g., SEC, DOL) • Negative 2. Employees who raise concerns internally (who “speak up”) • Positive  For the next few slides, we’ll be addressing external whistleblowers
  20. 20. VIRTUAL CONFERENCE How We Got Here July 2002 Corporate Scandal Leads to SOX 2002-2007 Years of Minimal SOX Enforcement 2007-2009 The Tide Turns 2010-2013 Dodd-Frank and the New Age of the Whistleblower July 2002 Corporate Scandal Leads to SOX
  21. 21. VIRTUAL CONFERENCE In a Time of Public Mistrust... ENRON TYCO WORLDCOM
  22. 22. VIRTUAL CONFERENCE Whistleblowers Emerge as Ethical Heroes
  23. 23. VIRTUAL CONFERENCE Robust External Whistleblowing  Number of tips received by SEC in first year of Dodd-Frank program  Number of tips received per week by SEC  Percent of those who made external reports who say they tried to report internally first 12/9/2013NAVEX Global Advisory Council 2013 23 3,001 58 84%
  24. 24. VIRTUAL CONFERENCE Increased Government Enforcement Efforts
  25. 25. VIRTUAL CONFERENCE Eye-Popping Whistleblower Numbers DOJ collected more than $5 billion during FY 2012 in FCA settlements and judgments GlaxoSmithKline settles substantial suit to lone whistleblower: $600 million to state and federal governments $96 million to former quality-assurance manager
  26. 26. VIRTUAL CONFERENCE Bounties Abound  SEC issues first bounty on August 21, 2012: o $50,000; statutory maximum (30%) of amount collected in enforcement action o Whistleblower remains anonymous o Thousands of cases are pending at the SEC  IRS issues record $104 million reward on Sept. 10, 2012 o Whistleblower collects record bounty despite also being sentenced to 40 months in prison for his role in tax evasion scheme  SEC issues $14 million bounty on October 1, 2013
  27. 27. VIRTUAL CONFERENCE Addressing Retaliation and Whistleblowing What You Can Do About It
  28. 28. VIRTUAL CONFERENCE Make Culture a Strategic Priority Recommendation #1
  29. 29. VIRTUAL CONFERENCE We Want Employees to Speak Up (internally)
  30. 30. VIRTUAL CONFERENCE Why Don’t Employees Report Internally? 27.5% 14.1% 14.0% 10.0% 8.6% 7.7% 7.7% 7.3% 5.5% 4.8% 4.2% 4.2% 2.8% 2.6% 1.9% 1.6% 1.1% Source: CEB Compliance and Ethics Leadership Council Employee Reason for Not Reporting Percentage of Explanations, 2012
  31. 31. VIRTUAL CONFERENCE Employee Mistrust of Management: Survey Says… 2011 Maritz Employee Engagement Survey finds: 25% of employees report less trust in management than 2010 Only 10% say they trust management to make the right decision in times of uncertainty Only 14% believe their company’s leaders are ethical and honest Only 7% believe senior management’s actions are consistent with their words
  32. 32. VIRTUAL CONFERENCE Employee Mistrust of Management: Survey Says… 2010 Deloitte Ethics and Workplace Survey: One third of employed Americans plan to look for a new job when the economy improves. Among their top reasons for leaving: 48% cite loss of trust in employer 46% cite lack of transparent communication from company leadership
  33. 33. VIRTUAL CONFERENCE The Power of an Ethical Culture  Percentage of employees who believe their company rewards ethical conduct who reported wrongdoing (internally) (ERC 2012)  Percentage of employees who believe their company does not reward ethical conduct who reported wrongdoing internally 12/9/2013NAVEX Global Advisory Council 2013 33 72% 57%
  34. 34. VIRTUAL CONFERENCE Reporting Rates Rise When Ethical Commitment is Perceived to be Stronger 55.3% 76.6% 70.7% 50.6% 50.6% 65.3% 89.3% 76.9% 54.3% 56.9% Overall Senior Executiv es Manager s Professi onals Non- Manager s Top Quartile Companies (n = 4,382) Bottom Quartile Companies (n = 12,539) Employee Reporting Rates Percent of Employees Reporting Observed Misconduct, 2012 Source: CEB Compliance and Ethics Leadership Council
  35. 35. VIRTUAL CONFERENCE The Disconnect “Senior Executives consistently have a higher perception of their companies’ culture than other employees” 5.35 5.55 5.86 6.15 Non-Managers (n = 116,882) Professionals (n = 95,882) Managers (n = 63,560) Senior Executives (n = 5,293) Perceptions of Corporate Integrity Integrity Index1 Scores by Employee Level, 2012
  36. 36. VIRTUAL CONFERENCE Assess Your Culture  Cultural surveys  Benchmark reporting  Conduct a program review  Determine stakeholder communication preferences and expectations  Identify opportunities to drive program awareness: training, communication and internal marketing
  37. 37. VIRTUAL CONFERENCE Integrated System for Incident or Complaint Management Recommendation #2
  38. 38. VIRTUAL CONFERENCE 1. Effective report and intake procedures 2. “Speak up” training for manager & employees 3. Notification protocol 4. Effective investigation protocol – including training for investigators 5. Effective remedial measures and appropriate way to track and communicate discipline 6. Reporting and communication
  39. 39. VIRTUAL CONFERENCE Managers Receive Majority of Allegations 66.0% 24.7% 20.1% 7.3% 5.4% 2.5% 2.1% 1.4% 1.3% 0.8% 0.8% 0.4% ToDirect Manager ToHuman Resources ToSuperior ToCompliance andEthics Department To Hotline/Helpline ToLegal Department ToSecurity Department ToWorks CouncilorUnion Rep ToAudit Department ToCompany Website To Ombudsperson ToGovernment Agency Method for Reporting Business Misconduct Percentage of Information Flowing to a Given Channel1, 2012 1) Multiple Responses Allowed Source: CEB Compliance and Ethics Leadership Council
  40. 40. VIRTUAL CONFERENCE MANUAL AUTOMATED INTEGRATED The (R)evolution of Ethics & Compliance Programs Reactive  Take a hotline call  Push remedial training  Update a policy Proactive  Software based workflow management  Automated delivery of content and information  Scheduled reviews and updates Predictive/Preventive  Internal and external data flows  Data modeling and quantitative insight  Proactive identification of future enterprise risk
  41. 41. VIRTUAL CONFERENCE Implement Annual Training for Employees and Managers Recommendation #3
  42. 42. VIRTUAL CONFERENCE Trend: 2011 National Business Ethics Survey o 65% of employees reported observed misconduct, up from 53% in 2007 o 22% who reported misconduct say they experienced retaliation, up from 12% in 2007 o 42% reported weak “ethics cultures,” up from 35% two years ago
  43. 43. VIRTUAL CONFERENCE Does Your Workforce Understand the Rule Against Retaliation?
  44. 44. VIRTUAL CONFERENCE  People didn’t know how to report, or  People were afraid to report, or  Managers didn’t know how to properly handle the report Attacking the Problem at Its Core Misconduct that grew out of control
  45. 45. VIRTUAL CONFERENCE What Should Training Cover? • The Duty to Report • Benefits of Reporting • Policies & Expectations • How to Report • Protections against Retaliation • Guidance for Managers
  46. 46. VIRTUAL CONFERENCE Recommendation #4 Investigations protocol
  47. 47. VIRTUAL CONFERENCE What To Do With Whistleblower Allegations? • Investigate • Evaluate • Take remedial action • Disclose? • Negotiate from the best position
  48. 48. VIRTUAL CONFERENCE “The only way to deal with a whistleblower’s accusations – again, every single time and often against your own instincts – is with a hyper-bias toward believing that the informant is onto something big. Such a bias must impel you to investigate every claim ferociously. You may think it’s a waste of time and money, and will go nowhere; you should be so lucky. And for goodness’ sake, don’t let the investigation be conducted by the boss who’s been accused of wrongdoing! Bring in an outside agency to do the sleuthing, or at the very least, executives outside the scope of the alleged problem, with no relationship to the people involved. Yes, you may hate the whole mishegaas and so might everyone it touches. But it’s the only way to overcompensate for the propensity to wish whistleblowers away with the perfunctory spot check or the “Everything O.K.?” kind of look-see that usually occurs.” -- Jack and Suzy Welch, Reuters, May 1, 2012 Investigate Every Time
  49. 49. VIRTUAL CONFERENCE Make Sure Allegations are Taken Seriously Percent of those who made external reports who say they tried to report internally first 12/9/2013NAVEX Global Advisory Council 2013 49 84%
  50. 50. Survey Question: Would you like a NAVEX Global representative to contact you to discuss solutions? A. Yes, please B. No, thank you 50
  51. 51. Questions…
  52. 52. VIRTUAL CONFERENCE Thank You Please be sure to visit the Exhibit Hall & Social Networking Lounge to speak with Industry Experts!