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An Analysis of Current Whistleblower Laws: Defending a More Flexible Approach to Reporting Requirements

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An Analysis of Current Whistleblower Laws: Defending a More Flexible Approach to Reporting Requirements An Analysis of Current Whistleblower Laws: Defending a More Flexible Approach to Reporting Requirements Gerard Sinzdakt INTRODUCTION Sherron Watkins is regarded as a hero for her decision to blow the whistle on the illegal activities of her employer Enron.1 Had Enron survived the resulting scandal, however, the company could have fired or otherwise retaliated against Watkins with legal impunity.2 Under Texas's whistleblower law, employees of private employers receive legal protection against retaliation only if they report wrongdoing to an external law enforcement agency.3 Because Watkins reported her concerns only to Enron CEO Kenneth Lay,4 her 5 actions did not meet Texas's strict report recipient requirement. The Texas whistleblower law is not unique. Most state whistleblower statutes restrict the parties to whom a whistleblower may report in order to receive protection from retaliation. 6 The majority of states, for example, protect only those employees who file reports with external government bodies.7 In Copyright © 2008 California Law Review, Inc. California Law Review, Inc. (CLR) is a California nonprofit corporation. CLR and the authors are solely responsible for the content of their publications. t J.D., University of California, Berkeley School of Law (Boalt Hall), 2008. 1 would like to thank Professor Gillian Lester for her guidance and assistance with this Comment. 1. Richard Lacayo & Amanda Ripley, Persons of the Year, TIME, Dec. 30, 2002, at 30. 2. Watkins expected the company to "just stick [her] in a comer and treat [her] like a pariah and sort of force [her] out." Miriam A. Cherry, Whistling in the Dark? Corporate Fraud, Whistleblowers and the Implications of the Sarbanes-OxleyAct for Employment Law, 79 WASH. L. REV. 1029, 1051-52 (2004). 3. TEX. GOV'T CODE ANN. § 554.002(b) (2004). 4. Cherry, supra note 2, at 1036-37. 5. Following Enron and other corporate scandals, Congress passed the Sarbanes-Oxley Act ("SOX"). SOX provides protection to employees of public companies who, like Watkins, report violations of securities and accounting regulations. Unlike Texas's whistleblower law, SOX protects both employees who report internally to supervisors and externally to government regulators. Sarbanes-Oxley Act of 2002 § 806(a), 18 U.S.C. § 1514A (2006)). 6. See infra Part II.C. 7. See, e.g., CAL. LAB. CODE § 1102.5 (West 2008); CONN. GEN. STAT. § 31-51m (1992); 1633 1634 CALIFORNIA LAW REVIEW [Vol. 96:1633 these states, employees who, like Watkins, only report employer wrongdoing internally cannot rely on the protections of their state whistleblower law. A few states take the opposite approach, requiring employees to first report their suspicions internally to supervisors. 8 Virtually no states protect those who choose to report to the media or other non-governmental third parties. This Comment analyzes the arguments both for and against strict report recipient requirements. This analysis reveals that neither an external nor an internal report recipient requirement provides sufficient protection to whistleblowing employees, who face a very real threat of retaliation. 9 Studies indicate that whistleblowers choose their report recipient based on a wide variety of practical considerations-including the employee's status in an organization, the status of the wrongdoer, the organization's culture, and the significance of the wrongdoing.10 A rigid report recipient requirement- whether external or internal-cannot match the diversity of situations in which employees find themselves. An unduly restrictive reporting requirement therefore inevitably leaves many good-faith whistleblowers unprotected.II In order to avoid unjust denials of protection, this Comment proposes that states adopt a more open-ended report recipient standard. More specifically, states should provide protection to employees who report either internally to a supervisor or externally to a government body so long as the employee possessed both a subjectively and objectively reasonable belief that the recipient could correct the employer's unlawful behavior. State laws should also extend protection to employees who report to the media or to other third parties via the Internet when certain conditions are met. This flexible standard would more accurately reflect the variety of situations confronting employees. In addition, the reasonableness requirement would protect employers' interest in avoiding meritless lawsuits from "chronic complainers" 12 and would promote society's interest in effective law enforcement. MICH. COMP. LAWS § 15.361 (2006). 8. See, e.g., N.J. STAT. ANN. § 34:19-1 to -8 (2008); N.Y. LAB. LAW § 740 (McKinney 2008); OHIO REV. CODE. ANN. § 4113.52 (West 2008). 9. See generally MARCIA P. MICELI & JANET P. NEAR, BLOWING THE WHISTLE: THE ORGANIZATIONAL AND LEGAL IMPLICATIONS FOR COMPANIES AND EMPLOYEES (1992) (discussing evidence of retaliation against whistleblowers); David Culp, Whistleblowers: Corporate Anarchists or Heroes? Towards a Judicial Perspective, 13 HOFSTRA LAB. L.J. 109, 113, 123 (1995) (describing a study that reveals that retaliation was a primary concern for federal employees who considered blowing the whistle); Laura Simoff, Comment, Confusion and Deterrence: The Problems that Arise From a Deficiency in Uniform Laws and Proceduresfor Environmental "Whistleblowers," 8 DICK. J. ENVTL. L. & POL'Y 325, 342 (1999) (describing the high incidence of retaliation against whistleblowers in the science community). 10. See Elletta Sangrey Callahan & Terry Morehead Dworkin, Who Blows the Whistle to the Media, and Why: OrganizationalCharacteristics of Media Whistleblowers, 32 Am. Bus. L.J. 151, 162-63 (1994) (providing study ofwhistleblowers and their motivations). 11. See infra Part 1I. 12. See Blackburn v. United Parcel Serv., Inc., 3 F. Supp. 2d 504, 517 (D.N.J. 1998) (providing an example of a lawsuit brought by a "chronic complainer"). 2008] A FLEXIBLE APPROACH TO REPORTING REQUIREMENTS 1635 Section I of this Comment provides an overview of the salient features of current state and federal whistleblower laws. The case studies presented in Section I illustrate the application of four such laws to recent whistleblowers. Section III then analyzes the policies which underlie various report receipt requirements and demonstrates why restrictive requirements afford inadequate protection to employees. Finally, Section IV presents a proposal for a more flexible approach to report recipient requirements and applies the proposed standard to the case studies detailed in Section II. I CURRENT WHISTLEBLOWER PROTECTIONS: RATIONALES AND SOURCES Whistleblowers provide a valuable service to both their employers and the public at large. In just the past year, whistleblowers have played a prominent role in the discovery and remediation of employer and government misconduct in such areas as aviation safety, 13 public health,14 privacy,15 and corporate sales and marketing practices. 16 Employees are often in a unique position to 17 recognize and report wrongdoing within both the private and public sectors. They can alert employers to problems before those problems escalate. If an employer refuses to resolve an issue, employees may be the only parties capable of reporting the problem to external authorities.18 As one court noted, "[w]ithout employees who are willing to risk adverse employment consequences as a result of whistleblowing activities, the public would remain unaware of large-scale and potentially dangerous abuses." 19 The presence of 13. See Matthew L. Wald & Micheline Maynard, Behind the Chaos in Air Travel, a Pendulum Swing at the F.A.A., N.Y. TIMEs, Apr. 13, 2008, at Al (discussing the actions of two FAA whistleblowers). 14. Ana Radelat, CDC Enters Fray of Tainted Trailers, USA TODAY, Apr. 2, 2008, at 3A (detailing story of whistleblower at the CDC who called attention to the dangers of formaldehyde fumes in trailers that the Federal Emergency Management Agency had provided to people displaced by hurricanes Rita and Katrina); see also John Carey, What Ever Happened to 'An Apple a Day'?, Bus. WK., Mar. 31, 2008, at 93 (whistleblowing activity of a pharmaceutical sales representative resulted in Warner-Lambert's criminal conviction and payment of $340 million fine). 15. Eric Lichtblau & David Stout, Report on F.B.I. Use of Personal Data, N.Y. TIMES, Mar. 13, 2008, available at http://www.nytimes.com/2008/03/13/washington/13cnd-fbi.html. (describing whistleblower's role in uncovering the FBI's misuse of personal information). 16. Linda A. Johnson, Merck to Pay $671 million to Settle Whistle-Blower Suit, S.F. CHRON., Feb. 8, 2008, at C2 (detailing agreement by Merck to pay $671 million to the U.S. government to settle charges that its sales and marketing practices violated federal law; the charges resulted from an investigation that began when two whistleblowers reported Merck's conduct to public officials). 17. See, e.g., Stefan Rutzel, Snitching for the Common Good: In Search of a Response to the Legal Problems Posed by Environmental Whistleblowing, 14 TEMP. ENVTL. L. & TECH. J. 1, 2 (1995) (discussing the critical role that employees play in alerting companies and government regulators to violations of environmental laws). 18. "Seventy-five to eighty percent of the information on which the Inspectors General Act [sic] comes from so-called whistleblowers." 135 CONG. REC.H752 (daily ed. Mar. 21, 1989). 19. Dolan v. Cont'l Airlines, 563 N.W.2d 23, 26 (Mich. 1997). 1636 CALIFORNIA LA W REVIEW [Vol. 96:1633 whistleblowers may also help deter
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