Regulations meant to overhaul and strengthen federal oversight of the financial system, which many see as responsible for causing the economic recession, have the added benefit of strengthening employee rights in the workplace. The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law by President Obama on Wednesday, contains important protections for employees who blow the whistle on corporate wrongdoing. The legislation expands whistleblower protections for employees of financial services companies and other publicly-traded corporations and their subsidiaries by adding financial incentives to encourage whistleblowing, prohibiting retaliation against employees who blow the whistle, and amending the Sarbanes-Oxley Act of 2002.
Among its many provisions, the Dodd-Frank Act incentivizes employees to report financial wrongdoing to the government by entitling them to a portion of monetary sanctions levied by the Securities and Exchange Commission (“SEC”). Under the law, individuals who provide original information that leads to a government sanction generally will be entitled to 10-30% of the penalties exceeding $1 million. Individuals who are convicted of participating in the wrongdoing they reported are not eligible for the award, nor are individuals who fail to provide information requested by the SEC, who gained the information of wrongdoing through auditing required by the SEC, or who are employees of the SEC or other enforcement agencies.
The Dodd-Frank Act also includes protections for employees who report wrongdoing related to the offering or provision of consumer financial products or services – for instance loans, property appraisals, financial advice, or credit counseling. Under the Act, an employer may not fire or otherwise discriminate against an employee because he or she reported financial wrongdoing, provided information related to financial wrongdoing, or refused to engage in behavior the employee reasonably believed violated financial laws. Employees who are retaliated against are entitled to reinstatement, double back pay, interest, litigation costs, and attorneys’ fees.
Wayne N. Outten, managing partner at Outten & Golden LLP, a law firm that regularly represents financial services employees, said, “Employees are at the front lines for identifying and reporting violations of the law in the financial services industry. Employees who blow the whistle in the workplace should never have to worry about whether it will cost them their job, and this law makes sure that that is true.”
Said Tammy Marzigliano, co-chair of Outten & Golden’s Whistleblower and Retaliation Practice Group, “This law is a win-win. By strengthening protections for whistleblowers in the financial services, the law protects consumers and their investments.”
In addition to creating financial incentives for reporting wrongdoing and prohibiting retaliation, the Dodd-Frank Act amends the Sarbanes-Oxley Act of 2002 to make that law, commonly referred to as SOX, more favorable to employees. It doubles the time period for filing claims of retaliation with the Department of Labor from 90 days to 180 days. It also prohibits forced arbitration of SOX retaliation claims and clarifies that employees have the right to have their SOX retaliation claims heard by a jury in federal court.