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A recent article in National Law Journal (click here) highlights that, while many businesses have started to recognize the enormous financial risks represented by employees filing federal whistleblower claims under the False Claims Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform Act, and the Consumer Protection Act, many are unaware of the dangers presented by state whistleblower laws.  Last year, employers in jurisdictions including Michigan and New Jersey were slapped with multimillion-dollar verdicts under state-specific whistleblower statutes.

 

The article points out that state whistleblower laws, unlike federal whistleblowers laws, vary greatly by jurisdiction.  For example, the threshold question of "who is a whistleblower?" has different answers in different states.  Some states, such as Florida and New Jersey, have enacted sweeping whistleblowers laws that prohibit employers from retaliating against employees who object to or refuse to participate in unlawful activities, report unlawful activities to governmental agencies, and/or assist in governmental protections.  Other states like New York have more limited protections, prohibiting retaliation claims only against private employees who disclose or threaten to disclose conduct that "creates and presents a substantial and specific danger to the public health or safety, or which constitutes health care fraud."

 

The article further opines that recent expansion in state whistleblower protection laws by states such as California and Minnesota represent increased risks to businesses.  For example, in 2013 California expanded its whistleblower protection statute to report purported behavior internally to (to "a person with authority over the employee" or another employee with "the authority to investigate, correct, or discover" the reported violation) and externally (to "any public body conducting an investigation, hearing or inquiry.")  The California amendments also subject employer to liability for "anticipatory retaliation," i.e., they can be held liable for retaliation against an employee based on the belief that the employee might be a whistleblower.  Minnesota's amendments to its whistleblower statute broadly defines a "good faith" reporting as "anything that is not in false or in reckless disregard for the truth" and penalize "conduct that might dissuade a reasonable employee from making or supporting a report, including post-termination conduct by an employer or conduct by an employer for the benefit of a third party."

 

Additionally, New York is considering adopting legislation that would mirror the whistleblower "bounty" provision in the Dodd-Frank Act, allowing eligible whistleblowers to recover between 10% to 30% of monetary sanctions obtained by the state Department of Financial Services for violations of New York's banking, insurance, and financial service laws.  New Jersey is considering amending whistleblower laws to extend to unpaid interns.  And Pennsylvania lawmakers recently introduced legislation that emulates the False Claims Act, allowing whistleblowers to file a civil lawsuit against anyone alleged to have committed health care fraud or other fraud against the state.

 

The take-away here in light of the variation in and expansion of state whistleblower laws?  Businesses should remain vigilant about changes to their states' whistleblower laws and continually review and update their compliance policies accordingly.

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