Corporate Law Journal, Vol. 3, No. 4, Fall 2008
6 Pages Posted: 27 Aug 2009
Date Written: September 1, 2008
The number of law suits brought against corporations in the United States as a result of employee whistleblowers has risen in recent years. There are two predominant reasons for this trend. First, publicity surrounding cases such as Enron in the early 2000s have made employees more sensitive to potential misconduct in the workplace. For instance, a 2007 study found that 56% of employees reported that they had observed conduct that “violated company ethics standards, policy, or the law” in the previous twelve months. Second, employees are now more aware of the role of whistleblowers and are more likely to report potential misconduct to outside entities rather than utilizing internal reporting mechanisms. According to a recent report from the Department of Justice, since 2001, 300 to 400 civil cases have been filed each year under the False Claims Act (“FCA”) by employees charging that their companies defrauded the government. Furthermore, in 2007 the Department of Justice recovered $1.45 billion in FCA whistleblower actions.
Once an employee has decided to become a whistleblower, the initial battle is lost. The challenge for corporations today, therefore, is to create an environment in which employees feel secure reporting potential misconduct through internal channels. This can only be achieved, however, by creating an investigative structure that ensures the reporting employee feels his or her concerns have been properly investigated and addressed. Furthermore, the corporation must respond to the employee’s complaint in a manner that does not lead the employee to believe he or she is being or will be retaliated against because of their actions.
This article focuses on these issues and the mechanisms by which corporations can greatly diminish the chances that an employee will become a whistleblower, while simultaneously creating a corporate culture of openness and trust that will increase employee morale and assist with the corporation’s overall compliance and ethics mission.
Suggested Citation: Suggested Citation
Dervan, Lucian E., Responding to Potential Employee Misconduct in the Age of the Whistleblower: Foreseeing and Avoiding Hidden Dangers (September 1, 2008). Corporate Law Journal, Vol. 3, No. 4, Fall 2008. Available at SSRN: https://ssrn.com/abstract=1462455