How do the whistleblower provisions in the American Recovery and Reinvestment Act (ARRA) of 2009 affect employers?

The American Recovery and Reinvestment Act of 2009 (ARRA), signed into law by President Barack Obama on February 17, 2009, adopted new whistleblower protections for employees of private employers and state and local governments who disclose waste, fraud, gross mismanagement or a violation of law related to stimulus funds. Daniel Westman, an attorney with Morrison & Foerster, outlines key whistleblower provisions governing employers that receive funds made available by the economic stimulus law:

Covered employers. The Act's whistleblower provisions cover non-Federal employers who receive covered funds. Who is included within the definition of a non-Federal employer is not clear. The federal government and its agencies are clearly excluded. However, given the overall intent of the Act that stimulus funds should not be wasted, prudent employers should assume that the whistleblower provisions apply to any employer who receives a contract, grant or other payment appropriated or made available by the stimulus bill, including private employers, federal government contractors and subcontractors, and state and local governments and their contractors and subcontractors.

Protected conduct. Protected conduct under the ARRA's whistleblower provisions includes a disclosure of information by an aggrieved employee to a person with supervisory authority over the employee, a State or Federal regulatory or law enforcement agency, a member of Congress, a court or grand jury, the head of a Federal agency, or an inspector general. The employee must reasonably believe the disclosed information is evidence of:

• Gross mismanagement of an agency contract or grant relating to stimulus funds;

• A gross waste of stimulus funds;

• A substantial and specific danger to public health or safety related to the implementation or use of stimulus funds;

• An abuse of authority related to the implementation or use of stimulus funds; or

• A violation of a law, rule, or regulation that governs an agency contract or grant related to stimulus funds.

Reasonable belief. Although the ARRA does not define reasonable belief other whistleblower protection laws, such as the Sarbanes-Oxley Act, apply a standard of objective reasonableness, which evaluates the reasonableness of a belief based on the knowledge available to a reasonable person in the same factual circumstances with the same training and experience as the aggrieved employee.

Internal disclosures. Unlike analogous whistleblower laws that extend to private employers, the ARRA's whistleblower provisions expressly cover internal disclosures, including disclosures made by employees in the ordinary course of performing their job duties.

Mismanagement, waste, and abuse. Historically, federal and state whistleblower laws distinguish between the types of complaints protected in the government sector and those protected in the private sector. Typically, whistleblower laws protecting government sector employees were broadly written to protect concerns about mismanagement, waste, and abuse with respect to public funds.

In contrast, whistleblower laws protecting private sector employees were more narrowly drawn to protect only concerns about the public health or safety, or violations of law. Because the ARRA involves the provision of public funds to employers in both the government and private sectors, the Act melds together the categories of protected complaints typically found in whistleblower laws applicable to the government and private sectors. Accordingly, the Act greatly expands the subject matters of protected complaints in private sector employment to include the categories of mismanagement, waste and abuse with respect to stimulus funds.

Prohibited retaliation. The Act prohibits a broad range of retaliatory employment actions, including termination, demotion, or any other discriminatory act that would dissuade a reasonable person from engaging in protected conduct.

What does an employee have to show? To prevail in a whistleblower action, an aggrieved employee must establish that the protected conduct was a contributing factor to the reprisal. This can be established through the closeness in time between the protected activity and the retaliatory act or by demonstrating that the decision-maker knew of the protected disclosure.

What does an employer have to show? An employer can avoid liability only by demonstrating by clear and convincing evidence, a high evidentiary burden, that it would have taken the same action in the absence of the employee engaging in protected conduct.

How will the law be enforced? Actions brought under the ARRA's whistleblower provisions must be filed with the Inspector General of the appropriate government agency. Unless the inspector general determines that the action is frivolous, does not relate to covered funds, or has been resolved in another Federal or State administrative proceeding, the inspector general must conduct an investigation and make a determination on the merits of the whistleblower retaliation claim no later than 180 days after receipt of the complaint.

Within 30 days of receiving an inspector general's investigative findings, the head of the agency must determine whether there has been a violation, in which event the agency head can award an employee reinstatement, back pay, compensatory damages, and attorney fees, and can require the employer to engage in unspecified affirmative action to abate the violation. If an agency files an action in federal court to enforce an order of relief for a prevailing employee, the court may also award exemplary damages.

If an agency head has denied relief in whole or in part or has failed to issue a decision within 210 days of the employee's filing of a complaint, the aggrieved employee may file a lawsuit in federal court, and either party may demand a jury trial.

Predispute arbitration. The Act expressly states that predispute arbitration agreements do not apply to these whistleblower provisions.