A pair of Democrats have introduced legislation in Congress to expand protections for financial whistleblowers to close some loopholes in the Dodd-Frank Act that have been exploited by some employers.
[IMGCAP(1)]Rep. Elijah E. Cummings, D-Md., ranking member of the House Committee on Oversight and Government Reform, and Senator Tammy Baldwin, D-Wis., introduced the Whistleblower Augmented Reward and Non-Retaliation Act of 2016 (WARN Act), which would expand protections for those who blow the whistle on financial crimes.
“Whistleblowers who report abuses on Wall Street often put their careers and livelihoods at risk,” Cummings said in a statement Thursday. “When we in Congress passed the Dodd-Frank Act, we put in place protections for whistleblowers that are now being undermined by financial firms. Our bill would address these abuses and create stronger protections for whistleblowers who shine a light on corporate malfeasance.”
The Dodd-Frank Act made critical changes following the 2008 financial crisis to protect whistleblowers. Since then, however, large financial institutions have exploited loopholes in the law. For example, some companies have reportedly required new hires to sign employment agreements that would gag them from blowing the whistle, and others have conditioned employment on the willingness of employees to waive their statutory rights.
The WARN Act would prohibit employers from forcing whistleblowers to waive their rights or disclose their communications with the government, and safeguard whistleblowers from retaliation if they refuse to participate in activities they believe to be in violation of the law. The bill would also protect regulators who disclose information relating to a bank’s safety and soundness. It would harmonize whistleblower awards under FIRREA (the Financial Institutions Reform, Recovery, and Enforcement Act) and the Federal Deposit Insurance Act with those under the Dodd-Frank Act so whistleblowers are eligible to receive between 10 percent and 30 percent of penalties and recoveries imposed as a result of the information they provide.
[IMGCAP(2)]The bill would also apply procedures, evidentiary standards, and burdens of proof that allow whistleblowers to show that the exercise of protected behavior was a contributing factor leading to an unfavorable personnel action. In addition, it would provide civil remedies and punitive damages for whistleblowers who experience employment discrimination, including reinstatement, twice the amount of accrued back pay (with interest), and further compensation for any special damages such as litigation costs.
“In 2008, the reckless actions of Wall Street caused an economic collapse that touched every family and business in America,” said Baldwin. “Wall Street was bailed out of this mess but the impact was felt by small businesses and hard working families who are still struggling to recover from reduced economic growth, job layoffs, lost income, home foreclosures and retirement savings that were wiped away. The middle class has paid a steep price for the irresponsible actions of others, yet only one top banker went to jail for the financial crisis. If we strengthen and empower whistleblowers in the financial industry, we can do a better job of holding Wall Street accountable. These reforms will help us do that.”
The WARN Act has been endorsed by Americans for Financial Reform, the AFL-CIO and the Communication Workers of America, and other organizations such as the Government Accountability Project.
“The WARN Act is a much-needed makeover to modernize primitive laws, establish consistent financial whistleblower standards, and address lessons learned from recent experience. This is good government legislation at its best,” said Shanna Devine, legislative director at the Government Accountability Project.
“It's incredibly difficult for would-be whistleblowers to overcome the culture of secrecy that permeates large financial firms, in large part because of the fear of retaliation," said Alexis Goldstein, senior policy analyst at Americans for Financial Reform. "The WARN Act addresses this problem in two important ways—by expanding the activities that count as protected whistleblowing, and by closing loopholes in the existing anti-retaliation rules.”