Whistleblower cases are long and difficult, but attorneys may soon bring more of them due to expanded options laid out in a new law that takes effect this month.
The Dodd-Frank Wall Street Reform and Consumer Protection Act allows for whistleblowers to recover 10 to 30 percent of the amounts collected by the U.S. Securities and Exchange Commission as monetary sanctions imposed on publicly-traded companies in judicial, administrative or other related actions that exceed $1 million.
Unlike previous law, the new legislation will allow whistleblowers to be eligible for compensation even if they report information which may have already been public, making it easier to collect.
The current False Claims Act offers similar financial incentives, in that whistleblowers could recover 15 to 30 percent of a sanction, but they essentially require that any allegations be new to the federal government in order to be eligible for compensation.
The changes will give lawyers more ammunition to keep employers honest, said Jeff Hynes, co-chair of the Wisconsin Employment Lawyers Association.
“I think we’ll see a healthy flow of cases that vindicates the policies that Congress wanted to provide adequate incentive to private attorney generals to take on these cases,” he said.
The new law also will give lawyers more time to investigate whistleblower claims.
Dodd-Frank doubles the length of time, from 90 days to 180 days, for claims to be reported after the date in which the employee found out about a violation.
“This will definitely help attorneys,” said Mequon employment attorney Janet Heins, “because it’s easy to blow past the statute of limitations without a client realizing that they are giving up their rights.”
The changes to the law make whistleblower cases much more attractive, Hynes said.
“I anticipate taking substantially more of these cases,” he said, “because the incentives have been conspicuously increased for lawyers who want to work in this area.”
While taking on the cases still won’t be a bargain, often taking years to litigate, the chances of succeeding in a claim will increase with the new laws.
But other employment attorneys questioned whether the law change will sustain an increase in whistleblowers reporting directly to the SEC, rather than internally to the company.
Milwaukee employment lawyer Nola Hitchcock Cross said she doubted the allure of federal money would persuade a wave of employees to report directly to the SEC.
“To be perfectly candid, I don’t think anyone goes around planning to be a whistleblower,” she said. “There is a perception, whether it’s true or not, that people get blacklisted when they blow the whistle so I don’t think there is a big incentive.”
Cross suggested the work increase for lawyers could stem from retaliation claims by employers, given that the protections will be greater under Dodd-Frank.
The new law allows for an independent cause of action for a whistleblower who has been retaliated against and the reporting person is eligible for double back pay with interest, attorney fees and possible reinstatement to their job.
Until the law is officially implemented later this month, Chicago whistleblower attorney Steve Cohen said it is hard to know for sure what the effect will be for lawyers.
If there is an increase in claims, which he expects, it will still take a few years to realize any kind of trend in successful litigation, Cohen said.
“Once word starts getting out and resources are applied to investigate these cases, it’s going to take a few years for these cases to get hold,” he said. “They will begin to build once settlements and successful cases are announced.”
Jack Zemlicka can be reached at [email protected].