April 7, 2017
Compliance Matters

Expanded Whistleblower Protection for  Employees of Federal Contractors
Late last year, Congress made permanent the provisions of a four-year pilot program to provide protection for "whistleblowers" working for federal contractors and their subcontractors.  The new Whistleblower Protection for Contractors Act (the "Act") protects employees of federal contractors who "blow the whistle" by complaining - either to an outside agency or internally -- about "gross mismanagement," a "gross waste of Federal funds", an "abuse of authority," a "danger to public health or safety,", or a "violation of any law, rule, or regulation related to a federal contract or grant."  This is a much broader range of whistleblower complaints than those which are protected under the False Claims Act. 

While prior law already extended whistleblower protection to federal employees and employees of Department of Defense contractors, this Act -- which passed with broad bipartisan support -- extends whistleblower protection to the employees of companies that contract with, or receive grants from, other federal departments.  It generally covers companies with federal contracts or grants valued at $150,000 or more.  It also extends protection to the employees of subcontractors working under those covered contractors.  (Companies contracting with intelligence agencies are exempted.) 

These expanded protections are codified as Section 4712 of Title 41, which governs federal contracting.  The statute provides that any complaint of a "reprisal" against a whistleblower which is reported within three years of the alleged retaliatory action must be investigated by the Office of the Inspector General ("OIG") within the contracting federal agency.  The OIG must complete its investigation within 180 days, but this deadline can be extended by as many as 180 additional days if the complaining party stipulates to the extension. 

The OIG's investigative findings are submitted to the
head of the contracting agency , who must make a final determination within 30 days of receiving the report as to whether there has been a prohibited reprisal.  If the agency head determines that there has been a prohibited reprisal, he or she must issue a remedial order, which may include ordering the contractor to "abate" the reprisal, reinstatement a fired or demoted whistleblower with back pay and/or reimbursement of the employee for the cost of pursuing the complaint, including attorneys' fees.  (The contractor has the right to submit a written response to the OIG's findings during the 30-day  period that they are under consideration by the agency head.) The agency is authorized to sue in federal court to enforce the order if necessary.

If the OIG or agency head do
not find that there was a prohibited reprisal, or fail take the required actions within the prescribed deadlines, the alleged whistleblower can sue the employer in federal court and is entitled to a jury trial.  If, on the other hand, the agency head does find that a reprisal has occurred and issues a remedial order, the contractor will have 60 days to file an appeal with a federal Court of Appeal.

The provision that the
head of the contracting agency initially adjudicates each whistleblower claim provides a strong incentive for contractors to prevent reprisals against whistleblowers, because the same agency head decides which companies are awarded contracts or grants, or whether existing contracts or grants are renewed.  Contractors also face the prospect of the OIG for the contracting agency delving deep into the company's internal operational records during a whistleblower investigation, and those investigative records may be discoverable in a subsequent lawsuit.

Despite having four years to implement the whistleblower protection procedures during the pilot program, the effectiveness of federal agencies in implementing them has been questionable, as revealed by a recent audit by the Government Accountability Office.  The audit focused on four departments - State, Commerce, Interior and Homeland Security -- and found that, out of 1,560 complaints of reprisals received during the 18-month period reviewed, the agencies' OIGs found only 44 of the complaints alleged reprisals that falls within the scope of the statute and required investigation.  Of the 44 claims investigated,
none of the investigations resulted in a finding that a prohibited reprisal had occurred.

The statute also requires agencies to place provisions in new contracts (or in major modifications of existing contracts) which require contractors and their subcontractors to notify their employees of their rights under the statute and procedures for reporting reprisals.

In response to the new law, and its potential to increase whistleblower liability, employers with federal government contracts or grants of $150,000 or more would be well-advised to review how employees who complain of gross mismanagement, abuse of authority, wasting federal dollars, public endangerment or unlawful activities are treated, and to consider creating or enhancing policies and procedures to ensure that such "whistleblowers" are protected from reprisal.  This might include increasing emphasis on whistleblower rights in management and supervisor training, as well as reviewing procedures for investigating such complaints and documenting investigative findings.

If you have any questions about this article, please contact any member of the Firm. We can be reached at (818) 508-3700, or online at www.brgslaw.com


Richard S. Rosenberg
Katherine A. Hren
Philip L. Reznik
Ballard Rosenberg Golper & Savitt, LLP

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Ken Ballard: 
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Charlotte, NC 28210
Matthew Wakefield:
(704) 846-2143 


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