DOD Publishes Emergency Interim Final Rule Protecting Whistleblowers Employed Under a DOD Contract or Subcontract

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On September 30, 2013, the Department of Defense (“DOD”) published a regulation implementing Section 827 (Enhancement of Whistleblower Protections for Contractor Employees of the Department of Defense) of the National Defense Authorization Act of 2013 (“FY13 NDAA” or “the Act”).  Section 827 actually took effect on July 1, 2013, notwithstanding the DOD’s delay in publishing the regulation.  Contracting officers are required to include notice of the whistleblower clause in all solicitation provisions and contract clauses issued on or after September 30, 2013.

Prior to the effective date of Section 827, apart from the anti-retaliation provisions of the False Claims Act, 31 U.S.C. §3730(h), employees of DOD prime contractors were protected partially under the Defense Contractor Whistleblower Protection Act, 10 U.S.C. §2409,  but only with respect  to the disclosure of information relating to gross mismanagement of a DOD contract or grant, gross waste of DOD funds, substantial and specific danger to the public health and safety, or violations of law relating to a DOD contract or grant.  Further, such disclosures were protected only if made to a Member of Congress, an Inspector General, a DOD official responsible for contract oversight, an authorized official of a defense agency, or the Department of Justice (“DOJ”).   Whistleblower advocates complained that employees of DOD subcontractors had no whistleblower protections whatsoever, that reports of misconduct made to a contractor or subcontractor were not protected, and that employees had no right to bring a case to court and have a jury decide whether they were entitled to compensatory and punitive damages and an award of attorney’s fees.  Section 827 addresses those complaints and creates a new landscape for whistleblower claims in federal defense contracting.

Changes in the Law Governing Whistleblowers Employed by DOD Contractors and Subcontractors under FY13 NDAA

In enacting Section 827 of the FY13 NDAA, Congress significantly broadened and clarified the whistleblower protection rights of all employees working under a DOD prime contract or subcontract in the following ways:

  • First, by clarifying that all DOD contractors and subcontractors (except for contracts with any element of the intelligence community) are prohibited from retaliating against their employees for disclosing information protected under the Act – regardless of the dollar value of the contract or subcontract, or the size of the contractor – unless the contractor or subcontractor can demonstrate that the action was taken in response to a non-discretionary directive issued by an executive branch official acting within the scope of his or her lawful authority. 
  • Second, by expanding the definition of “protected disclosure” to include reporting a contractor or subcontractor for conduct the employee reasonably believes to be an arbitrary and capricious exercise of authority that is inconsistent with the mission of the DOD or the successful performance of a DOD contract.  This new category of protected conduct is very broad and ambiguous – and could open the floodgates to complaints and litigation by employees seeking to challenge routine disciplinary actions.
  • Third, by clarifying that an employee who initiates or provides evidence of contractor or subcontractor misconduct in any judicial or administrative proceeding relating to waste, fraud or abuse on a DOD contract is deemed to have made a protected disclosure.
  • Fourth, by granting employees three years from the date of reprisal in which to file an administrative complaint with the Inspector General of the Department of Defense.  It is unclear from the statute and the regulation whether the three year statute of limitations will be applied retroactively so as to permit employees to bring whistleblower claims based on adverse job actions that occurred prior to July 1, 2013.
  • Fifth, by adopting the  “contributing factor” test for proof of causation between a protected disclosure and an adverse job action – as opposed to a significant, primary or  “controlling factor.”
  • Sixth, by requiring the DOD OIG to complete an investigation and issue written findings within 30 days of a whistleblower complaint – unless the complainant agrees to grant the OIG an extension of up to an additional 180 days.
  • Seventh, by requiring DOD agency heads to act upon an OIG report within 30 days by issuing an order of dismissal or by finding for the complainant and ordering the contractor or subcontractor to take one or more of the following remedial actions:
  • Take affirmative action to abate the reprisal;
  • Reinstate the complainant to the position held before the reprisal, together with compensatory damages (including back pay), employment benefits, and other terms and conditions of employment that would apply to the person in that position had the reprisal not been taken; and/or
  • Pay the complainant an amount equal to the aggregate amount of all costs and expenses (including attorney’s fees and expert witness fees) that were reasonably incurred by the complainant for, or in connection with, bringing the complaint regarding the reprisal, as determined by the agency head.
  • Eighth, by requiring the agency head to request that the DOJ file an action for enforcement of the remedial order in U.S. District Court if the contractor or subcontractor fails to comply within 30 days.
  • Ninth, by authorizing the complainant to file suit for enforcement of the agency head’s remedial order, whether or not DOJ brings an action for enforcement; alternatively, by permitting the complainant to intervene in the DOJ enforcement action.
  • Tenth, by authorizing the District Courts, in response to actions for enforcement of a DOD agency head order, to grant appropriate relief to the complainant, including injunctive relief, compensatory and exemplary damages, and reasonable attorney’s fees and costs.
  • Eleventh, by authorizing an aggrieved employee of a DOD contractor or subcontractor to file a civil suit against the employer for a violation of the DOD whistleblower protection provisions from the 211th day following the filing of the underlying OIG administrative complaint up to the second anniversary of the 211th day.
  • Twelfth, by requiring DOD contractors and subcontractors to inform employees in writing, in the predominant native language of the workforce, of their rights under the DOD whistleblower provision. 
  • Thirteenth, by providing that whistleblower protection provisions cannot be waived by the employee as a condition of employment or continuing employment.  Hence, for example, an employer could not invoke a pre-dispute arbitration agreement to pre-empt an employee’s right to file an administrative complaint with the OIG, or otherwise to file suit against the employer after exhausting the OIG procedure.

The Rights of DOD Contractors and Subcontractors in Defending Whistleblower Complaints

It goes without saying that a contractor or subcontractor named as the respondent in a whistleblower complaint is under obligation to cooperate responsibly with an OIG whistleblower retaliation investigation, including filing timely responses to requests for information and documents and making management witnesses available for interview.  The issues central to the OIG inquiry will be whether the official(s) responsible for taking the complained of adverse job action knew of the complainant’s protected disclosure activity at the time of decision and whether the decision was made, in whole or in part, because of the complainant’s protected activity.  If protected conduct played any part in the decision, in order to escape liability the employer would be required to prove by clear and convincing evidence that it would have taken the adverse job action regardless of the employee’s protected activity. 

Suffice it to say that the conduct of a whistleblower complainant’s chain of command may be under a microscope during an OIG investigation.  Management witnesses with authority to take adverse employment actions are deemed to be agents of the employer, and their actions, for good or for ill, can be imputed to their contractor or subcontractor employer.  Because the filing of a whistleblower complaint is itself protected, where the complainant continues to be employed by the respondent, it is very important to ensure that the employer’s management team refrain from showing animus towards the complainant and protect the complainant from harassment by co-workers.

At the conclusion of the OIG’s investigation, if the agency head determines that the whistleblower complaint has merit and orders the contractor or subcontractor to take affirmative action to reinstate the complainant with back pay and all other rights and privileges of employment, and to pay the complainant’s attorney’s fees and costs, the contractor or subcontractor has only two choices: 

  • Comply with the agency head order voluntarily, or
  • File a petition for review with the U.S. Court of Appeals in the circuit in which the reprisal is alleged to have occurred no later than 60 days after issuance of the order.  Filing such an appeal will not stay the enforcement of the order unless a stay is specifically entered by the court.  Congress has not provided the contractor or subcontractor with the right to a de novo hearing on liability and damages, as determined by the agency head.  Instead, to avoid compliance, a contractor or subcontractor must demonstrate that the liability finding is not supported by substantial evidence or is otherwise arbitrary and capricious.  If either or both the DOJ and the employee have sought enforcement of the order before a U.S. District Court, it is likely that the action of the U.S. Court of Appeals would be stayed pending the entry of a final order in the District Court.

Recommended Action Items

The new DOD whistleblower protections granted under Section 827 of FY13 NDAA, as implemented by DOD, will have a significant impact upon employer-employee relations in the federal contracting industry.  Given the new rules, it is in the best interest of federal defense contractors and subcontractors to undertake a vigorous review of their ethics and whistleblower policies and procedures and to train managers and supervisors to be able to recognize employee complaints and disclosures that fall within all protected categories. 

Topics:  DOD, NDAA, Whistleblower Protection Policies, Whistleblowers

Published In: Government Contracting Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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