Why You Shouldn’t Relax on Pretaliation—Even if Policymakers Do

by NAVEX Global
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About two years ago, the Securities and Exchange Commission (SEC) made history when it brought the first “pretaliation” whistleblower enforcement action against KBR Inc., a technology and engineering firm in Houston. The $130,000 fine sent a message to employers in the U.S.—and regulators went on to take similar actions against other companies over the next 18 months.

it’s possible the pretaliation rule will survive, perhaps with less rigorous enforcement or fewer financial incentives.

Pretaliation is defined as any attempt to use confidentiality or other employment agreements to muzzle whistleblowers. But enforcement at the level we’ve seen of late could soon go out the window, given the change in leadership in Washington.

The legislation behind the SEC’s pretaliation actions—the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act—has been targeted for roll back by the new administration. Just how far back, and what will become of the applicable Rule 21F-17(a), is an open question, though the administration’s recent changes to whistleblowing rules relating to the Energy Department may indicate an intention to reduce those protections. Still, it’s possible the pretaliation rule will survive, perhaps with less rigorous enforcement or fewer financial incentives.


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While organizations should definitely take note of any such changes, their normal courses of action can remain steady. Whatever the climate in Washington, organizations will be far more protected if they maintain the systems, processes and cultures that keep employees from taking their complaints to regulators—from becoming whistleblowers—in the first place.

Keep Employees from Becoming Whistleblowers

Here are some important steps organizations can take to keep potential violations and other matters in-house while also making sure they are addressed and corrected.

  1. Implement a true open-door policy: Employees need to feel like they can raise concerns internally. Best practice is to offer a range of avenues. Typically, options range from managers to HR representatives, the ethics and compliance team, to hotlines and web-based reporting tools. With employee cooperation, organizations can address problems before they become crises—and before they are reported externally.
  2. Deploy strong communication from management: Company leadership needs to make sure employees—especially the ones who haven’t reported before—understand that bringing issues forward is valued. It’s not enough to put posters on a wall or standard language in the Code of Conduct. Employees need to know that reporting helps the organization and—perhaps most importantly—won’t elicit retribution.
  3. Install the right systems and processes: Organizations need to ensure prompt follow-up on all issues, including those disclosed to managers. Smart organizations incorporate a central incident management system designed specifically to manage and analyze reported issues. They also establish processes that ensure that even concerns raised verbally are entered into the system.
  4. Ensure necessary follow-up: This is extremely important. If reported concerns are ignored or if the investigation takes too long, employees will get the implicit message that speaking up is a waste of time and that the organization does not really care about ethical business conduct. As my colleague Matt Kelly recently pointed out, compliance officers cite employee cynicism—the type that can be engendered if they report something and nothing is done about it—as a primary factor undermining compliance efforts (in this case, training).
  5. Broadcast the results: Protecting reporters’ identities is important, given the risk of retaliation. Even so, organizations should consider the value of releasing “sanitized” information about actions taken as the result of employee reports. Sharing outcomes helps demonstrate that speaking up matters and that the organization is serious about identifying and correcting wrongdoing. Often, organizations use periodic newsletters and emails to spread the word, and some offer annual awards to recognize employees who have spoken up.

Despite Changes, Stick to the Fundamentals                                                                           

While companies are always wise to keep an eye on policy and regulatory changes, those hoping for relief from pretaliation enforcement are, in our view, looking at the issue backwards. Instead of focusing on the ability to muzzle employees who might reveal violations of the law, companies should be working to minimize violations in the first place by fostering a culture of business integrity and should encourage employees to raise any potential violations that may occur so that they can be addressed internally as soon as possible.  Besides being “the right thing to do,” such an approach is far more likely to reduce the risk of liability than disincentives to external whistleblowing. 


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View original article at Ethics & Compliance MattersTM

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