Last week, Rep. Elijah E. Cummings (D-MD) and Senator Tammy Baldwin (D-WI) introduced the Whistleblower Augmented Reward and Non-Retaliation Act of 2016
(WARN Act), a groundbreaking legislation that would encourage corporate whistleblowers, particularly those in the banking sector to come forward with
enhanced protections, providing a safe passage that the industry has never before seen. Banks are regulated by multiple regulatory agencies but currently
whistleblowers in those institutions have limited avenues to safely report wrongdoing. This legislation has the potential to change that forever.
The WARN Act would enforce upstanding citizenship in the financial sector in two major ways:
Enhanced Employment Protections for Whistleblowers and Regulators
The bill would prohibit employers from demanding that employees waive their rights or disclose their communications with the government. By making it illegal for institutions to contractually ban potential whistleblowers from disclosure, the WARN Act comprehensively addresses the proliferation of gag orders. This is critical, particularly in light of findings from The Street, The Bull, and The Crisis: A Survey of the U.S. & UK Financial Services Industry, which found that 28 percent of financial services professionals earning $500,000 or more per year say that their company’s confidentiality policies and procedures bar the reporting of potential illegal or unethical activities directly to law enforcement of regulatory authorities. WARN would also safeguard whistleblowers from retaliation if they refuse to engage in actions that they suspect are unlawful. In addition regulators disclosing sensitive information pertaining to a bank’s “safety and soundness” would be offered the same level of protection as whistleblowers. This is a crucial detail as it highlights the fact that regulators, like whistleblowers, can be bullied into submission and secrecy.
Legal Protections and Monetary Incentives
The WARN Act would allow whistleblowers to show, through legal procedures including evidentiary standards and burden of proof, that their honest, protected actions as whistleblowers contributed to unfavorable personnel actions. It’s not uncommon for a whistleblowing employee to be harrassed or demoted because of her or his ethical pursuit. WARN would ensure that the whistleblower has backing from the court against such retaliatory conduct.
Whistleblowers would also be eligible to receive between 10 and 30 percent of monetary sanctions recovered for their willingness to stand up and report wrongdoing—which award guidelines are already present in the SEC Whistleblower Program established by the Dodd-Frank Act in 2010. Moreover, whistleblowers won’t have to worry about out-of-pocket legal expenses or lost pay. WARN would reinstate them up to twice the amount of back pay, with interest, in addition to civil remedies, punitive damages, and compensation for any other related fees.
We applaud Senator Baldwin and Representative Cummings for introducing such a necessary piece of legislation. On the front lines of whistleblower advocacy, we regularly field inquiries from individuals in the banking industry who are interested in reporting significant banking violations but have been reluctant to follow through given the wholesale absence of meaningful employment protections and monetary incentives. Potentially, the WARN Act is the answer, and based on the success of the SEC Whistleblower Program, it may be a crucial first step to rebuild ethical cultures in the U.S. banking industry.