Robin Foret
April 20, 2009 — 2,532 views  
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Any employer receiving stimulus funds, or who will conduct business with an entity that will receive such monies, must take appropriate steps to ensure that the funds are properly utilized and that employees who report suspected abuse of funds are not retaliated against.  As part of the national response to the economic downturn President Obama enacted the American Recovery and Reinvestment Act of 2009 (“ARRA” or “Stimulus Plan”), which is infusing billions of dollars into the private sector.  Amidst growing concern that funds will not be used for their intended purpose, Congress has inserted whistleblower provisions to protect employees who report the misuse of federal funds received under the Stimulus Plan.  

Section 1553 of the ARRA encourages employees to report the mismanagement or abuse of public funds, and protects employees who report suspected mismanagement or abuse of stimulus monies by allowing them to sue for damages and job loss if they suffer retaliation for reporting suspected conduct.  The whistleblower provision applies to any non-federal employer who receives a contract, grant or other payment made available by the Stimulus Plan, including private employers, government contractors and subcontractors.  The intended reach of the whistleblower provisions is very broad in that it extends not only to companies that directly receive stimulus money, but also to companies that do business with entities that receive those funds.  Accordingly, any business that receives stimulus funds under the ARRA, or that subcontracts with an entity that receives funds, is susceptible to a whistleblower claim.  The whistleblower provisions protect employees who report suspected conduct to any one of the following: a state or federal regulatory agency; a member of Congress; a court or grand jury; the head of a federal agency; an inspector general; or an individual with supervisory authority over the employee (including any supervisor or a member of human resources). 

To be protected under Section 1553, the employee must “reasonably believe” that the information disclosed is evidence of:

        Gross mismanagement of an agency contract or grant relating to covered funds;

        A gross waste of covered funds;

        A substantial and specific danger to public health or safety related to the implementation or use of stimulus funds;

        An abuse of authority related to the implementation or use of stimulus funds; or

        A violation of a law, rule or regulation that governs an agency contract or grant related to stimulus funds.

The whistleblower provisions contained in the Stimulus Plan provide broader protections as compared to other whistleblower laws administered by the Occupational Safety and Health Administration and the U.S. Department of Labor.   The term “reasonable belief” is not specifically defined by the ARRA, but whistleblower laws such as those contained in Section 806 of the Sarbanes-Oxley Act (“SOX”) will undoubtedly provide guidance.   Section 806 of SOX, which also requires a reasonable belief on the part of the employee, has been interpreted to incorporate an objective reasonableness element taking into consideration the employee’s educational level, training and experience.   The same analysis will likely apply to the Section 1553 definition of reasonable belief.  

Whistleblowers who submit a report based on a reasonable belief of suspected abuse of stimulus funds are protected from retaliatory employment decisions, including termination, demotion, loss of benefits, loss of monetary compensation, etc.   Under new United States Supreme Court standards of what constitutes retaliation, employees may even be protected from certain types of reprimands, loss of promotional opportunities, and lateral transfers that reassign duties even without adverse economic consequences.  Moreover, the standard for proving a claim as a whistleblower is easier than for employees claiming discrimination under Title VII of the Civil Rights Act.  A whistleblower must show only that a legitimate report of suspected abuse of funds was a “contributing factor” (as opposed to a motivating factor) to the negative employment decision.  Employers have a heavy burden of proof to defend ARRA whistleblower claims because they must demonstrate by clear and convincing evidence that the same negative employment action would have been taken regardless of the employee’s protected conduct.   Equally important, the rights and remedies provided to employees by the new Stimulus Plan may not be waived by agreement or as a condition of employment. 

Employers receiving stimulus funds, as well as those who will conduct business with entities that receive such funds, must take appropriate steps to ensure that the funds are properly utilized, and that employees who report suspected abuse of funds are not retaliated against.  This will require proper auditing procedures for tracking the use of stimulus funds, a method of handling internal complaints by employees, a policy against retaliation against employees who make complaints concerning the use of stimulus funds, and a training program for supervisory employees so that they understand the new whistleblower provisions of the Stimulus Plan.

The information contained in this article is not designed to address specific situations, and does not include rules and regulations that apply to all states.  If you have questions concerning this topic, you should consult with legal counsel of your choice to obtain advice on various fact specific matters.  

Robin Foret

The Foret Law Firm

Robin Foret practices in the areas of employment law, commercial litigation and specialty insurance defense claims. She handles a variety of employment matters such as theft of trade secrets, breach of employment agreements, non-competition agreements, wage and hour issues under the Fair Labor Standards Act (FLSA), discrimination and harassment issues under Title VII of the Civil Rights Act of 1964 (Title VII) and the Texas Commission on Human Rights Act (TCHRA), the Americans with Disabilities Act (ADA), Family Medical Leave Act (FMLA) issues, and the Sarbanes-Oxley Act (SOX). Robin has handled a wide variety of employment law matters for employers, as well as for executive-level employees, before agencies, and state and federal courts.