When employees witness unethical behavior at work, such as fraud, misconduct, or harassment, they often fail to report it. They fear that doing the right thing may not be worth the potential consequences, so they look the other way.
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While 45 percent of workers say they have seen misconduct at work, only 65 percent of those who have seen misconduct choose to report it, according to the "National Business Ethics Survey" from the Ethics Resource Center.
Is reporting misconduct worth it, or should employees quietly ignore questionable ethics to protect themselves and their jobs?
Whistleblowing Is More Common Than You Realize
Government whistleblowers like Edward Snowden and Chelsea Manning have become household names in recent years, but many don't realize how often whistleblowing occurs in the corporate world.
"The vast majority of whistleblowers are not like Mr. Snowden," says Stephen M. Kohn, whistleblowing attorney, founder of the National Whistleblower Center, and author of The New Whistleblower's Handbook: A Step-by-Step Guide to Doing What's Right and Protecting Yourself.
Rather than reporting questionable government actions to the public, many whistleblowers are alerting the authorities to corporate and tax fraud via the Securities and Exchange Commission (SEC) and the Internal Revenue Service (IRS). According to Kohn, the SEC has paid out more than $50 million in whistleblower rewards this year alone.
"Whistleblowers who proceed anonymously or confidentially often avoid retaliation, as their employers may never discover who they are," Kohn says. "But if a whistleblower is uncovered in corporate America, they face the destruction of their career."
The Most Important Rule of Whistleblowing: Follow the Money
Those who suspect corruption in their workplace should remember the primary motive for unethical behavior is usually a financial one. Understanding this is key to determining which laws may protect the whistleblower.
Kohn says "follow the money" is the most important whistleblowing rule for two reasons.
"First, the fraud and misconduct uncovered by the whistleblower is often money-based," he says. "Most people do not violate the law or create working conditions that threaten the environment or the public safety because they are evil. They do it to save money, increase profits, or demonstrate high rates of return on investments."
Kohn continues: "Second, some of the most powerful and effective whistleblower laws permit employees to report these illegal actions confidentially. If the government confirms that validity of the whistleblower's complaint, and the government sanctions the employer for the illegal conduct, the employee is eligible for a financial reward. These rewards are paid directly from the fines and penalties obtained by the wrongdoers."
Whistleblower laws create what Kohn calls "the perfect storm for accountability": An insider alerts the authorities confidentially. The government uses the insider's information to build a case. If the fraudster is found guilty, they must pay for their crimes – and part of that payment goes to the whistleblower as a reward for placing themselves in jeopardy.
Kohn notes that reward-based whistleblower laws "generally permit the whistleblower to obtain a reward of between 10-30 percent of the sanctions obtained."
The Safest Way to Blow the Whistle
Laws have changed in recent years to provide additional protection to corporate whistleblowers.
"Thirty years ago, numerous industries were not covered under any whistleblower laws, such as food safety, airline safety, and securities frauds," Kohn says. "Today, these loopholes have, for the most part, been fixed."
Now, whistleblowers in the majority of the U.S. economy have protection under a number of federal and state laws, regardless of industry or sector.
"Additionally, the most modern laws recognize that whistleblowers need confidentiality and permit whistleblowers to file claims confidentially or anonymously," Kohn adds. "They also recognize that the overwhelming majority of employees who witness fraud or misconduct are afraid to report these crimes, fearing termination. Thus, they have created incentives – for example, financial rewards – to encourage employees with solid and demonstrable evidence of illegal conduct to report these crimes to federal or state law enforcement officials."
Kohn says the new laws are "revolutionary in impact" and have "radically increased the ability of the government to detect frauds and hold fraudsters accountable."
According to Kohn, the safest way to blow the whistle while avoiding retaliation would be via a procedure authorized under the Dodd-Frank Act's securities and commodity fraud laws:
"The whistleblower must provide a licensed attorney with his or her information and swear to the truthfulness of that information. The lawyer must keep a copy of this declaration. Thereafter, the lawyer files the claim on behalf of the client, but does not disclose the identity of the client."
If you're considering blowing the whistle, listen up: It's imperative for your safety and your career that you know your rights and the appropriate methods for reporting violations.
"The ability to protect yourself from retaliation and/or qualify for confidentiality or a financial reward often depends upon how you blow the whistle," Kohn says. "Did you report to the correct office? Did you report in a timely manner? Did you provide the information needed to obtain coverage? Know your rights."
This article is for informational purposes only and does not constitute legal advice.