On December 12, 2024, the National Highway Traffic Safety Administration (NHTSA) finalized a new rule formalizing its whistleblower program and implementing the whistleblower provisions of the Vehicle Safety Act. In finalizing these rules, NHTSA joins a small group of federal agencies with their own congressionally authorized whistleblower programs, including the Securities and Exchange Commission (SEC), whose whistleblower program NHTSA's program resembles.1 Through this program, Congress added NHTSA to the growing number of agencies seeking to encourage whistleblowers, like the US Department of Justice (DOJ), which announced its Corporate Whistleblower Awards Pilot Program earlier this year.
The rule provides that any former or current employees or contractors who provide "original information" regarding potential safety defects, noncompliance with the Federal Motor Vehicle Safety Standards, or certain other violations of the National Traffic and Motor Vehicle Safety Act (the "Vehicle Safety Act") may be eligible to receive a monetary award, if the original information leads to the resolution of an investigation involving collection of a monetary civil penalty.2 NHTSA may award between 10 to 30 percent of collected monetary sanctions over $1 million that result from any enforcement action arising from original whistleblower information.
History
In 2015, Congress amended the Vehicle Safety Act to add a provision creating the whistleblower program. Because the amendment took effect immediately, NHTSA was authorized to make awards, even before finalizing its whistleblower program regulations. On November 9, 2021, NHTSA issued its first whistleblower award, giving over $24 million to a whistleblower in connection with information provided to NHTSA related to Hyundai Motor America and Kia America. Afterwards, in April 2023, NHTSA initiated rulemaking relating to this program. The proposed rules outlined the program's scope and procedures, as well as the processes for submitting original information to NHTSA and applying for awards. After considering 14 public comments, NHTSA adopted the proposed rules without significant changes.
NHTSA's Program Defines 'Whistleblowers' Broadly
Under the NHTSA's program, the term "whistleblower" means any employee or contractor of a motor vehicle manufacturer, part supplier, or dealership who voluntarily provides to NHTSA original information relating to any motor vehicle defect, noncompliance, or any actual or alleged violation of any notification or reporting requirement, or any regulation under the Vehicle Safety Act likely to cause unreasonable risk of death or serious physical injury.3 NHTSA's definition of whistleblowers encompasses only individuals, not entities. Moreover, advocacy groups, media reporters, and industry trade associations are excluded from NHTSA's definition of "whistleblower" under these rules.4
NHTSA's definitions of the terms "contractor" and "employee" encompass independent contractors, former contractors and employees, employees of foreign parent companies, and even owners. There is no restriction or minimum amount of time a contractor or employee must have worked with the motor vehicle manufacturer, parts supplier, or dealership before they may become a whistleblower. Nor is there any restriction on how recently a contractor or employee must have worked for the entity to be considered a "former" contractor or employee. Rather, all former employees are encompassed within the definition, creating a broad category of personnel qualified to become whistleblowers under NHTSA's program.
Notable Aspects of the Rule Establishing the Program
NHTSA's Final Rule provides detailed guidance on the procedure potential whistleblowers must follow to submit original information to NHTSA, as well as on the potential award available. Particularly notable aspects of the newly released program include:
Collected Monetary Sanctions Exclude Performance Obligations, Restitution, and Amounts Held in Abeyance: Under the new rule, a whistleblower that reports original information to NHTSA leading to a resolution involving civil penalties is eligible to recover between 10 to 30 percent of collected monetary sanctions over $1 million. NHTSA specifies that collected monetary sanctions do not include restitution intended to directly compensate victims or amounts set aside to satisfy performance obligations. Deferred penalties or abeyance amounts are only considered "collected monetary sanctions" if and when such amounts are actually paid to the US government.5
Internal Reporting Mechanisms Must Be Exhausted:If the motor vehicle manufacturer, supplier, or dealership has an internal reporting mechanism in place that protects employees from retaliation, any potential whistleblower must first report their information through that mechanism before attempting to seek an award through NHTSA's program. NHTSA may waive this requirement for good cause or if the whistleblower reasonably believes such report would result in retaliation, or that the original information was already internally reported, already part of an internal inquiry or investigation, or was otherwise already known to the manufacturer, supplier or dealership.6
The Rules Bar Recovery to Those Who Contribute to the Violation: Though the rules define whistleblowers broadly, whistleblowers who deliberately or substantially contribute to the alleged violation are barred from benefitting from any collected monetary sanctions. This is consistent with the DOJ Pilot Program, which similarly prohibits payments to whistleblowers who meaningfully participated in the reported criminal activity, leaving open the possibility that minimal participants may remain eligible for reward payments. Further, the rules bar recovery to a whistleblower that has been convicted of a criminal violation by a US federal or state court related to the violation.7
Next Steps
NHTSA's whistleblower program, though it resembles the programs of agencies like the SEC, will bring its own challenges specific to the automotive industry. Companies within the automotive industry will be well-served to continue to maintain and update robust internal procedures and protocols to detect potential defects and noncompliance, report timely to NHTSA, and notify consumers and dealers regarding any safety defects or noncompliance with federal motor vehicle safety standards. In addition, companies within the automotive industry can take further steps to protect themselves by establishing and maintaining effective internal reporting mechanisms that allow employees to report pertinent information without fear of retaliation, before that information is reported to NHTSA.
Footnotes
1. In its November 2024 report to Congress, the SEC reports receiving over 24,000 whistleblower reports, but the agency notes that over 14,000 of those reports came from two individuals.
2. Original information is information derived from the independent knowledge or analysis of an individual, not known to NHTSA, and not exclusively derived from an allegation made in judicial or administrative actions, governmental reports, hearings, audits, or investigations, or from the news media. Such independent knowledge may come from potential whistleblowers' experiences, communications and observations in their business or social interactions, and need not be first-hand knowledge of the alleged violation.
3. 89 FR 101952, 101959 (Dec. 17, 2024); 49 C.F.R. Part 513.2.
6. Id. at 101962-64; 49 C.F.R. Part 513.7.
7. 89 FR 101952, 101964-64; 49 C.F.R. Part 513.7(g).
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