A Whistleblower Just Filed A Complaint Against Your Company: Here's What To Do Now

Few situations create more uncertainty than learning that an employee has filed a whistleblower complaint. Questions arise immediately: Is the allegation legitimate? Should the employee be placed on leave? Do we need to notify our insurance carrier? Are we now prevented from disciplining the employee if there are unrelated ongoing work related issues?

There is no one-size-fits-all answer. Every complaint requires a careful assessment of the facts, the applicable law, and the entity’s obligations. Taking the wrong approach in the early stages can turn an internal personnel matter into protracted litigation.

Understand What Constitutes Whistleblower Activity

Not every workplace complaint qualifies as protected whistleblowing. However, many employers underestimate the scope of employee protections.

In New Jersey, the primary whistleblower statute is the Conscientious Employee Protection Act (CEPA), one of the broadest whistleblower protection laws in the country. CEPA generally protects employees who disclose, object to, or refuse to participate in conduct they reasonably believe violates a law, regulation, or public policy.

Protected activity may include reporting:

• Financial fraud or accounting irregularities
• Unsafe working conditions
• Environmental violations
• Healthcare or patient safety concerns
• Wage and hour violations
• Discrimination or harassment
• Regulatory noncompliance
• Consumer fraud or deceptive business practices

In addition to CEPA, employees may be protected under various federal statutes, including those enforced by agencies such as the U.S. Department of Labor, the Securities and Exchange Commission, and the Occupational Safety and Health Administration. While all of these regulations have their own requirements, there are several best practices that apply universally.

Resist the Urge to React Immediately

When allegations involve misconduct by management or a key employee, emotions often run high. While it can be tempting to defend the accused, challenge the employee’s credibility, or make immediate personnel decisions, those reactions can create unnecessary legal risk and escalate an already tense situation.

The initial response should focus on protecting the integrity of the investigation—not assigning blame. Accordingly, before taking any employment action, employers should determine:

• Who needs to be informed about the complaint;
• What company documents, if any, should be preserved;
• Whether outside counsel should be engaged to direct the investigation;
• Whether the claim should be disclosed to insurance carriers; and
• Whether any reporting obligations exist.

Do Not Retaliate

Perhaps the biggest mistake employers make is taking actions that can later be characterized as retaliation. Retaliation is not limited to termination. It can include:

• Demotions;
• Reductions in compensation;
• Changes in work assignments;
• Exclusion from meetings or projects;
• Negative performance reviews that are inconsistent with prior evaluations;
• Threats or intimidation;
• Harassment; and
• Unnecessary disciplinary action.

Even actions that appear unrelated to the complaint may be scrutinized if they occur shortly after protected activity. Therefore, if legitimate performance or disciplinary issues exist, employers should work closely with counsel before proceeding to ensure those actions are supported by documented business reasons.

Preserve Relevant Evidence

Once a whistleblower complaint has been made, employers should take reasonable steps to preserve potentially relevant evidence. That may include:

• Emails
• Text messages
• Internal messaging platforms
• Personnel files
• Financial records
• Compliance documents
• Security footage
• Electronic files
• Audit records

Deleting documents, even pursuant to a routine document retention policy, can create significant litigation issues if relevant evidence is lost after the company becomes aware of potential claims. Notice to preserve any related documents may be appropriate depending on the circumstances.

Conduct an Independent Investigation

An effective internal investigation serves multiple purposes. It helps determine whether the allegations have merit, demonstrates that the company took the complaint seriously, and allows management or counsel to address legitimate compliance issues before they become larger problems.

The scope of the investigation depends on the allegations, but generally should include:

• Reviewing relevant documents
• Interviewing witnesses
• Evaluating company policies
• Determining whether laws or regulations may have been violated
• Identifying any necessary corrective action

For significant allegations involving executives, financial misconduct, regulatory issues, or anticipated litigation, companies often benefit from having outside counsel oversee the investigation to preserve privilege where appropriate and help ensure the process is conducted objectively.

Review Your Insurance Coverage

Many businesses overlook insurance issues until litigation has already begun. Depending on the circumstances, policies that may provide coverage include:

• Employment Practices Liability Insurance (EPLI);
• Directors and Officers (D&O) liability insurance;
• Fiduciary liability insurance; and
• Certain professional liability policies.

Because many policies contain strict notice requirements, employers should review applicable policies promptly after learning of a claim or circumstances that could reasonably lead to one.

Address Legitimate Compliance Problems

Not every whistleblower complaint is accurate. However, many identify weaknesses that deserve attention. If an investigation uncovers compliance deficiencies, businesses should consider corrective measures such as:

• Updating internal policies;
• Improving reporting procedures;
• Providing additional employee training;
• Enhancing internal controls;
• Revising supervisory practices; and
• Implementing stronger compliance oversight.

Prepare for Potential Litigation

Many whistleblower complaints are resolved internally. Others develop into agency investigations or civil litigation. In either case, early preparation can make a substantial difference.

Developing a strategy early often allows companies to respond more effectively if government agencies or opposing counsel become involved. Employers work with experienced legal counsel to evaluate:

• The strength of the underlying allegations;
• Potential damages;
• Key witnesses;
• Available defenses;
• Document preservation efforts;
• Public relations considerations; and
• Business continuity concerns.