International Game Technology, a publicly traded company, agreed to pay a fine of US $500,000 to the Securities and Exchange Commission for terminating an employee who raised certain concerns regarding accounting practices with management and filed a complaint on the company’s internal whistleblower hotline. According to the SEC, from 2008 through October 30, 2014, while employed at IGT, the employee consistently received very favorable reviews and was promoted to be director of a division with 11 direct reports and a spending budget of over US $700 million. In July 2014, the employee raised concerns to his two supervisors, including his executive supervisor, regarding how certain costs were accounted for in the company’s financial statement; he believed the costs were overstated. According to the SEC, the employee “had a heated disagreement with [his] executive supervisor on the issue.” In response, the executive supervisor advised IGT’s chief executive officer that he would terminate the employee. However, shortly afterwards, the employee submitted his complaint on IGT’s whistleblower hotline. In response, the company conducted a formal investigation utilizing outside counsel that concluded that the firm’s accounting practices were appropriate. Following completion of the investigation, the employee was terminated. The SEC charged that this termination violated the employee’s anti-retaliation rights for whistleblowing under applicable law (click here to access the Securities Exchange Act Section 21F(h)).

My View: From the SEC’s Order in this matter, it is not clear how reasonable were the complaining employee’s allegations, or in what manner he presented his concerns, other than to note that he and his executive supervisor had a “heated disagreement” on the issue. Apparently, the executive supervisor considered a slide the employee had prepared stating his views to be “inflammatory” and was concerned his statements had “no basis in fact.” An internal investigation helped by outside counsel appeared to confirm the executive supervisor’s view. Although whistleblowing is and should be protected, all complaints should have some legitimate basis, and companies should not be penalized for terminating employees who abuse a whistleblowing process for illegitimate purposes or who engage in improper conduct even in connection with a legitimate complaint. Otherwise employees are empowered to extort their employers for their own inappropriate actions or conduct. It’s a fine line. (Click here for background on the SEC’s whistleblower protections in the article, “Another Publicly Traded Firm Sanctioned by SEC for Allegedly Undercutting Whistleblower Protections Through Severance Agreements” in the August 21, 2016 edition of Bridging the Week.)