New whistleblower procedures now govern all government contracts funded under the American Recovery and Reinvestment Act of 2009 (Recovery Act). Contractors doing business with the federal government need to be aware that existing FAR whistleblower procedures at FAR 3.901 through 3.906 will not apply to transactions funded under the Recovery Act. The new Recovery Act whistleblower provisions, codified at FAR 3.907, will govern newly awarded contracts, as well as existing contracts if future orders will use Recovery Act funds. Thus, it is imperative that contractors assess the impact that the new provisions could have on their current employment procedures.

Section 1553 of the Recovery Act contains broad protections for whistleblowers who work for government contractors accepting Recovery Act funds. The Act provides for approximately $500 billion in government spending, which is aimed at stimulating the economy. Government contractors who receive any portion of those funds, however, should be aware that section 1553 of the Act contains new protections for public and private employees who “blow the whistle” on a wide range of potential fraud associated with these funds. As a result, this section of the Recovery Act appears to be extremely pro-employee, and it could raise issues for government contractors who have been or will be recipients of these funds. It is also important to note that this legislation did not proceed through the normal Congressional debate process and, therefore, there is no legislative history to guide a reading of the statute.

For a whistleblower to be protected from retaliatory action by his employer under the Recovery Act, he must make a disclosure about a protected topic to a particular recipient as defined by the statute. The broad reach of Section 1553 is apparent from several substantive provisions, including the broad statutory definition of employer. The new whistleblower protections affect all non-federal employers receiving covered funds as: (1) a contractor, subcontractor, grantee or recipient; (2) a professional membership organization, certification or other professional body, agent or licensee of the federal government, or a person acting in interest of an employer receiving covered funds; or (3) a state or local government and any contractor or subcontractor thereof receiving covered funds. Individuals working for any of these employers are protected from being discharged, demoted or otherwise discriminated against as a reprisal for disclosing a potential fraud under Section 1553.

The Recovery Act also protects statements concerning a broad scope of subject matter. Protection is awarded if the employee “reasonably believes” that the information contained in the disclosure evidences:

  • Gross mismanagement of agency contract or grant,
  • Gross waste of funds,
  • Substantial and specific danger to public health or safety,
  • Abuse of authority related to implementation or use of funds, or
  • Violation of law, rule or regulation related to agency contract or grant.

A disclosure concerning one of these topics is protected provided the statement is made to one of the following recipients:

  • The Recovery Accountability and Transparency Board,
  • The Agency’s IG, the Comptroller General,
  • A member of Congress,
  • A state or federal regulatory or law enforcement agency,
  • A person with supervisory authority over employee,
  • A court or grand jury,
  • A head of a federal agency or
  • A representative of any of the above.

Given the breadth of protected topics and the range of recipients, it would appear that many statements made by a whistleblower working for an employer receiving Recovery Act funds could be protected by the new whistleblower provisions.

Furthermore, in what appears to be a drastic change of course, Section 1553 of the Recovery Act also allows statements that employees make as part of their jobs to qualify as protected disclosures. In contrast to prior whistleblower statutes and to the Supreme Court’s decision in Garcetti v. Ceballos, the Recovery Act states that disclosures “made in the ordinary course of an employee’s duties” are protected disclosures. For example, this change allows attorneys and internal auditors who investigate fraud as part of their jobs to be protected from any adverse employment actions if they make any statement that fits within the broad definition of a protected disclosure under the Act. Because the statute provides this blanket protection to these employees, commentators have speculated that Section 1553 may force employers to document any misconduct or poor job performance–however slight–by employees in that protected category to substantiate any later decision to terminate their employment and attempt to avoid a retaliation claim.

Companies that have entered into contracts or plan to enter into contracts with the federal government that will be funded, in whole or in part, with funds available through the Recovery Act need to assess how these new whistleblower protections could affect future employment decisions.