The “economic stimulus bill”—formally referred to as the American Recovery and Reinvestment Act of 2009—signed into law on February 17, 2009 includes a whistleblower protection provision for employees of private contractors and state and local governments who report gross mismanagement, gross waste, public safety issues, abuse of authority, or violation of law in the implementation or use of the stimulus funds. See American Recovery & Reinvestment Act of 2009, Pub. L. No. 111-5, § 1553. These whistleblower protections are often referred to as the “McCaskill Amendment.”

Like other whistleblower protection statutes, the stimulus bill’s whistleblower protections require that an employee satisfy certain requirements in order to be protected. First, the wrongdoing reported must be one of the following: (1) gross mismanagement of the agency contract or stimulus funds; (2) gross waste of stimulus funds; (3) abuse of authority in implementing or using the stimulus funds; (4) a violation of law, rule, or regulation related to an agency contract or grant using stimulus funds; or (5) a substantial and specific danger to public health or safety in the implementation or use of stimulus funds. Second, the employee must have a “reasonable belief” that the information he/she possesses is evidence of wrongdoing falling in one of the above-listed categories. A reasonable belief is likely to be interpreted as an objectively reasonable belief, as it is in other federal whistleblower protections, requiring the belief be one a reasonable person in the same factual circumstances would hold. Third, the employee must disclose the wrongdoing to one of the following individuals or entities: (1) the Board, (2) an inspector general, (3) Comptroller General, (4) a member of Congress, (5) a state or federal regulatory or law enforcement agency, (6) a person with supervisory authority over the employee, (7) a court, (8) a grand jury, or (9) the head of a federal agency. The Act specifically states that the whistleblower protection applies to internal disclosures and disclosures made in the ordinary course of the employee’s duties. If an employee’s actions meet all three requirements, he/she is protected as a whistleblower under the Act.

This protection means that his/her employer is prohibited from taking any action toward that employee that would dissuade a reasonable person from making such a disclosure. An employee seeking to prove that his/her employer’s actions were retaliatory must show that his/her protected conduct (defined above) was a “contributing factor” in the employment action taken. The Act specifically states that knowledge of the employee’s disclosure by the person taking the employment action and temporal proximity between the action and the disclosure are sufficient to show that the whistleblowing disclosure was a contributing factor in the employment action. To rebut such a showing, an employer must demonstrate by clear and convincing evidence—a very high standard—that the action would have been taken regardless of the disclosure. This standard is a significant departure from other whistleblower retaliation protections and will make it significantly easier for employees to successfully prove a claim. If a claim is successfully proven, an employee may be granted reinstatement, back pay, compensatory damages, and costs and attorneys’ fees.

The Act does contain an administrative exhaustion requirement. Employees alleging a violation of the Act must file a complaint with the appropriate inspector general. The inspector general must within 180 days of receipt of the complaint either (1) determine that the claim is frivolous; does not relate to stimulus funds; or is already pending with another agency or (2) investigate and render a decision on the claim. If a violation is found, the head of the applicable agency must award appropriate remedies within 30 days of receipt of the investigation findings. After 210 days (180 for the investigation and decision and 30 for the remedy) or after a partial or full denial of relief, the employee may appeal and bring an action in federal court reviewing the agency’s decision de novo. This court appeal right includes the right to a trial by jury. It is important to also note that any applicable arbitration agreement signed by the employee prior to the whistleblower complaint is not effective in waiving the employee’s right to a court action under the Act. In addition, the Act requires that employers receiving stimulus funds post notice of employees’ rights and remedies under the whistleblower protection section of the Act.

Employers accepting stimulus funds or awarded contracts using stimulus funds should take notice of this provision. They also should take complaints from employees regarding misuse of stimulus funds, fraud, or waste very seriously, investigate them, and document the investigation appropriately. Because of the lenient employee-friendly burden of proof under the Act allowing for proof of retaliation by temporal proximity or mere knowledge, employers should proceed very cautiously in taking adverse employment action against an employee who recently made complaints that fall within the Act’s protections.