Community banks, as well as publicly traded companies, have reason to take notice of the new whistleblower liability scheme set out in the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. 111-203. For all publically traded companies, sections 748 and 922 expand causes of action for employees reporting SOX, SEC and CFIC matters of concern. This article will focus on the new anti-retaliation provisions of Section 1057 of the Act, which will be of concern to financial institutions regardless of size or corporate structure, including community banks and savings and loans.
Who is covered? The scope is intentionally broad and appears to cover most businesses providing consumer financial services. This includes common banks and savings institutions, loan brokers, property appraisers, stored value instrument providers, check cashing and money transmitters, debt collectors and others.
Which employees? Of course, direct employees are afforded the new protection. But even agents or contractors of covered entities may potentially avail themselves of the Act’s rights.
Actionable conduct? The Act prohibits employer retaliation for providing to the Bureau of Consumer Financial Protection or other local state or federal agency, information respecting any violation of law or regulation over which the new Bureau has investigative duties. This includes situations where the employee is called to testify in a proceeding involving such consumer financial laws. Further an employee’s objection or refusal to participate in work activity which he reasonably believes to be in violation of such consumer financial laws is protected conduct.
Procedures? An employee must report retaliation to the Secretary of Labor’s office within 180 days from the alleged violation. To prevail it need only be shown that the protected action was a “contributing factor” to the adverse personnel action. The Act posts a decidedly employee-favorable standard, at least as opposed to other anti-retaliation laws, e.g. Title VII where the employee generally must meet a “determining” or “significant” factor standard. If the Secretary of Labor does not issue a ruling with 210 days, or 90 days after a final order is entered, the employee may file in federal court a private cause of action respecting the alleged violation. Notably if the Secretary concludes the complaint was frivolous, the employer may receive its reasonable attorney fees, not to exceed $1000. This frivolous filing penalty may act as a two-edged sword, however, as one suspects the frivolous filing penalty will be rarely invoked, perhaps further encouraging appeal by an embittered employee.
Remedies? An offending employer may be ordered to reinstate the employee with back pay wages and compensatory damages, and to pay attorney fees, expert witness expenses and all litigation costs. Employers are expressly prohibited from seeking to protect themselves from the new liability scheme through arbitration agreements or other employment contract provisions which attempt to waive or limit the Act’s provisions.