Spurred in 2007 by massive product recalls, many of which were children's products, and widespread coverage of lead-tainted imported toys, Congress passed the Consumer Product Safety Improvement Act of 2008 ("2008 Act"). The 2008 Act amends the Consumer Product Safety Act of 1972 ("1972 Act") primarily to strengthen lead testing and labeling standards for toys and games, enhance the power and duties of the Consumer Product Safety Commission, provide public access to product history and recall databases, and empower state attorneys general to enforce consumer product safety laws.
Less attention has been focused on the new whistleblower protections in the 2008 Act. In an effort to encourage employees inside the consumer products industry to report safety or health concerns, Congress created a federal cause of action for unlawful retaliation against whistleblowers. The scope of protections and the legal mechanisms for their enforcement largely mirror what Congress adopted for securities fraud whistleblowers in the Sarbanes-Oxley Act of 2002, which were fashioned on long-standing protections in place for whistleblowers in health- and safety-impacting industries such as nuclear power, transportation and those affecting drinking water and air quality. Unlike many of the other provisions in the 2008 Act, the whistleblower provisions took effect immediately.
This new whistleblower protection regime has the broadest sweep of any previous protections and potentially reaches more employees than ever before. Regardless of whether or not a company is publicly traded and subject to Sarbanes-Oxley, this protection applies to all manufacturers, private labelers, distributors and retailers in the consumer products industry, not just those portions of the industry that triggered this legislation. Consumer products, as defined in the 1972 Act, generally encompass articles and their component parts that are customarily produced or distributed for sale to, or use by, consumers, with certain exceptions relating to products regulated elsewhere such as tobacco, motor vehicles, pesticides, firearms, aircraft, boats, drugs, cosmetics and food. (The precise definition of "consumer products" under the 1972 Act is at 15 U.S.C. § 2052.)
This alert summarizes the new regime and provides preliminary advice to employers who have not adopted policies and procedures relating to whistleblowers.
Coverage Of The Consumer Products Whistleblower Legislation
The 2008 Act protects employees of a manufacturer, private labeler, distributor, or retailer of a consumer product from retaliation in compensation, terms, conditions or privileges of employment for:
- Providing to the employer, the federal government or a state attorney general information about "any violation of, or any act or omission the employee reasonably believes to be a violation of any provision" of the 1972 Act, as amended, any other statute enforced by the Consumer Product Safety Commission or "any order, rule, regulation, standard or ban under any such Act."
- Testifying in a proceeding concerning such a violation.
- Assisting or participating in such proceeding.
- Objecting to, or refusing to participate in, any activity, policy, practice or assigned task that the employee reasonably believed to be a violation.
The perceived violation that the employee raises need not be an actual violation, but merely one that the employee "reasonably believes" is a violation. Expecting that the Department of Labor, which enforces these protections, will interpret phrases in the 2008 Act in the same way it interprets identical phrases in other federal whistleblower protections, an employee's reasonable belief that a violation has occurred will not be a significant hurdle for an employee to meet for his or her actions to be deemed protected under the 2008 Act.
Litigation An Aggrieved Whistleblower Can File
The 2008 Act provides that a person who believes he or she has suffered unlawful retaliation may file a complaint with the United States Secretary of Labor within 180 days of the alleged unlawful act. The Department of Labor will investigate the complaint, render a preliminary decision and, if either party objects to such decision, conduct a full hearing before an Administrative Law Judge. We assume that, as under Sarbanes-Oxley and other federal whistleblower laws, the Secretary of Labor will assign the preliminary investigation phase to the Occupational Safety and Health Administration.
The complaining individual may stop Department of Labor proceedings and take his or her claim to federal court at certain points during the process, such as 210 days after the filing of the complaint if the Secretary of Labor has not yet issued a final decision. While Sarbanes-Oxley's whistleblower provision is silent as to whether persons can proceed before a jury in federal court (and many courts have held they cannot), the 2008 Act expressly provides that the "action shall, at the request of either party to such action, be tried by the court with a jury." A prevailing complainant can obtain "all relief necessary to make the employee whole, including injunctive relief and compensatory damages," and such relief may entail reinstatement, back pay with interest and compensation for "special damages" such as litigation costs and attorney's fees.
Basic Steps Employers Should Take To Minimize Risk
Employers in the consumer products industry can expect to be faced with retaliation claims filed by current or former employees who believe, or at least assert they believe, they were discharged or otherwise retaliated against because of some protected act. If experience with Sarbanes-Oxley, the Atomic Energy Act and other whistleblower protections is any guide, the number of such lawsuits will be small at the outset but will increase rapidly. With the prospect of a jury deciding the claim and awarding damages, the stakes to employers in the consumer products industry will be substantially higher than the stakes faced by employers subject to other federal whistleblower protections. Accordingly, employers are encouraged to act now to minimize these risks. At a minimum, employers subject to the 2008 Act should:
- Establish, disseminate and train all employees in carefully drafted procedures that allow employees to raise consumer product safety concerns to managers other than their direct and indirect supervisors. Such procedures should provide a variety of alternative mechanisms that employees can use to raise such concerns, including an anonymous "hot-line."
- Establish, disseminate and train all employees in a policy that prohibits any person from retaliating in any way against any employee who has raised a safety concern. Again, procedures should be implemented to provide a multitude of avenues through which employees can complain about perceived retaliation.
- Establish procedures for investigating complaints, but allow flexibility in such procedures to adapt to the unique needs of any situation. Such procedures should differentiate between investigations of the original consumer product safety concerns and investigations of retaliation allegations – each addresses different issues and requires different safeguards.
- Work with Human Resources to assure that adverse employment decisions relating to whistleblowers are not only non-retaliatory, but are also handled thoughtfully and properly so the employer can prevail should the whistleblower challenge the decision in future litigation.