About a week ago, President Biden signed the American Rescue Plan, the new Covid-19 stimulus relief bill, into law. While the $1.9 trillion stimulus package provides, among other things, direct funding to individuals, it also extends opportunities for businesses to receive Paycheck Protection Program (“PPP”) loans. Unlike individuals, who have received stimulus checks directly into their bank accounts, however, companies must carefully navigate the PPP application process and administration of the loan to avoid exposing themselves to any claims related to a misuse of government funds.
State and federal legislators enacted several laws to address the Covid-19 pandemic, but with increased legislation came increased litigation. In 2020, Covid-19 related labor and employment filings made up only 1.85% of all federal and state labor and employment filings, but by January 2021 that amount had almost doubled and continues to grow. This increase includes a rise in whistleblower claims. The American Rescue Plan provides for a second wave of PPP loans, and a streamlined process for forgiveness of prior PPP loans. The bill also allots $15 billion to the Emergency Injury Disaster Loan program, which provides long-term, low-interest loans from the Small Business Administration, and $25 billion for a new grant program for bars and restaurants. Companies that do not take steps to ensure they are in compliance with the programs provided in the plan risk exposure to potential whistleblower litigation.
The Uptick in Covid-19 Related Whistleblower Claims
Of note, the government has issued a federal directive to prioritize the investigation of coronavirus-related fraud. It is common for aggressive fraud enforcement to follow dramatically increased federal spending. Thus, it is no surprise that the $1.9 trillion price tag will draw the attention of government agencies tasked with ensuring such funds are not being misused. At the same time, government agencies and law firms representing whistleblowers alike contain extensive information on their websites encouraging employees to be vigilant and raise any issues of wrongdoing or misconduct. This has been particularly evident considering the amount of complaints filed with the Occupational Health and Safety Administration (“OSHA”) within the past year, regarding health and safety-related issues in the workplace along with the increase of social media campaigns reporting employers for purported COVID-19 violations.
As a result, companies can anticipate more whistleblower claims being brought under statutes, like the False Claims Act, which imposes liability on companies that defraud governmental programs or other federal laws regulating financial misconduct like the Sarbanes-Oxley Act and the Dodd-Frank Act, or their state law counterparts. Some of the statutes also offer huge financial incentives to the potential whistleblower for a successful recovery. Financial institutions that have already distributed hundreds of billions of dollars under the CARES Act, the prior Covid-19 relief law, continue to be at risk. In the past, medical providers, pharmaceuticals, defense contractors, government supply contractors, government grant recipients, and banks with government-issued loans were the usual suspects for federal whistleblower claims. Covid-19 loans and funding changes that landscape, however, adding industries that did not previously have to contemplate these types of claims.
Avoiding Whistleblower Claims
To avoid the potential influx of Covid-19 related whistleblower claims, companies must first ensure compliance policies are in place to support the administration of government funding received under the new Covid-19 stimulus plan. Also key is having policies that provide mechanisms for employees to report any suspected wrongdoing. Although it may seem counter-intuitive, companies that want to avoid whistleblower complaints should encourage them, not silence them. While employees make whistleblower claims for a variety of reasons, many feel that their concerns are not being heard by their employer. Numerous studies show that employees who report externally, tried to report internally first and many followed up to attempt to resolve the issue with the company, but the company failed to act. Interestingly, social media is also playing a role with employees across industries and across geographies communicating about their workplaces and Covid-19 concerns. With the plaintiff’s bar actively highlighting their services, employees can easily find an attorney willing to assist with such a complaint.
In order to help avoid external claims and possible negative media attention (whether accurate or not), employees should be urged to report their concerns internally. Employers can follow the below guidelines to help protect themselves against whistleblower complaints.
• Have a process by which employees may report anonymously and remain anonymous throughout an investigation. Due to the risk of retaliation complaints, companies should not attempt to identify anonymous whistleblowers. Having multiple avenues for reporting misconduct and/or retaliation is key.
• The reporting process should be published somewhere that is easily accessible to employees.
• Clearly communicate and enforce anti-retaliation policies and procedures. It is a good time to review and update anti-retaliation policies and reaffirm the company’s commitment to following these policies.
• Take complaints seriously. Complaints should be investigated and documented fully using a consistent process.
• Ensure that the reasons for employee disciplinary action are consistent, well documented, and unrelated to any complaints. This is, of course, the case with any employee disciplinary action.
• Train and retrain employees on the company’s reporting procedure and anti-retaliation policy. This includes training supervisors on the importance of listening to employee concerns and reporting them for investigation.
• Follow-up and close out an investigation with the complaining employee if the report is not anonymous. While the company may not be able to divulge the exact resolution to a complainant, the complainant should know the claim was investigated and taken seriously.
These simple, but often overlooked, steps can help protect your company in the face of an anticipated increase in whistleblower claims during the Covid-19 era.