The possibility of a whistleblower in the rank and file may seem like too far-fetched an idea to consider for many employers. Even more far-fetched for many is the idea that whistleblower-worthy misconduct could happen on their watch. The U.S. Department of Justice (DOJ) Fraud Division's recent unveiling of its Fraud Whistleblower Incentive Program (WHIP), however, poses significant implications for employers that are not proactive in encouraging internal reporting of suspected misconduct and who do not respond appropriately to those reports when received. Here is what employers need to know: 

What is WHIP?  

WHIP incentivizes individual fraud tipsters with payments ranging from $10,000 to $30,000 per qualifying tip. A unique, and potentially concerning, aspect of this program compared with similar government reporting programs is that payments are awarded for original information leading to criminal charges, fast-tracking payments that historically have been contingent on final resolution of those charges. In other words, individual employees are eligible for substantial, fast payments for reporting suspected misconduct and cooperating in subsequent investigations against their employers. Even employees who played a minor role in the misconduct themselves are not automatically excluded from eligibility. Further, whether a tip “leads” to criminal charges is subject to DOJ discretion without clearly defined parameters as to what constitutes a payment-worthy tip. 

Notably, WHIP was announced just days after the DOJ Fraud Division's Directive 26-12, which outlines an increased commitment to prosecuting corporations for fraud. 

Subject Matter of Qualifying Tips  

To be eligible for WHIP consideration, tips must relate to federal healthcare offenses or fraud related to programs and benefits administered by the Department of Agriculture, the Department of Labor, the Department of Health and Human Services, the Department of Housing and Urban Development, the Department of Education, the Department of Veterans Affairs, the Department of War, or the Small Business Administration. DOJ Fraud has highlighted a particular focus on fraud in the areas of hospice, home health care, day care, and special services fraud. Despite its already broad reach, DOJ has been clear that this program's focus will likely be expanded. 

The bottom line — any employer administering, participating in, or benefiting from a federal program should proactively reevaluate their compliance and internal reporting protocols.  

Legal Implications for Employers 

Aside from the obvious side effect of WHIP (increased potential for DOJ scrutiny and potential prosecution), additional implications are worth considering from an employment law lens: 

• Retaliation Claims 

  Whistleblowers are afforded protection from retaliation by federal statute, and DOJ Fraud expressly encourages WHIP tipsters to report any retaliation faced as a result of their report directly to the Fraud Division. In response, DOJ Fraud can decline to extend cooperation credit to a prosecuted company and/or institute enforcement action for any retaliation. In sum, WHIP not only opens employers up to DOJ scrutiny, but also incentivizes employees to envelop themselves in a protected class, increasing the chance for retaliation actions in tandem. 

  Relatedly, WHIP requires tipsters to cooperate in any investigation resulting from their tip. Such cooperation may include working proactively under the supervision of U.S. law enforcement agents. In other words, employers are faced with the possibility of protected whistleblowers continuing to mine information at the direction of law enforcement with very limited avenues for redress. 

• Confidentiality Agreements 

  DOJ guidance makes clear that any employer who impedes or interferes with an employee's ability to relay a qualifying tip is subject to criminal prosecution and other penalties for that impediment. Notably, this expressly includes attempts to enforce confidentiality provisions of employment contracts or similar policies. This calls for employers to think critically and, in many cases, consult counsel before invoking a confidentiality provision, particularly if they are involved in a covered federal program or industry discussed above.  

Proactive Steps to Consider 

At this point, the best defense against WHIP fallout as an employer is a good offense: 

• Compliance Policies

  Employers that administer, participate in, or benefit from federal programs should take proactive steps to ensure their compliance programs and policies are up to par based on current federal guidance. Employers involved in the presently covered programs and industries should consider consulting counsel to scale a comprehensive compliance audit and assessment of WHIP exposure. The effect of these efforts is twofold: 1) preventing misconduct for whistleblowers to report; and 2) insulating the company from claims that lapses in compliance protocols contributed to or caused any reported misconduct. 

• Internal Reporting Programs 

  Though WHIP is undoubtedly hard to compete with, it is imperative for employers to encourage internal reporting through structured, protected reporting channels. Programs should be easy to access, and misconduct reports of any magnitude should be taken seriously and addressed promptly. Employers that receive internal reports that may be covered by WHIP should consult counsel immediately to assess if utilizing one of DOJ's self-disclosure incentive programs is warranted. Time is of the essence when seeking the benefits of self-disclosure, and using a DOJ self-disclosure channel is not a decision that should be taken lightly or made without the benefit of being fully informed. 

  While DOJ may have the upper hand with WHIP's monetary incentives, employers have the benefit of human relationships and proximity. By ensuring that employees who relay concerns feel heard and taken seriously, and by providing easy avenues for them to relay those concerns internally, employers can increase their chances of getting out ahead of a WHIP report.