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NAVEX Global November 2013 Virtual Conference

The Retaliation Juggernaut: Why Retaliation Risk is Everywhere & What

You Should Do About it

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Today’s Speakers

2

Gregory Keating, Shareholder Littler Mendelson

Andy Foose, Vice President Advisory Services

NAVEX Global

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Retaliation

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The Rising Tide

15.7%

17.4%

19.5%

20.6%

22.6%

24.0%

25.4%

27.1%

27.5%

27.0%

27.9%

28.6%

29.5%

29.8%

32.3%

34.3%

36.0%

36.3%

37.4%

38.1%

14% 19% 24% 29% 34% 39%

FY 1993

FY 1994

FY 1995

FY 1996

FY 1997

FY 1998

FY 1999

FY 2000

FY 2001

FY 2002

FY 2003

FY 2004

FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY 2010

FY 2011

FY 2012

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Anti-Retaliation Protections are Everywhere

ACA

OSHA

ADA

False Claims Act

Equal Pay Act (FLSA)

FLSA

Immigration Reform and Control Act

(IRCA)

ADEA

FLSA

NLRA

Workers Compensation Acts

The Rehabilitation Act

USERRA

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What is Retaliation?

Employers cannot take:

• “adverse action” against their

employees

• for “participating” in “protected

activity”

• or “opposing” unlawful

employment practices.

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Proving a Retaliation Claim

I engaged in “protected activity.”

I was subject to “adverse action.”

There is a “causal connection” between 1 and 2.

o 3 strikes – You’re Out

7

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Key Concepts To Understand

“Protected Activity”

o How to define it?

o What are the limits, and when can you curb it?

“Adverse Action”

A “Causal Connection”

8

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Protected Activity

Participation

Opposition

9

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Protected Activity? Maybe.

Employee most complain about some potentially unlawful conduct or activity.

“Mr. Smith is not treating me right.”

• Protected?

“I noticed something doesn’t look quite right on last quarter’s sales reports.”

• Protected?

“I told my supervisor that we are omitting required information from our 10-K reports, but he just told me the reports are fine and not to worry about it.”

• Protected?

10

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What Counts as an Adverse Action?

U.S. Supreme Court: One standard that has been applied in

whistleblower cases says that an employer’s action will be deemed

“materially adverse” if it “well might have dissuaded a reasonable

worker from making or supporting” a protected complaint.

o Giving a negative reference or job evaluation?

o Demoting the employee’s spouse?

o Changing job assignments?

o Allowing name-calling?

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Materially Adverse Standard

Does not protect against:

o “petty slights, minor annoyances, and simple lack of good manners.”

o “snubbing.”

But...“context matters.”

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Adverse Action: Retaliatory Harassment

Employers face liability for coworker harassment or retaliation if

the employer knows of the conduct and fails to address it

Claim may exist even without a showing of a hostile work

environment

Court focuses on actions of the ultimate decision maker

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Outside Of Employment

Incidents outside the employment context can constitute an adverse

action:

The following actions were considered sufficient to constitute an

adverse action in the discrimination context:

o A false report to a government agency about the complainant’s

immigration status

o Accosting a complainant outside of work with a hostile tone and

manner and foul language

o Defaming a complainant in the news, the news media alleging that she

misappropriated state funds

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Adverse Action: Third-Party Retaliation

Thompson v. North American Stainless, LP 131 S. Ct. 863 (2011):

Complainant filed a sex discrimination charge with the EEOC. Three

weeks later, her fiancé was fired.

In a unanimous decision, the U.S. Supreme Court held that a reasonable

worker obviously might be dissuaded from engaging in protected activity

if she knew that her fiancé would be fired.

Where is the line? It depends:

o “We expect that firing a close family member will almost always meet the Burlington

standard, and inflicting a milder reprisal on a mere acquaintance will almost never do so,

but beyond that we are reluctant to generalize.”

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Whistleblowing

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How are they Related?

Whistleblowing ↔ Retaliation

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Whistleblowers

Make good faith reports of suspected misconduct

o For example:

• Non-compliance with accepted accounting practices

• Bribery in foreign transactions

• Violations of health and safety laws

• Securities violations, such as insider trading

Are protected from retaliation for blowing the whistle

May be entitled to rewards from the government for blowing the

whistle on certain misconduct

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Whistleblowers – Two Variations

1. Employees who alert outside authorities (e.g., SEC, DOL)

• Negative

2. Employees who raise concerns internally (who “speak

up”)

• Positive

For the next few slides, we’ll be addressing external

whistleblowers

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How We Got Here

July 2002

Corporate Scandal Leads to SOX

2002-2007

Years of Minimal SOX Enforcement

2007-2009

The Tide Turns

2010-2013

Dodd-Frank and the New Age of the

Whistleblower

July 2002

Corporate Scandal Leads to SOX

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In a Time of Public Mistrust...

ENRON TYCO WORLDCOM

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Whistleblowers Emerge as Ethical Heroes

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Robust External Whistleblowing

Number of tips received

by SEC in first year of

Dodd-Frank program

Number of tips received

per week by SEC

Percent of those who made

external reports who say they

tried to report internally first

12/9/2013 NAVEX Global Advisory Council 2013 23

3,001

58

84%

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Increased Government Enforcement Efforts

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Eye-Popping Whistleblower Numbers

DOJ collected more than $5 billion

during FY 2012 in FCA settlements

and judgments

GlaxoSmithKline settles substantial

suit to lone whistleblower:

$600 million to state and

federal governments

$96 million to former

quality-assurance manager

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Bounties Abound

SEC issues first bounty on August 21, 2012:

o $50,000; statutory maximum (30%) of amount collected in enforcement action

o Whistleblower remains anonymous

o Thousands of cases are pending at the SEC

IRS issues record $104 million reward on Sept. 10, 2012

o Whistleblower collects record bounty despite also being sentenced to 40

months in prison for his role in tax evasion scheme

SEC issues $14 million bounty on October 1, 2013

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Addressing Retaliation and Whistleblowing

What You Can Do About It

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Make Culture a Strategic Priority

Recommendation #1

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We Want Employees to Speak Up

(internally)

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Why Don’t Employees Report Internally?

27.5% 14.1% 14.0% 10.0% 8.6% 7.7% 7.7% 7.3% 5.5% 4.8% 4.2% 4.2% 2.8% 2.6% 1.9% 1.6% 1.1%

Source: CEB Compliance and Ethics Leadership Council

Employee Reason for Not Reporting Percentage of Explanations, 2012

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Employee Mistrust of Management: Survey Says…

2011 Maritz Employee Engagement Survey finds:

25% of employees report less trust in management than 2010

Only 10% say they trust management to make the right decision in times of uncertainty

Only 14% believe their company’s leaders are ethical and honest

Only 7% believe senior management’s actions are consistent with their words

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Employee Mistrust of Management: Survey Says…

2010 Deloitte Ethics and Workplace Survey:

One third of employed Americans plan to look for a new job when the economy improves. Among their top reasons for leaving:

48% cite loss of trust in employer

46% cite lack of transparent communication from company leadership

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The Power of an Ethical Culture

Percentage of employees who

believe their company rewards

ethical conduct who reported

wrongdoing (internally) (ERC 2012)

Percentage of employees who

believe their company does not

reward ethical conduct who

reported wrongdoing internally

12/9/2013 NAVEX Global Advisory Council 2013 33

72%

57%

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Reporting Rates Rise When Ethical Commitment is Perceived to be Stronger

55.3%

76.6%

70.7%

50.6%

50.6%

65.3%

89.3%

76.9%

54.3%

56.9%

Overall

SeniorExecutiv

es

Managers

Professionals

Non-Manager

s

Top Quartile Companies (n = 4,382)

Bottom Quartile Companies (n = 12,539)

Employee Reporting Rates Percent of Employees Reporting Observed Misconduct, 2012

Source: CEB Compliance and Ethics Leadership Council

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The Disconnect

“Senior Executives consistently have a higher perception of their companies’ culture

than other employees”

5.35

5.55

5.86

6.15

Non-Managers (n = 116,882)

Professionals (n = 95,882)

Managers (n = 63,560)

Senior Executives (n = 5,293)

Perceptions of Corporate Integrity Integrity Index1 Scores by Employee Level,

2012

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Assess Your Culture

Cultural surveys

Benchmark reporting

Conduct a program review

Determine stakeholder communication preferences and expectations

Identify opportunities to drive program awareness: training, communication and internal marketing

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Integrated System for Incident or Complaint Management

Recommendation #2

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1. Effective report and

intake procedures

2. “Speak up” training for manager & employees

3. Notification protocol

4. Effective investigation

protocol – including training for

investigators

5. Effective remedial measures and

appropriate way to track and

communicate discipline

6. Reporting and

communication

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Managers Receive Majority of Allegations

66.0% 24.7% 20.1% 7.3% 5.4% 2.5% 2.1% 1.4% 1.3% 0.8% 0.8% 0.4%

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Method for Reporting Business Misconduct Percentage of Information Flowing to a Given Channel1, 2012

1) Multiple Responses Allowed Source: CEB Compliance and Ethics Leadership Council

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MANUAL AUTOMATED INTEGRATED

The (R)evolution of Ethics & Compliance Programs

Reactive

Take a hotline call

Push remedial training

Update a policy

Proactive

Software based workflow management

Automated delivery of content and information

Scheduled reviews and updates

Predictive/Preventive

Internal and external data flows

Data modeling and quantitative insight

Proactive identification of future enterprise risk

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Implement Annual Training for Employees and Managers

Recommendation #3

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Trend: 2011 National Business Ethics Survey

o 65% of employees reported

observed misconduct, up from

53% in 2007

o 22% who reported misconduct

say they experienced retaliation,

up from 12% in 2007

o 42% reported weak “ethics

cultures,” up from 35% two years

ago

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Does Your Workforce Understand the Rule Against Retaliation?

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People didn’t know how to report, or

People were afraid to report, or

Managers didn’t know how to properly handle the report

Attacking the Problem at Its Core

Misconduct that grew out of control

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What Should Training Cover?

• The Duty to Report

• Benefits of Reporting

• Policies & Expectations

• How to Report

• Protections against Retaliation

• Guidance for Managers

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Recommendation #4

Investigations protocol

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What To Do With Whistleblower Allegations?

• Investigate

• Evaluate

• Take remedial action

• Disclose?

• Negotiate from the best position

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“The only way to deal with a whistleblower’s accusations – again, every single time and often against your own instincts – is with a hyper-bias toward believing that the informant is onto something big. Such a bias must impel you to investigate every claim ferociously. You may think it’s a waste of time and money, and will go nowhere; you should be so lucky. And for goodness’ sake, don’t let the investigation be conducted by the boss who’s been accused of wrongdoing! Bring in an outside agency to do the sleuthing, or at the very least, executives outside the scope of the alleged problem, with no relationship to the people involved. Yes, you may hate the whole mishegaas and so might everyone it touches. But it’s the only way to overcompensate for the propensity to wish whistleblowers away with the perfunctory spot check or the “Everything O.K.?” kind of look-see that usually occurs.”

-- Jack and Suzy Welch, Reuters, May 1, 2012

Investigate Every Time

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Make Sure Allegations are Taken Seriously

Percent of those who made

external reports who say they

tried to report internally first

12/9/2013 NAVEX Global Advisory Council 2013 49

84%

Survey Question:

Would you like a NAVEX Global representative to

contact you to discuss solutions?

A. Yes, please

B. No, thank you

50

Questions…

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Thank You

Please be sure to visit the Exhibit Hall &

Social Networking Lounge to speak with Industry Experts!