Speak-Up Culture and the Regulatory Requirements

A speak-up culture, also known as a “whistleblower culture,” is a working environment where employees feel comfortable and encouraged to report any potential misconduct or illegal activity without fear of retaliation. In the United States, there are several laws and regulations that mandate the establishment of a speak-up culture in various industries.

The Laws Requiring Speak-Up Cultures

One of the most well-known laws protecting whistleblowers is the Sarbanes-Oxley Act (SOX) of 2002. SOX, which was enacted in response to the Enron and WorldCom financial scandals, requires publicly traded companies and their management to establish internal controls to detect and prevent fraud, and to ensure that financial information is accurate and transparent. Under SOX, employees are protected from retaliation for reporting potential securities fraud, and companies are required to have procedures in place for employees to report any concerns anonymously.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 also includes provisions to protect whistleblowers. The Act established the Securities and Exchange Commission’s (SEC) Office of the Whistleblower, which is responsible for administering the SEC’s whistleblower program. The program provides financial incentives for individuals who provide information that leads to a successful enforcement action, and also provides protections against retaliation.

In addition to federal laws, there are also state laws and regulations that protect whistleblowers. For example, the California False Claims Act allows for individuals to sue on behalf of the state for fraud committed against government programs or contracts, and provides protection for whistleblowers from retaliation.

Enforcement of these laws and regulations is typically carried out by government agencies such as the SEC, the Occupational Safety and Health Administration (OSHA), and the Department of Labor (DOL). These agencies have the power to investigate complaints of retaliation, and can take action against companies found to be in violation of whistleblower protection laws.

The Cost of Not Speaking Up

There are several examples of organizations being penalized for not having a speak-up culture. One notable case is Wells Fargo, which in 2016 was fined $185 million by the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, and the City and County of Los Angeles for illegal sales practices. The bank was found to have created millions of unauthorized bank and credit card accounts, and employees had raised concerns about these practices as early as 2002. However, the bank’s management did not take action to address the problem, and whistleblowers were allegedly retaliated against for speaking out.

Another example is the mining company Alpha Natural Resources, which in 2016 agreed to pay $3.5 million in fines to settle whistleblower retaliation claims under the Federal Mine Safety and Health Act. The DOL’s Office of the Inspector General found that the company had fired and demoted employees for reporting safety concerns, and for cooperating with federal safety inspections.

A Speak-Up Culture is More Than Checking a Box

A speak-up culture is legally required in various industries in the United States under laws such as the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. While compliance with these regulations is important, ethics and compliance professionals should not view a speak-up culture as simply a requirement to be met. Instead, they should recognize the benefits that such an environment can bring to a workplace. Creating a culture where employees feel comfortable reporting misconduct or illegal activity can lead to the early detection and prevention of fraud, as well as improve overall trust and transparency within the organization. Additionally, it can minimize the chances of reputational damage, legal actions and also can boost up the company’s productivity, morale and employee engagement.

Ethico can help you build a strong speak-up culture in your workplace, learn how our case management platform can lay the foundation for an exceptional compliance program.

References

• Sarbanes-Oxley Act of 2002, Public Law 107-204
• Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Public Law 111-203
• California False Claims Act, Government Code sections 12650-12656
• “Wells Fargo to Pay $185 Million in Fines Over Illegal Sales Practices,” New York Times, September 8, 2016
• “Alpha Natural Resources to Pay $3.5 Million to Settle Whistleblower Retaliation Claims,” U.S. Department of Labor, August 2016