New Federal Stimulus Law Expands Protection for Whistleblowers

On Feb. 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009. This law provides $787 billion of federal stimulus spending and tax cuts. These stimulus funds are to be distributed by more than 20 federal agencies across a number of different industries in a wide-reaching plan to stimulate the economy.

Under this new federal stimulus law, employees and others who report misconduct by business entities receiving federal stimulus money will have broad protections against retaliation by their employers. While whistleblowers are already granted certain protections against employer retaliation, this law broadens these legal protections in response to concerns about the waste and mismanagement of stimulus funding.

Section 1553 of the new Federal Stimulus Plan states that any business entity receiving funds under the act is prohibited from demoting, discharging or otherwise discriminating against any employee when such an individuals makes a reasonable disclosure of information involving any of the following acts on the part of the business or its representatives:

  1. gross mismanagement of stimulus funds
  2. gross waste of stimulus funds
  3. specific and substantial threat to public safety or health related to use of the funds
  4. an abuse of authority with relation to the funds
  5. and a violation of law, rule, or regulation with relation to the funds.

The protections afforded by this law kick in when disclosure of such information is made by an employee to his or her supervisor, co-workers, investigative authority, state or federal law enforcement or government representatives, courts, and grand juries.

This whistleblower protection provided by the Stimulus Law has two broad intended effects. One, it helps to compel individuals with information about misuse of stimulus funds to come forward and report such action by providing them protection against retaliation. Second, the law deters entities receiving stimulus funds from misuse and waste by providing such legal consequences. This law is also much broader than similar laws, with the former providing whistleblower protection in a greater number of contexts and thus potentially deterring misconduct by fund recipients.

Read on to learn more about the elements of this whistleblower protection statute.

Five elements of the whistleblower protections

To be considered a violation of Section 1553, the following criteria must be met:

  1. The employer must have received funds under the act directly or indirectly
  2. To receive protection, the employee must disclose information they believe is evidence of wrongful conduct under one of the five aforementioned categories.
  3. This disclosure must be made to one of the parties also listed above.
  4. The employer must have discharged, demoted, or otherwise discriminated against the “whistleblowing” employee following the disclosure
  5. This employer action must be considered a retaliatory response to the employee’s disclosure. (note that the employer action need only be compelled by the disclosure as a contributing, not a sole factor, in the action. This can be proven by circumstantial evidence.)

Filing a claim of whistleblower discrimination

In order to file a complaint of employer discrimination of a whistleblower, the latter must file a complaint with the inspector general of the federal agency that distributed the stimulus funds. This inspector then has to determine if the complaint is warranted, investigate the allegations, and file a report of their findings with the Transparency Board.

In a case where the whistleblower has exhausted this administrative course of action, they have the right to file a private lawsuit against the employer. This may be a beneficial step, particularly in cases where the investigator has declined to conduct or continue an investigation, complete and file a report within a specific timeframe, or some other terminating action.

As the law exists at present, some questions remain unanswered as to its implementation. For example, the statute of limitations for filing a private lawsuit is unclear. It is also unclear as to whether the employee in a whistleblower lawsuit may pursue punitive damages. Other questions remain and will likely play out in future cases involving whistleblowers.

Ted Oshman


Ted Oshman has been with The Oshman Firm since 1988 serving clients for over 25 years. Learn more about Ted's background and featured practice areas here.

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