• PA’s New Whistleblower Law: New State and Local Contracting Liabilities
  • July 9, 2015 | Author: Christopher D. Carusone
  • Law Firm: Cohen Seglias Pallas Greenhall & Furman PC - Pittsburgh Office
  • Businesses that contract with state or local government entities in Pennsylvania need to be aware of a new liability threat - lawsuits from employees alleging waste or wrongdoing in connection with the award of public funds. It is critical for you and your businesses to understand these recent changes and the expansion of Pennsylvania’s Whistleblower Law. If you depend on Pennsylvania public contracts, prepare now to prevent damages later.

    What’s a whistleblower?
    For the purposes of the Pennsylvania statute, a “whistleblower” is an employee who makes a good-faith report of wrongdoing or waste in connection with the award of public funds. The law prohibits an employer from discharging, threatening or otherwise discriminating against an employee if the employee makes a good faith report, or is about to report, an instance of wrongdoing or waste of public funds by the company. The law also prohibits an employer from retaliating against an employee for cooperating in any investigation or hearing regarding the report.

    What qualifies as “wrongdoing” or “waste” under the whistleblower law?
    Under the whistleblower law, the term “wrongdoing” has a specific definition. Wrongdoing is defined as a violation of a statute, regulation, ordinance or code of conduct/ethics. By contrast, the term “waste” is pretty vague. Waste is defined as a contractor’s act or omission that results in “substantial abuse, misuse, destruction or loss” of public funds.

    When is an employer liable under the whistleblower law?
    A whistleblower has six months to bring a civil action following a discharge or other adverse employment action. In order to establish liability, the whistleblower must show that prior to the employer’s adverse action against him or her, the employee made, or was about to make, a good faith report of an instance of wrongdoing or waste of state or local government funds by the employer. An employer can successfully defend against a whistleblower lawsuit if it can establish that the adverse employment action against the employee occurred for a separate and legitimate reason.

    What are the consequences for violating the whistleblower law?
    Violations of the new whistleblower law should be taken very seriously. An employee who is successful in a whistleblower lawsuit may be entitled to reinstatement of his or her employment with full benefits and seniority rights, back pay, reimbursement of the employee’s reasonable attorney and witness fees, a fine of up to $10,000 and other damages as appropriate. But that is not the worst of it. Substantiation of the employee’s complaint of waste or wrongdoing in connection with the award of public funds could also result in termination of the company’s existing public contracts and placement on a suspension/debarment list.

    Best Practices to avoid whistleblower liability
    1. Maintain policies and procedures to prevent waste and wrongdoing in connection with the receipt of state or local funds.
    It starts with the obvious - a clear declaration that waste and wrongdoing in connection with public funds is strictly prohibited under your company policy. You should implement procedures to ensure that your company is adhering to all statutes, regulations, ordinances and codes of conduct applicable to the receipt of public funds. Employ standard checklists and regular audits during crucial phases of each project to stop waste and abuse before it starts.

    2. Post notices and use other means to notify employees of the protections and obligations under the law.
    These postings should include a description of an employee’s rights and obligations under the law. Most importantly, your procedure for reporting complaints should be clear and well-known to all employees. Designate a specific company official as a point of contact for all whistleblower complaints. It is wise to consider designating someone outside your employees’ immediate chain of command to short circuit claims of retaliation.

    3. Contemporaneous documentation isn’t just for jobsites!
    Contemporaneously document employee performance deficiencies or misconduct and take timely steps to correct the behavior. Waiting to document past problems with an employee’s performance until after an employee has made a report of waste or wrongdoing makes it more difficult for you to argue that any adverse action you take is not related to the whistleblower complaint. 4. Retain outside legal counsel. Don’t handle whistleblower complaints internally. Outside legal counsel should investigate whistleblower complaints to properly determine the facts, assess the company’s exposure to liability, and interact with the whistleblower and any government agency investigating the complaint. The last thing your company wants when faced with a whistleblower complaint is a credible allegation that the investigation was so biased and poorly conducted that it constituted a separate act of retaliation against the employee.