Workers Have New Incentives to Snitch to Feds Skipping Internal Ethics Hotlines

Workers Have New Incentives to Snitch to Feds Skipping Internal Ethics Hotlines

July 1, 2024, Law.com

Steve Fagell’s commentary was included in a Law.com article analyzing how a new Department of Justice (DOJ) program that offers cash rewards to whistleblowers will give employees an additional incentive to take allegations of misconduct straight to the feds, bypassing internal ethics hotlines companies count on to ferret out suspicious behavior before it becomes a crisis. Companies aren’t legally required to voluntarily self-disclose, or VSD.

“I would not necessarily predict that the DOJ programs will discourage internal reporting,” Steve said, “but it could complicate the consideration for employees thinking about where to take their concerns.”

He added that the motivations of individuals to report misconduct are far too varied to be reduced to a conclusion that the DOJ’s new program will spur a particular behavior. “But with that said, could there be certain employees who choose not to report internally because they have a prospect of a whistleblower award at DOJ—yes. And I think that ultimately just points out how complex the enforcement environment currently is for companies,” he said.

The article also mentions an analysis Steve co-authored analyzing whether the DOJ programs will complicate voluntary-disclosure decisions for companies “by creating greater uncertainty about whether they will reap the benefits of coming forward.”

“Decisions on whether to make a voluntary disclosure are already ‘extraordinarily complex,’ Steve wrote, and the potential of a whistleblower beating a company to the punch adds a difficult-to-account-for variable.”

“The incremental hypothetical risk that a company’s VSD will not be considered voluntary could have the effect of leading companies to shy away from making a VSD,” he said.