The Essential Role of Workplace Culture in the New Whistleblower Era

This is the latest in a series of columns by O’Melveny & Myers attorneys, focusing on key legal issues specific to a variety of U.S. industries.

With corporate whistleblowers enjoying greater rewards and protections than ever—like those created by Dodd-Frank—companies must do more than simply pledge to combat unlawful and unethical conduct in order to compete with those external rewards. A company’s best defense against such whistleblowing actions includes not only compliance with the law, but a workplace culture in which employees consider themselves to be allies of the company in achieving that compliance. That alliance can help ensure not only that employees engage in lawful and ethical conduct, but that they handle concerns in a manner that is consistent with the well-being of the company, such as reporting concerns internally first rather than rushing to external sources. To promote a more collaborative culture, employers should take a fresh look at how they train managers and communicate support for internal reporting.

Training managers not just on antiharassment and antiretaliation policies, but on fostering a culture of civility, respect, and ethical behavior, are among the most important steps a company can take to develop a collaborative culture. Training that includes interactive discussions and role-playing can be particularly effective in demonstrating the type of workplace culture the employer expects.

Other aspects of manager training should include specific guidance such as:

• How to Recognize an Internal Report: Complaints need not contain any magic words that identify a legal or ethical violation. Train managers to ask questions so that they understand the underlying issue. The company will be much better positioned to act appropriately if it knows of the potential violation early on.
• What to Do Once a Report Has Been Lodged: A manager’s initial reaction to an employee’s concerns will set the stage for future interactions. Rather than be quick to defend the company or minimize the employee’s concerns, all managers should know to inform a complaining employee that the company appreciates his or her stepping forward, and that no retaliation will occur, even if the subsequent investigation reveals no actual wrongdoing. Supplying managers with a checklist or handout regarding the company’s investigative and antiretaliation policies will better ensure that managers provide an appropriate response to the employee and immediately pass the report on to those who will ultimately be responsible for determining the course of the investigation.
• How to Avoid a Retaliation Claim: First and foremost, the company should be clear that it prohibits retaliation against employees. Further, it should ensure that documentation and ongoing performance management is a part of the ordinary course of business. Performance management means not waiting until the annual review period to inform an employee about performance issues; it also requires managers to document all discussions and feedback provided to employees. Not only does strong performance management make an employee more likely to succeed, but an employee who knows that any past performance issues are well-documented will be less likely to have a viable retaliation claim.

Similarly, a company’s well-communicated support for internal reporting conveys that the company values both ethical behavior and what its employees have to say. To that end, companies should establish regular employee communications (e.g., via monthly newsletters, staff meetings, and handbook updates) that address the importance the company places on compliance with its legal duties, ethical obligations, and its own code of conduct, as well as each individual’s stake in ensuring such compliance. Be clear that the company expects all employees, contractors, consultants, and agents to report any concerns regarding past, ongoing, or potential wrongdoing.

To further encourage internal reporting, companies should make multiple reporting channels available, but developing the best mechanisms for internal reports can be a challenge. For example, anonymous reporting options, although legally required for issues arising under Sarbanes-Oxley, have their downsides for other ethical or legal compliance concerns. These downsides include, among others, difficulties in investigating vague reports. Accordingly, companies should do their best to make non-anonymous options appealing to employees by clearly communicating that employees will not be subject to retaliation and will be provided the highest level of confidentiality possible.