March 4, 2009.

Baker Botts Office

ARRA Legislation Update

Economic Recovery Package Provides Additional Protections for Whistleblowers

On February 17, 2009, President Obama signed into law the $787 billion economic recovery package titled the American Recovery and Reinvestment Act of 2009 (“ARRA”). One provision of the ARRA that received little attention, but that could have significant repercussions, is Section 1553, which provides additional whistleblower protections to all employees of non-federal employers that receive funding under ARRA.

Who is Protected

Section 1553 concerns non-federal employers that have received funding from the Federal Government, at least some of which has been “appropriated or otherwise made available” by ARRA. It prohibits such employers from discharging, demoting or otherwise discriminating against any employee who discloses what the employee reasonably believes is evidence of gross mismanagement or gross waste of ARRA funds, a substantial danger to public health or safety relating to the use of ARRA funds, or any violation of law, rule or regulation related to the ARRA funds.

Making a Claim

Section 1553 contains no statute of limitations on an employee claim for reprisal. However, a protected employee seeking to make a claim for wrongful reprisal must exhaust all administrative remedies before pursuing a civil action.

Specifically, a protected employee must first submit a complaint to the appropriate inspector general. To prevail, such employee must establish one of the following: (1) the employee’s disclosure was a contributing factor in the reprisal, (2) the official undertaking the reprisal knew of the employee’s disclosure, or (3) the reprisal occurred within a period of time after the employee’s disclosure such that a reasonable person could conclude the disclosure was a contributing factor in the reprisal. The employee’s claim may be rebutted by clear and convincing evidence demonstrating that the same reprisal action would have been taken in the absence of the disclosure.

Absent an extension of time, the head of the agency has 210 days to make a determination on the complaint. If the head of an agency denies relief in whole or in part, does not issue an order within 210 days after the submission of a complaint (or within 30 days of expiration of extension of time), or decides not to investigate or to discontinue investigation, the employee may then bring a civil action in the appropriate U.S. District Court, without regard to the amount in controversy.

Available Remedies

If the employee’s claim prevails, the agency or court may order the employer to abate the reprisal, or to reinstate the employee together with the compensation (including back pay), compensatory damages, employment benefits and all costs and expenses — including attorneys’ fees and expert witnesses’ fees — reasonably incurred in bringing the complaint. Unlike many other federal laws, Section 1553 contains no statutory damages cap.

Other Notable Provisions

Section 1553 protects employees from discharge related to their disclosures made to any state or federal regulatory or law enforcement agency, to their supervisors, to a court or grand jury, or even to a member of Congress. They are protected as well from discharge for disclosures made in the ordinary course of their duties.

Finally, Section 1553 claims cannot be waived by any agreement, policy, form or condition of employment and are not subject to any pre-dispute arbitration agreement, except as provided in a collective bargaining agreement. See Section 1553(d). This means that unlike other federal whistleblower laws, Section 1553 claims cannot be waived through a severance package and are not covered by an employment agreement arbitration clause.

It is not immediately apparent whether this provision will result in more employee whistleblowing with respect to ARRA funds, as Section 1553 does not have the same kind of incentives that the False Claims Act has, for example, with respect to fraud perpetrated on the Federal Government. However, at minimum the Section may provide employees an additional argument against their employers in litigation over discharges, particularly given that an employee may rely on the proximity between the disclosure and reprisal event to meet Section 1553’s burden of proof requirements.

To review the text of the American Recovery and Reinvestment Act of 2009, including Section 1553, please click here.


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