Whistleblowers Need Not Apply

• Published date: 01 December 2018
• Author: Jennifer M. Pacella,Leora F. Eisenstadt
• Date: 01 December 2018
• DOI: http://doi.org/10.1111/ablj.12131

American Business Law Journal

Volume 55, Issue 4, 665–719, Winter 2018

Whistleblowers Need Not Apply

Leora F. Eisenstadt*and Jennifer M. Pacella**

Whistleblowers are severely disadvantaged when they apply for jobs. Many whistle-

blowers experience retaliation twofold—first, at their place of employment after

they initially blow the whistle, and, second, on the job market for any subsequent

employment. This negative trail follows whistleblowers, labeling them as disloyal,

suspicious, and, ultimately, not ideal employees, and, thus, unable to find work.

Current federal law largely ignores this problem, and protections for job applicants

with whistleblowing histories have been severely lacking in some of the most promi-

nent whistleblowing statutes. This article is the first to examine this glaring lack of

legal protection as it pertains specifically to whistleblower job applicants by under-

taking a comparative analysis of the retaliation protections available in a number

of federal statutes and suggesting statutory reform based on that analysis. Specifi-

cally, this article draws comparisons between civil rights statutes, including Title

VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, and the

Age Discrimination in Employment Act, which each provide expansive protections

for job applicants, and the most prominent current federal whistleblowing statutes,

the Sarbanes-Oxley Act, the Dodd-Frank Act, and the False Claims Act, which lack

these protections. We conclude by recommending amendments to these federal whis-

tleblowing statutes, arguing for specific retaliation protections and redress for

whistleblowers who are denied a chance to work again because of their past

revelations.

*Assistant Professor, Department of Legal Studies, Fox School of Business, Temple Univer-

sity; B.A., YaleUniversity; J.D., New York University School of Law, L.L.M, Temple Univer-

sity Beasley School of Law.

**Assistant Professor of Law at the City University of New York (CUNY), Zicklin School of

Business, Baruch College. J.D., University at Buffalo School of Law; M.A., University of

North Carolina at Chapel Hill, B.A., State University of New Yorkat Geneseo.

This article greatly benefited from discussions at the 2017 Annual Academy of Legal Studies

in Business Conference, and was the recipient of the Jackson Lewis Outstanding Employ-

ment Law Paper Award at the 2018 Annual Academy of Legal Studies in Business Confer-

ence and the Best Paper Award at the 2018 Mid-Atlantic Academy of Legal Studies in

Business Conference.

©2018 The Authors

American Business Law Journal ©2018 Academy of Legal Studies in Business

665

INTRODUCTION

In a class on business law and ethics, the professor presented a hypo-

thetical problem, asking students to place themselves in the position of

an employee of a real estate firm. The employee has just discovered

that his employer intends to conceal the existence of toxic waste on a

piece of the firm’s property that is under contract to a residential prop-

erty developer. After discussing the fact that numerous parties may be

impacted by this situation, the professor asked the students whether

they would disclose the existence of the toxic waste—whether they

would choose to become whistleblowers. Out of twenty-two students,

only one student asserted that he would blow the whistle on his own

company. Twenty-one students unequivocally stated that they would

allow the deal to go through, knowing that the toxic chemicals may

never be discovered, and despite the fact that they may eventually

harm the residents of a nursing home that was planned for the prop-

erty. When asked what factor was most influential in their decisions,

nearly every student reported that it was the fear that whistleblowing

would lead not only to the loss of a current job but to an inability to

find future work because of the stigma that accompanies it. These stu-

dents, with little to no actual work experience, had already absorbed

the sentiment that whistleblowing often comes with a hefty price and

even in the controlled setting of the classroom, they were unwilling to

pay it.

1

Aside from retaliation by employers, the fear of damaging future

employment prospects is among the most significant disincentives for

would-be whistleblowers, as prospective employers may avoid hiring

known whistleblowers altogether due to the perception that they are

“disloyal.”

2

Studies reveal that most whistleblowers, whether in the cor-

porate business community or another field, never work in their field of

expertise again, due to formal or informal blacklisting and the negative

trail that their reputation as a whistleblower leaves in their specific

1

The experience described occurred in Professor Eisenstadt’s class in fall 2015.

2

See Geoffrey Christopher Rapp, Beyond Protection: Invigorating Incentives for Sarbanes-Oxley

Corporate and Securities Fraud Whistleblowers, 87 B.U. L. REV. 91, 95 (2007) (discussing the lack

of incentives for potential whistleblowers).

666 Vol. 55 / American Business Law Journal

employment community.

3

The case of Sherron Watkins is a fitting exam-

ple. A former vice president of Enron Corporation, Watkins discovered

accounting irregularities among the special purpose entities that CFO

Andy Fastow had created to hedge assets with the company.

4

Watkins

became immediately concerned that these accounting practices consti-

tuted large-scale fraud, and, alarmed by the abrupt departure of Jeff

Skilling, the company’s CEO, Watkins eventually came forward to Ken

Lay, the chairman of the company, to report her findings.

5

Subsequent

to meeting with Lay and despite assurances to her that he would rectify

these concerns, Lay instead sought the advice of the company’s law firm

as to how Watkins could be fired.

6

Enron executives then immediately

began treating Watkins as a “pariah,” moving her office, refusing to

assign work to her, and generally ignoring her accounting concerns.

7

At

a public event in 2014, when asked what her personal life has been like

since blowing the whistle, Watkins acknowledged that her label of “whis-

tleblower” is synonymous in society with that of “troublemaker,” making

it difficult for her to ever work in “Corporate America” again.

8

Noting

that “most well-known whistleblowers” end up “out of [their] industry,”

Watkins acknowledged this fact as one of the reasons why she supports

bounty reward programs to incentivize whistleblowers to come forward,

3

See, e.g., Alexander Dyck et al., Who Blows the Whistle on Corporate Fraud?,65J.FIN. 2213,

2216, 2245 (2010) (noting examples of whistleblowers who will “never get a job in Corpo-

rate America again”); Nina Schichor, Does Sarbanes-Oxley Force Whistleblowers to Sacrifice Their

Reputations? An Argument for Granting Whistleblowers Non-Pecuniary Damages, 8 U.C. DAVIS

BUS. L.J. 272, 294 (2008) (discussing the occurrence of blacklisting); Robert Johnson, Com-

ment, Whistling While You Work: Expanding Whistleblower Laws to Include Non-Workplace-Related

Retaliation After Burlington Northern v. White, 42 U. RICH.L.REV. 1337, 1343 (2008) (dis-

cussing a study showing that two-thirds of internal whistleblowers have been blacklisted in

their industries); Beverley H. Earle & Gerald A. Madek, The Mirage of Whistleblower Protec-

tion Under Sarbanes-Oxley: A Proposal for Change,44A

M.BUS. L.J. 1, 25 (2007) (discussing the

difficulties experienced by whistleblowers, including not being able to find “the next job”).

4

Text of Letter to Enron’s Chairman After Departure of Chief Executive, N.Y. TIMES (Jan.

16, 2002), http://www.nytimes.com/2002/01/16/business/16TEXT.html.

5

Sherron Watkins, American Whistleblowers Live at Baruch, at 20:55–26:00, VIMEO (Oct.

21, 2014), https://vimeo.com/110412275 [hereinafter Watkins’s Remarks].

6

Id.

7

Id. at 26:00–26:17.

8

Id. at 1:10:03–1:11:20.

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