The Illinois Whistleblower Act, as recently amended, provides enhanced employee protections to those who report wrongdoing at their workplace. The term “whistleblower” can entail some extreme examples, such as government workers alerting others to suspected wrongdoing, bank employees reporting fraud, or egregious issues that could result in extensive organizational or personal liability. But properly construing “whistleblowing” as it applies to a plethora of issues both small and large, will benefit a nonprofit and its leaders immensely.
This article focuses on employment-related whistleblower guidance for nonprofit organizations, including key definitions, explaining the critical importance of avoiding retaliation, noting applicable whistleblower protections under specific contexts, and providing recommendations for whistleblower policy development.
Whistleblower Legal Context
For some readers, hearing the word “whistleblower” evokes the high-profile accounting scandals of the early 2000s, particularly whistleblower protections embedded in the federal Sarbanes-Oxley Act (“SOX”) which followed soon after. SOX applies quite narrowly to publicly traded companies and their agents, prohibiting retaliation against employees who “blow the whistle” on what they may “reasonably believe” to constitute certain illegal activities such as mail fraud or securities fraud. SOX therefore would not apply to nonprofits, since by definition they are not owned (much less publicly traded). Another federal law known simply as the “Whistleblower Protection Act” protects “any disclosure of information” by federal government employees that they similarly “reasonably believe” to constitute a legal violation or other matter of particular concern. Again, such law is inapplicable to nonprofits by definition.
Notably, no generally applicable whistleblower federal law exists for employees in nonprofit corporations. However, certain state laws may protect whistleblowers
Focusing on the Illinois Whistleblower Act (“IWA”), as applicable for nonprofit employees working in Illinois and otherwise indicative of state legal trends, the next sections explore the contours of legal protections, pitfalls, and proactive measures for nonprofit leaders to consider regarding whistleblower activity.
Defining “Whistleblowing” Under the Amended IWA
Nonprofit organizations may rightfully hesitate about the extent to which whistleblower laws apply to them, given the above considerations along with general misunderstandings about what “whistleblower” means for legal purposes.
Under the IWA, the term “whistleblowing” applies broadly, protecting employees who disclose or threaten to disclose to any supervisor, board member, or others, “information related to an activity, policy, or practice of the employer if the employee has a good faith belief that the activity, policy, or practice (i) violates a State or federal law, rule, or regulation or (ii) poses a substantial and specific danger to employees, public health, or safety.”
The IWA’s protections are thus not exhaustive, as they do not protect reports of every imaginable type of ethical concern or moral issues. But practically speaking, an employer may otherwise wish to know of such issues even if they are not technically covered by the IWA or other whistleblower legal protections.
Key Changes with the Amended IWA
The IWA’s amendments made two major changes to the existing law. First, it expanded protections to those who report wrongdoing internally, not just externally (such as to law enforcement or regulatory agencies). Second, the IWA now protects employees who report wrongdoing based on a good faith belief, even if no actual wrongdoing occurred. These changes are consistent with a trend to expand whistleblower protections, as the IWA follows along with similar whistleblower protections in California, Minnesota, New Jersey, New York, and Virginia.
How Does the IWA Protect Employees?
Whistleblower laws like the IWA incentivize employees to come forward without fear of repercussions and encourage accountability for organizations. Overall, that is very good! The IWA amendments provide employees with greater legal protections, which in turn could mean liability or exposure to a lawsuit for an employer that engages in retaliation – whether intentionally or unintentionally. Traditionally, such protections from retaliation existed when an actual violation of law was present and that violation was reported to an outside agency or law enforcement. Under the amended IWA, employees who report what they believe to be a violation of law (even if it does not turn out to be an actual violation) and who report only internally will fall under protected whistleblower status.
The IWA provides that an employee who makes or threatens to make a whistleblower complaint cannot be punished for doing so in the form of “retaliatory action.” In practical terms, that prohibition means an adverse consequence or threatened consequence resulting from the whistleblower’s complaint or report. Note too that because the IWA’s apparent purpose is to encourage employees to freely report without fear, the statutory language prohibiting retaliation hinges on a “reasonable” employee’s beliefs or perceptions, not necessarily an employer’s subjective intent. More specifically, the IWA instructs as follows:
"Retaliatory action" means an adverse employment action or the threat of an adverse employment action by an employer or his or her agent to penalize or any non-employment action that would dissuade a reasonable worker from disclosing information under this Act.
When addressing whistleblower issues within the context of ongoing nonprofit operations, employers thus should carefully consider whether some resulting action (or possibility thereof) may be construed as “adverse” for an affected employee.
Importance of Whistleblower Policies
What steps should nonprofit employers take next? Of utmost importance is adopting a new whistleblower policy or reviewing and/or clarifying an existing whistleblower policy, especially for those covered under the new IWA or other applicable state law. The policy may be confined only to the employment context or more broadly in terms of governance too. Keep in mind that a nonprofit may well have a broadly applicable and detailed written policy for its entire operations, along with a summary version set forth in its employee handbook. The more detailed policy should provide extensive guidance for supervisors, board members, and others involved with whistleblower issues.
A summary version could be provided to employees (and possibly volunteers too), generally along the lines of “if you see something, say something.” It may be appropriate as well for such summary version of a whistleblower policy to clarify that anti-harassment policies, employee disciplinary matters, and other grievance resolution policies may potentially overlap but involve their own protocols and distinctives.
Employers should consider the following elements when evaluating or developing an employee handbook whistleblower policy:
• The policy is clear and easy to follow, to ensure that employees understand how and to whom to report their concerns;
• The policy identifies the types of concerns covered (e.g., known or suspected illegal activity, ethics issues, or other wrongdoing);
• The policy emphasizes that it is not up to a concerned employee to investigate matters further on their own before making a report (i.e., encourage reporting sooner rather than later);
• The policy provides direction about who may receive a report of wrongdoing (e.g., specified nonprofit executives, board members, or otherwise a leader with whom the whistleblower is comfortable);
• The policy mentions potential next steps;
• The policy provides assurance of confidentiality as may be warranted;
• The policy also assures employees about anti-retaliation protections; and
• The policy does not make any promises of specific action except as noted above and otherwise carefully considered in advance.
Important Whistleblower Compliance Aspects
Consistent with these policy dynamics, employers must remain attentive to any reports their employees make. They should support follow-up steps taken in response to such reports with adequate documentation. Such documentation is important for an investigation into any complaints made and the organization’s resulting exposure regarding any wrongdoing. Such documentation may also be supportive of an employer’s actions in the event that an employee later alleges that they were retaliated against as a whistleblower. Additional guidance for handling whistleblower complaints is provided in our law firm’s related blog article.
Training supervisors, board members, and others who may receive a report on the scope of the organization’s whistleblower policy and the scope of state whistleblower protections is also appropriate. As an overarching matter, all leaders should be knowledgeable about the policy itself. Additionally, they should be equipped to identify what next steps may be warranted, consistent with the policy’s parameters, in accordance with the specific circumstances involved in the whistleblower report, and potentially with the assistance of legal counsel for related guidance. Leaders should be aware too that questionable matters should not be summarily dismissed or otherwise given minimal attention, especially in light of potential legal violations, safety issues, or serious financial implications. Likewise, any actual, potential, or even perceived retaliatory measures should be assiduously avoided.
In Illinois, such training may be especially important given the IWA’s protections against a variety of retaliatory or adverse actions and associated civil penalties. Notably, the IWA authorizes civil action by aggrieved employees, with generous remedies including reinstatement, back pay with interest, other compensation, attorneys’ fees, and penalties. The IWA further makes it a Class A misdemeanor to violate an employee’s applicable legal rights, including freedom from retaliation in connection with whistleblower reports.
Sample Nonprofit Applications of Whistleblower Protections
Certain issues with whistleblower reporting may arise more frequently in the nonprofit world. Nonprofit organizations may be smaller and have less rigid structures than for-profit companies, including less formal reporting processes. Employees may perceive a fair degree of loyalty among members of management as well as a willingness to make sacrifices for a worthy cause, and thus fear making a report of wrongdoing. The following two examples illustrate related considerations particularly for nonprofit employers and employees.
First, imagine a nonprofit engaged in meaningful charitable work with only five full-time employees. The newest employee, an administrative assistant, notices certain discrepancies with the Executive Director’s credit card reimbursement requests – and believes the Executive Director is using his credit card for personal items. The long-serving Executive Director is beloved by the program participants and all of the employees. Most employees openly talk about how they believe the Executive Director is under-compensated.
Should the administrative assistant report his concerns? Absolutely. To whom? His direct supervisor is the Executive Director, so he does not feel comfortable raising questions about the reimbursement requests directly. The organization does not have a designated HR person, but the Operations Manager is also responsible for HR and is the Executive Director’s close friend. Maybe the new administrative assistant is not comfortable discussing the reimbursement issues with the Operations Manager – worse yet – maybe the administrative assistant reports his concerns and is told to “keep it quiet.” What should he do next? Report his concerns about the Executive Director, and now the Operations Manager, too, to the Board of Directors.
This pattern is not uncommon – and presents an illustration of why a policy clarifying the available reporting structure and each person’s role in that structure is key. A whistleblower policy should notify employees that it is not an employee’s responsibility to investigate potential wrongdoing on their own. Further, if they are uncomfortable reporting concerns to a direct supervisor, it is important to outline alternative reporting options available. Failure to have such reporting mechanisms in place could expose the organization to financial and legal liability.
Second, consider an employee who complains informally while talking to the HR Director about her manager texting her outside her regular work hours. This employee is hourly and not exempt, but her manager expects her to read and respond to the work-related texts at night and on weekends but asks that she not log her hours. By informally communicating her frustrations to the HR Director, would this employee be designated a whistleblower? Possibly, at least in Illinois and some other states. The HR Director is on notice of the potential violations of wage and hour laws. The IWA protects employees who provide “information related to an activity, policy, or practice” that the employee believes is illegal. Informal conversation that does not assert illegality may not necessarily confer whistleblower protections. But at the very least, the HR Director now has a credible report of potential wage and hour issues, should investigate further, and then take any remedial or other corrective steps as may be warranted.
Employment Actions Notwithstanding Whistleblower Status
As an important final consideration, a nonprofit employer should evaluate whether an employee has ever made a report of wrongdoing, before taking any adverse action against them (demoting, reducing pay or hours, terminating, etc.). Correspondingly, it is wise to further consider an employee’s perceptions (not only those of the organization) of whether any report, whether formal or informal, may be perceived to confer whistleblower protections. Keep in mind the extensive available remedies to this employee under Illinois law, including reinstatement, back pay with interest, and other penalties. Punishing indeed!
Note further, however, that simply because an employee previously reported an issue does not mean no adverse action can be taken against that employee for some other reason – such as termination for poor performance. Indeed, the IWA expressly recognizes that scenario for employer as follows: “[i]t shall be a defense . . . that the retaliatory action was predicated solely upon grounds other than the employee’s exercise of any rights protected by this Act.” An employer thus may assert such defense, but potentially not without great expense and trouble to prove itself (and its supervisors) non-culpable. An employer who encounters such circumstances should proceed carefully, particularly when an employment termination is close in time to the employee’s report.
Wrapping Up
As demonstrated by the IWA, an employee’s “whistleblower” status and available protections is not limited to scenarios of fraud or financial wrongdoing, and the trigger for such legal protections is not always obvious or identifiable from the outset. For these compelling reasons, employers should be extremely careful in handling whistleblower issues. As a best practice, nonprofits should adopt, implement, and follow whistleblower policies that are broadly applicable and known to all personnel. Supervisors should be well equipped and trained on how to apply the policies. And above all, any such whistleblowing activities – no matter how minor or serious – should be appreciated by nonprofit leaders as opportunities for addressing concerns that foster flourishing, organizational health, and wise accountability.
