Government Contracts Monitor

New Whistleblower Protections Are Now In Effect For Employees Of Federal Contractors And Subcontractors

July 12, 2013

Over the years, Congress has enacted many whistleblower protection statutes aimed at specific industries to encourage employees in those industries to report fraud, waste, and abuse. All federal government contractors – at every level - should be aware of the newest whistleblower protection statute that went into effect on July 1, 2013. The statute, 41 U.S.C. § 4712, applies to all employees working for federal contractors or subcontractors. As part of the National Defense Authorization Act for Fiscal Year 2013, Congress added a new pilot program for whistleblower protections (and amended the existing program for defense contractors).

41 U.S.C. § 4712 states that an “employee of a contractor, subcontractor, or grantee may not be discharged, demoted, or otherwise discriminated against as a reprisal for” whistleblowing.

The statute defines whistleblowing as making a disclosure “that the employee reasonably believes is evidence of”:

Gross mismanagement of a Federal contract or grant
A gross waste of Federal funds
An abuse of authority relating to a Federal contract or grant
A substantial and specific danger to public health or safety; or
A violation of law, rule, or regulation related to a Federal contract or grant.

To qualify under the statute, the employee’s disclosure must be made to:

A Member of Congress or a representative of a Congressional committee
An Inspector General
The Government Accountability Office
A federal employee responsible for contract or grant oversight or management at the relevant agency
An official from the Department of Justice or other law enforcement agency
A court or grand jury; or
A management official or other employee of the contractor, subcontractor, or grantee who has responsibility to investigate, discover or address misconduct.

These whistleblower protections cannot be waived by any agreement, policy, form or condition of employment. The new statute does not apply to “any element of the intelligence community” or to “any disclosure made by an employee of a contractor, subcontractor, or grantee of any element of the intelligence community.” The new statute also expressly does not “provide any rights to disclose classified information.”

Contractors should be aware of the new statute’s enforcement procedures. Employees alleging whistleblower retaliation are required to “submit a complaint with the Inspector General of the executive agency involved.” The Inspector General must investigate the employee’s allegations and issue a report of the findings of the investigation to the employee, the contractor involved, and the head of the agency. The head of the agency then has thirty days to act on the Inspector General’s report. The head of the agency may either order relief (in the form of an abatement order, an order of reinstatement, and/or an order directing the contractor/subcontractor to pay the employee’s attorneys’ fees and costs) or deny relief.

If the employee is denied relief, the employee then has the right to file a complaint claiming whistleblower retaliation in federal court. If the contractor or subcontractor disputes an agency head’s order of relief, it may challenge the agency’s action in a federal appellate court.

The new whistleblower protection statute applies to:

All contracts and grants awarded on or after July 1, 2013;
All task orders entered on or after July 1, 2013; and
All contracts that are modified on or after July 1, 2013.

The new statute directs the FAR Council to promulgate new regulations and FAR clauses implementing this new whistleblower legal system. The FAR Council has started this process, but to date, has not finalizes the new regulations. Employers, however, should not wait for the new FAR clauses and must be aware that the law applies now.

41 U.S.C. § 4712(i) states that the new whistleblower protection law “shall be in effect for the four-year period” that began on January 2, 2013. It remains to be seen whether Congress will deem this new enforcement and protection scheme worthy of becoming permanent.

In the meantime, all federal contractors and all federal subcontractors should be mindful of this change in the law and devise strategies within their HR departments for preventing and managing whistleblower retaliation claims. Given the current economic climate, it is not unreasonable to expect that some employees terminated for legitimate and non-retaliatory reasons may resort to this new whistleblower protection law in an attempt to remain employed. Managed effectively from their inception, most of these claims should be easily and favorably resolved for the contractor, at least at the administrative agency level.

Michael J. Schrier is the attorney responsible for the content of this article.