Maximizing Damages in a Whistleblower Retaliation Case
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Damages a Whistleblower Can Recover in a Whistleblower Retaliation Case
Click here to learn more about anti-retaliation protections for SEC whistleblowers under the Dodd-Frank Act and Sarbanes-Oxley Act.
Whistleblower Retaliation Remedies and Damages
Whistleblower retaliation can exact a serious toll, including lost pay and benefits, reputational harm, and emotional distress. Indeed, whistleblower retaliation can derail a career and deprive the whistleblower of millions of dollars in lost future earnings.
Whistleblowers should be rewarded for doing the right thing, but all too often they suffer retaliation and find themselves marginalized and ostracized. Federal and state whistleblower laws provide several remedies to compensate whistleblowers that have suffered retaliation, including:
- back pay (lost wages and benefits);
- emotional distress damages;
- damages for reputational harm;
- reinstatement or front pay in lieu thereof;
- lost future earnings; and
- punitive damages.
Whistleblower Retaliation Settlements and Verdicts
Back Pay Damages in Whistleblower Retaliation Cases
Back pay is compensation for lost wages and benefits that the whistleblower would have earned absent the adverse employment action, offset by interim earnings. A back pay award may include all promotions and salary increases the complainant would have received in the absence of retaliation. See, e.g., Welch v. Cardinal Bankshares Corp., 2003-SOX-15, at 17 (ALJ Feb. 15, 2005) (holding that a prevailing complainant “is entitled to all promotions and salary increases that he would have obtained but for the illegal discharge”) rev’d on other grounds, 536 F.3d 269 (4th Cir. 2008). The value of stock options is recoverable in SOX whistleblower cases. Hagman v. Washington Mutual Bank, Inc., 2005-SOX-73, 2006 WL 6105301, *32 (Dec. 19, 2006).
In addition to back pay, a prevailing whistleblower is entitled to prejudgment interest under certain whistleblower protection laws. Prejudgment interest accrues from the time of the whistleblower’s termination to the time that the court entered judgment.
Under the False Claims Act whistleblower protection law and Dodd-Frank anti-retaliation provision, a prevailing whistleblower is entitled to recover double back pay. In Mooney v. Americare, the court held that back pay is doubled before the court offsets the value of interim earnings (also known as mitigation).
Back pay can also include contracted severance pay to which he would be entitled in the event of discharge without cause when reinstatement was not appropriate. See Loftus v. Horizon Lines, Inc., ARB No. 16-082, ALJ No. 2014-SPA-004 (ARB May 24, 2018).
Front Pay in Lieu of Reinstatement in Whistleblower Retaliation Cases
Reinstatement is the “presumptive and preferred remedy,” but where pronounced animosity between the parties leads both of them to advocate against reinstatement, front pay may be an appropriate substitute. Front pay is designed to compensate the plaintiff for the time it would take to secure comparable employment. See, e.g., Hagman v. Washington Mutual Bank, Inc., ALJ Case No. 2005-SOX-00073, at 26–30 (ARB Dec. 19, 2006), appeal dismissed, ARB Case No. 07-039 (ARB May 23, 2007) (awarding $640,000 in front pay to a banker whose supervisor became verbally and physically threatening when the banker disclosed concerns about the short funding of construction loans).
Where a whistleblower demonstrates that he planned to continue working for the employer until he or she reached normal retirement age and demonstrates sufficient efforts to mitigate damages (find comparable employment), the whistleblower can been entitled to expected earnings to the date of retirement. For example in the Perez v. Progenics Pharmaceuticals SOX whistleblower case, the court awarded approximately $2.7 in front pay. That case is discussed in an article in Corporate Counsel titled How to Help a Whistleblower.
Front pay is an appropriate remedy in lieu of reinstatement in SOX whistleblower cases. See Jones v. SouthPeak Interactive Corp., 986 F. Supp. 2d 680 (E.D. Va. 2013), aff’d, 777 F.3d 658 (4th Cir. 2015). Andrea Jones worked at SouthPeak Interactive Corp. (“SouthPeak”) as its chief financial officer, and SouthPeak terminated her employment two days after she disclosed accounting irregularities to the SEC. Following a four-day trial, a jury found for Jones and awarded nearly $700,000 in damages. Jones then filed a motion seeking front pay in lieu of reinstatement and in addition to compensatory damages. Judge Payne awarded front pay, and noted the following:
Front pay also has been more precisely defined as “a lump sum … representing the discounted present value of the difference between the earnings [an employee] would have received in his old employment and the earnings he can be expected to receive in his present and future, and by hypothesis, inferior, employment.” McKnight v. Gen. Motors Corp., 908 F.2d 104, 116 (7th Cir.1990), cert. denied, 499 U.S. 919, 111 S.Ct. 1306, 113 L.Ed.2d 241 (1991), partially superseded by Civil Rights Act of 1991, Pub.L. 102-166, 105 Stat. 1071 (codified at 42 U.S.C. 1981 et seq.). If a plaintiff has been diverted onto a less profitable career path through the unlawful actions of his former employer, an award of front pay to compensate the plaintiff until such time as he can regain his former career track is not a windfall.
SouthPeak appealed Judge Payne’s decision. The DOL filed an amicus curiae brief arguing that front pay is an appropriate remedy under SOX, and the Fourth Circuit affirmed. See 777 F.3d at 663.
In calculating front pay, courts should apply the following guiding principles:
- “It is well settled that `the risk of lack of certainty with respect to projections of lost income must be borne by the wrongdoer, not the victim.” Bartek v. Urban Redevelop ent Authority, 882 F.2d 739, 746 (3d Cir. 1989).
- The Court should “assume, absent evidence to the contrary, that the illegally discharged employee would have continued working for the employer until he or she reached normal retirement age.” See Perez v. Progenics Pharmaceuticals, Inc., 204 F. Supp. 3d 528 (S.D.N.Y. 2016).
Compensatory Damages in Whistleblower Retaliation Cases
The SOX whistleblower protection law and similar corporate whistleblower protection laws authorize the award of not only economic damages, but also “special damages” which includes damages for emotional distress, mental anguish, humiliation and injury to reputation. See, e.g., Lockheed Martin Corp. v. Admin. Rev. Bd., 717 F.3d 1121, 1138 (10th Cir. 2013) (upholding an award of “noneconomic compensatory damages” for “emotional pain and suffering, mental anguish, and humiliation”). As a federal judge held in Hanna v. WCI Communities, Inc., 348 F.Supp.2d 1332 (S.D.Fla.2004), a SOX whistleblower case, “[w]hen reputational injury caused by an employer’s unlawful discrimination diminishes a plaintiff’s future earnings capacity, [he] cannot be made whole without compensation for the lost future earnings [he] would have received absent the employer’s unlawful activity.”
“[A] plaintiff’s testimony, standing alone, can support an award of compensatory damages, [but] the evidence of the emotional distress must be demonstrable, genuine, and adequately explained.” Price v. City of Charlotte, N.C., 93 F.3d 1241, 1251-52 (4th Cir. 1996). The whistleblower’s testimony “must indicate with specificity how the plaintiff’s alleged distress manifested itself.” Bryant v. Aiken Reg’l Med. Ctrs., 333 F.3d 536, 547 (4th Cir. 2003) (internal quotation marks and alterations omitted).
Attorney Fees and Litigation Costs in Whistleblower Retaliation Cases
Legal fees and costs in whistleblower retaliation cases can also be significant. In the Wadler v. Bio Rad SOX whistleblower retaliation case, Bio-Rad stipulated to $3M in attorney fees for the whistleblower’s counsel. In March 2020, Magistrate Judge Michael E. Hegarty awarded $2,719,225.50 in lodestar fees on the whistleblower’s recovery of $620,105.00 in an NDAA whistleblower retaliation case. See Cejka v. Vectrus Systems Corp., 2019 WL 8198090 (D. Colo. Feb. 21, 2019).
Sarbanes-Oxley (SOX) Whistleblower Jury Verdicts
Recently, a California jury awarded former Bio-Rad Laboratories Inc. General Counsel Sanford Wadler $11M in his Sarbanes-Oxley whistleblower retaliation lawsuit. Approximately $3M of the award is for back pay and the remaining amount is for punitive damages. Under the Dodd-Frank Act, backpay will likely be doubled. Wadler worked as GC at Bio-Rad for approximately 25 years. He blew the whistle internally by reporting potential violations of the Foreign Corrupt Practices Act (“FCPA”). Bio-Rad investigated Wadler’s disclosures and concluded that there was no evidence of either a violation or an attempted violation of the FCPA. In June 2013, Bio-Rad terminated Wadler’s employment due to alleged poor work performance and behavior. The jury verdict in the Wadler SOX case appears to be the highest award to date under the whistleblower protection provision of SOX. There are approximately three other SOX whistleblower cases that resulted in damages in excess of $2M:
- In 2014, a California jury awarded $6 million to Catherine Zulfer in her SOX whistleblower retaliation action against Playboy, Inc. (“Playboy”). Zulfer v. Playboy Enters. Inc., JVR No. 1405010041, 2014 WL 1891246 (C.D. Cal. Mar. 5, 2014). Zulfer, a former accounting executive, alleged that Playboy had terminated her in retaliation for raising concerns about executive bonuses to Playboy’s chief financial officer (“CFO”) and chief compliance officer (“CCO”). She contended that she had been instructed by Playboy’s CFO to set aside $1 million for executive bonuses that had not been approved by the board of directors. Zulfer refused to carry out this instruction, warning Playboy’s General Counsel that the bonuses were contrary to Playboy’s internal controls over financial reporting. After Zulfer’s disclosure, the CFO retaliated by ostracizing Zulfer, excluding her from meetings, forcing her to take on additional duties, and eventually terminating her employment. After a short trial, a jury awarded Zulfer $6 million in compensatory damages and also ruled that Zulfer was entitled to punitive damages. Id. Zulfer and Playboy reached a settlement before a determination of punitive damages.
- In 2016, Dr. Perez, a former senior manager of pharmaceutical chemistry at Progenics Pharmaceuticals, Inc. (“Progenics”), recovered a total of $5M in a SOX whistleblower case. Perez alleged that Progenics terminated his employment in retaliation for his disclosure to Progenics executives that the company was committing fraud against shareholders by making inaccurate representations about the results of a clinical trial. Dr. Perez represented himself at trial. Corporate Counsel magazine reported on the case in an article titled: How to Help a Whistleblower.
- In 2013, the Ninth Circuit affirmed a SOX jury verdict awarding $2.2 million in damages, plus $2.4 million in attorney’s fees, to two former in-house counsel. Van Asdale v. Int’l Game Tech., 549 F. App’x 611, 614 (9th Cir. Sept. 27, 2013). Shawn and Lena Van Asdale, both former in-house counsel at International Game Technology (“IGT”), alleged that they had been terminated in retaliation for disclosing shareholder fraud related to IGT’s merger with rival game company Anchor Gaming (“Anchor”). Specifically, the Van Asdales alleged that Anchor had withheld important information about its value, causing IGT to commit shareholder fraud by paying above market value to acquire Anchor. Van Asdale v. Int’l Game Tech., 577 F.3d 989, 992 (9th Cir. 2009). When the Van Asdales discovered the issue, they brought their concerns about the potential fraud to their boss, who had served as Anchor’s general counsel prior to the merger. IGT terminated both plaintiffs shortly thereafter.
SOX Whistleblower Lawyer’s Guide to Sarbanes-Oxley Whistleblower Protection Law
The whistleblower protection provision of the Sarbanes-Oxley Act provides robust protection to corporate whistleblowers, and indeed some SOX whistleblowers have achieved substantial recoveries. See our guide to the SOX whistleblower protection law: Sarbanes-Oxley Whistleblower Protection: Robust Protection for Corporate Whistleblowers.
A recent post-verdict decision in an FRSA whistleblower retaliation case discusses well-established authority for tax gross-ups where there is a lump sum payment for back pay:
The majority of circuit courts that have ruled on the issue have found authority for tax gross-ups rests within the district court’s broad discretion to make victims of unlawful employment practices whole. Sears, 749 F.2d at 1456; Eshelman, 554 F.3d at 422; EEOC v. N. Star Hosp., Inc., 777 F.3d 898 (7th Cir. 2015); Clemens, 874 F.3d at 1117 (“We join the thoughtful analysis of the Third, Seventh, and Tenth Circuits, and reject the matchbook musings of the D.C. Circuit. In so doing, we also agree with those courts that the decision to award a gross up—and the appropriate amount of any such gross up—is left to the sound discretion of the district court.”); see also Sonoma Apartment Assocs. v. United States, 127 Fed. Cl. 721, 732 (2016) (“[I]f [a plaintiff’s] evidence reflects that the tax differential can be ascertained with reasonable certainty, then the court should consider allowing recovery of a tax neutralization payment.”).
The Eighth Circuit in Arneson v. Callahan, came close to authorizing a “tax enhancement remedy” when available “as an element of making persons whole for discrimination injuries.” 128 F.3d at 1247 (citing Loeffler v. Frank, 486 U.S. 549, 558); see Arneson v. Sullivan, 958 F. Supp. 443, 446–47 (E.D. Mo. 1996) (enhancing the plaintiff’s “back pay award to compensate him for the increased income tax liability resulting from the receipt of the award in two lump sum payments.”). However, the plaintiff in Arneson was seeking tax-enhancement damages against the Social Security Administration, and the Eighth Circuit reversed the district court’s tax enhancement award because Congress had not yet waived sovereign immunity for such relief, nor “authorized the tax enhancement remedy against the federal government.” Id. Therefore, the Eighth Circuit has not directly ruled on whether there is authority for a tax gross-up award when a private employer, rather than the federal government, is liable. But see Hukkanen v. Int’l Union of Operating Eng’rs, Hoisting & Portable Loc. No. 101, 3 F.3d 281 (8th Cir. 1993) (affirming district court’s denial of a tax enhancement or gross-up against non-governmental employer due to lack of sufficient evidence for the amount requested, but not challenging the court’s authority to order a tax gross-up).
This Court concludes authority for tax gross-ups exists in light of the make-whole remedy under the FRSA and similar anti-discrimination statutes, as well as the majority of circuit courts holding the same. Indeed, “ ‘[i]t is the historic purpose of equity to secure complete justice,’ and that ‘[i]n the context of a claim brought under a federal statute intended to combat discrimination, the phrase “complete justice” has a clear meaning: “the [district] court has not merely the power but the duty to render a decree which will so far as possible eliminate the discriminatory effects of the past as well as bar like discrimination in the future.” ’ ” Clemens, 874 F.3d at 1116 (citing Bayer v. Neiman Marcus Grp., Inc., 861 F.3d 853, 873 (9th Cir. 2017)) (citations omitted). Considering the special circumstances here regarding the protracted nature of litigation and the adverse tax consequences Plaintiff will face by receiving a lump sum gap-pay award in 2022, the Court holds Plaintiff is entitled to a tax gross-up. The Court must now determine whether such an award is prejudicial to Defendant and whether Plaintiff has met his evidentiary burden in support of the amount requested. SeeEshelman, 554 F.3d at 443.
(S.D. Iowa 2022).
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- Zuckerman was recognized by Washingtonian magazine as a “Top Whistleblower Lawyer” (2020, 2018, 2017, 2015, 2009, and 2007), selected by his peers to be included in The Best Lawyers in America® in the category of employment law (2011-2021) and in SuperLawyers in the category of labor and employment law (2012 and 2015-2021), is rated 10 out of 10 by Avvo, based largely on client reviews, and is rated AV Preeminent® by Martindale-Hubbell based on peer reviews
- We have published extensively on whistleblower rights and protections, and speak nationwide at seminars and continuing legal education conferences. We blog about new developments under whistleblower retaliation and rewards laws at the Whistleblower Protection Law and SEC Awards Blog, and in 2019, the National Law Review awarded Zuckerman its “Go-To Thought Leadership Award” for his analysis of developments in whistleblower law.
Video FAQs About Whistleblower Protection and Retaliation Laws
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Punitive Damages in FRSA Retaliation Cases
“In Youngermann, the ALJ found that the employer acted with reckless indifference to the complainant’s rights when the complainant refused to haul a truck with insufficient lighting, and awarded $100,000. In D’Hooge v. BNSF Rys., ALJ No. 2014–FRS–2, slip op. at 65 (ALJ Mar. 25, 2015), aff’d ARB Nos. 15–042, –066, Respondent was assessed a punitive damage award of $25,000 in a case where one manager had made a “snap, personal assumption” that a report was made in bad faith. In Griebel v. Union Pac. R.R. Co., OALJ No. 2011–FRS–00011 (ALJ Jan. 31, 2013), aff’d ARB No. 13–038 (ARB Mar. 18, 2014), the ARB affirmed $100,000 in punitive damages where the employer had “a mentality that discourages the filing of an injury report, and meets those that are filed with suspicion and mistrust” and did not give appropriate consideration to employees’ rights under the FRSA. In Harvey, the ALJ awarded $100,000 in punitive damages after finding that the “[r]espondent’s policies and culture have created an atmosphere of fear and discouragement surrounding the reporting of injuries and locomotive defects, and this atmosphere has resulted in a chilling effect on employees’ decisions to engage in protected activity.” Harvey v. Union Pacific Railroad, OALJ No. 2011–FRS–00039 at 42–46 (ALJ Feb. 12, 2015). In Laidler v. Grand Trunk Western Railroad Co., ARB No. 2021–0013, ALJ No. 2014–FRS–00099 (ARB Aug. 31, 2021), the ARB affirmed a punitive damages award of $100,000 where the ALJ determined that Respondent “creat[ed] a work environment in which employees put themselves in danger out of fear of losing their livelihoods, creating an issue of safety and striking at the heart of the FRSA’s protections.” In Burt v. Nat’l Railroad Passenger Corp. (“Amtrak”), the ARB affirmed an award of $35,000 in punitive damages where the ALJ found that the respondent’s culture recklessly disregards a complainant’s anonymity when they engage in protected activity or other confidential reporting. ARB No. 2020–0042, ALJ No. 2018–FRS–00015 (ARB Apr. 29, 2021). In Lancaster v. Norfolk Southern Railway Co., the ARB affirmed an award of $25,000, where the respondent intentionally violated the Hours of Service Act. ARB No. 2019–0048, ALJ No. 2018–FRS–00032 (ARB Feb. 25, 2021).” Klinger v. BNSF Railroad Co., ALJ No. 2016-FRS-00062, at 24-25 (ALJ Sept. 29, 2022).
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