12.16.2010 Employment Aspects of Dodd-Frank Wall Street Reform and Consumer Protection Act
Editor Jacob, Lynn F.President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”) into law on July 21, 2010 and it became effective the next day. Among other things, the Act amends the Commodity Exchange and Security Exchange Act of 1934 and the Corporate and Criminal Fraud Accountability Act of 2002 (“Sarbanes/Oxley” or “SOX”) to create a new rewards system and whistle-blower protection for those using the system and creates financial services whistle-blowing protection for employees in the consumer financial product or service industry. Financial institutions and brokerage houses should review their policies and practices in light of these significant changes to the law.
Whistle-blowers who provide “original information” to the Federal Reserve’s newly created Commodity Futures Trading Commission (“CFTC”) or the Securities and Exchange Commission (“SEC”) regarding certain types of corporate fraud or securities violations are now entitled to bounties of 10% to 30% of the monetary sanctions in excess of one million dollars recouped from the violator by the Government in either civil or criminal proceedings. Although certain individuals are ineligible for such rewards, internal audit and compliance personnel and other employees who learn of violations in the course of the performance of their job duties have significant incentives to go directly to the Government with their concerns.
While whistle-blowers previously were allowed to file complaints of retaliation for reporting fraud against shareholders and insider trading by their employers by filing an administrative complaint with the Department of Labor, whistle-blowers now may go directly to federal court with claims of unlawful retaliation. Whistle-blowers reporting violations of consumer financial protection laws to their employer, the Consumer Financial Protection Bureau, a Government regulator or law enforcement may also bring retaliation claims directly to federal court. Whistle-blowers reporting fraud against shareholders may seek federal court review if the Secretary of Labor failed to reach a determination within 180 days of filing of the SOX complaint. Remedies for retaliatory termination include reinstatement or front pay, attorney fees and back pay. In the case of retaliation for reporting securities fraud issues, the remedy includes double back pay.
The Act also creates Offices of Minority and Women Inclusion (“OMWI”) within more than 20 federal financial regulatory agencies including the Department of the Treasury, the FDIC and the SEC. Each OMWI will take responsibility for matters relating to diversity in three different spheres: (1) the Agency’s own workforce and senior management; (2) businesses that contract with the Agency and (3) businesses that are regulated by the Agency. Although the OMWI Director will be evaluating contractors’ good faith efforts, this Director will have no enforcement authority.
Because the Act now provides that rights and remedies available to whistle-blowers under SOX cannot be waived by pre-dispute arbitration agreements or releases, employers should consider obtaining new arbitration agreements for those employees who have signed agreements that are now unenforceable and should review the language in their standard post-termination releases and confidentiality agreements. They also should consider updating their internal complaint procedures to provide increased opportunities for making internal complaints. Training continues to be an important part of any employer’s program to limit liability. They should consider a renewed focus on training employees on their options for reporting unlawful or unethical conduct and training the supervisors and management team on the scope of the consumer financial protection laws and the reporting of any complaints pursuant to those laws. Because complaints of unlawful retaliation can be made in some instances up to ten years after the alleged retaliation, record retention policies should be reviewed in light of this new potential liability.
Questions abound as to how the 2300 page Act will be applied. On November 3, 2010, the SEC published its proposed rules on the whistle-blower rewards program, and the deadline for comments is December 17, 2010. The proposed rules do not address the whistle-blower protection aspects of the Act or provide guidance as to the OMWI.
If you have questions about the information in this alert, please contact Lynn Jacob at .