{"id":1743,"date":"2018-04-02T20:10:13","date_gmt":"2018-04-02T20:10:13","guid":{"rendered":"https:\/\/www.jacksonwhitelaw.com\/az-labor-employment-law\/?page_id=1743"},"modified":"2024-11-21T23:20:06","modified_gmt":"2024-11-21T23:20:06","slug":"rewards-for-whistleblowers","status":"publish","type":"post","link":"https:\/\/www.jacksonwhitelaw.com\/az-labor-employment-law\/blog\/rewards-for-whistleblowers\/","title":{"rendered":"Rewards For Whistleblowers"},"content":{"rendered":"

When an employee chooses to report evidence of an employer\u2019s illegal activity, the individual is referred to as a whistleblower. Whether the activity in question involves fraud, discrimination, or retaliation, there are federal laws to protect the whistleblower and provide financial incentives as a reward for taking the risk to \u201cblow the whistle.\u201d The reward for whistleblowers varies from case to case, hinging in large part on the type of illegal activity being reported and the extent of the whistleblower\u2019s involvement in the case.<\/p>\n

Tax fraud<\/h2>\n

Under Section 406<\/a> of the Internal Revenue Code, the IRS is able to pay a monetary reward to whistleblowers who provide specific and credible information that results in the collection of taxes, interest, and penalties from a noncompliant taxpayer. The IRS whistleblower program<\/a> allows claims against individuals and organizations, and it offers two types of rewards depending the value of the collected taxes, interest, and penalties:<\/p>\n

    \n
  1. If the disputed taxes, interest, and penalties exceed $2 million, the whistleblower is entitled to 15% to 30% of the amount collected<\/li>\n
  2. If the disputed taxes, interest, and penalties are less than $2 million, the whistleblower can receive a maximum award of 15%<\/li>\n<\/ol>\n

    Note that when the subject is an individual rather than an organization, the IRS applies an additional stipulation regarding the subject\u2019s annual income. In order to receive the maximum reward of 15% to 30%, the individual\u2019s gross annual income must be greater than $200,000. If the individual\u2019s gross annual income is less than $200,000, the whistleblower\u2019s reward is capped at 15% and cannot exceed $10 million.<\/p>\n

    Securities fraud<\/h2>\n

    There are two federal laws that form the basis for the SEC\u2019s whistleblower program<\/a>. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank<\/a>) allows rewards for whistleblowers who report securities fraud, and the Foreign Corrupt Practices Act (FCPA<\/a>) provides rewards for whistleblowers who uncover evidence of companies bribing foreign officials.<\/p>\n

    The SEC\u2019s Whistleblower Commission is authorized by Congress provide monetary rewards to whistleblowers of 10% to 30% when a high-quality tip leads to sanctions in excess of $1 million. Generally speaking, whistleblowers who play a more active role in the investigation and provide crucial evidence to the Commission receive a greater reward than employees who just submit an anonymous tip.<\/p>\n

    Commodities Fraud<\/h2>\n

    The Dodd-Frank law also created a whistleblower program for fraud related to commodities futures, options, and swaps. This whistleblower program is run by the Commodity Futures Trading Commission (CFTC<\/a>). As with the SEC whistleblower program, the CFTC program allows for whistleblower rewards of 10% to 30% when a high-quality tip leads to over $1 million in sanctions.<\/p>\n

    Defrauding the government<\/h2>\n

    When an individual or organization commits fraud against the United States Government, the False Claims Act (FCA<\/a>) allows a whistleblower to file a qui tam lawsuit against the fraudster on behalf of the government. Most qui tam cases<\/a> involve Medicare, Medicaid, and defense contracts, but the wide mandate of the FCA is intended to cover any type of government fraud outside of tax fraud and securities fraud (which are covered separately by the IRS and SEC).<\/p>\n

    The FCA allows the court to impose damages of up to three-times the defrauded amount (known as treble damages). When the Department of Justice<\/a> intervenes in a qui tam lawsuit (which happens in about one-third of cases), the whistleblower is entitled to a reward of 15% to 25% of the awarded damages. If the DOJ declines to intervene, the whistleblower can continue the qui tam lawsuit individually and is entitled to a higher reward of 25% to 30% of the awarded damages. Most successful qui tam lawsuits reach a settlement agreement outside of court.<\/p>\n

    Discrimination and harassment<\/h2>\n

    There are four federal laws that form the basis for discrimination- and harassment-based whistleblower claims in the United States:<\/p>\n