The SEC is reporting a sharp increase in whistleblower complaints since the pandemic shutdown, with swelling numbers of laid off workers reporting their employers for wrongdoing. From mid-March to mid-May, the SEC logged approximately 4,000 whistleblower complaints, a 35 percent increase from the previous year.
“Working remotely hasn’t decreased whistleblowing – just the opposite,” says executive employment attorney Joe Ahmad of Houston-based Ahmad, Zavitsanos, Anaipakos, Alavi & Mensing, or AZA, who devoted a blog post to this trend. “History tells us that whistleblower claims and claims against businesses tend to increase during economic downturns. We also saw this in 2015 when the collapse in oil prices resulted in widespread energy sector layoffs. FLSA wage-and-hour lawsuits filed by employees against their employers increased dramatically then, just as they are now.”
One likely reason for the increase is that workers who have been laid off or furloughed often feel they have less to lose by coming forward with a whistleblower complaint or lawsuit against their employer. Inspired by Black Lives Matter protests over discrimination, they also may be more likely to speak out when they see wrongdoing, especially if it involves workplace discrimination.
“Another explanation is that there may simply be more fraud and waste to report right now – from businesses taking shortcuts to balance the books to coronavirus-related insider trading, stock scams, and compliance issues like fraudulently filing for federal PPP financial assistance,” Mr. Ahmad says.
A provision in the Dodd-Frank Act allows whistleblowers to receive up to 30 percent of the monetary recovery. The SEC recently paid out a record $50 million to a single whistleblower. In all, the commission has paid out more than $500 million, including more than $100 million in this fiscal year alone.
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