If 2018 was the year of truth-telling, 2019 will be the year of reckoning.
We closed out 2018 with the U.S. workplace situated squarely in the eye of a storm, a time of relative calm after the first torrent and ahead of the inevitable next wave. #MeToo shed light on a workplace full of predation, emboldening victims to finally speak out with less fear of reprisal because they were sheltered, in part, by the numbers.
In the light, the details of assaults were as heartbreaking as their scale. Corporations began facing significant legal and reputational exposure as a result of the steadfast courage of whistleblowers.
When it comes to cultivating an ethical culture at work, there are few obstacles as formidable as an anemic economy. In December, the Federal Reserve acknowledged that the U.S. economy is softening. Pundits anticipate a global slowdown, increased volatility in the financial markets, and some even whisper of a possible recession down the road.
According to the Ethics and Compliance Initiative, questionable practices are almost twice as likely to be accepted in a high-pressure workplace as in others.
Will it be different now that we’re awake to ethical bankruptcy? Undoubtedly. The Observer Effect, a theory in physics, says a thing changes once examined. The common example is that checking tire pressure actually releases a little air.
As I wrote in a piece early last year, it’s hard to not have this moment in time strike me as a stark reminder of 2002, when I worked at the SEC and Time magazine’s “Person of the Year” cover included the brave women who blew the whistle on Enron and WorldCom.
While sexual harassment and financial fraud are violations governed by different arms of the U.S. legal system, the great success of the sweeping reforms that were put in place to hold the securities industry more accountable in a post-Enron world can serve as a road map for the next phase of the #metoo movement.
Perhaps examination will lead to profound transformation in the workplace as more and more victims come forward. In some ways it already has.
In October of last year, the Equal Employment Opportunity Commission reported that cases with allegations of sexual harassment rose more than 50% over the prior year. New charges filed with the EEOC alleging sexual harassment increased for the first time in at least eight years. Recoveries by the EEOC via litigation and administrative enforcement of sexual harassment matters in 2018 were nearly $70 million, a 47% increase from the prior year.
A groundbreaking report released in December by Senator Patty Murray is another harbinger for change. After a year of research, “‘…So I Tolerated It:’ How Workplaces Are Responding to Harassment and the Clear Need for Federal Action” thrust into the spotlight terrible practices that must – and we predict will – come to a screeching halt. For example, the report says employers continue to squeeze clauses into employment contracts that force workers to arbitrate legal disputes with their employers rather than sue in court. Arbitration produces different outcomes from litigation, most often to the workers’ disadvantage.
Employment agreements have been a way in the past to keep misconduct under wraps – an increasingly costly practice. In 2016, for example, the SEC levied steep penalties against two companies that incorporated language into their severance agreements that limited the ability of former employees to act as whistleblowers. Remarkably, just having the language in the contract was reason enough for the SEC to impose penalties in excess of $500,000. The defendant companies did not have to enforce these provisions to attract the SEC’s attention.
Federal agencies – and Congress – are now focusing on these issues. We expect to see companies audit and overhaul silencing tactics and ways of intimidating workers. The best organizations will begin encouraging employees to report misconduct, to allow employees to seek remedies in court, and to prohibit interference with an employee’s right to report misconduct to government authorities.
In the short-term, however, we may see more retaliation than repair. While more employees feel emboldened to report wrongdoing, retaliation remains a serious concern. In December 2018, the Center for Employment Equity at the University of Massachusetts released a report that studied more than 46,000 sexual harassment charges filed with the EEOC and state Fair Employment Practices Agencies. An astounding 68% of charges included an allegation of employer retaliation; 64% were associated with job loss.
Federal whistleblower programs that provide strong employment protections mean corporate wrongdoing may be more likely to be reported. Under the Sarbanes-Oxley Act of 2002, public company employers may not retaliate against employees who report corporate fraud.
The SEC whistleblower program established under Dodd-Frank goes even further – providing individuals who report securities violations with significant monetary incentives, employment protections and the ability to report anonymously. Tattletale and snitch are yesterday’s taunts. With such bounties and strong protections, we expect more reports of wrongdoing and, eventually, fewer reports of retaliation.
Under the watchful eyes of lawmakers, regulators, stockholders and peers, we’ll continue to reckon with the sickness and the weaknesses present in the U.S. workplace. We have witnessed the fall of titans and the implosion of heretofore untouchable organizations. We have heard the agonizing stories of victims and the triumphant tales of whistleblowers. We have read of office doors locking behind young female employees, threats of blacklisting, demotion.
But in 2019, we hope to tell more stories of courage, boldness, fearlessness. Now that the doors are open, the work of repair can begin.
Jordan A. Thomas is a nationally recognized SEC whistleblower lawyer at Labaton Sucharow LLP. He previously served as an Assistant Director at the SEC and was a principal architect of the agency’s whistleblower program.
This post was originally posted at http://www.marketwatch.com/news/story.asp?guid=%7B773CB872-2A61-11E9-A1EF-4615631E8CF2%7D&siteid=rss&rss=1.