By John E. Anderson, Sr.
The success of the auto industry is dependent in large part upon on safety, and the Federal Government has taken action to ensure that safety remains priority.
In December 2015, President Obama signed the Fixing America’s Surface Transportation Act, better known as the FAST Act, to begin long-term efforts to improve the state of ground transportation in the United States. All automotive companies—from the original equipment manufacturer, to the parts supplier, and the dealer will have to abide by a new set of regulations.
Under the FAST Act, a new automotive industry safety initiative took effect— the Motor Vehicle Safety Whistleblower Program (MVSWP). The MVSWP is designed to incentivize potential whistleblowers to report companies for attempting to cover up defects or failing to comply with reporting requirements for defects that are “likely to cause unreasonable risk of death or serious physical injury.”
While this sort of bounty program (rewarding individuals for reporting wrong-doing) has been around for over a century in other industries (notably finance), it’s a relatively new concept for the automotive industry. However, the program neither creates additional liabilities for automobile companies, nor does it increase reporting requirements. Rather, the MVSWP provides cover—and a potential reward—to any automotive company employee or contractor who voluntarily provides original information about motor vehicle defect “noncompliance” or a required reporting violation.
Sounding the whistle
The MVSWP operates as follows:
A whistleblower who provides “original information” (not merely reciting things that he heard from an original source) is eligible to receive 10 to 30 percent of collected monetary sanctions if he provides information that leads to a successful resolution in a covered action.
The reward could be quite lucrative. Consider that General Motors was sanctioned $35 million in 2014 for an ignition switch scandal, in which GM delayed the recall of its smaller cars for a faulty switch, which automatically shut the car’s engine off and prevented air bags from deploying, when the car was in motion. A whistleblower acting under this rule might have been entitled to an award of more than $10 million.
Thus, it’s reasonable to assume that the MVSWP will almost certainly lead to more whistle blowing and enforcement actions.
Adjusting to a new era
While the incentives to report wrong-doing are much higher in the new federal regulation, automotive companies can deflect potential whistleblowing risks by ensuring that they create a culture of internal accountability.
That’s because Congress built an exception into the MVSWP to deny a reward to a whistleblower under certain circumstances, including if the individual works at a company with an internal reporting mechanism to protect employees from retaliation. If such a program is in place, the whistleblower would be required to meet another qualifying element, such as a) having a reasonable belief he would have been retaliated against anyway, b) having a reasonable belief that the information was already internally reported, investigated or otherwise made known to the company, or c) “if the Secretary has good cause waive this requirement.” These instances are more difficult to demonstrate if an honest reporting system is in place and well respected within a company.
If policies aren’t already in place, companies should consider adopting such a program, and take the following steps:
• Make sure it’s accessible to all. Employees at all levels of a company should be informed on whistleblowing policies, and understand how they can safely report any potential issues. It’s wise to offer several different opportunities for reporting—to a direct manager, to the human resources department, the legal team, etc.—so that employees can approach whomever makes them feel most comfortable.
• Avoid retaliation. Reporting programs are nullified when retaliation from the company follows, so make certain that there are policies in place that prevent penalizing anyone who reports an issue.
• Respect anonymity. Keep the identities of those who report issues confidential as the reports are processed. If anonymity is not taken seriously, fear of retaliation will likely prevent people for reporting issues.
• Consider a third party. There are third-party companies in the market that make reporting easy and safe for whistleblowers, and they offer as seamless way to establish an internal reporting program. These firms offer a call-in number for employees to report any issues, and that company bears the responsibility to share the information to the appropriate parties.
• Take all reports seriously. Companies must establish procedures for following through with investigations so that potential issues are resolved.
Reporting mechanisms for whistleblowers aren’t just about preventing sanctions, litigation or poor publicity. They expose issues that help keep the nation’s public safer on the road—and that’s a victory for us all.
John E. Anderson, Sr. is a member attorney with the Nashville office of Dickinson Wright PLCC. He focuses his practice on commercial and business litigation. Reach him at [email protected]