New Federal Protections for Whistleblowers

As part of the Taxpayer First Act of 2019, Congress enacted new protections for whistleblowers who provide information about the failure to pay taxes that should have been paid, or about any conduct that the employee believes is a violation of tax laws or any federal law relating to tax fraud.The new protections, which can be found as part of 26 U.S.C. § 7623(d), are modeled after other federal whistleblower laws, such as the protections of the Sarbanes-Oxley Act which prohibit retaliation against whistleblowers who report fraud or violations of federal securities laws.(

Who is Protected From Retaliation?

Employees are protected from retaliation if they provide information, cause information to be provided, or assist in investigations, regarding “underpayment of tax” or “any conduct which the employee reasonably believes constitutes a violation of the internal revenue laws or any provision of Federal law relating to tax fraud.”In order to be protected from retaliation for that type of whistleblowing, employees must provide the information or assistance either internally within the employer’s organization to “a person with supervisory authority over the employee, or any other person working for the employer who has the authority to investigate, discover, or terminate misconduct,” or externally outside of the employer’s organization to certain parts of the U.S. Government, including the IRS, Secretary of the Treasury, Comptroller General of the United States, the Department of Justice, or the Congress.

In addition, employees are protected from retaliation if they testify, participate in, or otherwise assist in any administrative or judicial action taken by the IRS relating to an alleged underpayment of tax or any violation of the internal revenue laws or any provision of Federal law relating to tax fraud.

What Type of Retaliation is Prohibited?

If an employee engages in whistleblowing or other activity protected by the law, Employers, and any officer, employee, contractor, subcontractor or agent of an employer, are prohibited from taking any adverse action against the employee, including discharge, demotion, suspension, threats, harassment, or any type of discriminatory act.

What Can a Whistleblower Do if He or She Suffers Retaliation?

The procedures for pursuing a retaliation claim under this statute are similar to the procedures which govern retaliation claims under Sarbanes-Oxley.If an employee is subjected to retaliation in violation of this law, he or she can file a complaint with the Department of Labor within 180 days of the retaliation.If the Department of Labor has not issued a final decision within 180 days of the filing of the complaint, and the delay is not caused by the employee, the employee can bring his or her retaliation claim in federal court.If an employee brings a retaliation claim in federal court, there is a right to a trial by jury.Importantly, employers cannot prevent employees from bringing these types of claims to federal court by requiring the employee to sign pre-dispute arbitration agreements as a condition of their employment.

If an employee prevails on a retaliation claim under this statute, he or she will be able to obtain broad relief and compensation for their injuries, including reinstatement, double the amount of wages lost as the result of retaliation by the employer, the value of any benefits lost as a result of the retaliation, interest, other special or compensatory damages, as well as attorney’s fees and costs of litigation.

Any employee who believes that he or she has been retaliated against in violation of this law, or would like legal advice about blowing the whistle or reporting unlawful activity concerning their employment, should seek legal advice from a competent employment attorney in order to ensure that their rights are protected.

Madsen, Prestley & Parenteau has significant experience representing and advising whistleblowers and employees who have been subjected to retaliation in the workplace, and has achieved positive outcomes for our clients in many cases involving retaliation against employees.