You must always avoid any retaliation against whistleblowers when they come forward with complaints.

There are both state and federal laws, including the Sarbanes-Oxley Act of 2002, that protect whistleblowers from retaliation by their companies and employers. If you or your company engages in retaliation against a whistleblower that complains of fraud, illegal activities or other wrongful dealings in the workplace, you are risking a lawsuit brought by the worker. In addition, you could face criminal prosecution if the circumstances are correct.

Whistleblower Defined

A whistleblower is an employee who makes complaints about a company’s misconduct, such as complaints about health and safety code violations, shareholder fraud, financial mismanagement or other illegal activities. In addition to the employees that make the initial complaints, employees that later follow up with the complaints or give information to investigators are also considered whistleblowers. There are many laws, at both the federal and state levels, that protect whistleblowers from retaliation by their employers.

The Sarbanes-Oxley Act of 2002

After some of the most heinous financial frauds and corporate mismanagements ever seen (the Enron fiasco, for example), the United States government passed the Sarbanes-Oxley Act to force companies to act according to the law. The primary thrust of this Act is to prevent shareholder fraud and other financial wrongdoings of publicly traded companies. However, there are clauses within the Act that also create strong protections for whistleblowers.

By the terms of the Sarbanes-Oxley Act, if an employee makes complaints about his or her employer breaking, or not following, certain federal laws relating to securities, shareholder fraud, or other types of fraud (wire, mail, or bank), that employee is protected against retaliation by his or her employer. Even if it turns out that the employee’s complaints do not turn up any fraud or other wrongdoing, the employee is still protected as a whistleblower. As long as the employee had a good faith intention when he or she made the complaints, they are protected from retaliation.
Lastly, it is worth mentioning that the employee does not have to complain to a federal or state agency to receive the protection provided by the Act. Indeed, even if an employee makes a complaint to a superior within the company, he or she is still considered a whistleblower and will receive the protections accordingly.
As an employer, it is imperative that you comply with the Sarbanes-Oxley Act of 2002. Under the law, if you, as the employer, take an act that is intended to retaliate against a whistleblower, you could face fines. In addition, you could face time in prison – as much as 10 years.

Other Federal Laws that Protect Whistleblowers

In addition to the Sarbanes-Oxley Act, there are a number of other federal laws that protect whistleblowers in the workplace. As an example, employees that complain about discrimination or harassment in the workplace are protected against retaliation by their employers. There are other federal laws that also protect employees that complain about violations of health or safety codes, violations of the Family and Medical Leave Act, or about their employers breaking wage and hour laws.

Although many of these laws do not refer to “whistleblowers,” the concepts are the same — namely that you cannot retaliate against employees that make complaints about your company. Employees cannot be fired or subjected to other retaliatory measures because they made complaints, whether inside or outside of the company.
Lastly, there are a number of federal laws that protect workers that complain of wrongdoing within specific industries. For example, there are laws that protect workers that are employed by companies that do work for the federal government, or those that are employed by companies that deal with hazardous materials.

State Laws that Protect Whistleblowers

A large number of states have their own whistleblower laws that add to and compliment the federal whistleblower laws that are already in place. For example, many states have laws that protect whistleblowers that complain of violations of state laws regarding family and medical leave, mandatory time off for jury duty and voting, state antidiscrimination laws and state wage and hour laws.

In addition to the examples above, many states also allow employees to bring lawsuits when they believe that they were disciplined or terminated “in violation of public policy.” Generally speaking, many of these claims are brought by former employees that believe they were fired for reasons such as exercising a legal right or complaining of their company’s illegal activities. You should look up your state’s laws on this matter as they vary widely from one state to another.

There are some states that only allow an employee to bring a “violation of public policy” lawsuit if they complained to a government agent or agency. Other states allow employees to bring such lawsuits for internal complaints. Some states allow employees to bring lawsuits only when the law that the company allegedly violated contains explicit anti-retaliation clauses, and others do not have such a requirement. Still other states do not allow “public policy” claims at all.

How to Avoid Whistleblower Claims

In addition to being damaging to a company’s bank account, whistleblower lawsuits can also be very damaging to a company’s reputation and goodwill. Because of this, it is always a good idea to do your best to avoid whistleblower claims. Here are a few steps that you can take to reduce the risk that your company will be subject to such a lawsuit:

• Don’t retaliate — This first step seems pretty simple, yet it can be very hard to put into practice. You should always try to remember not to treat employees that have complained about your company any differently than those who have not. Many times company owners do not want to believe that their companies are engaging in illegal activity, which makes retaliation seem very desirable. However, taking out your frustrations on the employee that caused you the problem will not do anything to lessen the problems that your company is facing — in fact, it could only deepen them. Try to see the complaint as an opportunity to get your business back on a lawful track instead of a thorn in your side.
• Have a complaint policy in place and be sure to use it — A few laws, such as the Sarbanes-Oxley Act, make it so that certain publicly traded companies must have specific complaint handling policies in place. However, it is a good idea to have a complaint policy in place even if it is not required by law. Once you have your policy in place, make sure to train and educate your employees in using the system. You should always make it clear that an employee who comes forward will not suffer retaliation. Lastly, once you have your complaint policy in place, be sure to abide by it. 
• Investigate all credible complaints — If you receive an internal complaint about alleged wrongdoing, be sure to investigate it, so long as it is credible. If you find that the complaint was truthful, take the steps needed to remedy the situation. Keep in mind that if you make it a habit of not investigating complaints, your employees may decide to go to the government before notifying you. This could land your company in serious trouble.
• Be careful in disciplining whistleblowers for other misconduct — If you have a whistleblower in your company that needs to be disciplined for other conduct (for example, an employee that complained about safety code violations, but that is also sexually harassing his secretary), you must be very careful in your discipline. If you are concerned that the employee may turn around and sue you, you should think about contacting a lawyer before engaging in any discipline. Get evidence to support your claim that you are disciplining for reasons other than the whistle blowing and make sure the employee knows the reason he or she is being disciplined.

– See more at: http://smallbusiness.findlaw.com/employment-law-and-human-resources/whistleblower-retaliation-could-land-you-in-trouble.html#sthash.PCHg7ASh.dpuf