In the Trenches: Whistleblower fired after complaint about dropping standards

Sept. 19, 2007
Acme reorganizes to cut costs, and ends up alienating a worthy environmental director when it cuts corners on important evironmental standards. The director complains, and is fired. Only the names are changed to protect the innocent.

It was a deal he couldn’t refuse. Phil O’Dendron moved his family across the country so he could join Acme as its director of environmental reporting standards. This job involved extensive travel to Acme’s domestic plants for one specific purpose. Phil needed to standardize the methods and procedures each plant used for capturing environmental metrics, managing the data and reporting it in prescribed formats for every facet in which the EPA had its fingers. Phil reported to Acme’s environmental director, a person well respected for his extraordinary ability to extract meaningful information from buckets of seemingly random data and display it in a format that upper management could intuitively understand. Acme’s environmental group represented the triumph of science over politics.

After about a year, the executive offices spewed out another spasm of cost-cutting initiatives. One of them rattled the core structure of the environmental department. Under a now decentralized organization, Phil was responsible for compliance issues regarding only those materials that presented a risk of contaminating the land and water around any plant that might handle them too casually. He still traveled to Acme’s plants, but with a more limited and specific focus.

Another change was that Phil now reported to Lewie Katorze, whom Acme hired as director of operations. Lewie, by his own admission, was a big-picture guy who knew little and cared less about the intricacies of environmental matters. He saw his role as pure supervision and ruling the many Acme departments under his thumb by remote control.

It became clear to Phil that the combination of Lewie’s background, the decentralization and his own more limited role could raise problems. There was no effective global oversight. It was increasingly difficult to gather and report reliable data. Documentation accuracy was dissolving into shambles. Phil even discovered reporting violations and data errors.

For six months, Phil met with Lewie and other Acme brass to discuss the discrepancies and identify ways to fix the errors. He highlighted the risks involved with reporting faulty numbers to upper management, who would, in turn, report them to the government as true. He warned them about data that wasn’t validated before workers faced possible exposure to hazardous chemicals on the plant floor. The documentation for hazardous emissions was just as inadequate. Phil was concerned about errors including missing data, undocumented numbers, incorrect variables and other sloppy work. And, he noted, the reporting system Acme uses is now considered obsolete and some of the test methods Acme uses don’t conform to current government guidelines.

Then, a freelance computer programmer/systems analyst who was assigned to help improve the software and reporting system came forward with a complaint. She claimed she was being pressured to change and sanitize environmental data to bring it into compliance. Under the circumstances, this didn’t sit well with management and the programmer/analyst had her contract summarily terminated. When Phil complained about this retaliation, Lewie threatened to terminate him, too.

Later, a supervisor directed one of the contract programmers to “hard code” a troublesome stream of environmental data to reduce the apparent variability and stabilize the running average value just below the point at which the government would take an interest. When Phil became aware of it, he brought his objection to Lewie. At this meeting, Lewie expressed his frustration about a contract employee who had the gall to tell Acme how it should run its operations. But, Lewie was more upset by the fact that the contractor documented the entire event and that Phil was siding with the contractor.

Phil filed a complaint with Acme’s ombudsman. Because Lewie had already threatened him with termination if he didn’t keep quiet and quit the complaining, Phil also reported Lewie’s behavior to his boss, the vice president of operations.

A few days later, Cara Lainah from the HR department contacted Phil about his complaints. At their informal meeting, Phil explained in simple language what was going on, but it was clear that Cara didn’t grasp the seriousness of what was being said. Phil argued that the environmental department should return to the centralized structure that was in place when he was hired. Cara suggested having another meeting that included Lewie for the purpose of clarifying expectations on both sides.

At that meeting, Cara handed Phil a document titled “Performance Improvement Plan.” Lewie said it lists what Acme wants Phil to do and that Phil had no choice about having 60 days to conform to these expectations. Cara announced there would be a meeting every two weeks at which Phil would document his progress in meeting these expectations.

A month later, Cara sent Phil an e-mail saying that the next progress meeting would be Phil’s performance review. As expected, Lewie’s comments were predominately negative, but the review document contained no ratings at all and Phil wasn’t allowed to add his comments or responses to the review form. Two days later, Cara and Lewie informed Phil that he was being terminated. That afternoon, Lewie issued a company-wide e-mail saying that Phil took a position outside the Acme organization and that he was no longer employed here.

How could this situation have been avoided? Are these scenarios more likely to occur with a centralized or decentralized organizational structure? Is there some way to neutralize the threat that a whistleblower might represent? Do whistleblowers have any real protection from retaliation? Is it possible for any organizational structure to embrace the sound of the whistle? How can Acme get away with issuing an e-mail that contains false information about Phil’s reason for no longer being with the company and a new job as well?

An academician says:

I’m not optimistic regarding the future prospects for corporate whistleblowers. Most get fired, laid off or are shuffled to a dank office in the smelly part of the basement. While the whistleblowers think they’re providing a valuable service to the company, the employer often views such behavior as disloyalty, insubordination or an attempt to get the company or the boss in trouble. Thus, I’m sorry to say, unless you think that you’ll receive strong support from the people you report the problem to, the safest course of action is to just keep your mouth shut.

Often, management has a “tolerance zone” for ethics or safety violations. For example, consider the recent scandal concerning imported toys covered with lead-based paint, which violates U.S. safety standards. Many Chinese manufacturers knew this was occurring, as did some of the companies that distributed the toys in this country. However, their attitude was that although the product was a violation of U.S. standards, it wasn’t extreme enough to be a health hazard to the toy users. A whistleblower, in this case, would have been ignored, maybe even punished, because of this tolerance zone. I suspect that’s what happened, at least in part, at Acme.

The critical factor in preventing the punishment of whistleblowers is the attitude of top management. If executives look the other way or don’t think the violation is serious, then the violation will be ignored and anyone who complains too much will be punished. On the other hand, if top management thinks safety or environment is a top priority, there will be very few violations of safety standards, and whistleblowers will be embraced. Jack Welsh at GE reportedly had a quick fuse regarding any  ethical and safety standards violation, and managers who violated standards were quickly fired, and whistleblowers rewarded. There was no tolerance zone, and no tolerance, at GE.

The pharmaceutical industry has developed some strong protections to make sure their products comply with government standards. For example, companies in this industry usually have an Ethics Officer, who reports directly to the CEO, and whose job is to make sure the company is in 100% compliance. And there are frequent ethics reviews, quality audits and environment audits designed to make sure the product meets the highest standards. However, the industry seems to be more relaxed regarding sales ethics, as seen in the recent controversy regarding perks given by some companies to entice doctors to prescribe their drugs.

The point is that one can easily set up an organizational structure and system that can foster an environment that complies with ethical, safety and environmental standards. But this must be driven from the top. The CEO has to decide whether to emulate Jack Welch or Ken Lay.

Phil might eventually achieve his goal of bringing Acme into compliance. I think he has a good basis for a legal action against Acme, and he’s free to report Acme to the appropriate federal or state agency and provide them with ample documentation. That should be a wake-up call to Acme.
Professor Homer H. Johnson, Ph.D.
Loyola University Chicago
(312) 915-6682
[email protected]

An attorney says:

Perhaps the most distressing part of this scenario is the way Acme set about removing all credibility from its ombudsman program. After this experience, Acme can hardly tout the benefits of the program.

At the outset, an ombudsman should be precisely what the name implies - a neutral person who acts as a go between in resolving an issue between two parties. Acme unfortunately allowed one of its human resource staff to deal with Phil's complaints and simultaneously issue a warning to him. While it would be perfectly acceptable to allow an HR representative to serve as an ombudsman, it was totally inappropriate of Acme to allow the ombudsmen to present Phil with a warning about his job performance in the same meeting when he voiced his complaint about the environmental data.

If Phil's boss felt his performance was deficient, he should have directly addressed it with Phil. For this reason, most human resource departments don’t discipline employees or review their performance. The human resource function should be to review a performance appraisal prepared by the supervisor or to assist a supervisor in determining the proper discipline.

Acme's second problem with respect to the ombudsman program was providing Phil with a warning about his performance in the same meeting in which he complained about accurate reporting of environmental issues. By doing so, Acme virtually handed Phil a whistleblower case on a silver platter. For most plaintiffs, the prime difficulty in proving a whistleblower case is establishing that the employee suffered harm as a result of his complaints about illegal activity. One way to help prove a causal connection is to show that retaliation by a person who knew of a complaint occurred a short time after the complaint. Acme's human resource department kindly delivered both of these facts to Phil.

An employer who receives a report of illegal activity from an employee is well advised to take the complaint seriously, investigate thoroughly and take any appropriate corrective action. Any discipline of an employee who has made a complaint should be removed in time from the complaint and based on factors unrelated to the complaint.
Julie Badel, partner
Epstein Becker & Green, P.C.
(312) 499-1418
[email protected]

A corporate consultant says:

Although there's certainly enough blame to go around here, the primary culprits regarding the compliance issues in my view are the ombudsman and the Vice President of Operations. Where the hell were they in this case? Of course, all parties have a fiduciary responsibility to adhere to compliance standards and to report relevant data honestly; but an ombudsman and a senior executive have an even higher standard of responsibility. Neither took any action to protect employees, surrounding communities, or the organization. Acme, as an organization, deserves to suffer whatever penalties the law allows, but this case illustrates the validity of imposing legal responsibility on individual employees as well.

Lewie's lack of integrity apparently knows no bounds since, in addition to lying about performance data, he seems content to be open and notorious about it, willing to share his flagrant disregard for the law with anyone. Impervious to anything remotely akin to a sense of honor, he felt free to trivialize worker safety, and to lie in writing about Phil having taken another position. His assumption of impunity is staggering, yet he didn't have the guts to own up to his own decision to terminate Phil.

It's hard to imagine a less competent HR staffer than Cara. She failed to engage in due diligence regarding this case, failed to meet her own deadline for a two-week review of Phil, failed to ensure a proper performance review process, and was willingly complicit in Phil's termination. These are astonishing mistakes for someone in Cara's position, because they violate the most basic premises of the HR function. Worse, there were no less than three instances that should have caused Cara to escalate the situation, yet she completely ignored each of them: the moment she realized the issues were beyond her understanding; as soon as she realized that both an ombudsman and the VP of Operations had been informed; and as soon as she realized that the situation was moving toward a termination.

There’s no way to avoid a situation like this when the organization involved is so completely devoid of any sense of honor or responsibility. Centralized or not, an instance of this nature was inevitable for Acme, because its leadership knowingly and willingly disregarded the law, and employee and public safety. Acme's overt objective was to neutralize the whistleblower; the objective should have been to operate with integrity.

Hopefully, Phil will live large for the rest of his life from the settlement Acme would be wise to negotiate.

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