Whether suppliers can anticipate increased risk in the form of an automotive whistleblower act is no longer a question. It is now here. President Obama recently signed into law the Fixing America’s Surface Transportation Act (the “FAST Act”), the first comprehensive transportation bill in years. Included in the FAST Act, among other stand-alone bills spurred by a pattern of reporting delays and failures by vehicle manufacturers and several major vehicle recalls, is a slightly modified Motor Vehicle Safety Whistleblower Act (MVSWA). This Act will incentivize employees and automotive industry insiders to come forward with information regarding potential vehicle safety defects by offering the possibility of recovering sizeable whistleblower rewards.
What Kind of Information Does the MVSWA Seek?
The scope of the MVSWA is limited only to information that relates to any motor vehicle defect, noncompliance, violation or alleged violation of any notification or reporting obligation that “is likely to cause unreasonable risk of death or serious physical injury.” Some, however, have advocated for more comprehensive automotive whistleblower protections that apply more broadly to all vehicle defects or violations affecting public safety, public health or constitute fraud, particularly in light of Volkswagen’s (VW) egregious, but non-safety critical emissions violations.
Who is Eligible for an Award?
Under the Act, only an employee or contractor of a vehicle manufacturer, parts supplier or dealership who voluntarily shares original information with the Secretary of Transportation is considered a “whistleblower” eligible for an award. To the dismay of some, third parties with relevant information, like those who discovered VW’s emissions violations, are not considered “whistleblowers” under the Act and, thus, cannot obtain an award.
Additionally, the MVSWA disqualifies certain “whistleblowers” from receiving an award, including those who contribute to the wrongdoing, those who submit information that is based on information previously submitted by another whistleblower, as well as those who fail to provide the information in the form required. Also ineligible for an award are whistleblowers who fail to first report, or attempt to report, the information internally where the applicable vehicle manufacturer, parts supplier or dealership has an internal reporting mechanism intended to protect employees from retaliation, unless the whistleblower “reasonably believed” that the information was already known by the vehicle manufacturer, parts supplier or dealership or that sharing the information would have resulted in retaliation from the company.
What Can a Whistleblower Receive as an Award?
If the information provided by a whistleblower leads to a settlement or judgment of an administrative or judicial action by the Attorney General or Secretary of Transportation in excess of $1 million, the Secretary of Transportation is authorized to issue an award to the whistleblower. Whether to issue such an award, to whom and in what amount, however, remain entirely within the discretion of the Secretary. In determining an award, the Secretary is to consider the importance of the information provided to the resolution of the action, the level of assistance provided by the whistleblower in the action, if applicable, whether the whistleblower attempted to report the information internally and other relevant factors.
If the Secretary does issue a whistleblower award, the whistleblower(s) stands to gain a significant amount, as the MVSWA requires that the award be, in the aggregate, no less than 10 percent and no more than 30 percent of the total monetary sanctions collected. The Act also provides whistleblowers with the right to appeal any determination made by the Secretary.
What Does the MVSWA Mean for Suppliers?
Although the reach of these new whistleblower provisions is not as broad as some have argued for in light of the VW emissions violations, there is no doubt that the MVSWA, together with several other vehicle safety-related provisions of the FAST Act, amounts to substantially increased risk for automotive suppliers. As industry insiders now have significant financial incentives and protections for sharing relevant information, suppliers can be sure that government action will become even more aggressive and frequent than in the past. As such, it is more critical than ever for suppliers to ensure that their internal protocols and business culture foster swift communication and investigation of potential issues.
Call us for more information on how to safely navigate the current automotive climate and to learn more about our successes in handling whistleblower cases in similar contexts.