Whistleblower & Retaliation Protection Policies Can Help Nonprofits Better Manage Claim Risks
Every day, a growing number of claims are being brought against employers by their employees. Unfortunately, nonprofit organizations are not exempt from these types of claims. As a result, more organizations are adopting whistleblower protection policies to address complaints about the nonprofit’s activities and operations.
Why a whistleblower protection policy?
The American Competitiveness and Corporate Accountability Act of 2002, also known as the Sarbanes-Oxley Act, was passed with the intent to rebuild public trust in the corporate sector. In the act, two criminal provisions apply specifically to nonprofit organizations: prohibiting the organization from retaliating against whistleblowers, and prohibiting the destruction, alteration or concealment of certain documents or the impediment of investigations. Today, it remains against federal law for nonprofits to retaliate against an employee or volunteer who “blows the whistle” on the organization regarding its accounting and operational practices.
According to the American Bar Association, the statutes under which a whistleblower complaint may be made and records or investigations covered are not limited to Sarbanes-Oxley provisions. Therefore, nonprofits should consider voluntarily adopting the entire set of practices set forth in the entire Sarbanes-Oxley Act as good business practice. You can read more about the Sarbanes-Oxley Act and relevant provisions on the American Bar Association’s website.
The importance of having a whistleblower protection policy
Having a protection policy in place can assist your nonprofit clients in proactively addressing whistleblower and retaliation issues and potential violations, ensuring that if a problem develops, it can be swiftly investigated and corrected. A protection policy can also help the organization better maintain compliance with state and federal laws.
According to the National Council of Nonprofits, implementing a whistleblower protection policy signals to employees, board members and the public that the organization has an open-door policy for employees and volunteers to voice their concerns or complaints about its practices, demonstrating organizational transparency and accountability. Even organizations that strictly operate with unpaid staff should have a protection policy in place, allowing volunteers to feel comfortable in coming forward with issues of concern without fear of retaliation by the nonprofit.
“[Organizations with protection policies] will be in a better position to address all concerns, whether they are about fraudulent accounting practices, unsafe conditions, or alleged discrimination or harassment.” Source: National Council of Nonprofits.
The Internal Revenue Service views a whistleblower protection policy as helpful because:
- It encourages staff and volunteers to come forward with credible information on illegal practices or violations of adopted policies of the organization.
- Specifies that the organization will protect the individual from retaliation.
- Identifies staff, board members or outside parties to whom such information can be reported.
To help your nonprofit clients get started in putting together a whistleblower protection policy, the NCN has created a sample policy that can be accessed here.
Conclusion
By implementing a protection policy, your nonprofit clients can be better protected against whistleblower claims and avoid violations of state and federal laws. Of course, that doesn’t guarantee that a claim won’t occur. The good news is these types of employment-related claims can be mitigated with an employment practices liability insurance policy.
About Charity First
At Charity First, we’re passionate about providing innovative products, services, support and resources to meet the ongoing needs of your nonprofit clients. To learn more about our comprehensive employer practices liability insurance, please contact us at 800-352-2761 or marketing@charityfirst.com.