Subsidiary Cover

The Department of Labor has been dismissing retaliation suits raised by whistleblowers because they are employees of subsidiaries of publicly traded companies, rather than the companies directly. The numbers associated with whistleblower success, while not surprising, are indicative of the Bush administration’s overall view toward whistleblowers. From the Wall Street Journal:

The government has ruled in favor of whistleblowers 17 times out of 1,273 complaints filed since 2002, according to department records. Another 841 cases have been dismissed. Many of the dismissals were made on the grounds that employees worked for a corporate subsidiary, says Richard Moberly, a University of Nebraska law professor.

He studies issues involving workers who face retaliation from employers for reporting wrongdoing, and based his findings on department data. The rest of the cases are either pending, withdrawn or were settled.

The Sarbanes-Oxley Act of 2002 gives employees of publicly traded companies protections, but authors of that bill state that the protections are supposed to cover subsidiary employees as well.

Sen. Patrick Leahy, a Vermont Democrat who helped craft the whistleblower provision -- part of the Sarbanes-Oxley corporate governance act -- says the law was meant to cover workers in corporate subsidiaries. "Otherwise, a company that wants to do something shady, could just do it in their subsidiary," he said.

Leahy’s right. If you don’t close corporate loopholes, wrongdoing and corrupt practices will always run to where they have cover.

- Dylan Blaylock