OSHA Rule Protects Workers Who

Reveal Tax Violations

The U.S. Occupational Safety and Health Administration (OSHA) recently adopted a
new rule that outlines whistleblower protections under the federal Taxpayer First
Act (TFA). The final rule took effect on March 13.

It protects whistleblowers who testified about tax violations or assisted a government

investigation of tax violations.

The rule prohibits any kind of retaliation, including intimidation or undesirable

reassignment of duties, against employees who report tax fraud or underpayment of
taxes, said Sonya Rosenberg, an attorney with Neal, Gerber & Eisenberg in Chicago. 

Illegal retaliation includes:

 Firing or laying off.
 Demoting.
 Denying overtime or promotion.
 Disciplining.
 Denying benefits.
 Failing to hire or rehire.
 Reducing pay or hours.
 Making threats.
 Blacklisting.
 Reporting someone to police or immigration authorities.

To allege retaliation, workers must file complaints within 180 days after the retaliatory
action.

It's too early to tell if the new rule will eventually lead to more whistleblowers coming
forward with complaints about tax fraud or underpayment of taxes.

"Typically, a pretty limited control group of finance folks and company executives is
involved with an employer's tax-related filings and decisions, and these employees don't
often complain of irregularities to external government agencies, partially because they
are typically involved in the relevant decision-making," Rosenberg said.

Congress enacted the TFA in 2019 to reform the IRS and require the IRS to work
collaboratively with the private sector to prevent tax fraud.

Tips for Compliance

Employers should carefully and thoughtfully handle any complaints about unlawful
activity or company policy violations, even if the employer can't confirm any violations
occurred, Rosenberg said. The TFA and other federal and state whistleblower
protections may apply if an employee reasonably believed that a violation took place,
even if a violation didn't actually occur.

"Generally, best practice is to investigate the employee's concern, take appropriate

remedial or corrective action, if any, and document the investigation and any action
taken," Rosenberg said. "It is important to close the loop with the employee, regardless
of whether the investigation substantiates any issue, to confirm the issue was taken
seriously and appropriately looked into and addressed, and to reiterate the employer's
broadly applicable anti-retaliation mandate."

To avoid retaliation lawsuits, employers should understand that whistleblowers may be

protected even if there are other unrelated reasons for an adverse employment
decision.

"The protected activity does not need to be the only reason for the adverse action, but
rather can be one of many reasons. As such, employers should take particular care
when deciding whether to discipline or terminate an employee who has recently raised
concerns regarding tax compliance to ensure that the decision is based solely on
legitimate, nonretaliatory reasons," said Alexandra Romero, an attorney with Arent Fox
Schiff in Washington, D.C.

Employers should train managers on what the new OSHA rule requires. "Managers
frequently make decisions regarding compensation, employee discipline and even
termination, so it is important that they have a clear understanding of what constitutes
protected activity under this rule that cannot influence those decisions," Romero said.

The consequences for noncompliance are costly. "The rule provides significant
penalties for any complaint that is substantiated, including possible reinstatement of the
employee, plus damages equal to 200 percent of the amount of back pay owed to the
employee, including interest, as well as the employee's litigation costs and attorneys'
fees," Romero said.
In addition to tax violations, employees are protected under federal laws when they
report workplace safety problems, money laundering, mail fraud, environmental
hazards, railroad and mine hazards, and health insurance violations.

Beyond the federal laws, you should be aware of state laws protecting whistleblowers
from retaliation. Some states only have laws protecting government workers, while
some states protect private-sector workers, and others protect both, according to the
National Whistleblower Center in Washington, D.C.

"Many states already permit a cause of action for wrongful discharge where an
employee is terminated for protesting unlawful activity on the part of their employer,"
Romero said.

Reference: https://www.shrm.org/ResourcesAndTools/legal-and-compliance/employment-law/Pages/
whistleblower-Tax-Violations.aspx