On April 14, 2023, the National Highway Traffic Safety Administration (NHTSA) took a major step in formalizing its Whistleblower Program by issuing a notice of proposed rulemaking (NPRM) to formally promulgate regulations intended to create incentives for whistleblowers to provide safety information to NHTSA as well as provide protections for these whistleblowers. NHTSA is proposing these provisions under authority granted to the Agency through the Motor Vehicle Safety Whistleblower Act (Whistleblower Act), which is part of the Fixing America’s Surface Transportation (FAST) Act that President Obama signed into law in December 2015.
The Whistleblower Act permits NHTSA to pay bounties to whistleblowers who share original information regarding potential violations of the National Traffic and Motor Vehicle Safety Act (Safety Act) and regulations promulgated under the Safety Act. In effect, the FAST Act sought to incentivize individuals to share information with NHTSA related to any motor vehicle defect, noncompliance, or alleged violation of a reporting requirement that is likely to cause unreasonable risk of death or serious physical injury. Whistleblowers who share original information related to violations of NHTSA’s regulations could receive an award between 10% and 30% of any civil penalties over $1 million paid by the violating entity.
To qualify for the bounty, the whistleblower must provide original information – information that is derived from independent knowledge or analysis that is not already known to the U.S. Department of Transportation (U.S. DOT) or NHTSA. The statute further specifies that the information cannot be exclusively derived from an allegation made in a judicial or administrative proceeding or other outside source (such as a government report or investigation, or a media report).
Prior to publishing the NPRM, NHTSA received more than 150 whistleblower submissions and, notably, issued whistleblower awards in connection with two consent orders. The NPRM emphasizes the Agency has an active, ongoing whistleblower program based on the existing statutory protection and awards provisions and that the program is not contingent on promulgating regulations. During the pendency of the rulemaking, NHTSA will continue to follow its existing program and encourages whistleblowers to submit information to the Agency.
The NPRM Would Define “Original Information” and Related Terms Broadly to Incentivize Whistleblower Disclosures
Under the Whistleblower Act, Congress defined “original information” as information:
- derived from the independent knowledge or analysis of an individual;
- that is not known to NHTSA from any other source (unless the whistleblower is the original source); and
- that is not exclusively derived from an allegation made in a judicial or an administrative action, in a governmental report, a hearing, an audit, or an investigation, or from the news media, unless the whistleblower is a source of the information.
The NPRM explains that the statutory definition of “original information” does not require the whistleblower to “have direct, first-hand knowledge of potential violations.” Under the proposed definition of “independent knowledge,” whistleblowers “may have ‘independent knowledge’ of information even if that knowledge derives from facts or other information that has been conveyed by third parties.” The Agency recognizes that this interpretation of independent knowledge could cover information the whistleblower learned by observing or participating in a manufacturer’s processes for investigating, identifying, and addressing possible violations. NHTSA acknowledges that allowing this type of information to be covered could be seen as “circumventing or undermining the company’s internal processes.” In light of this potential concern, NHTSA seeks comments on whether the Agency should exclude such information. NHTSA explains, however, that it favors disclosure as soon as possible, noting that “it is critical that the Agency learn important safety information as quickly as it can” and that “efforts to come into future compliance does [sic] not negate prior violations of the law.”
The NPRM Proposes To Exclude From Consideration Limited Categories of Information Received From Whistleblowers
In the NPRM, NHTSA clarifies that it intends to exclude from consideration certain categories of information submitted by whistleblowers, including information:
- Derived solely from attorney-client privileged communications;
- Derived solely from attorney work product; or
- Obtained in violation of Federal or State criminal law, as determined by a court.
Regarding the third exclusion, NHTSA recognizes that a determination that the obtaining the information violates a criminal statute may not have been made at the time it is disclosed to the Agency and seeks comments on how to disincentivize whistleblowers from obtaining information in violation of criminal law. By contrast, NHTSA is not categorically excluding information disclosed by the whistleblower in possible violation of judicial or administrative orders. NHTSA reasons that limitations in protective orders, settlement agreements, or other confidentiality provisions that prohibit disclosing to NHTSA information private litigants obtain in private litigation are contrary to Rule 26 of the Federal Rules of Civil Procedure and public policy. Similarly, NHTSA believes that companies that use confidentiality agreements to prevent disclosing information to NHTSA are also contrary to public policy. Accordingly, the NPRM would not exclude this information. However, NHTSA does caution that whistleblowers should avoid violating a legally binding order or confidentiality agreement without the whistleblower consulting with private legal counsel.
NHTSA Would Reserve Authority to Waive the Statutory Requirement that Whistleblower Employees Must Report Information to the Manufacturer
The Whistleblower Act requires that, to be eligible for an award, employees must first internally report original information if the manufacturer offers an internal reporting mechanism. NHTSA anticipates that it will consider waivers of the internal reporting requirement on a case-by-case basis and will consider granting categorical waivers:
- For employees and contractors of other manufacturers; or
- If the employee reasonably believes:
- Internal reporting will result in retaliation;
- Someone else already internally reported the original information;
- The original information is already subject to internal investigation; or
- The original information is otherwise known by the manufacturer.
By using a standard based on the employee’s reasonable belief that will be evaluated on a case-by-case basis, NHTSA ensures that it will have broad authority to waive the statutory requirement that whistleblowers internally report potential violations in order to qualify for a bounty. NHTSA’s position underscores its policy of favoring disclosure of information in the interest of safety.
The 60-day comment period for this NPRM closes on June 13, 2023. Because NHTSA has an ongoing Whistleblower Program, the interpretations of the statutory terms and the policies favoring disclosure described in the NPRM’s preamble likely reflect much of the Agency’s current practices. However, manufacturers and industry trade groups should consider submitting comments to address proposed definitions and other provisions that could potentially lead to the submission of frivolous or unsubstantiated allegations. For example, does the proposal adequately protect manufacturers against unfounded claims asserted by their competitors? Does the proposal potentially give NHTSA too much authority to accept a potential whistleblower’s unsubstantiated “belief” that he/she would be subject to retaliation if the company’s internal processes were invoked? And what are the consequences of the Agency’s proposal to include submissions of information regarding “potential” defects, noncompliances, or violations (noting that the statute refers to “information relating to any motor vehicle defect, noncompliance, or any violation or alleged violation . . .”).
Manufacturers should remember that the best defense against civil penalties (and bounty incentives for whistleblowers) is to foster a culture of vehicle safety throughout their organizations. Consistent and clear messages that vehicle safety is a priority, coupled with robust internal processes and procedures that encourage reporting and proper evaluation of potential safety issues, can mitigate a manufacturer’s risk on multiple fronts, including the emergent risk associated with NHTSA’s whistleblower program.
Manufacturers should also ensure that they have internal policies that provide clear protections against retaliation (including protections for whistleblowers, such as an anonymous reporting option) for anyone that reports a potential violation, as well as an appropriate level of transparency for the reporter (such as confirming an issue is being investigated by the relevant safety team). These policies and messages are important steps for fostering this culture. Finally, all documents that are subject to the attorney-client privilege or protected under the work product doctrine should be properly marked and stored.