Financial institutions have been subject to greater scrutiny in recent years as a result of new federal legislation. Credit unions are no exception. At the same time, as the #MeToo movement demonstrates, employees are no longer willing to simply accept abuse and retaliation. It is incumbent upon credit union directors to shape culture and responsiveness. Otherwise, the organization will simply suffer the consequences with resultant damage to its balance sheet and reputation. Therefore, it would behoove all credit union directors to review their obligations under the various federal and state statutes which govern their organization.
As part of their review, credit union directors will observe they have a duty of care to ensure policies and procedures are in place to protect the credit union. For illustrative purposes, see 12 C.F.R. § 701.4 (governing federal credit unions); see also, e.g., Iowa Code § 533.205 (expressly placing a duty on credit union directors to carry out their various functions with care). A duty of care also exists with respect to the care and treatment of whistleblowers. 12 U.S.C. § 1790b(a)(1) (prohibiting credit unions from taking retaliatory steps against employees who provide information concerning the credit union to the NCUA or the United States Attorney General). State law and local laws may also provide further remedies for whistleblowers. This article will briefly address the duty of care which a credit union, and therefore its directors, has regarding whistleblowers.
Based upon the reported cases which concern retaliation against a credit union employee, the following scenario is not hard to imagine: A credit union employee suspects financial irregularities are occurring in the workplace. The employee exposes this information either privately or publicly to management and the NCUA or the FBI. Following the reported activity, the credit union terminates the whistleblower’s employment for reasons other than retaliation, i.e., deficient performance. Management maintains the termination was a result of poor performance. But the employee brings suit for wrongful termination against the credit union, claiming the termination occurred as a direct result of the employee’s whistleblowing activity. Although management may very well have had legitimate reasons for the termination and not an effort at retaliation, the credit union may still find themselves subject to litigation, and potential liability, for its actions against the employee.
This situation begs the question: what policies and procedures were in place by the credit union to encourage reporting and discouraging retaliation against whistleblowers? A credit union director would be well served by a review of recent federal circuit court decisions concerning employee complaints of retaliation for whistleblowing.
Although each court was faced with slightly different factual circumstances surrounding the retaliation claim, a common element surfaced among each decision: the lack of timely documentation by the credit union to support the termination. Despite credit union complaints of employee performance (or the lack thereof) and thus a legitimate ground for discharge, the assertion of whistleblowing activity, carried the day for the employee’s case. The federal circuit courts which have examined the issue have uniformly held that the employee had raised a question of fact as to whether the credit union had retaliated as a result of the employee’s whistleblowing activity and sent the case back to the district court for jury trial. See Schroeder v. Greater New Orleans Fed. Credit Union, 664 F.3d 1016, 1018 (5th Cir. 2011); Consodine v. NCUA, 366 Fed. Appx. 157 (Fed. Cir. 2010); Lippert v. Cmty. Bank, Inc., 438 F.3d 1275, 1276 (11th Cir. 2006); McNett v. Hardin Cmty. Fed. Credit Union, 118 Fed. Appx. 960, 961 (6th Cir. 2004); Simas v. First Citizens’ Fed. Credit Union, 170 F.3d 37, 41 (1st Cir. 1999).
The illustration and case law presented should be troubling to credit union directors. It becomes readily apparent that a credit union director has to ensure that the credit union has policies and procedures in place to encourage and protect whistleblowers. Many good specimen policies exist which address these duties. At the same time, a director needs to ensure that the credit union has sufficiently trained human resources personnel to identify potential whistleblower conduct and take adequate steps to protect the whistleblower. Likewise, human resources personnel need to take steps to document deficient performance so that the information is recorded and the employee appropriately counseled before the “johnny-come-lately” whistleblower assertion is made in response to a termination.
These cases should also be significant to credit union directors as they seem to broaden the imposition of a director’s duty of care under federal and state law. A director’s duty of care seems to encompass an assurance that policies are set forth within the credit union to protect against claims of retaliation for whistleblowing. At the very least, directors have an obligation to make certain that procedures are in place to provide employees alternative paths to report wrong doing, all employee complaints are taken seriously regardless of the issue, e.g, race, gender, whistleblowing, etc., and dealt with in a timely and appropriate manner.