DOL Implements Procedures for New Tax Whistleblower Claim Under Taxpayer First Act

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By: Connie N. Bertram, Jack Blum, and Samuel T. Long

On September 11, 2019, the Department of Labor announced that whistleblower retaliation complaints under the Taxpayer First Act (TFA) will be handled by the Occupational Safety and Health Administration (OSHA). 

TFA was created as part of a broader IRS reform bill that passed on July 1, 2018.   It provides a retaliation claim for employees who are terminated or otherwise disciplined because they provided information or assisted in an investigation regarding underpayments of tax or violations of the internal revenue or other federal tax fraud laws.  Generally speaking, the procedures for a TFA whistleblower retaliation claim follow those in place for whistleblower claims under the Sarbanes-Oxley Act, which are also administered by OSHA. 

Employees who prevail under this cause of action are entitled to “all relief necessary to make the employee whole” and compensatory damages, including reinstatement, 200% of the amount of back pay and 100% of all lost benefits, with interest, and special damages including litigation costs, expert witness fees, and reasonable attorney fees.  Employers cannot require employees to arbitrate TFA retaliation claims through pre-dispute arbitration agreements.

The TFA adds to the increasing list of statutes, such as the False Claims Act and the Sarbanes-Oxley Act, which provide whistleblower protections to employees who reasonably believe that their employer has violated federal law and report such beliefs.  When an employee blows the whistle regarding alleged wrongdoing, now including tax underpayment or fraud, employers should consult outside counsel to help navigate through the investigation and subsequent interactions with the employee and avoid or better prepare for potential whistleblower litigation.