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NHTSA Issues $24.3 Million Whistleblower Award: 5 Key Takeaways for Auto Suppliers

December 9, 2021

On November 9, 2021, the National Highway Traffic Safety Administration (NHTSA) issued its first-ever whistleblower bounty to a former Hyundai engineer. In the wake of this payout, plaintiff and whistleblower law firms are actively targeting employees of automotive companies up and down the supply chain given the lottery-like awards that are possible under the Motor Vehicle Safety Whistleblower Act (MVSWA). While the MVSWA was passed by Congress in 2015, the rulemaking process is still underway, with an expected publication date in early 2022.

Notwithstanding the lack of promulgated rules, and as evidenced by this recent payout, automotive companies must take heed of the MVSWA and prepare for an increase in whistleblower complaints.

In this advisory, Varnum’s Automotive and Investigations attorneys outline actions companies under NHTSA’s jurisdiction should take to ensure that their compliance programs and related policies and procedures are robust in the wake of this emergent risk.

Background on the MVSWA

The MVSWA, passed by Congress in 2015, established a program under which NHTSA may compensate whistleblowers who are connected to the automobile industry with significant monetary awards if they report motor vehicle safety issues, such as potential vehicle safety defects. The whistleblower award program is not limited to employees of or contractors for original equipment vehicle manufacturers; it also applies to any employee or contractor of a part supplier or dealership.

To qualify for an award, original information provided by the whistleblower must lead to the imposition of sanctions exceeding $1 million. Whistleblowers are incentivized to report violations by way of potential awards ranging between 10 to 30 percent of collected sanctions stemming from their complaint.

Additionally, in June of 2021, NHTSA posted a new website to facilitate whistleblowers to provide information about violations to the agency. This website helps whistleblowers determine what information should be provided and how to do so.

$24.3 Million Dollar Award

NHTSA demonstrated that the MVSWA has teeth when it issued its first whistleblower award on November 9, 2021. Kim Gwang-ho, an engineer who was employed by Hyundai, was awarded $24.3 million after he provided information to NHTSA about safety issues with engines used in Hyundai and Kia vehicles. The payment represented 30 percent of the $81 million collected by the government for violations of the Vehicle Safety Act—the statutory maximum. After the award was announced, a spokesperson for NHTSA emphasized that the agency is committed to awarding those who come forward with information.

How to Handle a Whistleblower

The MVSWA protects whistleblowers from retaliation. Among other things, the program prohibits a vehicle manufacturer, part supplier, or dealership from taking any material adverse employment actions against an employee on account of the employee’s reporting of a violation. Any complaints of retaliation are investigated by OSHA.

If a whistleblower reports a potential violation, the company must avoid taking adverse employment action that could be viewed as retaliatory, such as reduced hours, reassignment to a less desirable position, or falsely accusing the employee of poor performance. It is a best practice for a company that is the subject of a whistleblower complaint to not attempt to identify an anonymous whistleblower.

Five Actions to Prepare for an Increase in Whistleblowing

With the recent substantial award and actions by NHTSA to facilitate whistleblower complaints, employers should prepare for a potential increase in whistleblower complaints. Companies should be prepared both proactively – by implementing policies to minimize the likelihood of a whistleblower complaint – and reactively – by ensuring that whistleblower complaints are efficaciously handled and resolved. To that end, companies should:

  1. Educate employees on the company’s commitment to safety, encouraging them to identify safety concerns through an internal reporting system.
  2. Set expectations with employees on the process for reviewing and addressing safety complaints, including training on the steps of the review process and expected time frame for resolution.
  3. With most whistleblower complaints generally filed only after an employee feels that his or her concerns on a safety issue were not adequately addressed, it is critical that companies communicate with employees who have raised safety concerns, including providing appropriate updates on the process and the review.
  4. Develop policies addressing and training management to avoid retaliation for whistleblower complaints.
  5. Ensure that whistleblower complaints are directed to in-house or outside counsel to develop and implement an internal review and investigation to identify exposure, coordinate a response, and minimize potential disruption and financial impact.

Please contact a member of the Varnum Automotive and Investigations teams for more information about conducting an audit of your company’s compliance structure, creating and implementing a whistleblower policy, or the NHTSA Whistleblower Program and how it may affect your company.

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