The Wall Street Journal (WSJ) recently published a series of articles detailing its findings of an investigation into Facebook. The series is based on interviews with current and former Facebook employees and an extensive review of internal Facebook documents, some of which have been reportedly turned over to the Securities and Exchange Commission (SEC) and to Congress by a person seeking federal whistleblower protection.
The series includes five different parts that detail the main findings of the investigation and show a lack of transparency and potential public misrepresentations made by Facebook. One part of the series explains that, while Facebook claims all users are subject to the same enforcement policies, a program known as “cross check” or “XCheck,” shields high-profile and elite users from the company’s typical enforcement of its policies and standards. Some of these exempt users have abused their privileges, by sharing information that could be considered harassment or incitement to violence, with no consequences. The WSJ alleges that Facebook misled both the public and its own Oversight Board, which had been created to ensure the accountability of Facebook’s enforcement systems, about the XCheck system.
Another part of the series reveals that Facebook’s response to potential harms in developing countries, where its user base is large and growing, has been slow or inadequate, even when faced with serious reports from Facebook employees about a drug cartel that used Facebook to recruit new members, abusive employers who use the site to recruit workers, and groups that use it to incite violence against ethnic minorities.
The WSJ reports that employees repeatedly raised concerns or outright objected to at least some of the misconduct. Facebook employees who raised such concerns and faced retaliation for blowing the whistle may have protections under both federal and California law.
Facebook Whistleblower Protections from Retaliation
Whistleblower retaliation happens when a company takes an adverse action against an employee because he or she has reported illegal conduct on the part of the company. While termination is the most extreme form of retaliation, actions such as demotions or salary reductions may also be prohibited by anti-retaliation laws.
Employees of publicly traded companies, like Facebook, are protected against whistleblower retaliation if they report misconduct related to violations of federal securities rules or laws, securities fraud, fraud against shareholders, and mail, wire, and banking fraud. These protections come from the anti-retaliation provision of Sarbanes-Oxley Act (SOX). Depending on the content of the employee’s objection, SOX may protect a Facebook employee who reported concerns about the Company’s public misstatements, such as its misrepresentations about the XCheck system, since public disclosures that mislead investors about risks to the Company can constitute securities violations. For example, in 2019, Facebook paid the SEC $100 million to settle an enforcement action related to its misleading disclosures about the risk the Company faced working with Cambridge Analytica because of the misuse of user data. Facebook employees who report potential securities violations to the SEC may also be protected by the anti-retaliation provisions of the Dodd-Frank Act.
In addition to anti-retaliation protections, the SEC’s Whistleblower Program further incentivizes individuals to come forward with information about possible securities violations. The Program provides monetary awards to whistleblowers who provide the SEC with original information leading to an enforcement action that results in over $1 million in monetary sanctions. More information on navigating the Program can be found in the SEC Whistleblower Practice Guide.
Facebook Whistleblowers in California
Many states, such as California, where Facebook is headquartered, have their own laws that protect whistleblowers. California has a whistleblower statute that prohibits employers from retaliating against employees who in good faith report activities that they reasonably believe constitute violations of state or federal laws. The report must be made to a government or law enforcement agency or internally to someone who supervises the employee or who has authority to investigate the allegations. Employees who are terminated for whistleblowing may also have a wrongful termination claim, known in California as a Tameny claim. This type of claim requires that the termination violate an important public policy, which is based on a statutory or constitutional provision. In the case of Facebook, disclosures about fraudulent conduct such as the public misstatements about xcheck could provide such a basis for protected activity.
These are just some of the protections available to potential whistleblowers who make disclosures similar to those reported about Facebook. Individuals who are considering blowing the whistle on corporate wrongdoing in the technology industry, such as those purportedly committed by Facebook, should seek legal advice before doing so to ensure that they make their reports in a manner that maximizes the protections available to them. For those who have already blown the whistle and are facing retaliation, they should consult an attorney to determine what remedies are available to them. Contact Katz Banks Kumin to speak with one of our intake attorneys to discuss your case.