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Protections for Whistleblowers in Colorado

Generally, in Colorado, an employee who is hired for an indefinite amount of time is considered an at-will employee, meaning employment may be terminated by either the employee or the employer with no notice for any reason or no reason at all. However, Colorado has some protections against whistleblower retaliation for employees in both the public and private sectors.

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New IRS Regulations Make Certain Damage Awards and settlements Non-Taxable

The IRS issued new regulations on January 23, 2012, regarding the taxation of damages for injuries or sickness that are received through settlement or judgment.  The new regulations, 77 Fed. Reg. 3106, maintain the previous rule that emotional distress damages received through settlement or judgment are taxable income.  However, if the emotional distress is attributable to a physical injury or physical sickness, then the damages may be non-taxable, and some medical expenses for emotional distress are also excluded.  Another change in the regulations strikes the old requirement that to be excluded the damages must be based on an action that sounds in tort.  Now, the regulations provide for much broader coverage of damages.  In an employment discrimination, harassment or retaliation context, this means that a plaintiff’s recovered damages, whether through settlement or judgment, may be non-taxable if those damages resulted from physical injury or physical sickness, or if they resulted from emotional distress that was caused by or exacerbated by physical injury or physical sickness.  While taxation issues may not be the first thing on an employee’s mind when they suffer workplace discrimination, workplace harassment, or retaliation for reporting wrongful activity, it is good to know that in some cases the damage settlement or judgment that results from these wrongful employment practices is non-taxable.  Employees who believe that they have been discriminated against, harassed, or retaliated against should contact Clayton Wire at Ogborn Mihm LLP immediately to discuss their potential claims.  Although we are not tax attorneys, we may be able to help wronged employees get to the point where they need to worry about tax matters.

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Seventh Circuit Permits Whistleblower’s RICO Claims Based on SOX Violation to Go Forward

In an opinion that provides new ammunition for whistleblowers, the U.S. Court of Appeals for the Seventh Circuit permitted Michael DeGuelle’s claim for retaliation under the Racketeer Influenced and Corrupt Organizations Act (RICO) to continue.  According to his Complaint, Mr. DeGuelle had previously blown the whistle internally on tax law violations by his employer S.C. Johnson & Son, Inc., before he filed a claim under the Sarbanes-Oxley Act (SOX) with the Department of Labor.  Subsequent to this filing, Mr. DeGuelle was terminated in apparent retaliation for his SOX filing and whistleblowing activities.  Mr. DeGuelle filed a lawsuit alleging various state and federal claims.  Two of Mr. DeGuelle’s claims alleged that his former employer violated the federal RICO statutes based upon a pattern of racketeering activity, which includes violation of § 1513 of SOX.  Under this section of SOX, it is a crime to “knowlingly, with intent to retaliate, take[] any action harmful to any person, including interference with the lawful employment or livelihood of any person, for providing to a law enforcement officer any truthful information relating to the commission or possible commission of any Federal offense[.]” 18 U.S.C. 1513(e).   The Seventh Circuit stated that “[t]he language of § 1513(e) and logic imply that retaliatory actions always occur after a whistleblower reports others' wrongdoing,” and consequently the retaliation for such whistleblowing could be considered  part of a scheme to prevent disclosure, and thus a proper basis for a RICO claim.  This ruling permits whistleblowers who file a complaint under SOX and are retaliated against to take advantage of the increased damages provisions and attorney fees provisions of the federal RICO statutes.  Current or former employees who have blown the whistle against their employers, or who are contemplating blowing the whistle, should contact Ogborn Mihm LLP immediately to discuss their options.

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