When someone acts as a whistleblower and experiences what they believe to be retaliation or reprisals as a result of their actions, legal action may be necessary. In such cases, whistleblower settlements can help the whistleblower recover from any negative financial impacts of the action, and penalize the offending company or government agency found guilty of such behavior.
What is a Whistleblower Lawsuit?
This type of lawsuit is one brought against a corporation or government entity accused of illegal or fraudulent activity. In the United States, whistleblower settlements may be up to 20% to 30% of the funds recovered as a result of litigation.
Whistleblower lawsuits are not new. In fact, their history goes all the way back to the Civil War, when suppliers were knowingly selling the US Government goods and services that were of poor quality, but charging top quality prices. It was President Abraham who requested that a law be devised to deal with this type of fraudulent activity. From this request, the False Claims Act was passed and implemented. It has been part of the law of the land for over 140 years.
What is a Retaliation Lawsuit?
Many times when someone steps forward as a whistleblower, they may face retaliation for their actions. Though the law prohibits this activity, it may still happen in many cases. When a person feels they have been retaliated against for telling the truth, they may file a lawsuit to receive restitution for the wrongful behavior towards them. This type of lawsuit may also carry monetary benefits for the whistleblower if behaviors such as intimidation, demotion or wrongful termination are found to have occurred.
How Much Money Is On the Line?
Whistleblower settlements whether for retaliation or fraud, can reach into the millions of dollars. Individual settlements can reach into the millions of dollars, depending on the total amount recovered by the Government. The average settlement for retaliation lawsuits is between $70,000 and $200,000.
In 2012 the Justice Department recovered $3.3 billion dollars as the result of hundreds of lawsuits. Those lawsuits were thanks to whistleblowers, and the total amount paid out in proceeds to those individuals amounted to $439 million dollars. That is certainly a lot of money.
Due to the dollars that stand to be made, many companies have started paying for tips that could lead to a lawsuit in the hope of a big pay-off should they lead to a whistleblower settlement. Even so, blowing the whistle on fraud, corruption and abuse is not a walk in the park, and the potential life altering consequences should be weighed carefully.
Are Whistleblower Settlements Taxable?
Unfortunately, any settlement that is awarded as part of a whistleblower or retaliation lawsuit is taxable under the most recent IRS regulations. The settlement amount is taxed as income. There is one exception that provides a certain amount of relief. The amount of the settlement up to any real medical expenses related to the physical injury, sickness or emotional damages may be excluded from the taxable amount. If you find yourself is the position of receiving a monetary reward for whistleblowing you should consult with a tax attorney or accountant for the best way to avoid the maximum tax penalties related to whistleblower settlements.