Today in 1912: The Lloyd-La Follette Act was enacted

August 24, 2012

Today in Legal HistoryEarlier this week, the Securities and Exchange Commission (SEC) announced that it was preparing to pay its first “bounty” to a whistleblower pursuant to Section 922 of 2010’s Dodd-Frank Act.

The program provides an award to whistleblowers who provide high quality tips to the SEC that lead to successful enforcement actions and sanctions that amount to at least $1 million.

The whistleblower is entitled to 10%-30% of the amount the SEC collects (for more details on the program, check out this post).

This scheme is a significant advancement for whistleblower laws, which, up until this point, only provided protection for whistleblowers against retaliation.

Coincidentally, this award comes almost exactly 100 years after the first federal whistleblower law in the U.S. – the Lloyd-La Follette Act, which was enacted on August 24, 1912.

The Act was created by Congress in response to the issuance of executive orders by Presidents Theodore Roosevelt and William H. Taft that forbade federal employees from communicating directly with Congress without the permission of their supervisors.

And if a federal employee disregarded these “gag orders,” he was removed from his position.

To counter this, the Act provided that “[n]o person in the classified civil service of the United States shall be removed or suspended without pay therefrom except for such cause as will promote the efficiency of such service and for reasons given in writing.”

Further, the law explicitly guaranteed that the right of civil servants “to furnish information to either House of Congress, or to any committee or member thereof, shall not be denied or interfered with.”

What Presidents Roosevelt and Taft were trying to stop were federal employees, either individually or as a workers’ union, from petitioning Congress for improvements in pay or working conditions.

However, according to the Congressional Record, Congress was primarily concerned with federal employees’ free speech rights.

Regardless, the Act still expressly provided protections for the kind of labor complaints that Roosevelt and Taft were targeting in their gag orders.

Specifically, the law guaranteed that the presentation to Congress of any grievance, or membership in any independent association of postal employees seeking improvements in wages, hours, and working conditions, “shall not constitute or be cause for reduction in rank or compensation or removal of such person or groups of persons from said service.”

Although the law was a response to adverse employment actions taken against those seeking improvements in wages and working conditions, the Lloyd-La Follette Act has since functioned to protect federal employees from retaliation against their exercising their First Amendment rights to criticize the respective agency which employs them.

Moreover, it has acted as the foundation for the myriad of other whistleblower laws applying to federal employees, and served as a model for other whistleblower laws that protect private sector employees.

And without this broad foundation of legal protections, it is unlikely that Dodd-Frank would have been able to take the extraordinary step further beyond shielding whistleblowers to actually providing cash incentives to take action.

Thus, the individuals who are getting “whistleblower bounties” now can thank those federal employees who, over 100 years ago, fought for the right to even complain to Congress.