When Congress passes major new regulatory laws, it nowadays routinely throws in provisions authorizing lawsuits on behalf of so-called whistleblowers at regulated businesses. Lawmakers do this despite frequent complaints that such provisions encourage discontented employees to seize on borderline conduct and label it fraud or rule-breaking, enrich some persons who themselves took part in questionable practices, and interfere with companies’ own internal compliance efforts, to name a few presumably unintended consequences.

One reason these provisions are added with such regularity despite their at-best-mixed record is that they are lobbied for avidly by two groups of lawyers, the so-called qui tam bar (which collects a percentage of the sometimes enormous informant bounties provided by statute) and the plaintiff’s employment bar, for whom the laws (especially “anti-retaliation” provisions) can provide valuable leverage in negotiating on behalf of terminated employees even if no bounty is available.

While it has not been a major focus of bill opponents, the Dodd-Frank financial regulation bill is loaded with major new extensions of whistleblower law into the economy’s financial sector. Michael Fox at Jottings By An Employer’s Lawyer has more ^[1], and links to a more detailed account ^[2] at an understandably jubilant plaintiff’s-lawyer site. I covered the issue a few weeks ago ^[3] at Overlawyered, where there is also background on qui tam ^[4] and whistleblower ^[5] matters more generally.