Final Rule on Whistleblower-Related Legal Costs Shows It Pays (Possibly Literally) to Comment on Proposed Regulations
On July 25, 2014, the U.S. Department of Defense (“DOD”), General Services Administration (“GSA”), and National Aeronautics and Space Administration (“NASA”) adopted a Final Rule addressing the allowability of legal costs incurred by a contractor or subcontractor defending against a whistleblowing employee’s accusation of reprisal. The Final Rule implements a provision of the 2013 National Defense Authorization Act (“2013 NDAA”), which included a number of enhanced whistleblower protections. The Final Rule also includes one fairly significant change from the interim version, based apparently on a single set of comments received.
The 2013 NDAA and the Interim and Final Rules prohibit a contractor or subcontractor from being able to charge to a government contract any legal costs incurred while defending against a whistleblower’s reprisal complaint, if ultimately found liable. Due to “urgent and compelling circumstances,” the Interim Rule was promulgated without the opportunity for public comment. However, DOD, GSA, and NASA pledged to consider all comments received in response to the Interim Rule in formulating the Final Rule.
Accepting this offer, the management and operating contractor for the Department of Energy’s Y-12 National Security Complex noted, among other things, that the rigid language of the Interim Rule could discourage settlements of whistleblower complaints. The Councils responsible for developing the Final Rule agreed. As a result, the Rule now provides that if a whistleblower’s complaint of reprisal is resolved by “consent or compromise,” a contractor’s or subcontractor’s “reasonable costs [associated with the proceeding] . . . may be allowed if the contracting officer, in consultation with his or her legal advisor, determined that there was very little likelihood that the [whistleblower] would have been successful on the merits.”
While the practical impact of this revision remains to be seen, anyone who doubts the benefit of participating in notice and comment rulemaking may want to reconsider that stance. Submitting comments on a proposed or interim rule doesn’t have to cost a lot, and it may pay off, even when no one else speaks up.