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Ahead of the Curve Auto Supplier Blog

February 27, 2015

Bounties for Automotive Whistleblowers; an Ominous Twist in Vehicle Recall Crisis

Legislation in Congress that would offer bounties for auto industry whistleblowers is a troubling development in the vehicle recall crisis, one that could pose a number of legal and financial risks for automotive suppliers.

A Senate committee on Feb. 26 approved a bill that would encourage auto industry whistleblowers to reveal information related to vehicle defects or safety violations. Whistleblowers could earn up to 30 percent of penalties exceeding $1 million that are assessed on companies which ignore internal warnings and distribute defective products that could create a risk of serious injury or death.  

The Motor Vehicle Safety Whistleblower Act (S. 304) – or Thune-Nelson Act – is headed to the full Senate for a vote. If approved, it would apply to employees and contractors at automakers, automotive suppliers and even vehicle dealerships; the identity of whistleblowers would be protected.

The secretary of the U.S. Department of Transportation would determine the merits of each whistleblower claim and the amount of any reward to be paid. Thune said his bill “will be a powerful tool to help ensure that problems regarding known safety defects are promptly reported to safety regulators.”

If the bill becomes law, the Department of Transportation will also be issuing new regulations that will undoubtedly provide additional guidelines for automotive suppliers. While the legislation and anticipated regulations may be well-intended, they will create greater legal obligations for automotive suppliers and could increase the risk of government action against them.  

In addition to providing counsel regarding contracts and terms and conditions that protect automotive suppliers against undue liability, we have also handled many whistleblower cases in similar contexts. If Congress and the president pass this legislation, we will be in a unique position to help our auto supplier and dealership clients institute tools that will allow them to thrive in an increasingly complex regulatory world.

Edward J. Bardelli, Chair of the Litigation Practice Group at Warner Norcross & Judd, contributed to this article.

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