The U.S. Department of Labor, which is charged with enforcing the federal law protecting whistle-blowers at publicly traded companies, has been dismissing complaints on the technicality that workers at corporate subsidiaries are not covered by the law. The government has ruled in favor of whistle-blowers only 17 times out of 1,273 complaints filed between 2002 and 2008, according to Department of Labor records. Another 841 cases were dismissed. Many of the dismissals were made on the grounds that employees worked for a corporate subsidiary, according to Robert Moberly, a University of Nebraska law professor. The 2011 National Business Ethics Survey provided by the Ethics Resource Center reported that 31 percent of respondents who said they experienced reprisals for blowing the whistle on wrongdoing cited that these reprisals consisted of physical threats to themselves or their property.

Besides the lackluster federal enforcement of incidents of whistle-blowing, organizations are likely to retaliate against the employee who decides to blow the whistle and expose an alleged ethics violation. One way companies retaliate is by questioning the whistle-blower’s mental health. The goal of the strategy, known as “nuts and sluts,” is to cast doubt on the messenger. National Fuel Gas Company, a utility based near Buffalo, New York, fired Curtis Lee, a highly paid company lawyer, after he alleged that the chief executive and president had ordered him to backdate their stock options on forms submitted to the Security and Exchange Commission (SEC) in a way that made the options worth considerably more. Not only did National Fuel then sue Lee successfully for the return of the documents that might have provided proof, but it also persuaded a local court to ban him from ever repeating the accusations. In addition, the court ruled that he undergo psychiatric treatment, a ruling that was subsequently reversed on appeal on the grounds that it was illegal, but not before Lee had been “treated.” An official investigation into the matter was frustrated by the untimely death of the chairman of the company’s compensation committee.

Under the “employment at will” doctrine, companies in the United States do not have to give employees a reason for discharging them. Advocates for whistle-blowers believe that the greatest single protection for whistle-blowers would be to make it mandatory for firms to say why they are discharging an employee. The Whistleblower Protection Act has been in force since 1989, and in 2002 the Sarbanes-Oxley Act added additional protection to corporate whistle-blowers. However, these laws have loopholes that companies can use to protect their interests and avoid penalties from retaliating against a whistle-blower.

After reviewing hundreds of laws protecting whistle-blowers, Terrance Miethe, a professor of criminal justice at University of Nevada, concluded that “most legal protection for whistleblowers is illusory; few whistleblowers are protected from retaliatory actions because of numerous loopholes and special conditions of these laws, and the major disadvantage that individual plaintiffs have against corporate defendants,” due to the superior availability of resources and legal talent that companies have compared to a whistle-blower.