The National Highway Traffic Safety Administration (NHTSA) recently finalized its long-anticipated whistleblower program rule, an important step toward ensuring accountability and transparency within the automotive industry. Issued on December 5, 2024, the final rule implements the Motor Vehicle Safety Whistleblower Act, a law enacted in 2015 as part of the Fixing America’s Surface Transportation (FAST) Act. This regulatory milestone ushers in a comprehensive framework for whistleblowers to report safety violations, fraud, and other malfeasance in the auto sector, with robust protections and incentives.
The Whistleblower Act and Final Rule
The Motor Vehicle Safety Whistleblower Act was designed to incentivize insiders, such as employees, contractors, and suppliers, to report original information about violations of federal vehicle safety laws. The Act allows whistleblowers who provide original information that leads to the imposition of monetary sanctions in excess of $1 million to be eligible for an award of 10-30% of the collected monetary penalties.
The final rule outlines the procedural mechanisms for submitting whistleblower disclosures, the criteria for award eligibility, and protections against retaliation. It also describes the role of the Office of the Whistleblower, which has been established to administer the program and ensure compliance.
Under the rule, whistleblower reports must be original information about any regulatory violation, including defects presenting unreasonable risks of death or injury, non-compliance with Federal Motor Vehicle Safety Standards, and misrepresentations during processes related to regulatory compliance. Whistleblowers are also protected by confidentiality provisions that guarantee their identities will remain anonymous unless explicitly waived.
Key Highlights of the Final Rule
- Eligibility and Awards:
The final rule also provides that whistleblowers must submit information voluntarily to be eligible for an award. The information must lead to a successful enforcement action where penalties exceed $1 million. An award will be based on the significance of the whistleblower’s information, the extent of assistance provided by the whistleblower, and other applicable factors. - Confidentiality Protections:
It implements stringent confidentiality protections to encourage disclosures. The identity of the whistleblowers will not be disclosed, unless required by law, or with their consent. - Anti-Retaliation Provisions:
Retaliation against a whistleblower is prohibited. The final rule highlights that whistleblowers may be entitled to judicial redress if adverse employment consequences result from their disclosures. - Enforcement and Oversight:
The program, including processing disclosures, determining award eligibility, and protecting whistleblower rights, will be managed by the Office of the Whistleblower. This office is also mandated to increase public awareness of the program and its benefits.
Notable MVSWA Case: Hyundai and Kia Engine Defects
One of the milestone cases under the MVSWA involved whistleblower Kim Gwang-ho, a former Hyundai engineer. In 2016, Kim reported that Hyundai and its affiliate Kia failed to address a safety defect in vehicles equipped with Theta II engines. These engines were prone to seizing, potentially leading to engine failure or fires due to manufacturing debris restricting oil flow to bearings. Initially, Hyundai recalled certain vehicles made before 2012, claiming the issues had been resolved, but it failed to recall Kia vehicles with that same engine or other affected Hyundai models.
Kim’s disclosure prompted an investigation by the National Highway Traffic Safety Administration (NHTSA), which resulted in combined cash penalties of $81 million paid by Hyundai and Kia, plus millions invested in safety improvements. In November 2021, NHTSA awarded Kim $24.3 million, or 30% of the collected penalties—the maximum percentage allowed under the MVSWA.
The Hyundai and Kia case represents one of the most successful applications of MVSWA in detecting and punishing severe safety breaches in the automotive industry. It underlines the decisive role that whistleblowers continue to play in ensuring vehicle safety and holding manufacturers accountable for compliance failure. A substantial award given to Kim Gwang-ho has set a strong precedent that may further encourage other industry insiders to report safety concerns without fear of retaliation.
The NHTSA Whistleblower Program further solidifies the effort in finding and resolving systemic safety issues by adding incentives to whistleblowers who come forward. It added to the safety on offer and showcased the commitment of the federal government to prevent the number of fatalities and injuries due to vehicle defects by introducing greater accountability across the auto sector.
Conclusion
The issuance of the NHTSA whistleblower rule represents a significant step forward in federal efforts to enhance safety and accountability within the auto industry. This program provides an avenue for individuals to become watchdogs, creating a culture of compliance and transparency. As the rule takes effect, its impact will likely extend beyond regulatory enforcement, shaping the industry’s approach to safety and ethical practices for years to come.
For whistleblowers who might consider blowing the whistle on violations within the automotive sector, this program represents a great opportunity to contribute to public safety while receiving financial and legal protections.